THE PILLAR FUNDS
U.S. Treasury Securities Money Market Fund
Prime Obligation Money Market Fund
Tax-Exempt Money Market Fund
Fixed Income Fund
Intermediate-Term Government Securities Fund
New Jersey Municipal Securities Fund
Pennsylvania Municipal Securities Fund
Equity Growth Fund
Equity Value Fund
Equity Income Fund
Balanced Fund
(the "Funds")
Class A and Class B Shares
Supplement dated April 30, 1998 to the Prospectus dated April 30, 1998
Until July 1, 1998, (i) the net asset value per share for the Money Market Funds
shall be calculated as of the earlier of 12:00 noon, Eastern time, or the
regularly-scheduled close of normal trading on the New York Stock Exchange each
Business Day; and (ii) a purchase order or redemption request for a Money Market
Fund will be effective as of the Business Day received if it is received before
the Fund calculates its net asset value, normally 12:00 noon, Eastern time, and
certain other conditions are met. Please see the Prospectus for additional
information.
--------------------------------
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
PIL-A-025-02
<PAGE>
THE PILLAR FUNDS
U.S. Treasury Securities Money Market Fund
Prime Obligation Money Market Fund
Tax-Exempt Money Market Fund
Fixed Income Fund
Intermediate-Term Government Securities Fund
New Jersey Municipal Securities Fund
Pennsylvania Municipal Securities Fund
Equity Growth Fund
Equity Value Fund
Equity Income Fund
Mid Cap Fund
Balanced Fund
(the "Funds")
Class I Shares
Supplement dated April 30, 1998 to the Prospectus dated April 30, 1998
Until July 1, 1998, (i) the net asset value per share for the Money Market Funds
shall be calculated as of the earlier of 12:00 noon, Eastern time, or the
regularly-scheduled close of normal trading on the New York Stock Exchange each
Business Day; and (ii) a purchase order or redemption request for a Money Market
Fund will be effective as of the Business Day received if it is received before
the Fund calculates its net asset value, normally 12:00 noon, Eastern time, and
certain other conditions are met. Please see the Prospectus for additional
information.
--------------------------------
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
PIL-A-022-02
<PAGE>
THE PILLAR FUNDS
Summit Asset Management Account
RETAIL CASH SWEEP PROSPECTUS
U.S. Treasury Securities Money Market Fund (Class A Shares)
Prime Obligation Money Market Fund (Class S Shares)
Tax-Exempt Money Market Fund (Class A Shares)
(the "Funds")
Supplement dated April 30, 1998 to the Prospectus dated April 30, 1998
Until July 1, 1998, (i) the net asset value per share for the Funds shall be
calculated as of the earlier of 12:00 noon, Eastern time, or the
regularly-scheduled close of normal trading on the New York Stock Exchange each
Business Day; and (ii) a purchase order or redemption request for a Fund will be
effective as of the Business Day received if it is received before the Fund
calculates its net asset value, normally 12:00 noon, Eastern time, and certain
other conditions are met. Please see the Prospectus for additional information.
--------------------------------
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
PIL-A-030-02
<PAGE>
THE PILLAR FUNDS
Summit Asset Management Account
COMMERCIAL CASH SWEEP PROSPECTUS
Institutional Select Money Market Fund
U.S. Treasury Securities Money Market Fund (Class I Shares)
Prime Obligation Money Market Fund (Class I Shares)
(the "Funds")
Supplement dated April 30, 1998 to the Prospectus dated April 30, 1998
Until July 1, 1998, (i) the net asset value per share for the Funds shall be
calculated as of the earlier of 12:00 noon, Eastern time, or the
regularly-scheduled close of normal trading on the New York Stock Exchange each
Business Day; and (ii) a purchase order or redemption request for a Fund will be
effective as of the Business Day received if it is received before the Fund
calculates its net asset value, normally 12:00 noon, Eastern time, and certain
other conditions are met. Please see the Prospectus for additional information.
--------------------------------
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
PIL-A-029-02
<PAGE>
THE PILLAR FUNDS
Institutional Select Money Market Fund
(the "Fund")
Supplement dated April 30, 1998 to the Prospectus dated April 30, 1998
Until July 1, 1998, (i) the net asset value per share for the Fund shall be
calculated as of the earlier of 12:00 noon, Eastern time, or the
regularly-scheduled close of normal trading on the New York Stock Exchange each
Business Day; and (ii) a purchase order or redemption request for the Fund will
be effective as of the Business Day received if it is received before the Fund
calculates its net asset value, normally 12:00 noon, Eastern time, and certain
other conditions are met. Please see the Prospectus for additional information.
--------------------------------
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
PIL-A-028-02
<PAGE>
THE PILLAR FUNDS
U.S. Treasury Securities Plus Money Market Fund
(the "Fund")
Supplement dated April 30, 1998 to the Prospectus dated April 30, 1998
Until July 1, 1998, (i) the net asset value per share for the Fund shall be
calculated as of the earlier of 12:00 noon, Eastern time, or the
regularly-scheduled close of normal trading on the New York Stock Exchange each
Business Day; and (ii) a purchase order or redemption request for the Fund will
be effective as of the Business Day received if it is received before the Fund
calculates its net asset value, normally 12:00 noon, Eastern time, and certain
other conditions are met. Please see the Prospectus for additional information.
--------------------------------
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
PIL-A-024-02
<PAGE>
The Pillar Funds
Your Investment Foundation
PROSPECTUS
Class A and B Shares
April 30, 1998
<PAGE>
Table of Contents
Summary ................................................................... 2
Expense Summary ........................................................... 5
Financial Highlights ...................................................... 14
The Trust ................................................................. 17
Investment Objectives and Policies ........................................ 17
Investment Limitations .................................................... 25
The Advisor ............................................................... 27
The Administrator ......................................................... 28
The Transfer Agent ........................................................ 29
The Shareholder Servicing Agent ........................................... 29
The Distributor ........................................................... 29
Purchase and Redemption of Shares ......................................... 30
Performance ............................................................... 41
Taxes ..................................................................... 42
General Information ....................................................... 45
Description of Permitted Investments ...................................... 46
The Pillar Funds and Pillar are registered service marks of Summit Bank. Your
Investment Foundation and the stylized "P" logo are service marks of Summit
Bank. Reach Higher, Summit, Summit Bancorp and Summit Financial Services Group
are registered service marks of Summit Bancorp. Summit Bank is a service mark of
Summit Bancorp.
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE PILLAR FUNDS
CLASS A AND CLASS B SHARES
Investment Advisor:
SUMMIT BANK INVESTMENT MANAGEMENT DIVISION,
A DIVISION OF SUMMIT BANK
THE PILLAR FUNDS (the "Trust") consists of mutual fund portfolios seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to
shares of the following funds (each, a "Fund," and collectively, the "Funds"):
MONEY MARKET FUNDS
o U.S. Treasury Securities Money Market Fund
o Prime Obligation Money Market Fund
o Tax-Exempt Money Market Fund
FIXED INCOME FUNDS EQUITY AND BALANCED FUNDS
o Fixed Income Fund o Equity Growth Fund
o Intermediate-Term Government Securities Fund o Equity Value Fund
o New Jersey Municipal Securities Fund o Equity Income Fund
o Pennsylvania Municipal Securities Fund o Balanced Fund
The Trust's Class A Shares and Class B Shares are offered to all persons.
Persons who own Class A Shares or Class B Shares of a Fund are referred to
herein as "Shareholders." This Prospectus offers Class A Shares of the U.S.
Treasury Securities Money Market, Tax-Exempt Money Market, Intermediate-Term
Government Securities, New Jersey Municipal Securities and Pennsylvania
Municipal Securities Funds and Class A Shares and Class B Shares of the other
Funds. Class A Shares and Class B Shares differ with respect to the method of
paying distribution costs through sales charges, and distribution and service
fees.
| SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR |
| INSURED, ENDORSED OR GUARANTEED BY, ANY BANK (INCLUDING |
| SUMMIT BANK OR ITS AFFILIATES OR CORRESPONDENTS), ANY STATE |
| OR STATE AGENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION |
| (FDIC), THE U.S. GOVERNMENT OR ANY U.S. GOVERNMENT AGENCY. |
Amounts invested in the Funds are subject to investment risks, including
possible loss of the principal amount invested.
An investment in any of the Funds is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that a Money Market Fund will be able
to maintain a stable net asset value of $1.00 per share.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated April 30, 1998 has been filed with the Securities and Exchange
Commission and is available without charge by writing to the Distributor, SEI
Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling
1-800-932-7782. The Statement of Additional Information is incorporated into
this Prospectus by reference.
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.
April 30, 1998
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
Summary
The Pillar Funds (the "Trust") consists of open-end management investment
companies which provide a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about Class A
Shares and Class B Shares of the Trust's Prime Obligation Money Market Fund,
U.S. Treasury Securities Money Market Fund (Class A Shares only), Tax-Exempt
Money Market Fund (Class A Shares only) (the "Money Market Funds"); Fixed Income
Fund, Intermediate-Term Government Securities Fund (Class A Shares only), New
Jersey Municipal Securities Fund (Class A Shares only) and Pennsylvania
Municipal Securities Fund (Class A Shares only) (the "Fixed Income Funds");
Equity Growth Fund, Equity Value Fund and Equity Income Fund (the "Equity
Funds"); and the Balanced Fund (together with the Money Market, Fixed Income and
Equity Funds, the "Funds").
WHAT ARE THE INVESTMENT OBJECTIVES?
The Money Market Funds: Each Money Market Fund seeks to preserve principal value
and maintain a high degree of liquidity while providing current income. The
Tax-Exempt Money Market Fund also seeks to provide current income that is exempt
from federal income tax. There can be no assurance that a Money Market Fund will
be able to maintain a net asset value of $1.00 per share on a continuous basis.
The Fixed Income Funds: The Fixed Income Fund seeks a high level of total
return, primarily through current income and capital appreciation, consistent
with preservation of capital; the Intermediate-Term Government Securities Fund
seeks preservation of principal value and a high degree of liquidity while
providing current income; the New Jersey Municipal Securities Fund seeks current
income exempt from both federal and New Jersey income taxes, consistent with
preservation of capital; and the Pennsylvania Municipal Securities Fund seeks
current income exempt from both federal and Pennsylvania income taxes,
consistent with preservation of capital.
The Equity and Balanced Funds: The Equity Growth Fund seeks long-term growth of
capital; the Equity Value Fund seeks growth of both capital and income; the
Equity Income Fund seeks growth of capital consistent with an emphasis on
current income; and the Balanced Fund seeks growth of capital consistent with
current income.
There is no assurance that a Fund will meet its investment objective. See
"Investment Objectives and Policies."
WHAT ARE THE PERMITTED INVESTMENTS?
The Money Market Funds: The U.S. Treasury Securities Money Market Fund invests
exclusively in short-term U.S. Treasury obligations. The Prime Obligation Money
Market Fund invests in short-term, U.S. dollar denominated obligations of United
States issuers and obligations of U.S. and London branches of foreign banks. The
Tax-Exempt Money Market Fund invests primarily in short-term, U.S. dollar
denominated municipal securities of issuers located in all fifty states, the
District of Columbia, Puerto Rico and other U.S. territories and possessions.
See "Investment Objectives and Policies" and "Description of Permitted
Investments."
The Fixed Income Funds: The Fixed Income Fund invests at least 65% of its assets
in U.S. and Canadian Government obligations, corporate debt securities,
short-term bank obligations and repurchase agreements.
The Intermediate-Term Government Securities Fund invests in obligations issued
or guaranteed as to principal and interest by the U.S. Government, its agencies
or instrumentalities.
The New Jersey Municipal Securities and Pennsylvania Municipal Securities Funds
invest at least 80% of their assets in municipal obligations which produce
interest that, in the opinion of bond counsel for the issuer, is exempt from
federal income tax, and at least 65% of their assets in obligations which
produce interest that is exempt from applicable state income taxes.
The investments of the Fixed Income Funds are subject to market and interest
rate fluctuations which may affect the value of a Fund's shares. The greater the
Fund's dollar-weighted average portfolio maturity, the greater the fluctuations
are likely to be. In addition, certain securities, such as mortgage-backed
securities, are subject to the risk of prepayment during periods of declining
interest rates which may affect a Fund's ability to lock-in longer term rates
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
and manage portfolio maturity during such periods. See "Investment Objectives
and Policies," "General Investment Policies," "Risk Factors" and "Description of
Permitted Investments."
Are There Additional Risk Factors for the New Jersey Municipal Securities and
Pennsylvania Municipal Securities Funds? The concentration of the New Jersey
Municipal Securities and Pennsylvania Municipal Securities Funds in municipal
securities issued primarily by or on behalf of the states of New Jersey and
Pennsylvania, respectively, subjects these Funds to special investment risks,
such as the possible adverse effects of changes in economic conditions and
governmental policies of the states or their underlying governmental units. See
"Additional Risk Factors For New Jersey Municipal Securities" and "Additional
Risk Factors For Pennsylvania Municipal Securities."
The Equity and Balanced Funds: Each of the Equity and Balanced Funds may invest
in equity securities consisting of (i) common stocks; (ii) warrants to purchase
common stocks; (iii) securities convertible into common stocks; and (iv)
American Depositary Receipts ("ADRs"). In addition, the Balanced Fund invests in
certain fixed income and money market securities. The Equity Growth Fund may
also invest in European Depositary Receipts ("EDRs"), Continental Depositary
Receipts ("CDRs") and Global Depositary Receipts ("GDRs") and certain fixed
income securities. Because securities fluctuate in value, the shares of each
Fund will also fluctuate in value. In addition, the value of shares of the
Equity Growth and Balanced Funds are subject to market and interest rate
fluctuations that affect the value of their fixed income investments. The Equity
Growth Fund may also invest in options, futures and currency transactions. The
Funds' investments in securities of foreign issuers will subject the Funds to
risks associated with foreign investments. See "Investment Objectives and
Policies," "General Investment Policies," "Risk Factors" and "Description of
Permitted Investments."
Who is the Advisor? Summit Bank Investment Management Division, a division of
Summit Bank, serves as the advisor (the "Advisor") to the Trust. See "The
Advisor."
Who is the Administrator? SEI Fund Resources serves as the administrator (the
"Administrator") of the Trust. See "The Administrator."
Who is the Transfer Agent? State Street Bank and Trust Company acts as transfer
agent (the "Transfer Agent") for the Trust.
Who is the Shareholder Servicing and Dividend Disbursing Agent? Boston Financial
Data Services is the Trust's dividend disbursing agent and shareholder servicing
agent. See "The Shareholder Servicing Agent."
Who is the Distributor? SEI Investments Distribution Co. acts as distributor
(the "Distributor") of the Trust's shares. The Trust has adopted distribution
plans (the "Plans") on behalf of the Class A Shares and Class B Shares pursuant
to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). See "The Distributor."
How do I Purchase and Redeem Shares? Shares may be purchased and redeemed
directly from the Trust's Distributor or through an investment professional of a
securities broker or other financial institution, such as Summit Bank, that has
entered into a selling agreement with the Trust or the Distributor.
The Trust has also authorized certain broker-dealers and other financial
intermediaries (collectively, "Authorized Broker-Dealers") to accept purchase
orders and redemption requests up to the times mentioned below on behalf of the
Funds.
The Money Market Funds: A purchase order for a Money Market Fund will be
effective as of the "Business Day" received by the Distributor if the
Distributor (or Authorized Broker-Dealer) receives the order and payment in
federal funds before the Fund calculates its net asset value (normally, 3:00
p.m., Eastern time), on such Business Day. A "Business Day" for a Money Market
Fund is any day on which both the New York Stock Exchange is open for trading
and the Federal Reserve Bank is open. A redemption order for a Money Market Fund
will be effective as of the Business Day received by the Transfer Agent if the
Transfer Agent receives the order before the Fund calculates its net asset value
(normally, 3:00 p.m., Eastern time), on such Business
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
Day and the proceeds are to be sent in federal funds. See "Purchase and
Redemption of Shares."
The Non-Money Market Funds: Purchases and redemptions of Non-Money Market Fund
shares may be made through the Distributor on any "Business Day." A "Business
Day" for a Non-Money Market Fund is any day that the New York Stock Exchange is
open for trading. A purchase order will be effective as of the Business Day
received by the Distributor if the Distributor receives the order and payment
before the Fund calculates its net asset value (normally, 4:00 p.m., Eastern
time). The purchase price of Class A Shares of a Non-Money Market Fund is the
net asset value next determined after the purchase order is effective plus any
applicable sales load. The purchase price of Class B Shares is the net asset
value next determined after the purchase order is effective. Redemption orders
must be placed before the Fund calculates its net asset value (normally, 4:00
p.m., Eastern time) on any Business Day for the order to be effective that day.
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption, reduced by any
applicable contingent deferred sales charge, for Class B Shares, and for certain
Class A Shares that were purchased without an initial sales load. See "Purchase
and Redemption of Shares."
All Funds: The U. S. Treasury Securities Money Market, Tax-Exempt Money Market,
Intermediate-Term Government Securities, New Jersey Municipal Securities and
Pennsylvania Municipal Securities Funds each offer only Class A Shares to the
general public. Each of the other Funds offers two classes of shares to the
general public: Class A Shares and Class B Shares.
Class A Shares of the Equity Funds are offered at net asset value per share plus
a maximum initial sales charge of 5.50%; Class A Shares of the Fixed Income Fund
are offered at net asset value per share plus a maximum initial sales charge of
4.25%; Class A Shares of the Intermediate-Term Government Securities Fund are
offered at net asset value per share plus a maximum initial sales charge of
4.00%; and Class A Shares of the New Jersey Municipal Securities and
Pennsylvania Municipal Securities Funds are offered at net asset value per share
plus a maximum initial sales charge of 3.00%. Class A Shares of the Money Market
Funds are offered without a sales charge. Certain Class A Share purchases are
subject to reduced or waived sales charges and certain Class A Share redemptions
may be subject to a 1.00% contingent deferred sales charge.
Class B Shares of the Funds are offered at net asset value per share and are
subject to a maximum contingent deferred sales charge of 5.50% of redemption
proceeds during the first year, declining each year thereafter to 0% after the
sixth year. Class B Shares of the Funds pay annual distribution and service fees
of 1.00% of their average daily net assets. Only participants in the Systematic
Exchange Program may purchase Class B Shares of the Prime Obligation Money
Market Fund directly.
HOW ARE DIVIDENDS PAID?
The Money Market Funds: The net investment income (exclusive of capital gains)
of each Money Market Fund is determined and declared on each Business Day as a
dividend for Shareholders as of the close of business on that day.
The Fixed Income Funds: Each Fixed Income Fund declares dividends of
substantially all of its net investment income (exclusive of capital gains)
daily and distributes such dividends on or about the first Business Day of the
following month.
The Equity and Balanced Funds: Substantially all of the net investment income
(exclusive of capital gains) of the Equity Growth, Equity Value, Equity Income
and Balanced Funds is declared and distributed quarterly in the form of
dividends to Shareholders on the next to last Business Day of each quarter.
All Funds: Any capital gains will be distributed at least annually. Dividends
are paid in additional shares unless the Shareholder elects to take the payment
in cash. See "Dividends."
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Expense Summary
MONEY MARKET FUNDS
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Class A
- --------------------------------------------------------------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, as applicable) None
Wire Redemption Fee $10
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<CAPTION>
PRIME U.S. TREASURY
OBLIGATION SECURITIES TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisory Fees (after fee waivers)(1), (2) .34% .35% .33%
12b-1 Fees .25% .25% .25%
Other Expenses .31% .30% .32%
- ----------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(2) .90% .90% .90%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of Class A Shares of
each Money Market Fund to not more than .90% of average daily net assets of
that Fund. The Advisor reserves the right to terminate its fee waiver at any
time in its sole discretion.
(2) Absent a fee waiver for the Prime Obligation Money Market Fund and
Tax-Exempt Money Market Fund, the Advisory Fee would be .35% for each Fund,
respectively, and Total Operating Expenses would be .91% and .92%,
respectively, of such Fund's average daily net assets.
EXAMPLE--CLASS A SHARES
An investor in a Money Market Fund 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:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Each Money Market Fund...................................... $ 9 $29 $ 50 $111
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE CLASS A SHARES OF THE MONEY MARKET FUNDS. Financial
institutions may impose fees on their customers in addition to those described
above. Additional information may be found under "The Advisor," "The
Administrator," "The Shareholder Servicing Agent" and "The Distributor."
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Expense Summary
PRIME OBLIGATION MONEY MARKET FUND
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Class B
- --------------------------------------------------------------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption
proceeds, as applicable) 5.50%*
Wire Redemption Fee $ 10
Exchange Fee None
* Class B Shares of the Fund may be obtained only through exchange or through
purchases by participants in the Systematic Exchange Program.
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Prime Obligation
Money Market
Fund
- --------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1),(2)........................... .34%
12b-1/Shareholder Servicing Fees................................... 1.00%
Other Expenses..................................................... .31%
- --------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(2).................... 1.65%
- --------------------------------------------------------------------------------
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of Class B Shares of
the Prime Obligation Money Market Fund to not more than 1.65% of average
daily net assets of the Fund. The Advisor reserves the right to terminate
its fee waiver at any time in its sole discretion.
(2) Absent a fee waiver, the Advisory Fee would be .35% and Total Operating
Expenses for Class B Shares would be 1.66% of the Fund's average daily net
assets.
EXAMPLE--CLASS B SHARES
An investor in the Class B Shares of the Prime Obligation Money Market Fund
would pay the following expenses on a $1,000 investment assuming: (1)
imposition of the maximum sales charge; (2) a 5% annual return; and (3)
redemption at the end of each time period:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATION MONEY MARKET FUND 1 YR. 3 YRS. 5 YRS. 10 YRS.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at end of period............ $72 $92 $110 $157
Assuming no redemption..................................... $17 $52 $ 90 $157
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN CLASS B SHARES OF THE PRIME OBLIGATION MONEY MARKET FUND.
Financial institutions may impose fees on their customers in addition to those
described above. Additional information may be found under "The Advisor," "The
Administrator," "The Shareholder Servicing Agent" and "The Distributor."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, sales are reduced for
longer-term investors. See "Purchase and Redemption of Shares."
Long-term Shareholders may pay more than the equivalent of the maximum sales
charges otherwise permitted by the Conduct Rules (the "Conduct Rules") of the
National Association of Securities Dealers, Inc. (the "NASD"). The Trust intends
to operate the Class B Distribution Plan in accordance with its terms and with
the NASD Conduct Rules concerning sales charges.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
FIXED INCOME FUNDS
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NEW JERSEY PENNSYLVANIA
INTERMEDIATE-TERM MUNICIPAL MUNICIPAL
FIXED GOVERNMENT SECURITIES SECURITIES
INCOME FUND SECURITIES FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.25% 4.00% 3.00% 3.00
Maximum Sales Load Imposed on Reinvested
Dividends
(as a percentage of offering price) None None None None
Maximum Contingent Deferred Sales Charge
as a percentage of original purchase price
or redemption proceeds, as applicable) None None None None
Wire Redemption Fee $ 10 $ 10 $ 10 $ 10
Exchange Fee None None None None
</TABLE>
ANNUAL OPERATING EXPENSES -- CLASS A SHARES
(As a percentage of average net assets)
<TABLE>
<CAPTION>
NEW JERSEY PENNSYLVANIA
INTERMEDIATE-TERM MUNICIPAL MUNICIPAL
FIXED GOVERNMENT SECURITIES SECURITIES
INCOME FUND SECURITIES FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Advisory Fees (after fee waivers)(1), (2) .49% .46% .46% .45%
12b-1 Fees .25% .25% .25% .25%
Other Expenses .31% .34% .34% .35%(3)
- ----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers)(2) 1.05% 1.05% 1.05% 1.05%(3)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of Class A Shares of
each Fixed Income Fund to not more than 1.05% of average daily net assets.
The Advisor reserves the right to terminate its fee waivers at any time in
its sole discretion.
(2) Absent fee waivers, Advisory Fees for each Fixed Income Fund would be .60%,
and Total Operating Expenses would be as follows: Fixed Income Fund 1.16%,
Intermediate-Term Government Securities Fund 1.19%, New Jersey Municipal
Securities Fund 1.19%, and Pennsylvania Municipal Securities Fund 1.20%.
Additional information may be found under "The Advisor," "The Administrator"
and "The Distributor."
(3) Other expenses and Total Operating Costs have been restated to reflect
current expenses.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
EXAMPLE--CLASS A SHARES
An investor would pay the following expenses on a $1,000 investment in a Fund
assuming: (1) imposition of the maximum sales load; (2) a 5% annual return; and
(3) redemption at the end of each time period:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed Income Fund................................... $53 $74 $98 $165
Intermediate-Term Government Securities Fund........ $50 $72 $96 $163
New Jersey Municipal Securities Fund................ $40 $62 $86 $154
Pennsylvania Municipal Securities Fund.............. $40 $62 $86 $154
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN CLASS A SHARES OF THE FIXED INCOME FUNDS. Financial
institutions may impose fees on their customers in addition to those described
above. Additional information may be found under "The Advisor," "The
Administrator" and "The Distributor."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for a waiver or reduction of sales charges. See "Purchase and Redemption
of Shares."
Long-term Shareholders may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the NASD Conduct Rules. The Trust intends
to operate the Class A Distribution Plan in accordance with its terms and with
the NASD Conduct Rules concerning sales charges.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Expense Summary
FIXED INCOME FUND
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
FIXED
INCOME FUND
- --------------------------------------------------------------------------------
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, as applicable) 5.50%
Wire Redemption Fee $ 10
Exchange Fee None
ANNUAL OPERATING EXPENSES -- CLASS B SHARES
(As a percentage of average net assets)
FIXED
INCOME FUND
- --------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1), (2). .49%
12b-1/Shareholder Servicing Fees........................ 1.00%
Other Expenses.......................................... .31%
- --------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(2). 1.80%
- --------------------------------------------------------------------------------
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of Class B Shares of
the Fixed Income Fund to not more than 1.80% of average daily net assets.
The Advisor reserves the right to terminate its fee waivers at any time in
its sole discretion.
(2) Absent fee waivers, Advisory Fees for the Fixed Income Fund would be .60%
and Total Operating Expenses would be 1.91%. Additional information may be
found under "The Advisor," "The Administrator" and "The Distributor."
EXAMPLE--
CLASS B SHARES
An investor would pay the following expenses on a $1,000 investment in the Fund
assuming: (1) imposition of the maximum applicable sales load; (2) a 5% annual
return; and (3) redemption at the end of each time period as indicated:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
FIXED INCOME FUND 1 YR. 3 YRS. 5 YRS. 10 YRS.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at end of period............. $73 $97 $117 $174
Assuming no redemptions..................................... $18 $57 $ 97 $174
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN CLASS B SHARES OF THE FIXED INCOME FUND. Financial
institutions may impose fees on their customers in addition to those described
above. Additional information may be found under "The Advisor," "The
Administrator" and "The Distributor."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, sales charges are reduced
for longer-term investors. See "Purchase and Redemption of Shares."
Long-term Shareholders may pay more than the equivalent of the maximum sales
charges otherwise permitted by the NASD Conduct Rules. The Trust intends to
operate the Class B Distribution Plan in accordance with its terms and the NASD
Conduct Rules concerning sales charges.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
Expense Summary
EQUITY AND BALANCED FUNDS
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
EQUITY EQUITY EQUITY
GROWTH VALUE INCOME BALANCED
FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases*
(as a percentage of offering price) 5.50% 5.50% 5.50% 5.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, as applicable) None None None None
Wire Redemption Fee $ 10 $ 10 $ 10 $ 10
Exchange Fee None None None None
* The percentage shown is the maximum initial sales load. In certain
circumstances, shareholders may receive sales load waivers or reductions.
Purchases of $1,000,000 or more are at net asset value and shares redeemed
prior to 12 months from the date such shares were purchased are subject to a
contingent deferred sales charge of 1.00%.
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<CAPTION>
EQUITY EQUITY EQUITY
GROWTH VALUE INCOME BALANCED
FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Advisory Fees (after fee waivers)(1), (2) .48% .49% .46% .41%
12b-1 Fees .25% .25% .25% .25%
Other Expenses .32% .31% .34% .39%
- ---------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(2) 1.05% 1.05% 1.05% 1.05%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of Class A Shares of
each Fund to not more than 1.05% of average daily net assets. The Advisor
reserves the right to terminate its fee waivers at any time in its sole
discretion.
(2) Absent fee waivers for the Equity Growth, Equity Value, Equity Income and
Balanced Funds, Advisory Fees would be .75% for each Fund, and Total
Operating Expenses would be 1.32%, 1.31%, 1.34% and 1.39%, respectively, of
such Fund's average daily net assets. Additional information may be found
under "The Advisor," "The Administrator" and "The Distributor."
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
EXAMPLE
An investor in a Fund would pay the following expenses on a $1,000 investment
assuming: (1) imposition of the maximum sales load; (2) a 5% annual return; and
(3) redemption at the end of each time period:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Each Equity Fund............................................ $65 $ 87 $110 $176
Balanced Fund............................................... $65 $ 87 $110 $176
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE EQUITY AND BALANCED FUNDS. Financial institutions may
impose fees on their customers in addition to those described above. Additional
information may be found under "The Advisor," "The Administrator" and "The
Distributor."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for a waiver or reduction of sales charges. See "Purchase and Redemption
of Shares."
Long-term Shareholders may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the NASD Conduct Rules. The Trust intends
to operate the Class A Distribution Plan in accordance with its terms and the
NASD Conduct Rules concerning sales charges.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Expense Summary
EQUITY AND BALANCED FUNDS
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
EQUITY EQUITY EQUITY
GROWTH VALUE INCOME BALANCED
FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, as applicable) 5.50% 5.50% 5.50% 5.50%
Wire Redemption Fee $ 10 $ 10 $ 10 $ 10
Exchange Fee None None None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<CAPTION>
EQUITY EQUITY EQUITY
GROWTH VALUE INCOME BALANCED
FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Advisory Fees (after fee waivers)(1), (2) .48% .49% .46% .41%
12b-1/Shareholder Servicing Fees 1.00% 1.00% 1.00% 1.00%
Other Expenses .32% .31% .34% .39%
- --------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(2) 1.80% 1.80% 1.80% 1.80%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of Class B Shares of
each Fund to not more than 1.80% of its average daily net assets. The
Advisor reserves the right to terminate its fee waivers at any time in its
sole discretion.
(2) Absent fee waivers for the Equity Growth, Equity Value, Equity Income and
Balanced Funds, Advisory Fees would be .75% for each Fund and Total
Operating Expenses would be 2.07%, 2.06%, 2.09% and 2.14%, respectively, of
such Fund's average daily net assets. Additional information may be found
under "The Advisor," "The Administrator" and "The Distributor."
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
EXAMPLE -- CLASS B SHARES
An investor would pay the following expenses on a $1,000 investment in a Fund
assuming: (1) imposition of the maximum sales charge; (2) a 5% annual return;
and (3) redemption at the end of each time period:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EACH EQUITY FUND
Assuming a complete redemption at end of period............ $73 $ 97 $117 $174
Assuming no redemptions.................................... $18 $ 57 $ 97 $174
BALANCED FUND
Assuming a complete redemption at end of period............ $73 $ 97 $117 $174
Assuming no redemptions.................................... $18 $ 57 $ 97 $174
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN CLASS B SHARES OF THE EQUITY AND BALANCED FUNDS. Financial
institutions may impose fees on their customers in addition to those described
above. Additional information may be found under "The Advisor," "The
Administrator" and "The Distributor."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, sales charges are reduced
for longer-term investors. See "Purchase and Redemption of Shares."
Long-term Shareholders may pay more than the equivalent of the maximum sales
charges otherwise permitted by the NASD Conduct Rules. The Trust intends to
operate the Class B Distribution Plan in accordance with its terms and the NASD
Conduct Rules concerning sales charges.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
THE PILLAR FUNDS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent public accountants, as indicated in their report dated February 6,
1998 on the Trust's financial statements as of December 31, 1997, which is
incorporated by reference into the Trust's Statement of Additional Information
under "Financial Information." Additional performance information is contained
in the Trust's 1997 Annual Report to Shareholders and is available upon request
and without charge by calling 1-800-932-7782. These tables should be read in
conjunction with the Trust's financial statements and notes thereto.
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions Net Asset Net Assets
Value Net Gains or from Net Distributions Value Total End of
Beginning Investment Losses on Investment from Capital End of Return Period
of Period Income Securities Income Gains Period (+) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATION MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 $ 1.00 $ 0.05 -- $(0.05) -- $ 1.00 4.75% $17,514
1996 1.00 0.04 -- (0.04) -- 1.00 4.58 11,347
1995 1.00 0.05 -- (0.05) -- 1.00 5.14 6,925
1994 1.00 0.03 -- (0.03) -- 1.00 3.40 3,281
1993 1.00 0.02 -- (0.02) -- 1.00 2.40 377
1992(1) 1.00 0.02 -- (0.02) -- 1.00 2.60* 243
CLASS B
1997(2) $ 1.00 -- -- -- -- $ 1.00 5.48%* $ 10
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets Portfolio Average
Average to Average (Excluding (Excluding Turnover Commission
Net Assets Net Assets Waivers) Waivers) Rate Rate++
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1997 0.90% 4.67% 0.91% 4.66% -- --
1996 0.90 4.48 0.92 4.46 -- --
1995 0.90 5.01 0.91 5.00 -- --
1994 0.87 3.89 0.87 3.89 -- --
1993 0.89 2.38 0.89 2.38 -- --
1992(1) 0.89 2.43 1.01 2.31 -- --
CLASS B
1997(2) 1.65% 8.53% 3.01% 7.17% -- --
</TABLE>
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions Net Asset Net Assets
Value Net Gains or from Net Distributions Value Total End of
Beginning Investment Losses on Investment from Capital End of Return Period
of Period Income Securities Income Gains Period (+) (000)
- --------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1997 $ 1.00 $ 0.04 -- $(0.04) -- $ 1.00 4.28% $12,492
1996 1.00 0.04 -- (0.04) -- 1.00 4.27 3,503
1995 1.00 0.05 -- (0.05) -- 1.00 4.80 3,532
1994 1.00 0.03 -- (0.03) -- 1.00 3.17 633
1993 1.00 0.02 -- (0.02) -- 1.00 2.21 834
1992(1) 1.00 0.02 -- (0.02) -- 1.00 2.56* 436
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets Portfolio Average
Average to Average (Excluding (Excluding Turnover Commission
Net Assets Net Assets Waivers) Waivers) Rate Rate++
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1997 0.90% 4.22% 0.90% 4.22% -- --
1996 0.90 4.19 0.90 4.19 -- --
1995 0.90 4.66 0.90 4.66 -- --
1994 0.87 3.07 0.87 3.07 -- --
1993 0.89 2.17 0.89 2.17 -- --
1992(1) 0.90 2.27 0.95 2.22 -- --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions Net Asset Net Assets
Value Net Gains or from Net Distributions Value Total End of
Beginning Investment Losses on Investment from Capital End of Return Period
of Period Income Securities Income Gains Period (+) (000)
- --------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1997 $ 1.00 $ 0.03 -- $(0.03) -- $ 1.00 2.84% $ 8,509
1996 1.00 0.03 -- (0.03) -- 1.00 2.70 3,852
1995 1.00 0.03 -- (0.03) -- 1.00 3.17 5,238
1994 1.00 0.02 -- (0.02) -- 1.00 2.02 2,790
1993 1.00 0.02 -- (0.02) -- 1.00 1.74 3,866
1992(3) 1.00 0.02 -- (0.02) -- 1.00 2.17* 2,273
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets Portfolio Average
Average to Average (Excluding (Excluding Turnover Commission
Net Assets Net Assets Waivers) Waivers) Rate Rate++
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
1997 0.90% 2.82% 0.92% 2.80% -- --
1996 0.90 2.65 0.93 2.62 -- --
1995 0.90 3.14 0.96 3.08 -- --
1994 0.90 1.97 0.92 1.95 -- --
1993 0.90 1.72 0.94 1.68 -- --
1992(3) 0.90 2.07 1.04 1.93 -- --
</TABLE>
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions Net Asset Net Assets
Value Net Gains or from Net Distributions Value Total End of
Beginning Investment Losses on Investment from Capital End of Return Period
of Period Income Securities Income Gains Period (+) (000)
- --------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1997 $10.20 $ 0.57 $ 0.16 $(0.57) -- $10.36 7.41% $ 4,526
1996 10.48 0.55 (0.28) (0.55) -- 10.20 2.68 4,830
1995 9.44 0.56 1.04 (0.56) -- 10.48 17.36 5,844
1994 10.68 0.56 (1.18) (0.56) $(0.06) 9.44 (5.90) 5,525
1993 10.38 0.58 0.52 (0.58) (0.22) 10.68 10.76 6,519
1992(1) 10.00 0.47 0.44 (0.47) (0.06) 10.38 11.39* 1,214
CLASS B
1997(4) $10.11 $ 0.31 $ 0.28 $(0.31) -- $10.39 9.41% $ 1,268
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets Portfolio Average
Average to Average (Excluding (Excluding Turnover Commission
Net Assets Net Assets Waivers) Waivers) Rate Rate++
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
1997 1.05% 5.60% 1.16% 5.49% 80.34% --
1996 1.05 5.35 1.17 5.23 40.56 --
1995 1.05 5.58 1.16 5.47 35.49 --
1994 1.05 5.65 1.15 5.55 15.24 --
1993 1.05 5.24 1.13 5.16 49.49 --
1992(1) 1.05 5.93 1.20 5.78 23.86 --
CLASS B
1997(4) 1.80% 5.02% 1.86% 4.96% 80.34% --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1996
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions Net Asset Net Assets
Value Net Gains or from Net Distributions Value Total End of
Beginning Investment Losses on Investment from Capital End of Return Period
of Period Income Securities Income Gains Period (+) (000)
- --------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1997 $10.16 $ 0.55 $ 0.10 $(0.55) -- $10.26 6.60% $ 1,397
1996 10.37 0.52 (0.22) (0.51) -- 10.16 3.01 2,578
1995 9.51 0.51 0.86 (0.51) -- 10.37 14.71 3,665
1994 10.53 0.49 (1.01) (0.49) $(0.01) 9.51 (5.09) 2,372
1993 10.24 0.49 0.31 (0.49) (0.02) 10.53 7.94 4,903
1992(1) 10.00 0.39 0.25 (0.39) (0.01) 10.24 7.86* 2,190
- --------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 $10.70 $ 0.49 $ 0.17 $(0.47) -- $10.89 6.31% $18,651
1996 10.79 0.41 (0.09) (0.41) -- 10.70 3.08 20,247
1995 9.93 0.44 0.86 (0.44) -- 10.79 13.30 25,954
1994 10.85 0.45 (0.92) (0.45) -- 9.93 (4.35) 21,195
1993 10.29 0.46 0.56 (0.46) -- 10.85 10.09 22,061
1992(5) 10.00 0.29 0.29 (0.29) -- 10.29 8.29* 5,424
- --------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 $10.17 $ 0.43 $ 0.23 $(0.43) $(0.02) $10.38 6.63% $ 404
1996 10.22 0.42 (0.05) (0.42) -- 10.17 3.74 344
1995 9.55 0.38 0.67 (0.38) -- 10.22 11.15 269
1994 10.17 0.33 (0.62) (0.33) -- 9.55 (2.83) 336
1993(6) 9.98 0.20 0.19 (0.20) -- 10.17 6.28* 289
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997(7) $10.00 $(0.01) $ 1.24 -- $(1.98) $ 9.25 14.13%* $ 432
CLASS B
1997(8) $10.41 $(0.02) $ 0.77 -- $(1.98) $ 9.18 13.01%* $ 357
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY VALUE FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 $13.35 $ 0.15 $ 3.20 $(0.14) $(3.66) $12.90 25.51% $13,923
1996 12.83 0.19 2.51 (0.18) (2.00) 13.35 21.15 10,000
1995 10.21 0.21 3.47 (0.22) (0.84) 12.83 36.35 7,644
1994 11.12 0.18 (0.83) (0.18) (0.08) 10.21 (5.83) 3,031
1993 10.66 0.16 0.46 (0.16) -- 11.12 5.85 2,741
1992(1) 10.00 0.09 0.67 (0.10) -- 10.66 10.35* 1,562
CLASS B
1997(9) $14.81 $ 0.04 $ 1.73 $(0.05) $(3.66) $12.87 19.17%* $ 5,072
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets Portfolio Average
Average to Average (Excluding (Excluding Turnover Commission
Net Assets Net Assets Waivers) Waivers) Rate Rate++
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 1.05% 5.40% 1.19% 5.26% 57.82% n/a
1996 1.05 5.01 1.12 4.94 40.60 n/a
1995 1.05 5.08 1.30 4.83 68.29 n/a
1994 1.05 4.83 1.20 4.68 40.27 n/a
1993 1.05 4.59 1.23 4.41 31.69 n/a
1992(1) 1.05 5.00 1.36 4.69 12.38 n/a
- --------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 1.05% 4.35% 1.19% 4.21% 22.85% n/a
1996 0.92 3.88 1.18 3.62 13.93 n/a
1995 0.66 4.18 1.18 3.66 2.83 n/a
1994 0.52 4.40 1.18 3.74 16.81 n/a
1993 0.45 4.34 1.23 3.54 23.83 n/a
1992(6) 0.62 4.44 1.39 3.67 2.23 n/a
- --------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 1.05% 4.18% 1.21% 4.02% 71.89% n/a
1996 0.94 4.19 1.74 3.39 25.88 n/a
1995 1.05 3.80 1.55 3.30 36.92 n/a
1994 1.05 3.42 1.92 2.55 38.20 n/a
1993(6) 1.05 3.24 1.48 2.81 16.51 n/a
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997(7) 1.05% (0.28)% 1.32% (0.55)% 114.51% .0591
CLASS B
1997(8) 1.80% (1.08)% 2.09% (1.37)% 114.51% .0591
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY VALUE FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 1.05% 0.98% 1.31% 0.72% 80.24% .0609
1996 1.05 1.42 1.33 1.14 85.30 .0950
1995 1.05 1.83 1.32 1.56 61.88 n/a
1994 1.05 1.67 1.31 1.41 44.98 n/a
1993 1.05 1.51 1.30 1.26 89.91 n/a
1992(1) 1.05 1.64 1.36 1.33 45.68 n/a
CLASS B
1997(9) 1.80% 0.09% 2.07% (0.18)% 80.24% .0609
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions Net Asset Net Assets
Value Net Gains or from Net Distributions Value Total End of
Beginning Investment Losses on Investment from Capital End of Return Period
of Period Income Securities Income Gains Period (+) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 $13.35 $ 0.29 $ 2.94 $(0.28) $(3.08) $13.22 24.68% $16,686
1996 13.08 0.31 2.34 (0.29) (2.09) 13.35 20.70 12,444
1995 10.27 0.28 3.29 (0.28) (0.48) 13.08 35.21 9,612
1994 11.17 0.29 (0.80) (0.29) (0.10) 10.27 (4.56) 5,657
1993 10.73 0.28 0.78 (0.27) (0.35) 11.17 9.94 4,421
1992(1) 10.00 0.15 0.77 (0.19) -- 10.73 12.43* 585
CLASS B
1997(10) $14.34 $ 0.15 $ 1.94 $(0.18) $(3.08) $13.17 22.87%* $ 7,862
- --------------------------------------------------------------------------------------------------------------------------------
BALANCED FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 $11.40 $ 0.26 $ 1.92 $(0.29) $(1.27) $12.02 19.46% $ 9,901
1996 12.07 0.43 1.17 (0.44) (1.83) 11.40 13.39 9,095
1995 9.92 0.42 2.28 (0.42) (0.13) 12.07 27.53 8,452
1994 10.79 0.35 (0.87) (0.35) -- 9.92 (4.87) 6,737
1993 10.36 0.37 0.42 (0.36) -- 10.79 7.62 8,122
1992(1) 10.00 0.20 0.40 (0.24) -- 10.36 8.15* 2,990
CLASS B
1997(10) $11.93 $ 0.15 $ 1.34 $(0.18) $(1.27) $11.97 19.45%* $ 4,447
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets Portfolio Average
Average to Average (Excluding (Excluding Turnover Commission
Net Assets Net Assets Waivers) Waivers) Rate Rate++
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 1.05% 2.05% 1.34% 1.76% 76.67% .0694
1996 1.05 2.30 1.34 2.01 85.47 .1095
1995 1.05 2.36 1.35 2.06 42.97 n/a
1994 1.05 2.71 1.33 2.43 37.76 n/a
1993 1.05 2.42 1.35 2.12 89.89 n/a
1992(1) 1.05 2.54 1.40 2.19 58.41 n/a
CLASS B
1997(10) 1.80% 1.27% 2.13% 0.94% 76.67 .0694
- --------------------------------------------------------------------------------------------------------------------------------
BALANCED FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 1.05% 2.44% 1.39% 2.10% 93.85% .0959
1996 1.05 3.43 1.36 3.12 43.80 .1165
1995 1.05 3.64 1.36 3.33 41.63 n/a
1994 1.05 3.39 1.34 3.10 27.15 n/a
1993 1.05 3.47 1.38 3.14 63.03 n/a
1992(1) 1.05 3.59 1.45 3.19 82.76 n/a
CLASS B
1997(10) 1.80% 1.23% 2.28% 0.75% 93.85% .0959
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
* Annualized.
(+) Total Return does not reflect sales loads on Class A Shares.
(++) Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for the
fiscal years beginning after September 1, 1995.
(1) The Prime Obligation Money Market, U.S. Treasury Securities Money Market,
Fixed Income, Intermediate-Term Government Securities, Equity Value,
Equity Income and Balanced Funds (Class A Shares) commenced operations on
April 1, 1992. Ratios for this period have been annualized.
(2) The Prime Obligation Money Market Fund (Class B Shares) commenced
operations on December 30, 1997. Ratios for this period have been
annualized.
(3) The Tax-Exempt Money Market Fund (Class A Shares) commenced operations on
April 6, 1992. Ratios for this period have been annualized.
(4) The Fixed Income Fund (Class B Shares) commenced operations on May 16,
1997. Ratios for this period have been annualized.
(5) The New Jersey Municipal Securities Fund (Class A Shares) commenced
operations on May 4, 1992. Ratios for this period have been annualized.
(6) The Pennsylvania Municipal Securities Fund (Class A Shares) commenced
operations on May 13, 1993. Ratios for this period have been annualized.
(7) The Equity Growth Fund (Class A Shares) commenced operations on February
3, 1997. Ratios for this period have been annualized.
(8) The Equity Growth Fund (Class B Shares) commenced operations on May 21,
1997. Ratios for this period have been annualized.
(9) The Equity Value Fund (Class B Shares) commenced operations on May 12,
1997. Ratios for this period have been annualized.
(10) The Equity Income and Balanced Funds (Class B Shares) commenced operations
on May 8, 1997. Ratios for this period have been annualized.
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE TRUST
The Pillar Funds (the "Trust") is an open-end management investment company that
consists of diversified and non-diversified portfolios. The Trust currently
offers units of beneficial interest ("shares") in fifteen separate investment
portfolios. The Trust offers shares of the portfolios in up to four separate
classes of shares (Class A, Class B, Class S and Class I) which provide for
variations in distribution costs, voting rights, sales loads, minimum
investments, redemption fees, transfer agency fees and dividends. Except for
these differences between classes, each share of each portfolio represents an
undivided proportionate interest in that portfolio. This Prospectus relates to
the Class A Shares of the Trust's U.S. Treasury Securities Money Market Fund,
Prime Obligation Money Market Fund and Tax-Exempt Money Market Fund (the "Money
Market Funds"); the Fixed Income Fund, Intermediate-Term Government Securities
Fund, New Jersey Municipal Securities Fund and Pennsylvania Municipal Securities
Fund (the "Fixed Income Funds"); the Equity Growth Fund, Equity Value Fund and
Equity Income Fund (the "Equity Funds"); and the Balanced Fund (each, a "Fund,"
and collectively, the "Funds"); and Class B Shares of the Prime Obligation Money
Market Fund, Fixed Income Fund, Equity Funds and Balanced Fund. Each of the
Funds is a diversified mutual fund, except for the New Jersey Municipal
Securities Fund, Pennsylvania Municipal Securities Fund and International Growth
Fund, which are non-diversified mutual funds. Information regarding the Trust's
other portfolios and the Class I and S Shares of the Trust's portfolios is
contained in separate prospectuses that may be obtained by writing the Trust's
Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456 or by
calling 1-800-932-7782.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Fund are described below. For
additional information regarding risks and permitted investments of the Funds,
see "Risk Factors," "General Investment Policies" and "Description of Permitted
Investments" in this Prospectus and "Description of Permitted Investments" and
"Description of Ratings" in the Statement of Additional Information. There is no
assurance that the investment objective of any Fund will be met.
The Money Market Funds
The investment objective of each Money Market Fund is to preserve principal
value and maintain a high degree of liquidity while providing current income. In
addition, the Tax-Exempt Money Market Fund seeks to provide current income that
is exempt from federal income tax.
Each Money Market Fund intends to comply with regulations of the Securities and
Exchange Commission ("SEC") applicable to money market funds using the amortized
cost method for calculating net asset value. These regulations impose certain
quality, maturity and diversification restraints on investments by a Money
Market Fund. Under these regulations, each Money Market Fund will invest only in
U.S. dollar denominated securities, will maintain an average maturity on a
dollar-weighted basis of 90 days or less, and will acquire only "eligible
securities" that present minimal credit risks and have a maturity of 397 days or
less.
THE U.S. TREASURY SECURITIES MONEY MARKET FUND
The U.S. Treasury Securities Money Market Fund will invest exclusively in (i)
bills, notes and bonds issued by the U.S. Treasury; (ii) separately traded
interest and principal component parts of such obligations that are transferable
through the federal book entry system ("U.S. Treasury Obligations"); and (iii)
repurchase agreements involving U.S.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Treasury Obligations. The Fund may also engage in securities lending.
THE PRIME OBLIGATION MONEY MARKET FUND
The Prime Obligation Money Market Fund will invest in eligible securities
consisting of: (i) commercial paper and short-term corporate obligations of U.S.
issuers that satisfy the Fund's quality criteria; (ii) obligations (certificates
of deposit, time deposits and bankers' acceptances) of U.S. commercial banks,
U.S. savings and loan institutions and U.S. and London branches of foreign
banks, provided such institutions have total assets of $500 million or more as
shown on their last published financial statements at the time of investment and
are insured by the Federal Deposit Insurance Company ("FDIC") (the Fund may not
invest more than 25% of its total assets in obligations issued by foreign
branches of U.S. banks and London branches of foreign banks); (iii) U.S.
Treasury Obligations; (iv) obligations issued or guaranteed as to principal and
interest by the agencies or instrumentalities of the U.S. Government ("U.S.
Government Agencies"); and (v) repurchase agreements involving any such
obligations. In addition, the Fund may also engage in securities lending.
THE TAX-EXEMPT MONEY MARKET FUND
The Tax-Exempt Money Market Fund will invest at least 80% of its total assets in
obligations 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, the interest of which, in the opinion of bond
counsel for the issuer, is exempt from federal income tax (collectively,
"Municipal Securities"). The Fund will primarily purchase municipal bonds, notes
and tax-exempt commercial paper rated in one of the two highest short-term
rating categories by a nationally recognized statistical rating organization (an
"NRSRO") in accordance with SEC regulations at the time of investment or, if not
rated, as determined by the Advisor to be of comparable quality. Because the
Fund often purchases securities supported 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.
The Tax-Exempt Money Market Fund may purchase municipal obligations with demand
features including floating or variable rate obligations. In addition, the Fund
may invest in commitments to purchase securities on a "when-issued" basis, and
reserves the right to purchase securities subject to a standby commitment. The
Advisor has discretion to invest up to a total of 20% of the Fund's assets in
taxable money market instruments (including repurchase agreements) and
securities subject to the federal alternative minimum tax. However, the Fund
generally intends to be fully invested in securities exempt from federal income
tax. The Fund may also engage in securities lending.
The Fixed Income Funds
THE FIXED INCOME FUND
The investment objective of this Fund is to provide a high level of total
return, primarily through current income and capital appreciation, consistent
with preservation of capital. The Fund may not invest in certain securities that
may earn a higher return but which are more volatile and riskier than the Fund's
permitted investments.
At least 65% of the Fund's assets will be invested in (i) U.S. Treasury
Obligations; (ii) U.S. Government Agencies; (iii) corporate debt obligations
rated in one of the three highest rating categories by an NRSRO or determined by
the Advisor to be of comparable quality at the time of investment; (iv)
commercial paper rated in the highest short-term rating category by an NRSRO or
determined by the Advisor to be of comparable quality at the time of investment;
(v) short-term bank obligations (certificates of deposit, time deposits and
bankers' acceptances) of U.S. commercial banks with assets of at least $1
billion as of the end of their most recent fiscal year; (vi) securities of the
government of Canada and its
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
provincial and local governments; (vii) custodial receipts evidencing separately
traded interest and principal component parts of U.S. Treasury Obligations;
(viii) obligations subject to federal income tax issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities
("Taxable Municipal Securities"), which are rated A or higher by an NRSRO or
determined by the Advisor to be of comparable quality; and (ix) repurchase
agreements involving such securities. Of this amount, the Fund may, for
temporary defensive purposes, invest up to 35% of its assets in commercial paper
rated in one of the two highest short-term rating categories by an NRSRO or
determined by the Advisor to be of comparable quality at the time of investment.
Securities rated A are considered to be investment grade but could be more
vulnerable to adverse developments than obligations with higher ratings. In
addition, the Fund may invest in corporate bonds and debentures and commercial
paper issued by foreign issuers.
The remaining 35% of the Fund's assets may be invested in (i) mortgage-backed
securities consisting of collateralized mortgage obligations ("CMOs") and real
estate mortgage investment conduits ("REMICs") that are rated in one of the top
two rating categories by an NRSRO and which are backed solely by Government
National Mortgage Association ("GNMA") certificates or other mortgage
pass-throughs issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (ii) asset-backed securities secured by company
receivables, truck and auto loans, leases and credit card receivables rated in
one of the top two rating categories by an NRSRO.
The principal governmental issuers or guarantors of mortgage-backed securities
are GNMA, Fannie Mae and the Federal Home Loan Mortgage Corporation ("FHLMC").
Obligations of GNMA are backed by the full faith and credit of the U.S.
Government while obligations of FNMA and FHLMC are supported by the respective
agency only. The Funds may purchase mortgage-backed securities that are backed
or collateralized by fixed, adjustable or floating rate mortgages.
The Fund expects to maintain a dollar-weighted average portfolio maturity that
will not exceed fifteen years. The Advisor may vary this maturity substantially
in anticipation of a change in the interest rate environment.
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
The objective of this Fund is to preserve principal value and maintain a high
degree of liquidity while providing current income.
The Fund will be fully invested in U.S. Treasury Obligations and U.S. Government
Agencies.
The Fund will maintain a dollar-weighted average portfolio maturity of three to
ten years. Under normal circumstances, the Advisor anticipates that the Fund's
dollar-weighted average maturity will be approximately five years; however, the
Advisor may vary this average maturity substantially in anticipation of a change
in the interest rate environment.
THE NEW JERSEY MUNICIPAL SECURITIES FUND
The investment objective of this Fund is to provide current income exempt from
both federal and New Jersey income taxes, consistent with preservation of
capital.
The New Jersey Municipal Securities Fund will invest at least 80% of its net
assets in Municipal Securities. Under normal circumstances, except when
acceptable securities are unavailable as determined by the Advisor, at least 65%
of the Fund's assets will be invested in Municipal Securities, the interest of
which, in the opinion of bond counsel for the issuer, is exempt from the New
Jersey gross income tax ("New Jersey Municipal Securities"). The Fund will
primarily purchase (i) municipal bonds rated in one
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
of the three highest rating categories by an NRSRO; (ii) municipal notes rated
in one of the two highest rating categories by an NRSRO; (iii) commercial paper
rated in one of the two highest short-term rating categories by an NRSRO; (iv)
any of the foregoing determined by the Advisor to be of comparable quality at
the time of investment; or (v) securities of closed-end investment companies
traded on a national securities exchange. Securities rated A are considered to
be investment grade but could be more vulnerable to adverse developments than
obligations with higher ratings.
The Fund expects to maintain a dollar-weighted average portfolio maturity of
less than fifteen years. The Advisor may vary this maturity substantially in
anticipation of a change in the interest rate environment.
The New Jersey Municipal Securities Fund reserves the right to engage in "put"
transactions, although it has no present intention to do so. In addition, the
Advisor has discretion to invest up to a total of 20% of the Fund's assets in
taxable money market instruments (including repurchase agreements) and
securities subject to the federal alternative minimum tax. However, the Fund
generally intends to be as fully invested as possible in securities exempt from
federal income tax and not subject to the federal alternative minimum tax.
The New Jersey Municipal Securities Fund is a non-diversified investment
company. See "Risk Factors--Non-Diversification" for a discussion of the
additional risks of non-diversification.
THE PENNSYLVANIA MUNICIPAL SECURITIES FUND
The investment objective of this Fund is to provide current income exempt from
both federal and Pennsylvania income taxes, consistent with preservation of
capital.
At least 80% of the Fund's assets will be invested in Municipal Securities.
Under normal circumstances, except when acceptable securities are unavailable as
determined by the Advisor, at least 65% of the Fund's assets will be invested in
Municipal Securities, the interest of which, in the opinion of bond counsel for
the issuer, is exempt from Pennsylvania income tax ("Pennsylvania Municipal
Securities"). The Portfolio may invest up to 10% of its assets in securities the
income tax from which is subject to the federal alternative minimum tax.
Although permitted to do so, the Fund has no present intention to invest in
repurchase agreements or purchase securities subject to the federal alternative
minimum tax.
Municipal Securities that the Fund may purchase include (i) municipal bonds
which are rated BBB or better by Standard & Poor's Ratings Group ("S&P") or Baa
or better by Moody's Investor Service, Inc. ("Moody's") at the time of
investment or, if not rated, determined by the Advisor to be of comparable
quality; (ii) municipal notes which are rated at least SP-1 by S&P or MIG-1 or
V-MIG-1 by Moody's at the time of investment or, if not rated, determined by the
Advisor to be of comparable quality; and (iii) tax-exempt commercial paper rated
at least A-1 by S&P or Prime-1 by Moody's at the time of investment or, if not
rated, determined by the Advisor to be of comparable quality. Bonds rated BBB by
S&P or Baa by Moody's have speculative characteristics.
The Fund may invest in commitments to purchase such securities on a "when
issued" basis, and reserves the right to engage in "put" transactions. The Fund
may also purchase other types of tax-exempt instruments as long as they are of a
quality equivalent to the long-term bond or commercial paper ratings stated
above.
The Fund expects to maintain a dollar-weighted average portfolio maturity of
less than fifteen years. The Advisor may vary this maturity substantially in
anticipation of a change in the interest rate environment.
The Pennsylvania Municipal Securities Fund is a non-diversified investment
company. See "Risk
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Factors--Non-Diversification" for a discussion of the
additional risks of non-diversification.
GENERAL INVESTMENT POLICIES--FIXED INCOME FUNDS
For temporary defensive purposes when the Advisor determines that market
conditions warrant, each Fixed Income Fund may invest up to 100% of its assets
in the money market instruments described in the "Description of Permitted
Investments" and may hold a portion of its assets in cash. To the extent a Fixed
Income Fund is engaged in temporary defensive investing, the Fund will not be
pursuing its investment objective.
Both the Fixed Income and Intermediate-Term Government Securities Funds may
purchase mortgage-backed securities issued or guaranteed as to payment of
principal and interest by the U.S. Government, its agencies or
instrumentalities. These Funds may also invest in mortgage-backed securities
issued by private issuers rated in one of the two highest rating categories by
an NRSRO and backed by mortgage pass-throughs issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
Each of the Fixed Income Funds may invest in floating or variable rate
obligations and may purchase securities on a when-issued basis. In addition,
each Fund reserves the right to engage in securities lending but has no present
intention to do so.
If, after purchase, the rating of a security held by a Fixed Income Fund drops
below the prescribed investment quality, such security shall be sold at a time
when, in the judgment of the Advisor, it is not in the Fund's interest to
continue to hold such security.
RISK FACTORS--FIXED INCOME FUNDS
The market value of each Fixed Income Fund's fixed income investments will
fluctuate 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 will also affect the value of these investments. Changes
in the value of portfolio securities will not affect cash income derived from
these securities but will affect a Fund's net asset value.
Mortgage-backed securities are subject to prepayment of the underlying
mortgages. During periods of declining interest rates, prepayment of mortgages
underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by a Fixed Income Fund are prepaid, the Fund
must reinvest the proceeds in securities, the yield on which reflects prevailing
interest rates. Thus, mortgage-backed securities may not be an effective means
of locking in long-term interest rates for a Fund. Because of prepayments, it is
difficult to predict the actual maturity of mortgage-backed securities, which
may increase the difficulty of managing the average weighted maturity of the
Funds.
Investments in securities of foreign issuers may subject the Fixed Income Fund
to different risks than those attendant to investments in securities of U.S.
issuers, such as differences in accounting, auditing and financial reporting
standards, the possibility of expropriation or confiscatory taxation, and
political instability. There may also be less publicly available information
with regard to foreign issuers than domestic issuers. In addition, foreign
markets may be characterized by less liquidity, greater price volatility, less
regulation and higher transaction costs than U.S. markets.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
ADDITIONAL RISK FACTORS FOR NEW JERSEY MUNICIPAL SECURITIES
New Jersey Municipal Securities are primarily issued by or on behalf of the
State of New Jersey, its political subdivisions, agencies and instrumentalities.
The concentration in obligations of New Jersey issuers by the New Jersey
Municipal Securities Fund subjects the Fund to special investment risks. In
particular, changes in economic conditions and governmental policies of the
State of New Jersey and its municipalities could adversely affect the value of
the Fund and the securities held by it. For a further description of these
risks, see "New Jersey Municipal Securities and Special Considerations Relating
Thereto" in the Statement of Additional Information.
ADDITIONAL RISK FACTORS FOR PENNSYLVANIA MUNICIPAL SECURITIES
Under normal conditions the Pennsylvania Municipal Securities Fund will be fully
invested in obligations that produce interest income exempt from federal income
tax and Pennsylvania state income tax. Accordingly, the Fund will have
considerable investments in Pennsylvania Municipal Securities. As a result, the
Fund will be more susceptible to factors that adversely affect issuers of
Pennsylvania obligations than a mutual fund which does not have as great a
concentration in Pennsylvania Municipal Securities.
An investment in the Fund will be affected by the many factors that affect the
financial condition of the Commonwealth of Pennsylvania. For example, financial
difficulties of the Commonwealth, its counties, municipalities and school
districts that hinder efforts to borrow and lower credit ratings are factors
which may affect the Fund. See "Pennsylvania Municipal Securities and Special
Considerations Relating Thereto" in the Statement of Additional Information.
The Equity and Balanced Funds
THE EQUITY GROWTH FUND
The investment objective of the Fund is long-term growth of capital.
The Fund will normally be as fully invested as practicable in equity securities
consisting of common stocks, warrants to purchase common stocks, debt securities
and preferred stocks that are convertible into common stocks and ADRs, EDRs,
CDRs and GDRs. The Advisor will invest in companies that it expects will
demonstrate greater long-term earnings growth than the average company included
in the Standard & Poor's 500 Composite Index (the "S&P 500 Index"). This method
of investing is based upon the premise that growth in a company's earnings will
eventually translate into growth in the price of its stock.
To the extent that the Fund is not invested in equity securities, the Fund may
invest in the following fixed income securities for cash management purposes:
obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Securities");
corporate bonds and debentures rated in one of the three highest rating
categories by an NRSRO or determined by the Advisor to be of comparable quality
at the time of purchase, except that as part of its investment strategy, the
Fund may invest up to 5% of its total assets in lower rated bonds, commonly
referred to as "junk bonds," rated B or higher by an NRSRO or determined to be
of comparable quality by the Advisor; mortgage-backed securities consisting of
CMOs and REMICs that are rated in one of the top two rating categories by an
NRSRO and which are backed solely by GNMA certificates or other mortgage
pass-throughs issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and asset-backed securities secured by company receivables,
truck and auto loans, leases and credit card receivables that are rated in one
of the top two rating categories by an NRSRO. The
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Fund may also employ certain hedging and risk management techniques, including
the purchase and sale of exchange-listed and over-the-counter ("OTC") options,
futures and options on futures involving equity and debt securities, aggregates
of equity and debt securities and other financial indices. The Fund may write
options and invest in futures only on a covered basis.
THE EQUITY VALUE FUND
The investment objective of this Fund is growth of both capital and income.
The Fund will normally be as fully invested as practicable in equity securities
consisting of common stocks, warrants to purchase common stocks, debt securities
and preferred stocks convertible into common stocks and ADRs. The Advisor will
purchase equity securities which, in the Advisor's opinion, are undervalued in
the marketplace at the time of purchase.
THE EQUITY INCOME FUND
The investment objective of this Fund is growth of capital consistent with an
emphasis on current income.
The Fund will normally be as fully invested as practicable in equity securities
consisting of common stocks, warrants to purchase common stocks, debt securities
and preferred stocks convertible into common stocks and ADRs.
THE BALANCED FUND
The investment objective of this Fund is growth of capital consistent with
current income.
The Fund seeks to achieve growth of capital and current income by investing in a
balanced portfolio of equity securities, fixed income securities and money
market securities. The actual blend will vary according to market and economic
conditions. However, under normal market conditions, at least 25% of the Fund's
total assets will be invested in fixed income securities. This investment policy
may be changed by the Trust's Board of Trustees (the "Trustees") at any time;
however, Shareholders will be notified of any such change in advance.
The Fund may invest in the following equity securities: common stocks, warrants
to purchase common stocks, debt securities and preferred stocks convertible into
common stocks and ADRs.
The Fund may invest in the following fixed income securities: (i) U.S.
Government Securities; (ii) corporate bonds and debentures rated in one of the
three highest rating categories by an NRSRO or determined by the Advisor to be
of comparable quality at the time of purchase; (iii) mortgage-backed securities
consisting of CMOs and REMICs that are rated in one of the top two rating
categories by an NRSRO and which are backed solely by GNMA certificates or other
mortgage pass-throughs issued or guaranteed by the U.S. Government, its agencies
or instrumentalities; and (iv) asset-backed securities secured by company
receivables, truck and auto loans, leases and credit card receivables which are
rated in one of the top two rating categories by an NRSRO. Securities rated A
are considered to be investment grade but could be more vulnerable to adverse
developments than obligations with higher ratings.
The Fund may invest in the money market securities described in "Description of
Permitted Investments."
GENERAL INVESTMENT POLICIES--EQUITY AND BALANCED FUNDS
For temporary defensive purposes during periods when the Advisor determines that
market conditions warrant, each Equity and Balanced Fund may invest up to 100%
of its assets in the money market securities described in the "Description of
Permitted Investments" and may hold cash for liquidity purposes. To the extent
an Equity or Balanced Fund is engaged in temporary defensive investing, the Fund
will not be pursuing its investment objective.
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
Each of the Equity Value, Equity Income and Balanced Funds seeks to invest in
equity securities that the Advisor believes are of high quality. In evaluating
the quality of such securities, the Advisor places particular emphasis on the
management history of the issuer and on ratio analyses which focus on
prospective earnings, book value and anticipated growth rates.
Securities purchased by the Equity and Balanced Funds may involve floating or
variable interest rates and may be acquired through a forward commitment or on a
when-issued basis.
In addition, each Equity and Balanced Fund reserves the right to engage in
securities lending. The Equity and Balanced Funds will purchase equity
securities, including ADRs, that are traded in the United States on registered
exchanges or the over-the-counter market. However, each of these four Funds
reserves the right to invest up to 25% of its assets in foreign equity
securities denominated in foreign currency and traded on foreign markets, but
has no intention to do so.
RISK FACTORS--EQUITY AND BALANCED FUNDS
The value of the shares of the Equity and Balanced Funds will fluctuate due to
the underlying securities in which these Funds invest. The market value of the
convertible securities purchased by each Equity and Balanced Fund may also be
affected by changes in interest rates, the credit quality of the issuer and any
call provisions.
The market value of the Equity Growth and Balanced Funds' fixed income
securities will fluctuate in response to interest rate changes and other
factors. See "Risk Factors--Fixed Income Funds" above for a discussion of the
risks associated with fixed income investments.
Each Equity and Balanced Fund's investments in securities of foreign issuers may
subject that Fund to risks different than those attendant to investments in
securities of U.S. issuers, such as differences in accounting, auditing and
financial reporting standards applicable in foreign countries, the possibility
of expropriation or confiscatory taxation, political instability and greater
fluctuations in value due to changes in currency exchange rates. There may also
be less publicly available information with regard to foreign issuers than
domestic issuers. In addition, foreign markets may be characterized by less
liquidity, greater price volatility, less regulation and higher transaction
costs than U.S. markets. Moreover, the dividends payable on an Equity or
Balanced Fund's foreign securities may be subject to foreign withholding taxes,
thus reducing the net amount of income available for distribution to the Fund's
Shareholders. Also, it may be more difficult to obtain a judgment in a court
outside the United States. These risks could be greater in emerging markets than
in more developed foreign markets because emerging markets may have less stable
political environments than more developed countries.
The Equity Growth Fund may invest in lower rated bonds, which are commonly
referred to as "junk bonds." These securities are speculative and are subject to
a greater risk of loss of principal and interest than are investments in higher
rated bonds. The debt securities purchased by the Fund will be rated at least B
by an NRSRO or determined to be of comparable quality by the Advisor. Securities
rated B are considered highly speculative and while the issuer currently has the
capacity to meet debt service requirements, adverse business, financial or
economic conditions would likely impair its capacity or willingness to pay
interest and principal.
The Equity Growth Fund may invest in options and futures. There are various
risks associated with options and futures, including (i) the success of a
hedging strategy may depend on an ability to accurately predict movements in
security prices, interest rates or currency exchange rates; (ii) there may be
little correlation between the changes in a security's value and the price of
futures or options; (iii) a related future or option may not be liquid;
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
(iv) an exchange may impose trading restrictions or limitations; (v) government
regulations may restrict trading in futures and options; and (vi) the possible
lack of full participation in a rise in the market value of the underlying
security.
RISK FACTORS--NON-DIVERSIFICATION
The New Jersey Municipal Securities and Pennsylvania Municipal Securities Funds
are non-diversified funds under the Investment Company Act of 1940, as amended
(the "1940 Act"), and each therefore may invest a greater proportion of its
assets in the securities of a smaller number of issuers and may, as a result, be
subject to greater risk with respect to its portfolio securities. Each of the
Funds intends to satisfy the diversification requirements necessary to qualify
as a regulated investment company under the Internal Revenue Code of 1986,
as amended (the "Code"), by limiting its investments so that, at the close of
each quarter of the taxable year: (a) not more than 25% of the market value of
the Fund's total assets is invested in the securities (other than U.S.
Government securities) of a single issuer; and (b) at least 50% of the market
value of the Fund's total assets is represented by (i) cash and cash items, (ii)
U.S. Government securities and (iii) other securities limited in respect to any
one issuer to an amount not greater in value than 5% of the market value of the
Fund's total assets and to not more than 10% of the outstanding voting
securities of such issuer.
PORTFOLIO TURNOVER RATE
It is anticipated that the long-term average annual portfolio turnover rate for
each Fixed Income, Equity and Balanced Fund will not exceed 100%; however, there
may be times that the Advisor will sell securities depending on market
conditions and opportunities, and the portfolio turnover rate for each Fund may
reach higher levels. Higher portfolio turnover may increase the distributions
which a Fund is required to make to Shareholders and, therefore, lead to higher
tax liability for Shareholders with taxable accounts. Higher levels of portfolio
turnover will also lead to higher trading costs, which are reflected in each
Funds' operating expenses. With respect to the Balanced Fund, portfolio turnover
applies only to its investments in equity securities and non-money market, fixed
income securities, which are calculated separately. The historical portfolio
turnover rates for each Non-Money Market Fund are set forth in the Financial
Highlights above.
INVESTMENT LIMITATIONS
Money Market Funds: The investment objective and the following investment
limitations are fundamental policies of each Money Market Fund. In addition, it
is a fundamental policy of each Money Market Fund to use its best efforts to
maintain a constant net asset value of $1.00 per share although there can be no
assurance the Fund will be able to do so. It is also a fundamental policy of the
Tax-Exempt Money Market Fund to invest at least 80% of its assets in Municipal
Securities. Fundamental policies cannot be changed with respect to a Fund
without the consent of the holders of a majority of that Fund's outstanding
shares.
EACH MONEY MARKET 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 each Fund's total assets. See "Description
of Permitted Investments--Restraint on Investments by Money Market Funds."
2. Purchase any securities which would cause more than 25% of the total assets
of any 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 the obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities,
repurchase agreements involving such securities and obligations issued by
domestic branches of U.S. banks or U.S. branches of foreign banks subject to
the same regulation as U.S. banks or to investments in tax exempt securities
issued by governments or political subdivisions of governments.
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
3. Make loans, except that a Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; (b) enter into
repurchase agreements; and (c) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentage limitations apply at the time of the purchase of a
security.
It is a non-fundamental policy of each Money Market Fund to invest no more than
10% of its net assets in illiquid securities (as defined under "Description of
Permitted Investments").
Additional investment limitations are set forth in the Statement of Additional
Information.
Non-Money Market Funds: The investment objective and the following investment
limitations are fundamental policies of each Non-Money Market Fund. In addition,
it is a fundamental policy of the New Jersey Municipal Securities and
Pennsylvania Municipal Securities Funds to invest at least 80% of their
respective total assets in Municipal Securities. Fundamental policies cannot be
changed with respect to a Fund without the consent of the holders of a majority
of that Fund's outstanding shares.
EACH NON-MONEY MARKET 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 each Fund's total assets. This restriction
does not apply to the New Jersey Municipal Securities and Pennsylvania
Municipal Securities Funds.
2. Purchase any securities which would cause more than 25% of the total assets
of any 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 the obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements involving such securities or, with respect to the Fixed
Income Funds only, to investments in tax-exempt securities issued by
governments or political subdivisions of governments. For purposes of this
limitation, (i) utility companies will be classified according to their
services, for example, gas, gas transmissions, electric and telephone will
each be considered a separate industry; (ii) financial services 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; (iii) with respect to the Equity and Balanced
Funds only, supranational agencies will be deemed to be issuers conducting
their principal business activities in the same industry; and (iv) with
respect to the Equity and Balanced Funds only, governmental issuers within a
particular country will be deemed to be conducting their principal business
activities in the same industry.
3. Make loans, except that a Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; (b) enter into
repurchase agreements; and (c) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentage limitations apply at the time of the purchase of a
security.
It is a non-fundamental policy of each Non-Money Market Fund to invest no more
than 15% of its net assets in illiquid securities (as defined below under
"Description of Permitted Investments").
Additional investment limitations are set forth in the Statement of Additional
Information.
- --------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE ADVISOR
Summit Bank Investment Management Division, a division of Summit Bank (the
"Advisor"), serves as the investment advisor to the Trust. The Advisor makes the
investment decisions for the assets of the Funds and continuously reviews,
supervises and administers each Fund's investment program subject to the
supervision of, and policies established by, the Trustees of the Trust.
Summit Bank, 210 Main Street, Hackensack, New Jersey 07601, was chartered in
1899 and has been exercising trust powers and managing money since 1916. The
Investment Management Division began as a separate operating division of the
Bank in 1973. The Bank's investment professionals have, on average, over 20
years of experience in investment management. As of December 31, 1997, total
assets under management were approximately $8.2 billion.
Summit Bank is a wholly-owned subsidiary of Summit Bancorp, an interstate bank
holding company with approximately $30 billion in assets and 426 banking
offices, predominantly in New Jersey and eastern Pennsylvania, as of December
31, 1997.
Fixed Income Fund--Joseph Markovich is a Vice President of the Advisor and
currently manages the Fixed Income Fund. Mr. Markovich has managed the Fixed
Income Fund since January 1, 1997. Prior to January, 1997, Mr. Markovich managed
the Fixed Income Common Trust Funds for Summit Bank. Mr. Markovich has had
investment responsibility for equity and fixed income portfolios since joining
Summit Bank in 1985.
Intermediate-Term Government Securities Fund--Frances M. Tendall is a Vice
President and Regional Manager (Princeton) of the Advisor. Mrs. Tendall has
managed the Intermediate-Term Government Securities Fund and has co-managed the
U.S. Treasury Securities Money Market Fund since their inceptions in April,
1992. Mrs. Tendall joined Summit Bank in 1982.
New Jersey Municipal Securities and Tax-Exempt Money Market Funds--Charlene P.
Palmer is a Vice President of the Advisor and has managed the New Jersey
Municipal Securities Fund since its inception in May, 1992 and the Tax-Exempt
Money Market Fund since June, 1996. Mrs. Palmer's experience has emphasized
tax-exempt bonds. She joined Summit Bank in 1981.
Pennsylvania Municipal Securities Fund--Randolph E. Lestyk is Vice President and
Regional Manager (Pennsylvania) of the Advisor and has managed the Pennsylvania
Municipal Securities Fund since its inception in May, 1993. Prior to joining
Summit Bank in January, 1994, Mr. Lestyk was involved in equity and fixed income
investing at several financial institutions, serving as Director of Fixed Income
Investing, Head of Trust Investments, and most recently as Senior Vice President
and Chief Investment Officer of a major insurance company in Pennsylvania.
Equity Growth Fund--John Guarino is a Vice President and Regional Manager
(Summit) of the Advisor and has managed the Equity Growth Fund since its
inception in February, 1997 and co-managed the Fund with Chris Clark since July,
1997. Since February, 1997, he has also been co-manager of the Trust's Mid Cap
Fund. Mr. Guarino joined Summit Bank in April, 1985.
Mr. Clark is an investment portfolio manager with the Advisor and has
co-managed the Equity Growth Fund since July, 1997. Mr. Clark joined Summit Bank
in 1995 and prior to that was an investment portfolio manager with Merrill
Lynch.
Equity Income Fund--Richard H. Caro is a Vice President of the Advisor and has
- --------------------------------------------------------------------------------
27
<PAGE>
- --------------------------------------------------------------------------------
managed the Equity Income Fund since January, 1996. Since February 1997, he has
also been a co-manager of the Trust's Mid Cap Fund. Mr. Caro joined Summit Bank
in April, 1993 and currently has responsibility for managing both equity and
fixed income portfolios in the Investment Department.
Equity Value Fund--Fernando Garip is a Vice President and Regional Manager
(Hackensack) of the Advisor and has managed the Equity Value Fund since January,
1996. Mr. Garip joined Summit Bank in 1982.
Balanced Fund--Edward Kasperavich is a Vice President of the Advisor and has
managed the Balanced Fund since January, 1997. Mr. Kasperavich joined Summit
Bank in 1985.
U.S. Treasury Securities Money Market and Prime Obligation Money Market
Funds--Judith Wolk is a Vice President of the Advisor and has managed the Pillar
taxable money market funds and has co-managed the U.S. Treasury Securities Money
Market Fund with Mrs. Tendall since June, 1996. Prior to joining Summit Bank in
September, 1995, Ms. Wolk had substantial experience in money market instruments
with a large regional bank.
The Advisor is entitled to a fee from each Fund, which is calculated daily and
paid monthly at the annual rate of each respective Fund's average daily net
assets as set forth in the following table. The Advisor has voluntarily agreed
to waive all or a portion of its fees to limit the total operating expenses of
each Fund to the respective levels set forth below. The Advisor reserves the
right to terminate any and all fee waivers at any time in its sole discretion.
Also set forth below are the advisory fees each Fund paid to the Advisor (shown
as a percentage of average daily net assets) for the fiscal year ended December
31, 1997.
Maximum Total Fees Received
Contractual Operating Expense In Fiscal Year
Fee After Fee Waiver 1997
- ----------------------------------------------------------------------------
Class A Class B
- ----------------------------------------------------------------------------
Prime Obligation Money
Market Fund .35% .90% 1.65% .34%
U.S. Treasury Securities
Money Market Fund .35% .90% N/A .35%
Tax-Exempt Money Market
Fund .35% .90% N/A .33%
Fixed Income Fund .60% 1.05% 1.80% .49%
Intermediate-Term
Government Securities Fund .60% 1.05% N/A .46%
New Jersey Municipal
Securities Fund .60% 1.05% N/A .46%
Pennsylvania Municipal
Securities Fund .60% 1.05% N/A .45%
Equity Growth Fund .75% 1.05% 1.80% .48%
Equity Value Fund .75% 1.05% 1.80% .49%
Equity Income Fund .75% 1.05% 1.80% .46%
Balanced Fund .75% 1.05% 1.80% .41%
Summit Bank has also entered into a custodian agreement with the Trust, under
which it provides all securities safekeeping services as required by the Funds
and the 1940 Act. The Trust pays Summit Bank (referred to herein in its
custodial capacity as the "Custodian") a custodian fee, which is calculated
daily and paid monthly, at an annual rate of .025% of the average daily net
assets of each Fund.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The Administrator provides the Trust with administrative services, other
than investment advisory services, including all regulatory reporting, necessary
office space, equipment, personnel and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily net assets of each Fund.
- --------------------------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE TRANSFER AGENT
State Street Bank and Trust Company (the "Transfer Agent"), 225 Franklin Street,
Boston, Massachusetts 02110 is the Trust's transfer agent.
THE SHAREHOLDER SERVICING AGENT
Boston Financial Data Services, Two Heritage Drive North Quincy, Massachusetts
02171 is the Trust's dividend disbursing agent and shareholder servicing agent.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company, acts as the Distributor of the Trust's shares.
The Class A Shares of each Fund are subject to a distribution plan dated
February 28, 1992 ("Class A Plan"). As provided in the Distribution Agreement
and the Class A Plan, the Trust will pay the Distributor a fee of .25% of the
average daily net assets of each Fund's Class A Shares. The Distributor may
apply this fee toward: a) compensation for its services in connection with
distribution assistance or provision of shareholder services; or b) payments to
financial institutions and intermediaries such as banks (including Summit Bank),
savings and loan associations, insurance companies, investment counselors,
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services or reimbursement of expenses incurred in connection
with distribution assistance or provision of shareholder services. The Class A
Plan is characterized as a compensation plan since the distribution fee will be
paid to the Distributor without regard to the distribution or shareholder
service expenses incurred by the Distributor or the amount of payments made to
financial institutions and intermediaries.
The Board of Trustees of the Trust has approved and adopted a distribution plan
dated February 20, 1997 for Class B Shares of the Funds (the "Class B Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Class B Plan, the
Distributor is entitled to receive from the Funds an annual distribution fee of
.75% of the average daily net assets of each Fund's Class B Shares. The
Distributor may apply this fee toward: a) compensation for its services in
connection with distribution assistance or provision of shareholder services; or
b) payments to financial institutions and intermediaries such as banks
(including Summit Bank), savings and loan associations, insurance companies,
investment counselors, broker-dealers, and the Distributor's affiliates and
subsidiaries as compensation for services or reimbursement of expenses incurred
in connection with distribution assistance or provision of shareholder services.
Additionally, the Class B Plan provides that Class B Shares are subject to a
service fee at an annual rate of .25% of the average daily net assets of each
Fund's Class B Shares. The Class B Plan is characterized as a compensation plan
since the distribution fee will be paid to the Distributor without regard to the
distribution or shareholder service expenses incurred by the Distributor or the
amount of payments made to financial institutions and intermediaries.
Class A Shares and Class B Shares of each Fund are offered to all persons. (The
U.S. Treasury Securities Money Market, Tax-Exempt Money Market,
Intermediate-Term Government Securities, New Jersey Municipal Securities and
Pennsylvania Municipal Securities Funds offer Class A Shares only).
Consequently, it is possible that individuals and institutions may offer
different classes of shares of a Fund to their customers and thus receive
different compensation with respect to different classes of shares. In addition,
individuals and institutions that are the record owner of shares for the account
of their customers may impose separate fees for account services to their
customers. Each
- --------------------------------------------------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
Fund may also execute brokerage or other agency transactions through an
affiliate of the Advisor or through the Distributor for which such affiliate or
the Distributor receives compensation.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs which will be paid by the Distributor from
the sales charge it receives or from any other source available to it. Under any
such program, the Distributor may provide promotional incentives in the form of
cash or other compensation, including merchandise, gifts and prizes, and payment
of travel expenses, meals and lodging, to all dealers selling shares of the
Funds. Such promotional incentives will be offered uniformly to all dealers and
predicated upon the number of shares of the Trust's portfolios sold by the
dealer.
PURCHASE AND REDEMPTION OF SHARES
Alternative Sales Charge Options
You may purchase shares of a Fund at a price equal to its net asset value per
share plus a sales charge which, at your election, may be imposed either (i) at
the time of the purchase (the Class A "initial sales charge alternative"), or
(ii) on a contingent deferred basis (the Class B "deferred sales charge
alternative"). The U.S. Treasury Securities Money Market, Tax-Exempt Money
Market, Intermediate-Term Government Securities, New Jersey Municipal Securities
and Pennsylvania Municipal Securities Funds, however, offer Class A Shares only.
Each class represents a portion of a Fund's interest in a portfolio of
investments. The classes have the same rights and are identical in all respects
except that (i) Class A Shares and Class B Shares bear different distribution
and service fees resulting from their respective sales arrangements, (ii) each
class has exclusive voting rights with respect to approvals of any Rule 12b-1
distribution plan related to that specific class (although Class B Shareholders
may vote on any increase in distribution fees imposed on Class A Shares so long
as Class B Shares convert into Class A Shares), (iii) only Class B Shares carry
a conversion feature and (iv) each class has different exchange privileges.
As a result of each class's differing sales arrangements, Class A Shares are not
subject to a shareholder service fee and are subject to a lower distribution fee
than Class B Shares, and accordingly, Class A Shares pay higher dividends per
share. The Trust adds front-end sales charges to the net asset value of Class A
Shares of the Non-Money Market Funds and, therefore, unless a sales charge
waiver is available, an initial investment in Class A Shares will cost more per
share than Class B Shares. Class A Shareholders therefore would own fewer shares
than they would have owned if they had invested an identical sum in Class B
Shares.
Sales personnel of broker-dealers distributing the Funds' shares, and other
persons entitled to receive compensation for selling such shares, may receive
differing compensation for selling Class A or Class B Shares.
How to Choose the Right Class of Shares
The decision as to which class of shares provides a more suitable investment for
an investor depends on a number of factors, including the amount and intended
length of investment. Investors making investments that qualify for reduced
sales charges might consider Class A Shares. Investors who prefer not to pay an
initial sales charge might consider Class B Shares. For more information about
these sales arrangements, consult the Distributor or your investment
professional who is a salesperson, financial planner, investment advisor or
trust officer of an entity, other than the Distributor, that has entered into a
selling agreement with the Trust or the Distributor ("Investment Professional").
Shares may only be exchanged for shares of the same class of another Pillar
Fund. See "Exchanges."
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Front-End Sales Charge--Class A
All of the Funds offer Class A Shares. The public offering price of Class A
Shares equals the net asset value of the shares plus any applicable initial
sales charge. The Money Market Funds are not subject to a sales charge. The
sales charge as a percentage of an investment decreases as the amount invested
reaches the succeeding levels set forth in the following tables. The tables show
the initial sales charge on Class A Shares of the Funds to a "single purchaser"
(defined below), the reallowance paid to dealers and the agency commission paid
to brokers (collectively, the "commission"):
FIXED INCOME FUND:
Sales Charge Reallowance and
Sales Charge as a Brokerage
as a Percentage of Commission as
Percentage of Net Amount Percentage of
Amount of Purchase Offering Price Invested Offering Price
- -----------------------------------------------------------------------------
$0-99,999 4.25% 4.44% 4.00%
$100,000-249,999 3.75% 3.90% 3.50%
$250,000-499,999 2.75% 2.83% 2.50%
$500,000-999,999 2.00% 2.04% 1.75%
$1,000,000 and above* 0.00% 0.00% 0.00%**
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND:
Sales Charge Reallowance and
Sales Charge as a Brokerage
as a Percentage of Commission as
Percentage of Net Amount Percentage of
Amount of Purchase Offering Price Invested Offering Price
- -----------------------------------------------------------------------------
$0-99,999 4.00% 4.17% 3.50%
$100,000-249,999 3.00% 3.09% 2.70%
$250,000-499,999 2.00% 2.04% 1.80%
$500,000-999,999 1.00% 1.01% 0.90%
$1,000,000 and above 0.00% 0.00% 0.00%
NEW JERSEY MUNICIPAL SECURITIES AND PENNSYLVANIA MUNICIPAL SECURITIES FUNDS:
Sales Charge Reallowance and
Sales Charge as a Brokerage
as a Percentage of Commission as
Percentage of Net Amount Percentage of
Amount of Purchase Offering Price Invested Offering Price
- -----------------------------------------------------------------------------
$0-249,999 3.00% 3.10% 2.70%
$250,000-499,999 2.00% 2.05% 1.80%
$500,000-999,999 1.00% 1.01% 0.90%
$1,000,000 and above* 0.00% 0.00% 0.00%**
EQUITY AND BALANCED FUNDS:
Sales Charge Reallowance and
Sales Charge as a Brokerage
as a Percentage of Commission as
Percentage of Net Amount Percentage of
Amount of Purchase Offering Price Invested Offering Price
- -----------------------------------------------------------------------------
$0-49,999 5.50% 5.82% 5.00%
$50,000-99,999 4.75% 4.99% 4.25%
$100,000-249,999 3.75% 3.90% 3.25%
$250,000-499,999 2.75% 2.83% 2.50%
$500,000-999,999 2.00% 2.04% 1.75%
$1,000,000 and above* 0.00% 0.00% 0.00%**
- ------------------
* Purchases of $1,000,000 or more are at net asset value. However, a contingent
deferred sales charge will be imposed on such investments in the event such
shares are redeemed within 12 months from the date they were purchased. The
contingent deferred sales charge will be imposed at the rate of 1.00% of the
lesser of the current market value of the shares redeemed or the total cost
of such shares and is payable to the Distributor. In determining whether a
contingent deferred sales charge is payable, and, if so, the amount of the
charge, it is assumed that shares not subject to such charge are the first
redeemed.
** There is no initial sales charge on purchases of $1,000,000 or more; however,
the Distributor may pay a dealer concession and/or advance a service fee on
such transactions.
The commissions shown in the tables above apply to sales through financial
institutions. From time to time, some financial institutions, including Summit
Bank and its affiliates, may be reallowed up to the entire sales charge imposed
on the purchase of Class A Shares. Firms that receive a reallowance of the
entire sales charge may be considered underwriters for purposes of federal
securities laws. Commission rates may vary among the Funds.
- --------------------------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS FOR PURCHASES OF CLASS A SHARES
Right of Accumulation
A "single purchaser" (defined below) may benefit from the reduced sales charges
set forth in the foregoing tables for current purchases by adding the amount of
any current purchase with the market value of the Fund that the purchaser
already owns. The calculation of the sales charge for the current purchase will
be based on the combined amount. A single purchaser can also combine purchases
of Class A Shares of different Funds if those Funds are subject to a sales
charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Funds for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Code, including related plans of the
same employer. To be entitled to a reduced sales charge based upon shares
already owned, the investor must identify eligible accounts at the time of
purchase and provide the account number(s) of the investor and, if applicable,
the investor and spouse, their minor children, as well as the ages of such
children. The Trust may amend or terminate this right of accumulation at any
time prior to subsequent purchases.
Letter of Intent
A single purchaser may obtain a reduced sales charge by means of a written
Letter of Intent (a "Letter") that expresses the investor's intention to invest
a specified amount within a 13-month period, which if invested at one time,
would qualify for a reduced sales charge.
A Letter is not a binding obligation upon the investor to purchase the full
amount indicated. An investor must invest, or have already invested, at least
$1,000 in Class A Shares of each applicable Fund when the Letter is submitted.
Only those Funds which are subject to a sales charge are eligible to be counted
towards the amount indicated in the Letter. Five percent of the shares purchased
under a Letter will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge that would have been
applicable to the shares actually purchased if the investor fails to purchase
the amount indicated in the Letter. In such a case, escrowed shares will be
involuntarily redeemed to pay any additional sales charge. When the full amount
indicated in the Letter has been purchased, the escrowed shares will be
released. A Letter may include purchases of shares made within 90 days prior to
the date the investor signs the Letter; however, the 13-month period during
which the Letter is in effect will begin on the date of the earliest purchase.
Waiver of Class A Sales Charges
No sales charge is imposed on Class A Shares of a Fund: (i) issued in plans of
reorganization, such as mergers, asset acquisitions and exchange offers, to
which the Trust is a party; (ii) sold to dealers or brokers that have a sales
arrangement with the Distributor, for their own account or for retirement plans
for their employees; (iii) sold to present employees of dealers or brokers that
certify to the Distributor at the time of purchase that such purchase is for
their own account; (iv) sold to present or retired employees of Summit Bancorp,
or one of its affiliates and/or the spouses of such employees; (v) sold to
present employees of any entity that is a current service provider to the Trust;
(vi) sold to any qualified customer who has entered into an agreement with
Summit Bank, its affiliates or correspondent banks; (vii) sold to present or
retired Trustees of the Trust and their immediate families; (viii) sold to
present or retired Directors of Summit Bancorp or its affiliates, and their
immediate families; (ix) sold to beneficial owners of Class I Shares whose
interests are converted into Class A Shares; (x) purchased within 90 days of a
redemption
- --------------------------------------------------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
of Class A Shares of a non-money market fund (only to the amount of such
redemption); or (xi) sold to 401(k) plans that have entered into service
arrangements with Summit Bank, its affiliates or correspondent banks.
Deferred Sales Charges--Class B
Each of the Funds, except the U.S. Treasury Securities Money Market, Tax-Exempt
Money Market, New Jersey Municipal Securities, Pennsylvania Municipal Securities
and Intermediate-Term Government Securities Funds, offers Class B Shares. In
addition, Class B Shares of the Prime Obligation Money Market Fund may be
purchased directly only by participants in the Systematic Exchange Program,
which is described below.
Class B Shares are offered at their net asset value per share. If you sell
shares within six years of purchase, a contingent deferred sales charge (a
"CDSC") is assessed at the rates set forth below. The CDSC is assessed on the
lesser of the current market value or the initial purchase price of the shares
being redeemed. As a result, no sales charge will be imposed on increases in the
net asset value above the initial purchase price or on shares derived from
reinvestment of dividends or capital gain distributions.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE
OF DOLLAR AMOUNT SUBJECT TO CHARGE
Years Since Purchase CDSC
- -------------------------------------------
1 5.50%
2 5.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
7 0.00%
8 0.00%
Aging Schedule
In determining whether a particular redemption is subject to a CDSC, it is
assumed that Class B Shares are redeemed in the following order: (i) shares held
for over six years or shares acquired through reinvested dividends or capital
gain distributions and (ii) shares held longest during the six year period. This
method should result in the lowest possible sales charge.
Purchases will age based on the trade date of purchase. For example, a purchase
made on January 5 will be one year old on January 5 of the following year.
Waivers of Class B Sales Charges
The CDSC is waived on redemption of shares (i) following the death or disability
(as defined in the Code) of a Shareholder, or (ii) to the extent that the
redemption represents a minimum required distribution from an individual
retirement account or other retirement plan to a Shareholder who has attained
the age of 70 1/2. In addition, Shareholders who automatically reinvest their
dividends and distributions may redeem up to 10% of the value of their shares
each year without imposition of the CDSC. A Shareholder, or his or her
representative, must notify the Transfer Agent prior to the time of redemption
that the Shareholder is eligible for these waivers.
The CDSC is also waived on redemptions of shares held by Trustees, employees and
sales representatives of the Trust, the Distributor, or affiliates of the Trust
or the Distributor, and their immediate family members; employees of any
financial institution that sells shares of the Trust pursuant to a sales
agreement with the Distributor; and spouses and children under the age of 21 of
the aforementioned persons. Also, no CDSC will be imposed on the redemption of
shares originally purchased through a bank trust department, an investment
adviser registered under the Investment Advisers Act of 1940, or retirement
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
plans where the third party administrator has entered into certain arrangements
with the Distributor or any other financial institution, to the extent that no
payments were advanced for purchases made through such entities.
Additionally, shareholders of any mutual fund not affiliated with the Trust who
have paid a sales charge in that mutual fund may purchase Class B Shares of the
Trust, in an amount equal to the proceeds of the redemption of such unaffiliated
shares, by submitting such proceeds to the Distributor together with evidence of
the payment of a sales charge and the source of such proceeds. Purchases must
take place within 30 days of the redemption of the unaffiliated shares. Class B
Shares issued pursuant to this offer will not be subject to a CDSC.
Automatic Conversion of Class B Shares
Class B Shares of a Fund will automatically convert into Class A Shares of that
Fund without a sales charge after eight years from the acquisition of the Class
B Shares. The conversion will take place at the respective net asset values of
each of the classes. At that time the Shares will no longer be subject to the
higher distribution and service fees. When Class B Shares of a Fund convert, any
other Class B Shares that were acquired by the reinvestment of dividends and
distributions attributable to such Shares will also convert into Class A Shares.
Conversions are not taxable events to Shareholders.
How to Purchase Shares
Shares may be purchased directly from the Fund's Distributor or through an
investment professional of a securities broker or other financial institution,
such as Summit Bank, that has entered into a selling agreement with the Trust or
the Distributor. Shares of each Fund are sold on a continuous basis and may be
purchased on any business day that the New York Stock Exchange is open for
trading (a "Business Day"). However, with respect to a Money Market Fund, a
"Business Day" will, in addition, exclude days when the Federal Reserve Bank is
closed.
A purchase order for shares of a Fund will be executed at a per share price
equal to the net asset value next determined after the purchase order is
effective (plus any applicable sales charge in the case of Class A Shares of the
Non-Money Market Funds) (the "offering price").
The net asset value per share of each class of a Fund is determined by dividing
the total value of its investments and other assets that are allocated to that
class, less any liabilities that are allocated to that class, by the class's
total outstanding shares. Although the methodology and procedures are identical,
the net asset value per share of classes within a Fund may differ because of the
classes' different distribution and shareholder service expenses.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust, a Fund or its
Shareholders to accept such order. Investment Strategy Account Agreement
customers (Qualified Customers) should call the Transfer Agent for information
regarding requirements for purchase and redemption orders.
The Money Market Funds: A purchase order for a Money Market Fund will be
effective as of the Business Day received by the Distributor (or Authorized
Broker-Dealer discussed below) if the Distributor (or Authorized Broker-Dealer)
receives the order and payment in federal funds before the Fund calculates its
net asset value, normally 12:00 noon, Eastern time. All other purchase orders
will be effective on the next Business Day.
The net asset value per share for a Money Market Fund is calculated as of the
earlier of 12:00 noon, Eastern time, or the regularly-scheduled close of normal
trading on the New York Stock Exchange each Business Day based on the amortized
cost method as described under "Determination of Net Asset Value" in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
34
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Purchased shares of a Money Market Fund begin earning dividends on the Business
Day the purchase order for those shares is effective.
Non-Money Market Funds: A purchase order for a Non-Money Market Fund will be
effective as of the Business Day received by the Distributor if the Distributor
(or Authorized Broker-Dealer) receives the order and payment before the Fund
calculates its net asset value, normally 4:00 p.m., Eastern time. All other
purchase orders accompanied by payment, except those of certain types of
investors as described below, will be effective the next Business Day. Certain
institutional investors and financial institutions, such as Summit Bank, that
have entered into a settlement agreement with the Distributor, may make payment
in federal funds for purchases of Non-Money Market Funds to the Distributor by
12:00 noon, Eastern time, the Business Day following the effective date of the
trade. A purchase order may be canceled if the Distributor does not
receive federal funds before 12:00 noon, Eastern time, the next Business Day.
The net asset value per share of the Non-Money Market Funds is determined as of
the regularly-scheduled close of normal trading on the New York Stock Exchange
(normally, 4:00 p.m., Eastern time) each Business Day. Purchases will be made in
full and fractional shares of a Fund calculated to three decimal places. A Fund
may use a pricing service to provide market quotations. A pricing service may
use a matrix system of valuation to value fixed income securities which
considers factors such as securities prices, yield features, ratings and
developments related to a specific security.
Purchases Through Investment Professionals
A customer who purchases shares of a Fund through an Investment Professional
should contact that Investment Professional for information about purchasing
shares. Investment Professionals may charge fees for their services that are in
addition to, and unrelated to, the fees and expenses charged by the Funds. In
addition, the Trust has approved Authorized Broker-Dealers to act as the Funds'
agent for the purposes of accepting purchase orders. The Funds will be deemed to
have received a purchase order upon receipt of the order by an Authorized
Broker-Dealer. Other Investment Professionals may impose an earlier cut-off time
for receipt of purchase orders directed through them to allow time for
processing and transmittal of these orders to the Distributor for effectiveness
the same day. In addition, state securities laws may require banks and financial
institutions purchasing shares for their customers to register as dealers
pursuant to state laws.
Investment Requirements
The minimum initial investment is $1,000; however, the minimum initial
investment may be waived at the Distributor's discretion. All subsequent
investments must be at least $100. For investments made through the Automatic
Investment Plan, the minimum initial and subsequent investments must be at least
$50. All purchases made by check must be in U. S. dollars and made payable to
"The Pillar Funds," or in the case of a retirement account, to either the
Custodian or the retirement plan trustee. Third party checks, credit cards,
credit card checks and cash will not be accepted. When purchases are made by
check or Automated Clearing House ("ACH") transfer, redemption proceeds will not
be forwarded until the investment being redeemed has been in the account for 10
Business Days. If the check does not clear, the purchase will be canceled and
the investor could be liable for any losses or fees incurred.
No certificates representing shares will be issued. Customers must specify
whether they intend to purchase Class A or Class B Shares at the time of
investment. If a selection is not made, the investment will be made in Class A
Shares.
- --------------------------------------------------------------------------------
35
<PAGE>
- --------------------------------------------------------------------------------
INVESTING DIRECTLY
Investing by Mail
Investors may purchase shares of a Fund by completing and signing an Account
Application form and mailing it, along with a check (or other negotiable bank
instrument or money order) to:
The Pillar Funds
P.O. Box 8523
Boston, MA 02266-8523
The following address may be used for overnight delivery:
The Pillar Funds
c/o Boston Financial Data Services
Two Heritage Drive
North Quincy, MA 02171-2144
Investors may obtain Account Application forms by calling the Distributor at
1-800-932-7782.
Investing by Telephone
Purchases may be made to an existing account by calling the Distributor at
1-800-932-7782. While telephone transaction privileges are automatic,
Shareholders may specifically request that no telephone transactions be accepted
for their account(s). This election may be made on the Account Application form
at the time of purchase or at any time thereafter by completing and returning
appropriate documentation supplied by the Transfer Agent.
By Wire: Shareholders must call the Distributor before wiring funds. Federal
funds should be wired to:
State Street Bank and Trust Company
ABA #011000028
For Credit To DDA Account #9905-150-0
For Further Credit To Account # (insert account
number, Shareholder name, and control number assigned by the Distributor)
The Trust does not impose a fee for purchase wire transactions, although the
Shareholder's financial institution may charge a fee for this service.
Shares cannot be purchased by Federal Reserve wire on days when either the New
York Stock Exchange or the Federal Reserve is closed.
Orders will not be executed until payment has been received by the Distributor.
By ACH: This service allows the purchase of additional shares through an
electronic transfer of money from a checking or savings account. When an
additional purchase is made by telephone, the Transfer Agent will automatically
debit the pre-designated bank account for the desired amount. Shareholders may
call 1-800-932-7782 to request an Optional Services Form to establish this
option.
By Automatic Investment Plan: A Shareholder may also arrange for periodic
additional investments in the Funds through automatic deductions by ACH transfer
by completing an Optional Services Form. The minimum pre-authorized investment
amount is $50 per month. Customers may call 1-800-932-7782 to request an
Optional Services Form to establish an Automatic Investment Plan.
Any employee of Summit Bancorp or any of its affiliates who elects to
participate in the Trust's Automatic Investment Plan for the purchase of Class A
shares of any of the Trust's portfolios, excluding the Money Market Funds,
through an investment counselor of Summit Bank's Summit Financial Services Group
will receive $50 worth of shares of the portfolio of the Trust selected by the
investor. The offer is subject to the following additional conditions: (i)
limited to one payment per household and to one payment in the case of joint
accounts; (ii) Summit Bank must furnish to the Distributor the names and
addresses of each purchaser; and (iii) the offer may be terminated (as to
persons who have not yet purchased shares at the time of termination) at
- --------------------------------------------------------------------------------
36
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
any time by the Distributor without prior notice. The Distributor will not be
reimbursed by the Trust for any payment made pursuant to this offer.
Retirement Plans
The Funds may be used as part of a retirement portfolio. Investors can establish
their account under one of several tax-sheltered plans. Investors should contact
their Investment Professional or the Distributor at 1-800-932-7782 for details
regarding an IRA or other retirement plan.
How to Exchange Shares
Each portfolio of the Trust, other than the U.S. Treasury Securities Plus Money
Market Fund, (collectively, the "Eligible Funds") is eligible for exchange with
any other Eligible Fund.
Class A Shares of an Eligible Fund may be exchanged only for Class A Shares of
another Eligible Fund, usually without paying an additional sales charge.
However, exchanges from Class A Shares of an Eligible Money Market Fund, which
were purchased directly, to Class A Shares of an Eligible Non-Money Market Fund
are made at net asset value plus the appropriate sales load for that Eligible
Non-Money Market Fund.
Class B Shares of one Eligible Fund may be exchanged only for Class B Shares of
another Eligible Fund. Exchanges are made at relative net asset value per share
without the imposition at that time of a CDSC. For purposes of determining the
"age" of exchanged shares, exchanges will be treated as a transaction involving
a redemption of the original Eligible Fund followed by a purchase of the new
Eligible Fund, and shares will be exchanged in the same order as determined by
the aging hierarchy above (See "Aging Schedule"). The aging of Class B Shares
will continue uninterrupted regardless of an exchange.
If an exchange request is received in good order by the Transfer Agent by 4:00
p.m., Eastern time, on any Business Day, the exchange usually will occur on that
day. Exchanges are regarded as sales for federal and state income tax purposes
and could result in a gain or loss depending on the original cost of the shares
exchanged.
To exchange shares, several conditions must be met:
1. After the exchange is complete, the Shareholder must have at least $1,000
(the minimum account balance) in the new Eligible Fund.
2. Shares of Eligible Funds can only be exchanged between accounts with
identical registrations and tax identification numbers.
3. Shares in the original Eligible Fund must be held at least 10 Business Days
before an exchange can be made. Shares can be exchanged on any Business Day.
4. Shares of the new Eligible Fund selected for exchange must be available for
sale in the Shareholder's state of residence.
5. Shareholders should have received the prospectus for the new Eligible Fund
prior to initiating an exchange.
6. The prospectuses of both Eligible Funds involved in the exchange must offer
the exchange privilege.
By Mail: An exchange will be honored by a written letter of request to the
Transfer Agent if signed by all registered owners of the account.
By Telephone: Telephone exchange requests may be made by Shareholders either
calling the Transfer Agent at 1-800-932-7782 or contacting their Investment
Professional. See "Investing Directly--Investing by Telephone" above for a
description of telephone transaction privileges.
Systematic Exchange Program
Shares of the Funds also may be exchanged through automatic monthly deductions
from an investor's account for the same class of shares of the Trust.
- --------------------------------------------------------------------------------
37
<PAGE>
- --------------------------------------------------------------------------------
Under the Systematic Exchange Program, an investor initially purchases Class A
or Class B Shares of the Prime Obligation Money Market Fund in an amount equal
to the total amount of the investment the investor desires to make in the same
class of shares of a different portfolio of the Trust. On a monthly basis, a
specified dollar amount of the Prime Obligation Money Market Fund shares is
exchanged for shares of the same class of a specified Eligible Fund. Exchange of
Class A Shares will be subject to the applicable sales charge imposed by the
Eligible Fund and, accordingly, it may be beneficial for an investor to execute
a Letter in connection with a Class A Shares Systematic Exchange Program.
Exchanges of Class B Shares are not subject to a CDSC. The Systematic Exchange
Program of investing a fixed dollar amount at regular intervals over time in an
Eligible Fund may have the effect of reducing the average cost per share of the
shares of the Eligible Fund acquired. This effect may also be achieved through
the Trust's Automatic Investment Plan, which is described in the applicable
prospectuses. A Shareholder may apply for participation in the Systematic
Exchange Program through the Distributor or his or her Investment Professional.
Shares purchased through the Systematic Exchange Program are subject to the
conditions listed under "How to Exchange Shares," however, such shares are not
subject to the Trust's minimum investment limitations. Exchanges are considered
taxable events for Shareholders. If a Shareholder redeems, rather than
exchanges, Class B Shares of the Prime Obligation Money Market Fund, such shares
will be subject to the applicable CDSC.
How to Redeem Shares
Shares may be redeemed on any Business Day directly from the Transfer Agent or
through an Investment Professional. Each Fund intends to pay cash for all shares
redeemed, but under abnormal conditions that make payment in cash unwise,
payment may be made wholly or partly in portfolio securities with a market value
equal to the redemption price less any applicable CDSC. In such cases, an
investor may incur brokerage costs in converting such securities to cash.
When purchases are made by check or by ACH transfer, redemption proceeds will
not be forwarded until the investment being redeemed has been in the account for
10 Business Days. Otherwise, payment to Shareholders for shares redeemed will be
made as promptly as possible and, in any event, within seven days after the
Transfer Agent receives the redemption request in good order. A Shareholder may
request that the redemption proceeds are paid by check, by federal funds wire or
by ACH transfer.
A redemption order for shares of a Fund will be executed at a price per share
equal to the net asset value next determined after receipt of the redemption
order by the Transfer Agent (minus any applicable CDSC).
Money Market Funds: A redemption order for a Money Market Fund will be effective
as of the Business Day received by the Transfer Agent (or Authorized
Broker-Dealer discussed below) if the Transfer Agent (or Authorized
Broker-Dealer) receives the order before the Fund calculates its net asset value
(normally, 12:00 noon, Eastern time) on such Business Day and the proceeds are
to be sent in federal funds. Redemption orders received after the Fund
calculates its net asset value or that request proceeds to be delivered by check
or ACH transfer will be effective the following Business Day.
Non-Money Market Funds: A redemption order for a Non-Money Market Fund will be
effective as of the Business Day received by the Transfer Agent if the Transfer
Agent receives the order before the Fund calculates its net asset value
(normally, 4:00 p.m., Eastern time). Requests received after the Fund calculates
its net asset value will be effective on the next Business Day.
- --------------------------------------------------------------------------------
38
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Redemptions Through Investment Professionals
Shareholders should contact their Investment Professional for information about
redeeming shares of a Fund and any charges for services provided by the
Investment Professional. In addition, the Trust has approved Authorized
Broker-Dealers to act as the Funds' agent for the purposes of accepting
redemption requests. The Funds will be deemed to have received a redemption
request upon receipt of the request by an Authorized Broker-Dealer. Other
Investment Professionals may impose an earlier cut-off for receipt of redemption
orders directed through them to allow time for processing and transmittal of
these orders to the Transfer Agent for effectiveness the same Business Day.
By Mail: Shareholders may redeem shares of a Fund by mailing a letter of
instruction signed by all registered owners exactly as their names appear in the
registration to:
The Pillar Funds
P.O. Box 8523
Boston, MA 02266-8523
The following address may be used for overnight delivery:
The Pillar Funds
c/o Boston Financial Data Services
Two Heritage Drive
North Quincy, MA 02171-2144
A signature guarantee is required if any of the following conditions apply: (i)
the redemption is for more than $10,000 worth of shares, (ii) the redemption
check is payable to other than the Shareholder(s) of record, (iii) the
redemption check is mailed to other than the Shareholder(s) address of record,
or (iv) the redemption proceeds are to be forwarded by federal funds wire or ACH
transfer to a financial institution not pre-designated on the account. A
signature guarantee can be obtained from a commercial bank, a trust company, a
member firm of a domestic stock exchange or a member of a securities transfer
association medallion program. A signature guarantee cannot be provided by a
notary public. A signature guarantee is designed to protect the Shareholders,
the Trust and its agents from fraud.
To determine if any additional documentation may be required to consider a
redemption request in good order, Shareholders should contact their Investment
Professional or the Transfer Agent.
By Telephone: To redeem shares by telephone, Shareholders should call the
Transfer Agent at 1-800-932-7782. See "Investing Directly--Investing by
Telephone" above for a description of telephone transaction privileges. Neither
the Trust nor the Transfer Agent will be responsible for any loss, liability,
cost or expense for acting upon instructions that it reasonably believes to be
genuine. The Trust and the Transfer Agent will each employ reasonable procedures
to confirm that instructions communicated by telephone are genuine. If market
conditions are extraordinarily active, or other extraordinary circumstances
exist, Shareholders who experience difficulties placing redemption orders by
telephone may wish to consider placing the redemption order by other means.
By Check: Shares may be redeemed by check to the address of record for most
requests under $10,000. Requests received by the Transfer Agent by 4:00 p.m.,
Eastern time, will be processed that Business Day, and the check will be mailed
the following Business Day. For more information, call the Transfer Agent at
1-800-932-7782.
By Wire: Shares may be redeemed by federal funds wire and sent to a
pre-designated bank account. Shareholders may call 1-800-932-7782 to request an
Optional Services Form to establish this option.
For the Money Market Funds, a wire will be sent the Business Day that the
redemption request is effective. For Non-Money Market Funds, a wire will be sent
the Business Day after the redemption request is effective.
- --------------------------------------------------------------------------------
39
<PAGE>
- --------------------------------------------------------------------------------
The Trust reserves the right to assess a wire redemption charge, currently
$10.00, for this transaction, which will be deducted from the redemption
proceeds. The Shareholder's receiving financial institution may also impose a
fee.
By ACH: Shares may be redeemed by ACH transfer and sent to a pre-designated
financial institution account. Shareholders may call 1-800-932-7782 to request
an Optional Services Form to establish this option. ACH transfers of redemption
proceeds may take up to two Business Days to credit to the Shareholder's
financial institution.
The Trust does not charge for ACH transfers, but the Shareholder's receiving
financial institution may charge for this service.
By Systematic Withdrawal Plan: Shareholders with an account value of at least
$2,000 may elect to receive automatic distributions of $50 or more by
establishing a Systematic Withdrawal Plan. Distributions can be received either
by check or ACH transfer on a monthly, quarterly, semi-annual or annual basis.
To participate in a Systematic Withdrawal Plan, Shareholders must elect to have
all dividends and distributions reinvested in additional shares.
Shareholders who have attained the age of 70 1/2 may want to establish a
Systematic Withdrawal Plan as a convenient means to satisfy mandatory
distribution requirements from a retirement plan.
It is not generally in the best interest of a Shareholder to participate in a
Systematic Withdrawal Plan at the same time that he or she is purchasing
additional Class A Shares if those purchases are subject to a sales load. In
addition, it may not be in the best interest of a Class B Shareholder to
participate in a Systematic Withdrawal Plan when Class B Shares are subject to a
CDSC.
Shareholders may obtain an Optional Services Form to establish a Systematic
Withdrawal Plan by calling the Transfer Agent at 1-800-932- 7782.
Checkwriting Privilege
A Shareholder in the Class A Shares of a Money Market Fund may redeem shares by
writing checks for $500 or more on an existing account. Once a Shareholder has
signed and returned a signature card, a supply of checks will be issued. The
checks may be made payable to any person or entity and the Shareholder's account
will continue to earn dividends until the check clears.
Because of the difficulty of determining in advance the exact value of a Fund
account, a Shareholder may not use a check to close his or her account. There is
no fee for the Checkwriting Privilege, but if payment on a check is stopped upon
the Shareholder's request, or if the check cannot be honored because of
insufficient funds or other valid reasons, the Trust reserves the right to
assess a fee against the Shareholder's account for any expenses incurred by the
Trust.
Minimum Balance Requirements
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem (with the exception of a retirement account) the
shares of any Shareholder if, because of redemptions of shares by or on behalf
of the Shareholder, the account of such Shareholder in that Fund has a value of
less than $1,000, the minimum initial purchase amount. Before a Fund exercises
its right to redeem such shares and sends the proceeds to the Shareholder, the
Shareholder will be given 60 days' notice to reestablish the minimum balance. If
the balance does not increase within 60 days, the account may be closed and the
proceeds mailed to the address of record. Shares will be redeemed at the last
calculated net asset value on the day the account is closed.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
- --------------------------------------------------------------------------------
40
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
PERFORMANCE
Computation of Yield
From time to time, the Money Market Funds may advertise "current yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "current yield" of a Money
Market Fund refers to the income generated by an investment in the Fund over a
seven-day period (which period will be stated in the advertisement). This income
is then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The "effective yield" will be slightly higher than the
"current yield" because of the compounding effect of this assumed reinvestment.
The Fixed Income Funds may also advertise yield and total return (described
below). The yield of a Fixed Income Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The yield
is calculated by assuming that the income generated by the investment during
that period is generated over one year and is shown as a percentage of the
investment.
The Tax-Exempt Money Market, New Jersey Municipal Securities and Pennsylvania
Municipal Securities Funds 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 respective
Fund's yield, assuming certain tax brackets for a Shareholder.
Computation of Total Return
Each of the Fixed Income, Equity and Balanced Funds may also advertise total
return. Total return figures are based on historical earnings and are not
intended to indicate future performance.
The total return of a Fund refers to the average compounded rate of return on a
hypothetical investment, net of any initial or contingent deferred sales charge,
for designated time periods (including, but not limited to, the period from
which the Fund commenced operations through the specified date), assuming that
the entire investment is redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain distributions.
A Fund may periodically compare its performance to that of: (i) other mutual
funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives. A Fund may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of risk
adjusted performance. A Fund may use long-term performance of the capital
markets to demonstrate general long-term risk versus reward scenarios and could
include the value of a hypothetical investment in any of the capital markets. A
Fund may also quote financial and business publications and periodicals as they
relate to fund management, investment philosophy and investment techniques.
A Fund may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
- --------------------------------------------------------------------------------
41
<PAGE>
- --------------------------------------------------------------------------------
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial
or administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of a Fund or its
Shareholders. Accordingly, Shareholders are urged to consult their tax advisors
regarding specific questions as to federal, state and local income taxes.
Tax Status of the Funds
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other investment portfolios. Each Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies under Subchapter M of the Code, so as to be relieved of federal income
tax on that part of its net investment income and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) which is
distributed to Shareholders.
Tax Status of Distributions
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders.
Dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares and will not qualify for
the dividends-received deduction otherwise available to corporate shareholders.
Any dividends from net capital gain (the excess of net long-term capital gain
over net short-term capital loss) will be distributed annually and will be
treated as a 20% rate gain distribution (taxed at a rate of 20%) or a 28% rate
gain distribution (taxed at a rate of 28%), depending upon the designation by
the Fund (such designation being dependent upon the holding period of the Fund
in the underlying asset generating the net capital gain), regardless of how long
the Shareholder has held the Fund's shares. Capital gains distributions also
will not qualify for the dividends received deduction. Each Fund will make
annual reports to Shareholders of the federal income tax status of all
distributions.
Interest received on direct U.S. Government obligations that is exempt from tax
at the state level when received directly may be exempt, depending on the state,
when received by a Shareholder from a Fund, provided certain conditions are
satisfied. Interest received on repurchase agreements normally is not exempt
from state taxation. Each Fund annually will inform Shareholders of the
percentage of income and distributions derived from direct U.S. Government
obligations. Shareholders should consult their tax advisors to determine whether
any portion of the income dividends received from a Fund is considered
tax-exempt in their particular states.
Certain securities purchased by the Funds (such as STRIPs, TRs, TIGRs and CATs,
defined under "Description of Permitted Investments -- Derivatives") are sold at
original issue discount and thus generally do not make periodic cash interest
payments. A Fund will be required to include as part of its current income the
accreted interest on such obligations even though the Fund has not received any
interest payments on such obligations during that period. Because each Fund
distributes all of its net investment income to its Shareholders, a Fund may
have to sell portfolio securities to distribute such imputed income which may
occur at a time when the Advisor or Sub-Advisor would not have chosen to sell
such securities and which may result in a taxable gain or loss.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in these months will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 if
paid by the Fund at any time during the following January.
Each Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
The sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
- --------------------------------------------------------------------------------
42
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Generally, gain or loss on the sale, exchange or redemption of a share will be
capital gain or loss which will be long-term if the share has been held for more
than eighteen months, mid-term if the share has been held for more than twelve,
but not more than eighteen months and otherwise will be short-term. 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 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
loss from the sale or exchange of a capital asset held for more than twelve
months to the extent of the amount of the prior capital gains distribution (or
any undistributed net capital gains of the Fund which 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). Investors should
particularly note that this loss disallowance rule will apply to shares received
through the reinvestment of dividends during the 61-day period.
Income derived by a Fund from obligations of foreign issuers may be subject to
foreign withholding taxes. The Funds will not be able to elect to treat
Shareholders as having paid their proportionate share of such foreign taxes.
Additional Considerations for the New Jersey Municipal Securities and
Pennsylvania Municipal Securities Funds
The New Jersey Municipal Securities and Pennsylvania Municipal Securities Funds
will each distribute all of their net investment income (including net
short-term capital gain) to their respective Shareholders. If, at the close of
each quarter of its taxable year, at least 50% of the value of a Fund's assets
consist of obligations the interest on which is excludable from gross income,
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 federal income tax purposes, but may have
collateral consequences.
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 a Fund to purchase sufficient amounts of tax-exempt securities to
satisfy the Code's requirements for the payment of "exempt-interest dividends."
Interest on indebtedness incurred or continued by a Shareholder in order to
purchase or carry shares of the New Jersey Municipal Securities and Pennsylvania
Municipal Securities Funds is not deductible for federal income tax purposes.
Furthermore, these Funds may not be an appropriate investment for persons
(including corporations and other business entities) who are "substantial users"
(or persons related to "substantial users") of facilities financed by industrial
development private activity
- --------------------------------------------------------------------------------
43
<PAGE>
- --------------------------------------------------------------------------------
bonds. Such persons should consult their tax advisors before purchasing shares.
A "substantial user" is defined generally to include "certain persons" who
regularly use in their trade or business a part of a facility financed from the
proceeds of such bonds.
New Jersey Tax Considerations
Investors of the New Jersey Municipal Securities Fund will not be subject to the
New Jersey Gross Income Tax on distributions from the Fund attributable to
interest income from (and net gain, if any, from the disposition of) New Jersey
Municipal Securities or obligations of the United States, its territories and
possessions and certain of its agencies and instrumentalities ("Federal
Securities") held by the Fund, either when received by the Fund or when credited
or distributed to the investors, provided that the Fund meets the requirements
for a qualified investment fund by: 1) maintaining its registration as a
registered investment company with the SEC; 2) investing at least 80% of the
aggregate principal amount of the Fund's investments, excluding financial
options, futures, forward contracts, or other similar financial instruments
relating to interest-bearing obligations, obligations issued at a discount or
bond indexes related thereto to the extent such instruments are authorized under
the regulated investment company rules under the Code, cash and cash items,
which cash items shall include receivables, in New Jersey Municipal Securities
or Federal Securities at the close of each quarter of the tax year; 3) investing
100% of its assets in interest-bearing obligations, discount obligations, cash
and cash items, including receivables, financial options, futures, forward
contracts or other similar financial instruments relating to interest-bearing
obligations, discount obligations or bond indexes related thereto; and 4)
complying with certain continuing reporting requirements.
For New Jersey Gross Income Tax purposes, net income or gains and distributions
derived from investments in other than New Jersey Municipal Securities and
Federal Securities, and distributions from net realized capital gains in respect
of such investments, will be taxable. Gain on the disposition of shares is not
subject to New Jersey Gross Income Tax, provided that the Fund meets the
requirements for a qualified investment fund set forth above.
Pennsylvania Tax Considerations
For purposes of the Pennsylvania Personal Income Tax and the Philadelphia School
District Investment Net Income Tax, distributions which are attributable to
interest received by the Pennsylvania Municipal Securities Fund from its
investments in Pennsylvania Municipal Securities or Federal Securities are not
taxable. Distributions by the Fund to a Pennsylvania resident that are
attributable to most other sources may be subject to the Pennsylvania Personal
Income Tax and (for residents of Philadelphia) to the Philadelphia School
District Investment Net Income Tax.
Distributions paid by the Fund which are excludable as exempt income for federal
tax purposes are not subject to the Pennsylvania corporate net income tax. An
additional deduction from Pennsylvania taxable income is permitted for the
amount of distributions paid by the Fund attributable to interest received by
the Fund from its investments in Pennsylvania Municipal Securities and Federal
Securities to the extent included in federal taxable income, but such a
deduction is reduced by any interest on indebtedness incurred to carry the
securities and other expenses incurred in the production of such interest
income, including expenses deducted on the federal income tax return that would
not have been allowed under the Code if the interest were exempt from federal
income tax. Distributions by the Fund attributable to most other sources may be
subject to the Pennsylvania corporate net income tax. It is the current position
of the Pennsylvania Department of Revenue that Fund shares are considered exempt
assets (with a pro rata exclusion based on the value of the Fund attributable to
its investments in Pennsylvania Municipal Securities and Federal Securities) for
purposes of determining a corporation's capital stock value subject to the
Commonwealth's capital stock or franchise tax.
Shares purchased as an investment in the Pennsylvania Municipal Securities Fund
are exempt
- --------------------------------------------------------------------------------
44
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
from Pennsylvania county personal property taxes to the extent that the Fund's
investments consist of obligations which are themselves exempt from taxation in
Pennsylvania.
The Fund intends to invest primarily in obligations which produce interest
exempt from federal and Pennsylvania taxes. If the Fund invests in obligations
that are not exempt for Pennsylvania purposes but are exempt for federal
purposes, a portion of the Fund's distributions will be subject to Pennsylvania
Personal Income Tax.
GENERAL INFORMATION
The Trust
The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated Sep-tember 9, 1991. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each portfolio. In
addition to the Funds, the Trust currently consists of the U.S. Treasury
Securities Plus Money Market Fund, Institutional Select Money Market Fund,
International Growth Fund and Mid Cap Fund. Shares of the portfolios are offered
through up to four separate classes of Shares (Class A, B, I and S). All
consideration received by the Trust for shares of any portfolio and all assets
of such portfolio belong to that portfolio and would be subject to liabilities
related thereto.
Each Fund pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services, registering the shares
under federal laws and filing with state securities commissions, pricing,
insurance expenses, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses.
The Advisor, in addition to providing investment advice to the Trust, provides
investment advice to other clients. Some of these clients' funds are maintained
in asset allocation accounts and may be invested in the Funds. From time to
time, the Funds may experience relatively large purchases or redemptions due to
asset allocation decisions made by the Advisor for its clients. These
transactions may have a material effect on the Funds, since Funds that
experience redemptions as a result of reallocations may have to sell portfolio
securities and because Funds that receive additional cash will have to invest
it. While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on portfolio management to the extent
that Funds may be required to sell securities at times when they would not
otherwise do so, or receive cash that cannot be invested in an expeditious
manner. There may be tax consequences associated with purchases and sales of
securities, and such sales may also increase transaction costs. The Advisor is
committed to minimizing the impact of these transactions on the Funds to the
extent it is consistent with pursuing the investment objectives of its asset
allocation decisions on the Funds.
Trustees of the Trust
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
Voting Rights
Each share held entitles a Shareholder of record to one vote. The Shareholders
of each Fund or class will vote separately on matters relating solely to that
Fund or class. As a Massachusetts business trust, the Trust is not required to
hold annual meetings of Shareholders, but approval will be sought for certain
changes in the operation of the Trust and for the election of Trustees under
certain circumstances. In addition, a Trustee may be removed by the remaining
Trustees or by Shareholders at a special meeting called upon written request of
Shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested, the Trust will provide appropriate
assistance and
- --------------------------------------------------------------------------------
45
<PAGE>
- --------------------------------------------------------------------------------
information to the Shareholders requesting the meeting.
Reporting
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
Shareholder Inquiries
Shareholder inquiries should be directed to The Pillar Funds, P.O. Box 8523,
Boston, MA 02266-8523.
Dividends
Cash Sweep Shareholders automatically receive all income dividends and capital
gain distributions in cash. All other Shareholders automatically receive all
income dividends and capital gain distributions in Class A Shares or Class B
Shares, as appropriate, at the net asset value next determined following the
record date, unless the Shareholder has elected to take such payment in cash.
Cash Sweep Shareholders should refer to the Trust's cash sweep prospectus for
more information. Shareholders may change their election by providing written
notice to the Administrator at least 15 days prior to the distribution. If any
capital gain is realized, substantially all of it will be distributed at least
annually.
Dividends and distributions of each Fund are paid on a per-share basis. The
value of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
The amount of dividends payable on Class A Shares and Class B Shares will be
less than the dividends payable on Class I Shares because of the distribution
expenses charged to Class A and Class B Shares.
The Money Market Funds: The net investment income (exclusive of capital gains)
of each Money Market Fund is determined and declared on each Business Day as a
dividend to Shareholders of record as of the close of business on that day.
Dividends are paid by the Funds on or about the first Business Day of the
following month. Redeemed shares are not entitled to dividends declared the day
the redemption order is effective.
The Fixed Income Funds: Each Fixed Income Fund declares dividends of
substantially all of its net investment income (exclusive of capital gains)
daily and distributes such dividends on or about the first Business Day of the
following month. Shares purchased begin earning dividends on the Business Day
following the date of purchase, and accrue dividends through and including the
effective date of redemption.
The Equity and Balanced Funds: Substantially all of the net investment income
(not including capital gains) of each Equity and Balanced Fund is distributed in
the form of quarterly dividends to Shareholders of record on the next to last
Business Day of each quarter.
Counsel and Independent Public Accountants
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain permitted investments and associated
risk factors for the Funds:
AMERICAN DEPOSITARY RECEIPTS ("ADRS"), EUROPEAN DEPOSITARY RECEIPTS ("EDRS"),
CONTINENTAL DEPOSITARY RECEIPTS ("CDRS") AND GLOBAL DEPOSITARY RECEIPTS
("GDRS")--ADRs are securities, typically issued by a U.S. financial institution
(a "depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
include American Depositary Shares and New York Shares. EDRs, which are
sometimes referred to as Continental Depositary Receipts, are securities,
typically issued by a non-U.S. financial institution, that evidence ownership
interests in a security or a pool of securities issued by either a U.S. or
foreign issuer. GDRs are issued globally and evidence a
- --------------------------------------------------------------------------------
46
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
similar ownership arrangement. Generally, ADRs are designed for trading in the
U.S. securities markets, EDRs are designed for trading in European securities
markets and GDRs are designed for trading in non-U.S. securities markets. ADRs,
EDRs, CDRs and GDRs may be available for investment through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the security underlying the receipt and a depositary, whereas an
unsponsored facility may be established by a depositary without participation by
the issuer of the receipt's underlying security. Holders of an unsponsored
depositary receipt generally bear all the costs of the unsponsored facility. The
depositary of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
security or to pass through to the holders of the receipts voting rights with
respect to the deposited securities.
ASSET-BACKED SECURITIES--Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities. Asset-backed securities
entail prepayment risk, which may vary depending on the type of asset, but is
generally less than the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are unsecured obligations of
the card holder. The market for asset-backed securities is at a relatively early
stage of development. Accordingly, there may be a limited secondary market for
such securities.
BANKERS ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. They 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 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 the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES--Convertible securities are corporate securities that are
exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provisions.
- --------------------------------------------------------------------------------
47
<PAGE>
- --------------------------------------------------------------------------------
DERIVATIVES--Derivatives are securities that derive their value from other
securities, financial instruments or indices. The following are considered
derivative securities: options on futures, futures, options (e.g., puts and
calls), swap agreements, mortgage-backed securities (e.g., collateralized
mortgage obligations ("CMOs"), real estate mortgage investment conduits
("REMICs"), interest-only class ("IOs") and principal-only class ("POs")),
when-issued securities and forward commitments, floating and variable rate
securities, convertible securities, "stripped" U.S. Treasury securities (e.g.,
Receipts and STRIPs), and privately issued stripped securities (e.g., TGRs, TRs
and CATs). See elsewhere in this "Description of Permitted Investments" for
discussions of these various instruments, and see "Investment Objectives and
Policies" for more information about any investment policies and limitations
applicable to their use.
EQUITY SECURITIES--Equity securities represent ownership interests in a company
and consist of common stocks, preferred stocks, warrants to acquire common stock
and securities convertible into common stock. Investments in equity securities
in general are subject to market risks that may cause their prices to fluctuate
over time. The value of convertible equity securities is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provision. Fluctuations in the value of equity securities in which a Fund
invests will cause the net asset value of a Fund to fluctuate.
FIXED INCOME SECURITIES--Fixed income securities consist of bonds, notes,
debentures and other interest-bearing securities that represent indebtedness.
The market value of the fixed income investments in which a 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 a Fund's net asset value.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS--A Fund may enter into
contracts for the purchase or sale of securities, including index contracts. A
purchase of a futures contract means the acquisition of a contractual right to
obtain delivery to the Fund of the securities called for by the contract at a
specified price during a specified future month. When a futures contract on
securities is sold, a Fund incurs a contractual obligation to deliver the
securities underlying the contract at a specified price on a specified date
during a specified future month. A Fund may sell stock index futures contracts
in anticipation of, or during a market decline to attempt to offset the decrease
in market value of its common stocks that might otherwise result; and it may
purchase such contracts in order to offset increases in the cost of common
stocks that it intends to purchase. A Fund may enter into futures contracts and
options thereon to the extent that not more than 5% of the Fund's assets are
required as futures contract margin deposits and premiums on options and may
engage in futures contracts to the extent that obligations relating to such
futures contracts represent not more than 20% of the Fund's total assets.
A Fund may also purchase and write options to buy or sell futures contracts. A
Fund may write options on futures only on a covered basis. Options on futures
are similar to options on securities except that options on futures give the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract, rather than actually to purchase or sell the futures contract,
at a specified exercise price at any time during the period of the option.
When a Fund enters into a futures transaction it must deliver to the futures
commission merchant
- --------------------------------------------------------------------------------
48
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
selected by the Fund an amount referred to as "initial margin." This amount is
maintained in a segregated account at the custodian bank. Thereafter, a
"variation margin" may be paid by the Fund to, or drawn by the Fund from, such
account in accordance with controls set for such accounts, depending upon
changes in the price of the underlying securities subject to the futures
contract. In addition, a Fund will segregate liquid assets and/or cash in an
amount equal to its obligations under such contract. A Fund will enter into such
futures and options on futures transactions on domestic exchanges and, to the
extent such transactions have been approved by the Commodity Futures Trading
Commission for sale to customers in the United States, on foreign exchanges.
Options and futures can be volatile investments and involve certain risks. If
the Advisor applies a hedge at an inappropriate time or judges interest rates
incorrectly, options and futures strategies may lower a Fund's return. A Fund
could also experience losses if the prices of its options and futures positions
were poorly correlated with its other instruments, or if it could not close out
its positions because of an illiquid secondary market.
ILLIQUID SECURITIES--Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at which they are being
carried on a Fund's books. Not more than 10% of the net assets of a Money Market
Fund or 15% of the net assets of a Non-Money Market Fund will be invested in
such instruments. An illiquid security includes a demand instrument with a
demand notice period exceeding seven days, if there is no secondary market for
such security. Restricted securities, including Rule 144A securities, that meet
the criteria established by the Trustees of the Trust will be considered liquid.
INVESTMENT COMPANIES--A Fund may invest up to 10% of its total assets in shares
of other investment companies. Because of restrictions on direct investment by
U.S. entities in certain countries, investment in other investment companies may
be the most practical or only manner in which an international and global fund
can invest in the securities markets of those countries. Such investments may
involve the payment of substantial premiums above the net asset value of such
issuers' fund securities, and are subject to limitations under the 1940 Act.
A Fund does not intend to invest in other investment companies unless, in the
judgment of the Advisor, the potential benefits of such investment exceed the
associated costs relative to the benefits and costs associated with direct
investments in the underlying securities. As a shareholder in an investment
company, a Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees.
JUNK BONDS--Bonds rated below investment grade are often referred to as "junk
bonds." Such securities involve greater risk of default or price declines than
investment grade securities due to changes in the issuer's creditworthiness and
the outlook for economic growth. The market for these securities may be less
active, causing market price volatility and limited liquidity in the secondary
market. This may limit a Fund's ability to sell such securities at their market
value. In addition, the market for these securities may also be adversely
affected by legislative and regulatory developments. Credit quality in the junk
bond market can change suddenly and unexpectedly, and even recently issued
credit ratings may not fully reflect the actual risks imposed by a particular
security.
MONEY MARKET SECURITIES--Money market securities include short-term U.S.
Government Securities; custodial receipts evidencing separately traded interest
and principal components of securities issued by the U.S. Treasury; commercial
paper rated in the highest short-term rating category by an NRSRO or determined
by the Advisor to be of comparable quality at the time of purchase; short-term
bank obligations (certificates of deposit, time deposits and bankers'
acceptances) of U.S. commercial banks with assets of at least $1 billion as
- --------------------------------------------------------------------------------
49
<PAGE>
- --------------------------------------------------------------------------------
of the end of their most recent fiscal year; and repurchase agreements involving
such securities.
MORTGAGE-BACKED SECURITIES--Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed-rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
Government Pass-Through Securities: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, Fannie Mae and FHLMC. Fannie Mae and FHLMC obligations are
not backed by the full faith and credit of the U.S. Government as GNMA
certificates are, but Fannie Mae and FHLMC securities are supported by the
instrumentalities right to borrow from the U.S. Treasury. GNMA, Fannie Mae and
FHLMC each guarantees timely distributions of interest to certificate holders.
GNMA and Fannie Mae also each guarantees timely distributions of scheduled
principal. FHLMC has in the past guaranteed only the ultimate collection of
principal of the underlying mortgage loan; however, FHLMC now issues
mortgage-backed securities (FHLMC Gold PCS) which also guarantee timely payment
of monthly principal reductions. Government and private guarantees do not extend
to the securities value, which is likely to vary inversely with fluctuations in
interest rates.
Private Pass-Through Securities: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include CMOs and
REMICs that are rated in one of the top two rating categories. While they are
generally structured with one or more types of credit enhancement, private
pass-through securities typically lack a guarantee by an entity having the
credit status of a governmental agency or instrumentality.
CMOs: CMOs are debt obligations or multi-class pass-through certificates issued
by agencies or instrumentalities of the U.S. Government or by private
originators or investors in mortgage loans. In a CMO, series of bonds or
certificates are usually issued in multiple classes. Principal and interest paid
on the underlying mortgage assets may be allocated among the several classes of
a series of a CMO in a variety of ways. Each class of a CMO, often referred to
as a "tranche," is issued with a specific fixed or floating coupon rate and has
a stated maturity or final distribution date. Principal payments on the
underlying mortgage assets may cause CMOs to be retired substantially earlier
than their stated maturities or final distribution dates, resulting in a loss of
all or part of any premium paid.
REMICs: A REMIC is a CMO that qualifies for special tax treatment under the Code
and invests in certain mortgages principally secured by interests in real
property. Investors may purchase beneficial interests in REMICs, which are known
as "regular" interests, or "residual" interests. Guaranteed REMIC pass-through
certificates ("REMIC Certificates") issued by Fannie Mae or FHLMC represent
beneficial ownership interests in a REMIC trust consisting principally of
mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed mortgage pass-through
certificates. For FHLMC REMIC Certificates, FHLMC guarantees the timely payment
of interest, and also guarantees the payment of principal as payments are
required to be made on the underlying mortgage participation certificates.
Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. GNMA REMIC Certificates
are
- --------------------------------------------------------------------------------
50
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
supported by the full faith and credit of the U.S. Treasury.
Parallel Pay Securities; PAC Bonds: Parallel pay CMOs and REMICs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which must be retired by
its stated maturity date or final distribution date, but may be retired earlier.
Planned Amortization Class CMOs ("PAC Bonds") generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.
REITs: REITs are trusts that invest primarily in commercial real estate or real
estate-related loans. The value of interests in REITs may be affected by
the value of the property owned or the quality of the mortgages held by the
trust.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an IO while the other class may
receive all of the principal payments and is thus termed the PO. The value of
IOs tends to increase as rates rise and decrease as rates fall; the opposite is
true of POs. SMBs are extremely sensitive to changes in interest rates because
of the impact thereon of prepayment of principal on the underlying mortgage
securities and can experience wide swings in value in response to changes in
interest rates and associated mortgage prepayment rates. During times when
interest rates are experiencing fluctuations, such securities can be difficult
to price on a consistent basis. The market for SMBs is not as fully developed as
other markets; SMBs therefore may be illiquid.
Risk Factors: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known maturity.
In the absence of a known maturity, market participants generally refer to an
estimated average life. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants can
produce different average life estimates with regard to the same security. There
can be no assurance that estimated average life will be a security's actual
average life.
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 obligation 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 both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes, construction loan notes and participation interests in municipal
notes. Municipal bonds include general
- --------------------------------------------------------------------------------
51
<PAGE>
- --------------------------------------------------------------------------------
obligation bonds, revenue or special obligation bonds, private activity and
industrial development bonds and participation interests in municipal bonds.
OPTIONS--A put option gives the purchaser of the option the right to sell, and
the writer of the option the obligation to buy, the underlying security at any
time during the option period. A call option gives the purchaser of the option
the right to buy, and the writer of the option the obligation to sell, the
underlying security at any time during the option period. The premium paid to
the writer is the consideration for undertaking the obligations under the option
contract. The initial purchase (sale) of an option contract is an "opening
transaction." In order to close out an option position, a Fund may enter into a
"closing transaction," which is simply the sale (purchase) of an option contract
on the same security with the same exercise price and expiration date as the
option contract originally opened.
A Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to protect against an
increase in the cost of securities that the Fund may seek to purchase in the
future. A Fund pays a premium for purchasing put and call options. If price
movements in the underlying securities are such that exercise of the options
would not be profitable for a Fund, loss of the premium paid may be offset by an
increase in the value of the Fund's securities or by a decrease in the cost of
acquisition of securities by the Fund.
A Fund may write covered put and call options as a means of increasing the yield
on its portfolio and as a means of providing limited protection against
decreases in its market value. When a Fund sells an option, if the underlying
securities do not increase or decrease to a price level that would make the
exercise of the option profitable to the holder thereof, the option generally
will expire without being exercised and the Fund will realize as profit the
premium received for such option. When a call option of which a Fund is the
writer is exercised, the Fund will be required to sell the underlying securities
to the option holder at the strike price, and will not participate in any
increase in the price of such securities above the strike price. When a put
option of which a Fund is the writer is exercised, the Fund will be required to
purchase the underlying securities at the strike price, which may be in excess
of the market value of such securities.
A Fund may purchase and write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the SEC that OTC options are illiquid.
A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates.
Call options on securities or foreign currency written by a Fund will be
"covered," which means that the Fund will own an equal amount of the underlying
security or foreign currency. With respect to put options on securities or
foreign currency written by a Fund, the Fund will establish a segregated account
with its custodian bank consisting of liquid assets and/or cash in an amount
equal to the amount the Fund would be required to pay upon exercise of the put.
A Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars
- --------------------------------------------------------------------------------
52
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
multiplied by a specified number. Thus, unlike options on individual securities,
all settlements are in cash, and gain or loss depends on price movements in the
particular market represented by the index generally, rather than the price
movements in individual securities. A Fund may choose to terminate an option
position by entering into a closing transaction. The ability of a Fund to enter
into closing transactions depends upon the existence of a liquid secondary
market for such transactions.
All options written on indices must be covered. When a Fund writes an option on
an index, it will establish a segregated account containing liquid assets and/or
cash with its custodian in an amount at least equal to the market value of the
option and will maintain the account while the option is open or will otherwise
cover the transaction.
Risk Factors. Risks associated with options transactions include: (1) the
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while a Fund will receive a premium
when it writes covered call options, it may not participate fully in a rise in
the market value of the underlying security.
RECEIPTS--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. This discount is
accreted over the life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater interest rate
volatility than interest-paying investments.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The Fund will have actual or constructive possession
of the security as collateral for the repurchase agreement. A 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 securities or
if the Fund realizes a loss on the sale of the collateral securities. A 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.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS--Investments by a money market
fund are subject to limitations imposed under regulations adopted by the SEC.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risks and that are "eligible securities," which means
they are (i) rated, at the time of investment, by at least two NRSROs (one if it
is the only organization rating such obligation) in the highest short-term
rating category or, if unrated, determined to be of comparable quality (a "first
tier security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). Investments in second tier
securities (second tier conduit securities for the Tax-Exempt Money Market Fund)
are subject to the further constraint that (i) no more than 5% of a Fund's
assets may be invested in such securities in the aggregate, and (ii) any
investments in such securities of one issuer is limited to the greater of 1% of
a Fund's total assets or $1 million. A taxable money market fund may hold more
than 5% of its assets in the first tier securities of a single issuer for three
business days. A security is not considered to be unrated if its issuer has
outstanding obligations of comparable priority and security that have a
short-term rating. The Advisor will determine
- --------------------------------------------------------------------------------
53
<PAGE>
- --------------------------------------------------------------------------------
that an obligation presents minimal credit risks or that unrated instruments are
of comparable quality in accordance with guidelines established by the Trustees.
The securities that money market funds may acquire may be supported by credit
enhancements, such as demand features or guarantees. SEC regulations limit the
percentage of securities that a money market fund may hold for which a single
issuer provides credit enhancements.
SECURITIES OF FOREIGN ISSUERS--There are certain risks connected with investing
in foreign securities. These include risks of adverse political and economic
developments, the possible imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting requirements, the
possibility that there will be less information on such securities and their
issuers available to the public, the difficulty of obtaining or enforcing court
judgments abroad, restrictions on foreign investments in other jurisdictions,
difficulties in effecting repatriation of capital invested abroad and
difficulties in transaction settlements and the effect of delay on shareholder
equity. Foreign securities may be subject to foreign taxes, and may be less
marketable than comparable U.S. securities. Also it may be more difficult to
obtain a judgment in a court outside the United States.
SECURITIES LENDING--In order to generate additional income, a Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash, securities of the U.S.
Government or its agencies equal to at least 102% of the market value of the
securities lent. A Fund continues to receive interest on the securities lent
while simultaneously earning interest 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. A Fund pays lending and
other fees in connection with securities loans.
STANDBY COMMITMENTS AND PUTS--Securities subject to standby commitments or puts
permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to a Fund owning the security to which it relates. In certain cases,
a premium may be paid for a standby commitment or put, which premium will have
the effect of reducing the yield otherwise payable on the underlying security. A
Fund will limit standby commitment or put transactions to institutions believed
to present minimal credit risk.
TAXABLE MUNICIPAL SECURITIES--Taxable Municipal Securities are municipal
securities the interest on which is not exempt from federal income tax. Taxable
Municipal Securities include "private activity bonds" that are issued by or on
behalf of states or their political subdivisions to finance privately-owned or
operated facilities for business and manufacturing, housing, sports, and
pollution control and to finance activities of, and facilities for, charitable
institutions. Private activity bonds are also used to finance public facilities
such as airports, mass transit systems, ports, parking lots and low income
housing. The payment of principal and interest on private activity bonds is not
backed by a pledge of tax revenues, and is dependent solely on the ability of
the facility's operator to meet its financial obligations, and may be secured by
a pledge of the financed real and/or personal property.
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 with a withdrawal penalty or that
mature in more than seven days are considered to be illiquid securities.
U.S. GOVERNMENT AGENCIES--Obligations issued or guaranteed by agencies of the
U.S. Government, including, among others, the Federal
- --------------------------------------------------------------------------------
54
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Farm Credit Bank, the Federal Housing Administration and the Small Business
Administration, and obligations issued or guaranteed by instrumentalities of the
U.S. Government, including, among others, the Federal Home Loan Mortgage
Corporation, the Federal Land Banks and the U.S. Postal Service. Some of these
securities are supported by the full faith and credit of the U.S. 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 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 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 a Fund's shares.
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").
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices. The interest rates
st
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 security.
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.
A Fund will maintain with the Custodian a separate account with liquid assets
and/or cash in an amount at least equal to these commitments. The interest rate
realized, if any, on these securities is fixed as of the purchase date and no
interest accrues to a Fund before settlement. These securities may be 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
a Fund generally purchases securities on a when-issued or forward commitment
basis with the intention of actually acquiring securities, a Fund may dispose of
a when-issued security or forward commitment prior to settlement if it deems
such action appropriate.
- --------------------------------------------------------------------------------
55
<PAGE>
The Pillar Funds
Class A and B Shares
Prime Obligation Money Market Fund
U.S. Treasury Securities Money Market Fund*
Tax-Exempt Money Market Fund*
Fixed Income Fund
Intermediate-Term Government Securities Fund*
New Jersey Municipal Securities Fund*
Pennsylvania Municipal Securities Fund*
Equity Growth Fund
Equity Value Fund
Equity Income Fund
Balanced Fund
*Class A Shares only
Advisor:
[LOGO]
Distributor:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
1-800-932-7782
PIL-F-025-02
<PAGE>
[LOGO]
The Pillar Funds
Your Investment Foundation
PROSPECTUS
Class I Shares
April 30, 1998
<PAGE>
- --------------------------------------------------------------------------------
Table of Contents
Summary 2
Expense Summary 5
Financial Highlights 8
The Trust 10
Investment Objectives and Policies 10
Investment Limitations 18
The Advisor 19
The Administrator 21
The Transfer Agent 21
The Shareholder Servicing Agent 21
The Distributor 21
Purchase and Redemption of Shares 21
Performance 23
Taxes 24
General Information 27
Description of Permitted Investments 29
The Pillar Funds and Pillar are registered service marks of Summit Bank. Your
Investment Foundation and the stylized "P" logo are service marks of Summit
Bank. Reach Higher, Summit, Summit Bancorp and Summit Financial Services Group
are registered service marks of Summit Bancorp. Summit Bank is a service mark of
Summit Bancorp.
<PAGE>
April 30, 1998
THE PILLAR FUNDS
CLASS I SHARES
Investment Advisor:
SUMMIT BANK INVESTMENT MANAGEMENT DIVISION,
A DIVISION OF SUMMIT BANK
THE PILLAR FUNDS (the "Trust") consists of mutual fund portfolios seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to the
Class I Shares of the following funds (each a "Fund," and collectively, the
"Funds"):
MONEY MARKET FUNDS
o U.S. Treasury Securities Money
Market Fund
o Prime Obligation Money Market Fund
o Tax-Exempt Money Market Fund
FIXED INCOME FUNDS EQUITY AND BALANCED FUNDS
o Fixed Income Fund o Equity Growth Fund
o Intermediate-Term Government Securities Fund o Equity Value Fund
o New Jersey Municipal Securities Fund o Equity Income Fund
o Pennsylvania Municipal Securities Fund o Mid Cap Fund
o Balanced Fund
The Trust's Class I Shares are offered without distribution fees to: (i)
institutional investors (including Summit Bank, its affiliates and correspondent
banks) for the investment of their own funds; (ii) any individual or institution
(including Summit Bank, its affiliates and correspondent banks) for the
investment of funds held by such individual or institution in a fiduciary,
agency, custodial or other representative capacity, if such individual or
institution is able to provide complete shareholder recordkeeping services with
respect to shares purchased and held in such capacity; and (iii) any "qualified
customer" who has entered into an agreement with Summit Bank, its affiliates or
correspondent banks ("Qualified Customers"). Persons who own Class I Shares of a
Fund are referred to herein as "Shareholders." This Prospectus does not contain
information regarding the procedures for purchasing and redeeming shares held in
cash sweep accounts with Summit Bank. Please call the number below for a cash
sweep prospectus.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
INSURED, ENDORSED OR GUARANTEED BY, ANY BANK (INCLUDING
SUMMIT BANK OR ITS AFFILIATES OR CORRESPONDENTS), ANY STATE
OR STATE AGENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION
(FDIC), THE U.S. GOVERNMENT OR ANY U.S. GOVERNMENT AGENCY.
Amounts invested in the Funds are subject to investment risks, including
possible loss of the principal amount invested.
An investment in any of the Funds is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that a Money Market Fund will be able
to maintain a stable net asset value of $1.00 per share.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated April 30, 1998 has been filed with the Securities and Exchange
Commission and is available without charge by writing to the Distributor, SEI
Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling 1-800-
932-7782. The Statement of Additional Information is incorporated into this
Prospectus by reference.
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.
April 30, 1998
- --------------------------------------------------------------------------------
1
<PAGE>
Summary
The Pillar Funds (the "Trust") consists of open-end management investment
companies which provide a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about the
Class I Shares of the Trust's U.S. Treasury Securities Money Market, Prime
Obligation Money Market and Tax-Exempt Money Market Funds (the "Money Market
Funds"); Fixed Income, Intermediate-Term Government Securities, New Jersey
Municipal Securities, Pennsylvania Municipal Securities Funds (the "Fixed Income
Funds"); Equity Growth, Equity Value, Equity Income and Mid Cap Funds (the
"Equity Funds"); and the Balanced Fund (the "Balanced Fund," and together with
the Money Market, Fixed Income and Equity Funds, the "Funds").
WHAT ARE THE INVESTMENT OBJECTIVES?
The Money Market Funds: Each Money Market Fund seeks to preserve principal value
and maintain a high degree of liquidity while providing current income. The
Tax-Exempt Money Market Fund also seeks to provide current income that is exempt
from federal income tax. There can be no assurance that a Money Market Fund will
be able to maintain a net asset value of $1.00 per share on a continuous basis.
The Fixed Income Funds: The Fixed Income Fund seeks a high level of total
return, primarily through current income and capital appreciation, consistent
with preservation of capital; the Intermediate-Term Government Securities Fund
seeks preservation of principal value and a high degree of liquidity while
providing current income; the New Jersey Municipal Securities Fund seeks current
income exempt from both federal and New Jersey income taxes, consistent with
preservation of capital; and the Pennsylvania Municipal Securities Fund seeks
current income exempt from both federal and Pennsylvania income taxes,
consistent with preservation of capital;
The Equity and Balanced Funds: The Equity Growth Fund seeks long-term growth of
capital; the Equity Value and Mid Cap Funds seek growth of both capital and
income; the Equity Income Fund seeks growth of capital consistent with an
emphasis on current income; and the Balanced Fund seeks growth of capital
consistent with current income.
There is no assurance that a Fund will meet its investment objective. See
"Investment Objectives and Policies."
WHAT ARE THE PERMITTED INVESTMENTS?
The Money Market Funds: The U.S. Treasury Securities Money Market Fund invests
exclusively in short-term U.S. Treasury obligations. The Prime Obligation Money
Market Fund invests in short-term, U.S. dollar denominated obligations of United
States issuers and obligations of U.S. and London branches of foreign banks. The
Tax-Exempt Money Market Fund invests primarily in short-term, U.S. dollar
denominated municipal securities of issuers located in all fifty states, the
District of Columbia, Puerto Rico and other U.S. territories and possessions.
See "Investment Objectives and Policies" and "Description of Permitted
Investments."
The Fixed Income Funds: The Fixed Income Fund invests at least 65% of its assets
in U.S. and Canadian Government obligations, corporate debt securities,
short-term bank obligations and repurchase agreements.
The New Jersey Municipal Securities and Pennsylvania Municipal Securities Funds
invest at least 80% of their assets in municipal obligations which produce
interest that, in the opinion of bond counsel for the issuer, is exempt from
federal income tax, and at least 65% of their assets in obligations which
produce interest that is exempt from applicable state income taxes.
The Intermediate-Term Government Securities Fund invests in obligations issued
or guaranteed as to principal and interest by the U.S. Government, its agencies
or instrumentalities.
The investments of the Fixed Income Funds are subject to market and interest
rate fluctuations which may affect the value of a Fund's shares. These
fluctuations may be greater for the Fixed Income, New Jersey Municipal
Securities and Pennsylvania Municipal Securities Funds which expect to maintain
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1997
dollar-weighted average maturities greater than the other Fixed Income Funds. In
addition, certain securities, such as mortgage-backed securities, are subject to
the risk of prepayment during periods of declining interest rates which may
affect a Fund's ability to lock-in longer term rates and manage portfolio
maturity during such periods. See "Investment Objectives and Policies," "General
Investment Policies," "Risk Factors" and "Description of Permitted Investments."
Are There Additional Risk Factors for the New Jersey and Pennsylvania Municipal
Securities Funds? The concentration of the New Jersey Municipal Securities and
Pennsylvania Municipal Securities Funds in municipal securities issued primarily
by or on behalf of the states of New Jersey and Pennsylvania, respectively,
subjects these Funds to special investment risks, such as the possible adverse
effects of changes in economic conditions and governmental policies of the
states or their underlying governmental units. See "Additional Risk Factors For
New Jersey
Municipal Securities" and "Additional Risk Factors For Pennsylvania Municipal
Securities."
The Equity and Balanced Funds: Each of the Equity and Balanced Funds may invest
in equity securities consisting of (i) common stocks; (ii) warrants to purchase
common stocks; (iii) securities convertible into common stocks; and (iv)
American Depositary Receipts ("ADRs"). In addition, the Balanced Fund invests in
certain fixed income and money market securities. The Equity Growth Fund may
also invest in European Depositary Receipts ("EDRs"), Continental Depositary
Receipts ("CDRs") and Global Depositary Receipts ("GDRs") and certain fixed
income securities. Because securities fluctuate in value, the shares of each
Fund will also fluctuate in value. The Mid Cap Fund may experience greater
fluctuation because it will invest primarily in small to medium capitalization
companies. In addition, the value of shares of the Equity Growth and Balanced
Funds are subject to market and interest rate fluctuations that affect the value
of their fixed income investments. The Equity Growth Fund may also invest in
options, futures and currency transactions. The Funds' investments in securities
of foreign issuers will subject the Funds to risks associated with foreign
investments. See "Investment Objectives and Policies," "General Investment
Policies," "Risk Factors" and "Description of Permitted Investments."
Who is the Advisor? Summit Bank Investment Management Division, a division of
Summit Bank, serves as the advisor (the "Advisor") to the Trust. See "The
Advisor."
Who is the Administrator? SEI Fund Resources serves as the administrator (the
"Administrator") of the Trust. See "The Administrator."
Who is the Transfer Agent? State Street Bank and Trust Company acts as transfer
agent (the "Transfer Agent") for the Trust. See "The Transfer Agent."
Who is the Shareholder Servicing and Dividend Disbursing Agent? Boston Financial
Data Services is the Trust's dividend disbursing agent and shareholder servicing
agent. See "The Shareholder Servicing Agent."
Who is the Distributor? SEI Investments Distribution Co. acts as distributor
(the "Distributor") of the Trust's shares. See "The Distributor."
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
How do I Purchase and Redeem Shares?
In addition to the Distributor, the Trust has also authorized certain
broker-dealers and other financial intermediaries (collectively, "Authorized
Broker-Dealers") to accept purchase orders and redemption requests up to the
times mentioned below on behalf of the Funds.
The Money Market Funds: A purchase order for a Money Market Fund will be
effective as of the "Business Day" received by the Distributor (or Authorized
Broker-Dealer) if the Distributor (or Authorized Broker-Dealer) receives the
order and payment in federal funds before the Fund calculates its net asset
value (normally, 3:00 p.m., Eastern time), on such Business Day. A "Business
Day" for a Money Market Fund is any day on which both the New York Stock
Exchange is open for trading and the Federal Reserve Bank is open. A redemption
order for a Money Market Fund will be effective as of the Business Day received
by the Transfer Agent (or Authorized Broker-Dealer) if the Transfer Agent (or
Authorized Broker-Dealer) receives the order before the Fund calculates its net
asset value (normally, 3:00 p.m., Eastern time), on such Business Day and the
proceeds are to be sent in federal funds. See "Purchase and Redemption of
Shares."
The Non-Money Market Funds: Purchases and redemptions of Non-Money Market Fund
shares may be made through the Distributor on any "Business Day." A "Business
Day" for a Non-Money Market Fund is any day that the New York Stock Exchange is
open for trading. A purchase order will be effective as of the Business Day
received by the Distributor (or Authorized Broker-Dealer) if the Distributor (or
Authorized Broker-Dealer) receives the order and payment in federal funds before
the Fund calculates its net asset value (normally, 4:00 p.m., Eastern time).
Redemption orders must be placed before the Fund calculates its net asset value
(normally, 4:00 p.m., Eastern time), on any Business Day for the order to be
effective that day. The purchase and redemption price for shares is the net
asset value per share determined as of the end of the day the order is
effective. See "Purchase and Redemption of Shares."
HOW ARE DIVIDENDS PAID?
The Money Market Funds: The net investment income (exclusive of capital gains)
of each Money Market Fund is determined and declared on each
Business Day as a dividend for Shareholders as of the close of business on that
day.
The Fixed Income Funds: Each Fixed Income Fund declares dividends of
substantially all of its net investment income (exclusive of capital gains)
daily and distributes such dividends on or about the first Business Day of the
following month.
The Equity and Balanced Funds: Substantially all of the net investment income
(exclusive of capital gains) of the Equity Growth, Equity Value, Equity Income,
Mid Cap and Balanced Funds is declared and distributed quarterly in the form of
dividends to Shareholders on the next to last Business Day of each quarter.
All Funds: Any capital gains will be distributed at least annually. Dividends
are paid to shareholders who are cash sweep customers of Summit Bank ("Cash
Sweep Shareholders") in cash. Dividends are paid to all other Shareholders in
additional shares, unless the Shareholder has elected to take the payments in
cash. See "Dividends."
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1997
Expense Summary
MONEY MARKET FUNDS
CLASS I SHARES
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<CAPTION>
U.S. TREASURY
SECURITIES PRIME
MONEY OBLIGATION TAX-EXEMPT
MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Advisory Fees (after fee waivers) (1),(2) .35% .34% .33%
Other Expenses .30% .31% .32%
- --------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers)(2) .65% .65% .65%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of Class I Shares of
each Money Market Fund to not more than .65% of average daily net assets of
that Fund. The Advisor reserves the right to terminate its fee waiver at any
time in its sole discretion.
(2) Absent a fee waiver for the Prime Obligation Money Market Fund and
Tax-Exempt Money Market Fund, the Advisory Fee would be .35% for each Fund
and Total Operating Expenses would be .66% and .67% respectively, of each
Fund's average daily net assets. Additional information may be found under
"The Advisor," "The Administrator" and "The Distributor."
EXAMPLE--CLASS I SHARES
An investor in a Fund 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:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund $7 $21 $36 $81
Prime Obligation Money Market Fund $7 $21 $36 $81
Tax-Exempt Money Market Fund $7 $21 $36 $81
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in the Money Market Funds. Financial institutions may impose
fees on their customers in addition to those described above. Additional
information may be found under "The Advisor," "The Administrator" and "The
Distributor."
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Expense Summary
FIXED INCOME FUNDS
CLASS I SHARES
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<CAPTION>
FIXED NEW JERSEY PENNSYLVANIA INTERMEDIATE-TERM
INCOME MUNICIPAL MUNICIPAL SECURITIES GOVERNMENT
FUND SECURITIES FUND FUND SECURITIES FUND
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Advisory Fees (after fee
waivers)(1),(2) .49% .46% .45% .46%
Other Expenses .31% .34% .35%(3) .34%
- --------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers)(2) .80% .80% .80%(3) .80%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of Class I Shares of
each Fixed Income Fund to not more than .80% of average daily net assets.
The Advisor reserves the right to terminate its fee waiver at any time in
its sole discretion.
(2) Absent fee waivers, Advisory Fees for each Fixed Income Fund would be .60%
and Total Operating Expenses would be as follows: Fixed Income Fund .91%,
New Jersey Municipal Securities Fund .94%, Pennsylvania Municipal Securities
Fund .95% and Intermediate-Term Government Securities Fund .94%. Additional
information may be found under "The Advisor," "The Administrator" and "The
Distributor."
(3) Other Expenses and Total Operating Expenses have been restated to reflect
current expenses.
EXAMPLE--CLASS I SHARES
An investor would pay the following expenses on a $1,000 investment in a Fund
assuming (1) a 5% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Each Fixed Income Fund $8 $26 $44 $99
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in the Fixed Income Funds. Financial institutions may impose
fees on their customers in addition to those described above. Additional
information may be found under "The Advisor," "The Administrator" and "The
Distributor."
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Expense Summary
EQUITY AND BALANCED FUNDS
CLASS I SHARES
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<CAPTION>
EQUITY EQUITY EQUITY MID
GROWTH VALUE INCOME CAP BALANCED
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Advisory Fees (after fee waivers) (1),(2) .48% .49% .46% .46% .41%
Other Expenses .32% .31% .34% .34% .39%
- -----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(2) .80% .80% .80% .80% .80%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of Class I Shares of
each Fund to not more than .80% of average daily net assets. The Advisor
reserves the right to terminate its fee waiver at any time in its sole
discretion.
(2) Absent fee waivers for the Equity Growth, Equity Value, Equity Income, Mid
Cap and Balanced Funds, Advisory Fees would be .75% for each Fund and Total
Operating Expenses would be 1.07%, 1.06%, 1.09%, 1.09% and 1.14%,
respectively, of such Funds' average daily net assets. Additional
information may be found under "The Advisor," "The Administrator" and "The
Distributor."
EXAMPLE--CLASS I SHARES
An investor in a Fund 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:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Each Equity Fund $ 8 $26 $44 $ 99
Balanced Fund $ 8 $26 $44 $ 99
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in the Equity and Balanced Funds. Financial institutions may
impose fees on their customers in addition to those described above. Additional
information may be found under "The Advisor," "The Administrator" and "The
Distributor."
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
THE PILLAR FUNDS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent public accountants, as indicated in their report dated February 6,
1998 on the Trust's financial statements as of December 31, 1997, which is
incorporated by reference into the Trust's Statement of Additional Information
under "Financial Information." Additional performance information is contained
in the Trust's 1997 Annual Report to Shareholders and is available upon request
and without charge by calling 1-800-932-7782. These tables should be read in
conjunction with the Trust's financial statements and notes thereto.
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions Net Asset
Value Net Gains or from Net Distributions Value Net Assets
Beginning Investment Losses on Investment from Capital End of Total End of Period
of Period Income Securities Income Gains Period Return (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997(1) $10.00 $0.01 $ 1.22 $(0.01) $(1.98) $ 9.24 14.17%* $177,801
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY VALUE FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $13.35 $0.18 $ 3.20 $(0.18) $(3.66) $12.89 25.71% $242,881
1996 12.81 0.22 2.54 (0.22) (2.00) 13.35 21.69 116,715
1995 10.19 0.25 3.46 (0.25) (0.84) 12.81 36.71 82,677
1994 11.10 0.21 (0.83) (0.21) (0.08) 10.19 (5.61) 61,407
1993 10.64 0.18 0.46 (0.18) -- 11.10 6.12 67,383
1992(2) 10.00 0.14 0.64 (0.14) -- 10.64 10.51* 62,116
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $13.32 $0.32 $ 2.95 $(0.32) $(3.08) $13.19 25.04% $131,968
1996 13.07 0.33 $ 2.35 (0.34) (2.09) 13.32 21.01 58,035
1995 10.26 0.31 3.29 (0.31) (0.48) 13.07 35.55 44,202
1994 11.17 0.32 (0.81) (0.32) (0.10) 10.26 (4.42) 34,514
1993 10.72 0.29 0.80 (0.29) (0.35) 11.17 10.27 38,237
1992(2) 10.00 0.22 0.72 (0.22) -- 10.72 12.72* 32,538
- --------------------------------------------------------------------------------------------------------------------------------
MID CAP FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $13.33 $0.04 $ 2.65 $(0.04) $(1.18) $14.80 20.49% $ 46,125
1996 12.55 0.09 1.59 (0.09) (0.81) 13.33 13.56 45,556
1995 10.83 0.15 1.95 (0.15) (0.23) 12.55 19.49 42,375
1994 12.32 0.12 (1.27) (0.12) (0.22) 10.83 (9.34) 33,448
1993 10.99 0.11 1.33 (0.11) -- 12.32 13.22 35,648
1992(2) 10.00 0.07 0.99 (0.07) -- 10.99 14.30* 29,507
- --------------------------------------------------------------------------------------------------------------------------------
BALANCED FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $11.39 $0.32 $ 1.88 $(0.32) $(1.27) $12.00 19.68% $ 24,362
1996 12.05 0.48 1.16 (0.47) (1.83) 11.39 13.77 19,243
1995 9.91 0.44 2.27 (0.44) (0.13) 12.05 27.76 32,145
1994 10.78 0.37 (0.86) (0.38) -- 9.91 (4.61) 26,921
1993 10.35 0.38 0.43 (0.38) -- 10.78 7.89 25,712
1992(2) 10.00 0.29 0.34 (0.28) -- 10.35 8.53* 16,899
- --------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $10.21 $0.60 $ 0.17 $(0.60) -- $10.38 7.78% $206,810
1996 10.49 0.57 (0.28) (0.57) -- 10.21 2.94 100,129
1995 9.44 0.59 1.05 (0.59) -- 10.49 17.76 113,509
1994 10.68 0.59 (1.18) (0.59) $(0.06) 9.44 (5.66) 96,558
1993 10.38 0.61 0.52 (0.61) (0.22) 10.68 11.05 113,892
1992(2) 10.00 0.49 0.44 (0.49) (0.06) 10.38 11.60* 89,701
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets Portfolio Average
Average to Average (Excluding (Excluding Turnover Commission
Net Assets Net Assets Waivers) Waivers) Rate Rate+
<S> <C> <C> <C> <C> <C> <C>
EQUITY GROWTH FUND
- ------------------------------------------------------------------------------------------------------
CLASS I
1997(1) 0.80% 0.07% 1.07% (0.20)% 114.51% $.0591
- ------------------------------------------------------------------------------------------------------
EQUITY VALUE FUND
- ------------------------------------------------------------------------------------------------------
CLASS I
1997 0.80% 1.26% 1.06% 1.00% 80.24% $.0609
1996 0.80 1.67 1.08 1.39 85.30 0.950
1995 0.80 2.08 1.07 1.81 61.88 n/a
1994 0.80 1.92 1.06 1.66 44.98 n/a
1993 0.80 1.74 1.07 1.47 89.91 n/a
1992(2) 0.80 1.82 1.10 1.52 45.68 n/a
- ------------------------------------------------------------------------------------------------------
EQUITY INCOME FUND
- ------------------------------------------------------------------------------------------------------
CLASS I
1997 0.80% 2.34% 1.09% 2.05% 76.67% $.0694
1996 0.80 2.55 1.09 2.26 85.47 .1095
1995 0.80 2.61 1.10 2.31 42.97 n/a
1994 0.80 2.96 1.08 2.68 37.76 n/a
1993 0.80 2.65 1.10 2.35 89.89 n/a
1992(2) 0.80 2.88 1.14 2.54 58.41 n/a
- ------------------------------------------------------------------------------------------------------
MID CAP FUND
- ------------------------------------------------------------------------------------------------------
CLASS I
1997 0.80% 0.30% 1.09% 0.01% 59.80% $.0847
1996 0.80 0.66 1.10 0.36 41.41 .1010
1995 0.80 1.28 1.10 0.98 32.96 n/a
1994 0.80 1.06 1.08 0.78 13.82 n/a
1993 0.80 1.03 1.10 0.73 24.49 n/a
1992(2) 0.80 0.98 1.15 0.63 9.29 n/a
- ------------------------------------------------------------------------------------------------------
BALANCED FUND
- ------------------------------------------------------------------------------------------------------
CLASS I
1997 0.80% 2.67% 1.14% 2.33% 93.85% $.0959
1996 0.80 3.68 1.11 3.37 43.80 .1165
1995 0.80 3.89 1.11 3.58 41.63 n/a
1994 0.80 3.64 1.09 3.35 27.15 n/a
1993 0.80 3.75 1.14 3.41 63.03 n/a
1992(2) 0.80 3.88 1.20 3.48 82.76 n/a
- ------------------------------------------------------------------------------------------------------
FIXED INCOME FUND
- ------------------------------------------------------------------------------------------------------
CLASS I
1997 0.80% 5.90% 0.91% 5.79% 80.34% n/a
1996 0.80 5.60 0.92 5.48 40.56 n/a
1995 0.80 5.83 0.91 5.72 35.49 n/a
1994 0.80 5.91 0.90 5.81 15.24 n/a
1993 0.80 5.59 0.91 5.48 49.49 n/a
1992(2) 0.80 6.24 0.94 6.10 23.86 n/a
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions Net Asset
Value Net Gains or from Net Distributions Value Net Assets
Beginning Investment Losses on Investment from Capital End of Total End of Period
of Period Income Securities Income Gains Period Return (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $10.71 $0.49 $ 0.21 $(0.49) -- $10.92 6.76% $131,002
1996 10.79 0.44 (0.08) (0.44) -- 10.71 3.42 20,689
1995 9.93 0.47 0.86 (0.47) -- 10.79 13.57 28,080
1994 10.85 0.48 (0.92) (0.48) -- 9.93 (4.12) 19,977
1993 10.29 0.50 0.56 (0.50) -- 10.85 10.48 27,064
1992(3) 10.00 0.30 0.29 (0.30) -- 10.29 9.01* 9,395
- --------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $10.17 $0.45 $ 0.26 $(0.45) $(0.02) $10.41 7.18% $ 42,134
1996 10.23 0.44 (0.06) (0.44) -- 10.17 3.89 3,665
1995 9.55 0.40 0.68 (0.40) -- 10.23 11.53 3,345
1994 10.17 0.36 (0.62) (0.36) -- 9.55 (2.58) 2,734
1993(4) 10.00 0.23 0.17 (0.23) -- 10.17 6.01 2,922
- --------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $10.16 $0.58 $ 0.11 $(0.58) -- $10.27 6.96% $ 31,739
1996 10.37 0.53 (0.21) (0.53) -- 10.16 3.26 24,679
1995 9.51 0.54 0.86 (0.54) -- 10.37 15.00 28,877
1994 10.53 0.51 (1.01) (0.51) $(0.01) 9.51 (4.85) 26,277
1993 10.23 0.52 0.32 (0.52) (0.02) 10.53 8.32 34,075
1992(2) 10.00 0.41 0.24 (0.41) (0.01) 10.23 7.95* 16,327
- --------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $ 1.00 $0.04 -- $(0.04) -- $ 1.00 4.55% $487,196
1996 1.00 0.04 -- (0.04) -- 1.00 4.53 504,729
1995 1.00 0.05 -- (0.05) -- 1.00 5.05 463,531
1994 1.00 0.03 -- (0.03) -- 1.00 3.44 465,125
1993 1.00 0.02 -- (0.02) -- 1.00 2.46 420,947
1992(2) 1.00 0.02 -- (0.02) -- 1.00 2.81* 387,960
- --------------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATION MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $ 1.00 $0.05 -- $(0.05) -- $ 1.00 5.02% $400,689
1996 1.00 0.05 -- (0.05) -- 1.00 4.83 401,423
1995 1.00 0.05 -- (0.05) -- 1.00 5.40 259,667
1994 1.00 0.04 -- (0.04) -- 1.00 3.67 157,378
1993 1.00 0.03 -- (0.03) -- 1.00 2.65 129,780
1992(2) 1.00 0.02 (0.02) -- 1.00 2.85* 124,811
- --------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $ 1.00 $0.03 -- $(0.03) -- $ 1.00 3.10% $ 75,097
1996 1.00 0.03 -- (0.03) -- 1.00 2.94 67,082
1995 1.00 0.03 -- (0.03) -- 1.00 3.42 63,628
1994 1.00 0.02 -- (0.02) -- 1.00 2.27 37,745
1993 1.00 0.02 -- (0.02) -- 1.00 1.99 32,994
1992(5) 1.00 0.02 -- (0.02) -- 1.00 2.42* 22,963
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets Portfolio Average
Average to Average (Excluding (Excluding Turnover Commission
Net Assets Net Assets Waivers) Waivers) Rate Rate+
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
NEW JERSEY MUNICIPAL SECURITIES FUND
- -----------------------------------------------------------------------------------------------------
CLASS I
1997 0.80% 4.68% 0.94% 4.54% 22.85% n/a
1996 0.67 4.13 0.93 3.87 13.93 n/a
1995 0.41 4.43 0.93 3.91 2.83 n/a
1994 0.27 4.65 0.93 3.99 16.81 n/a
1993 0.20 4.57 1.00 3.77 23.83 n/a
1992(3) 0.46 4.56 1.22 3.80 2.23 n/a
- -----------------------------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL SECURITIES FUND
- -----------------------------------------------------------------------------------------------------
CLASS I
1997 0.80% 4.47% 0.96% 4.31% 71.89% n/a
1996 0.69 4.42 1.49 3.62 25.88 n/a
1995 0.80 4.05 1.27 3.58 36.92 n/a
1994 0.80 3.67 1.61 2.86 38.20 n/a
1993(4) 0.80 3.35 1.48 2.67 16.51 n/a
- -----------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
- -----------------------------------------------------------------------------------------------------
CLASS I
1997 0.80% 5.69% 0.94% 5.55% 57.82% n/a
1996 0.80 5.26 0.87 5.19 40.60 n/a
1995 0.80 5.33 1.05 5.08 68.29 n/a
1994 0.80 5.13 0.95 4.98 40.27 n/a
1993 0.80 4.87 1.00 4.67 31.69 n/a
1992(2) 0.80 5.30 1.11 4.99 12.38 n/a
- -----------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES MONEY MARKET FUND
- -----------------------------------------------------------------------------------------------------
CLASS I
1997 0.65% 4.45% 0.66% 4.44% -- --
1996 0.65 4.44 0.65 4.44 -- --
1995 0.65 4.92 0.65 4.92 -- --
1994 0.62 3.39 0.62 3.39 -- --
1993 0.64 2.42 0.64 2.42 -- --
1992(2) 0.65 2.67 0.70 2.62 -- --
- -----------------------------------------------------------------------------------------------------
PRIME OBLIGATION MONEY MARKET FUND
- -----------------------------------------------------------------------------------------------------
CLASS I
1997 0.65% 4.90% 0.66% 4.89% -- --
1996 0.65 4.73 0.67 4.71 -- --
1995 0.65 5.26 0.66 5.25 -- --
1994 0.62 3.68 0.62 3.68 -- --
1993 0.64 2.63 0.64 2.63 -- --
1992(2) 0.65 2.63 0.77 2.51 -- --
- -----------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
- -----------------------------------------------------------------------------------------------------
CLASS I
1997 0.65% 3.05% 0.67% 3.03% -- --
1996 0.65 2.90 0.68 2.87 -- --
1995 0.65 3.37 0.72 3.30 -- --
1994 0.65 2.27 0.68 2.24 -- --
1993 0.65 1.97 0.69 1.93 -- --
1992(5) 0.65 2.39 0.79 2.25 -- --
- -----------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
(+) Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for the fiscal
years beginning after September 1, 1995.
(1) The Equity Growth Fund commenced operations on February 3, 1997. Ratios for
this period have been annualized.
(2) The Equity Value, Equity Income, Mid Cap, Balanced, Fixed Income,
Intermediate-Term Government Securities, U.S. Treasury Securities Money
Market and Prime Obligation Money Market Funds commenced operations on April
1, 1992. Ratios for this period have been annualized.
(3) The New Jersey Municipal Securities Fund commenced operations on May 4,
1992. Ratios for this period have been annualized.
(4) The Pennsylvania Municipal Fund (Class I Shares) commenced operations on May
3, 1993. Ratios for this period have been annualized.
(5) The Tax-Exempt Money Market Fund commenced operations on April 6, 1992.
Ratios for this period have been annualized.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE TRUST
The Pillar Funds (the "Trust") is an open-end management investment company that
consists of diversified and non-diversified portfolios. The Trust currently
offers units of beneficial interest ("shares") in fifteen separate investment
portfolios. The Trust offers shares of each portfolio through up to four
separate classes of shares (Class A, Class B, Class I and Class S) which provide
for variations in distribution costs, voting rights, sales loads, minimum
investments, redemption fees, transfer agency fees and dividends. Except for
these differences between classes, each share of each portfolio represents an
undivided proportionate interest in that portfolio. This Prospectus relates to
the Class I Shares of each of the Trust's portfolios other than the U.S.
Treasury Securities Plus Money Market Fund, Institutional Select Money Market
Fund and International Growth Fund. Each of the Funds described herein is a
diversified mutual fund, except for the New Jersey Municipal Securities Fund and
Pennsylvania Municipal Securities Fund, which are non-diversified mutual funds.
Information regarding the Trust's other portfolios and the Class A Shares, Class
B Shares and Class S Shares, if any, of the Funds is contained in separate
prospectuses that may be obtained by writing the Trust's Distributor, SEI
Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling
1-800-932-7782.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Fund are described below. For
additional information regarding risks and permitted investments of the Funds,
see "Risk Factors," "General Investment Policies" and "Description of Permitted
Investments" in this Prospectus and "Description of Permitted Investments" and
"Description of Ratings" in the Statement of Additional Information. There is no
assurance that the investment objective of any Fund will be met.
The Money Market Funds
The investment objective of each Money Market Fund is to preserve principal
value and maintain a high degree of liquidity while providing current income. In
addition, the Tax-Exempt Money Market Fund seeks to provide current income that
is exempt from federal income tax.
Each Money Market Fund intends to comply with regulations of the Securities and
Exchange Commission ("SEC") applicable to money market funds using the amortized
cost method for calculating net asset value. These regulations impose certain
quality, maturity and diversification restraints on investments by a Money
Market Fund. Under these regulations, each Money Market Fund will invest only in
U.S. dollar-denominated securities, will maintain an average maturity on a
dollar-weighted basis of 90 days or less, and will acquire only "eligible
securities" that present minimal credit risks and have a maturity of 397 days or
less.
THE U.S. TREASURY SECURITIES MONEY MARKET FUND
The U.S. Treasury Securities Money Market Fund will invest exclusively in (i)
bills, notes and bonds issued by the U.S. Treasury; (ii) separately traded
interest and principal component parts of such obligations that are transferable
through the federal book entry system ("U.S. Treasury Obligations"); and (iii)
repurchase agreements involving U.S. Treasury Obligations. The Fund may also
engage in securities lending.
THE PRIME OBLIGATION MONEY MARKET FUND
The Prime Obligation Money Market Fund will invest in eligible securities
consisting of: (i) commercial paper and short-term corporate obligations of U.S.
issuers that satisfy the Fund's quality criteria; (ii) obligations (certificates
of deposit, time deposits and bankers' acceptances) of U.S. commercial banks,
U.S. savings and loan institutions and U.S. and London branches of foreign
banks, provided such institutions have total assets of $500 million or more as
shown on their last published financial statements at the time of investment and
are insured by the Federal Deposit Insurance Company ("FDIC") (the Fund may not
invest more than 25% of its total assets in obligations issued by foreign
branches of U.S. banks and London branches of foreign banks); (iii) U.S.
Treasury Obligations; (iv) obligations issued or guaranteed as to principal and
interest by the agencies or instrumentalities of the U.S. Government ("U.S.
Government Agencies"); and (v) repurchase agreements involving any of such
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
obligations. In addition, the Fund may also engage in securities lending.
THE TAX-EXEMPT MONEY MARKET FUND
The Tax-Exempt Money Market Fund will invest at least 80% of its total assets in
obligations 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, the interest of which, in the opinion of bond
counsel for the issuer, is exempt from federal income tax (collectively,
"Municipal Securities"). The Fund will primarily purchase municipal bonds, notes
and tax-exempt commercial paper rated in one of the two highest short-term
rating categories by a nationally recognized statistical rating organization (an
"NRSRO") in accordance with SEC regulations at the time of investment or, if not
rated, as determined by the Advisor to be of comparable quality. Because the
Fund often purchases securities supported 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.
The Tax-Exempt Money Market Fund may purchase municipal obligations with demand
features including floating or variable rate obligations. In addition, the Fund
may invest in commitments to purchase securities on a "when-issued" basis, and
reserves the right to purchase securities subject to a standby commitment. The
Advisor has discretion to invest up to a total of 20% of the Fund's assets in
taxable money market instruments (including repurchase agreements) and
securities subject to the federal alternative minimum tax. However, the Fund
generally intends to be fully invested in securities exempt from federal income
tax. The Fund may also engage in securities lending.
The Fixed Income Funds
THE FIXED INCOME FUND
The investment objective of this Fund is to provide a high level of total
return, primarily through current income and capital appreciation, consistent
with preservation of capital. The Fund may not invest in certain securities that
may earn a higher return but which are more volatile and riskier than the Fund's
permitted investments.
At least 65% of the Fund's assets will be invested in (i) U.S. Treasury
Obligations; (ii) U.S. Government Agencies; (iii) corporate debt obligations
rated in one of the three highest rating categories by an NRSRO or determined by
the Advisor to be of comparable quality at the time of investment; (iv)
commercial paper rated in the highest short-term rating category by an NRSRO or
determined by the Advisor to be of comparable quality at the time of investment;
(v) short-term bank obligations (certificates of deposit, time deposits and
bankers acceptances) of U.S. commercial banks with assets of at least $1 billion
as of the end of their most recent fiscal year; (vi) securities of the
government of Canada and its provincial and local governments; (vii) custodial
receipts evidencing separately traded interest and principal component parts of
U.S. Treasury Obligations; (viii) obligations subject to federal income tax
issued by or on behalf of states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities ("Taxable Municipal Securities"), which are rated A or
higher by an NRSRO or determined by the Advisor to be of comparable quality; and
(ix) repurchase agreements involving such securities. Of this amount, the Fund
may, for temporary defensive purposes, invest up to 35% of its assets in
commercial paper rated in one of the two highest short-term rating categories by
an NRSRO or determined by the Advisor to be of comparable quality at the time of
investment. Securities rated A are considered to be investment grade, but could
be more vulnerable to adverse developments than obligations with higher
ratings.
In addition, the Fund may invest in corporate bonds and debentures and
commercial paper issued by foreign issuers.
The remaining 35% of the Fund's assets may be invested in (i) mortgage-backed
securities consisting of collateralized mortgage obligations ("CMOs") and real
estate mortgage investment conduits
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
("REMICs") that are rated in one of the top two rating categories by an
NRSRO and which are backed solely by Government National Mortgage Association
("GNMA") certificates or other mortgage pass-throughs issued or guaranteed by
the U.S. Government, its agencies or instrumentalities; and (ii) asset-backed
securities secured by company receivables, truck and auto loans, leases and
credit card receivables rated in one of the top two rating categories by an
NRSRO.
The principal governmental issuers or guarantors of mortgage-backed securities
are GNMA, Fannie Mae and the Federal Home Loan Mortgage Corporation ("FHLMC").
Obligations of GNMA are backed by the full faith and credit of the U.S.
Government while obligations of FNMA and FHLMC are supported by the respective
agency only. The Funds may purchase mortgage-backed securities that are backed
or collateralized by fixed, adjustable or floating rate mortgages.
The Fund expects to maintain a dollar-weighted average portfolio maturity that
will not exceed fifteen years. The Advisor may vary this maturity substantially
in anticipation of a change in the interest rate environment.
THE INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
The objective of this Fund is to preserve principal value and maintain a high
degree of liquidity while providing current income.
The Fund will be fully invested in U.S. Treasury Obligations and U.S. Government
Agencies.
The Fund will maintain a dollar-weighted average maturity of three to ten years.
Under normal circumstances, the Advisor anticipates that the Fund's
dollar-weighted average maturity will be approximately five years; however, the
Advisor may vary this average maturity substantially in anticipation of a change
in the interest rate environment.
THE NEW JERSEY MUNICIPAL SECURITIES FUND
The investment objective of this Fund is to provide current income exempt from
both federal and New Jersey income taxes, consistent with preservation of
capital.
The New Jersey Municipal Securities Fund will invest at least 80% of its net
assets in Municipal Securities. Under normal circumstances, except when
acceptable securities are unavailable as determined by the Advisor, at least 65%
of the Fund's assets will be invested in Municipal Securities, the interest of
which, in the opinion of bond counsel for the issuer, is exempt from the New
Jersey gross income tax ("New Jersey Municipal Securities"). The Fund will
primarily purchase (i) municipal bonds rated in one of the three highest rating
categories by an NRSRO; (ii) municipal notes rated in one of the two highest
rating categories by an NRSRO; (iii) commercial paper rated in one of the two
highest short-term rating categories by an NRSRO; (iv) any of the foregoing
determined by the Advisor to be of comparable quality at the time of investment;
or (v) securities of closed-end investment companies traded on a national
securities exchange. Securities rated A are considered to be investment grade
but could be more vulnerable to adverse developments than obligations with
higher ratings.
The Fund expects to maintain a dollar-weighted average portfolio maturity of
less than fifteen years. The Advisor may vary this maturity substantially in
anticipation of a change in the interest rate environment.
The New Jersey Municipal Securities Fund reserves the right to engage in "put"
transactions, although it has no present intention to do so. In addition, the
Advisor has discretion to invest up to a total of 20% of the Fund's assets in
taxable money market instruments (including repurchase agreements) and
securities subject to the federal alternative minimum tax. However, the Fund
generally intends to be as fully invested as possible in securities exempt from
federal income tax.
The New Jersey Municipal Securities Fund is a non-diversified investment
company. See "Risk Factors - Non-Diversification" for a discussion of the
additional risks of non-diversification.
THE PENNSYLVANIA MUNICIPAL SECURITIES FUND
The investment objective of this Fund is to provide current income exempt from
both federal and Pennsylvania income taxes, consistent with preservation of
capital.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
At least 80% of the Fund's assets will be invested in Municipal Securities.
Under normal circumstances, except when acceptable securities are unavailable as
determined by the Advisor, at least 65% of the Fund's assets will be invested in
Municipal Securities, the interest of which, in the opinion of bond counsel for
the issuer, is exempt from Pennsylvania income tax ("Pennsylvania Municipal
Securities"). The Portfolio may invest up to 10% of its assets in securities the
income tax from which is subject to the federal alternative minimum tax.
Although permitted to do so, the Fund has no present intention to invest in
repurchase agreements or purchase securities subject to the federal alternative
minimum tax.
Municipal Securities that the Fund may purchase include (i) municipal bonds
which are rated BBB or better by Standard & Poor's Ratings Group ("S&P") or Baa
or better by Moody's Investor Service, Inc. ("Moody's") at the time of
investment or, if not rated, determined by the Advisor to be of comparable
quality; (ii) municipal notes which are rated at least SP-1 by S&P or MIG-1 or
V-MIG-1 by Moody's at the time of investment or, if not rated, determined by the
Advisor to be of comparable quality; and (iii) tax-exempt commercial paper rated
at least A-1 by S&P or Prime-1 by Moody's at the time of investment or, if not
rated, determined by the Advisor to be of comparable quality. Bonds rated BBB by
S&P or Baa by Moody's have speculative characteristics.
The Fund may invest in commitments to purchase such securities on a
"when-issued" basis, and reserves the right to engage in "put" transactions. The
Fund may also purchase other types of tax-exempt instruments as long as they are
of a quality equivalent to the long-term bond or commercial paper ratings stated
above.
The Fund expects to maintain a dollar-weighted average portfolio maturity of
less than fifteen years. The Advisor may vary this maturity substantially in
anticipation of a change in the interest rate environment.
The Pennsylvania Municipal Securities Fund is a non-diversified investment
company. See "Risk Factors--Non-Diversification" for a discussion of the
additional risks of non-diversification.
GENERAL INVESTMENT POLICIES--FIXED INCOME FUNDS
For temporary defensive purposes when the Advisor determines that market
conditions warrant, each Fixed Income Fund may invest up to 100% of its assets
in the money market instruments described in the "Description of Permitted
Investments" and may hold a portion of its assets in cash. To the extent a Fixed
Income Fund is engaged in temporary defensive investing, the Fund will not be
pursuing its investment objective.
Both the Fixed Income and Intermediate-Term Government Securities Funds may
purchase mortgage-backed securities issued or guaranteed as to payment of
principal and interest by the U.S. Government, its agencies or
instrumentalities. These Funds may also invest in mortgage-backed securities
issued by private issuers rated in one of the two highest rating categories by
an NRSRO and backed by mortgage pass-throughs issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
Each of the Fixed Income Funds may invest in floating or variable rate
obligations and may purchase securities on a when-issued basis. In addition,
each Fund reserves the right to engage in securities lending but has no present
intention to do so.
If, after purchase, the rating of a security held by a Fixed Income Fund drops
below the prescribed investment quality, such security shall be sold at a time
when, in the judgment of the Advisor, it is not in the Fund's interest to
continue to hold such security.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
RISK FACTORS--FIXED INCOME FUNDS
The market value of each Fixed Income Fund's fixed income investments will
fluctuate 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 will also affect the value of these investments. Changes
in the value of portfolio securities will not affect cash income derived from
these securities but will affect a Fund's net asset value.
Mortgage-backed securities are subject to prepayment of the underlying
mortgages. During periods of declining interest rates, prepayment of mortgages
underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by a Fixed Income Fund are prepaid, the Fund
must reinvest the proceeds in securities, the yield on which reflects prevailing
interest rates. Thus, mortgage-backed securities may not be an effective means
of locking in long-term interest rates for a Fund. Because of prepayments, it is
difficult to predict the actual maturity of mortgage-backed securities, which
may increase the difficulty of managing the average weighted maturity of the
Funds.
Investments in securities of foreign issuers may subject the Fixed Income Fund
to different risks than those attendant to investments in securities of U.S.
issuers, such as differences in accounting, auditing and financial reporting
standards, the possibility of expropriation or confiscatory taxation, and
political instability. There may also be less publicly available information
with regard to foreign issuers than domestic issuers. In addition, foreign
markets may be characterized by less liquidity, greater price volatility, less
regulation and higher transaction costs than U.S. markets.
ADDITIONAL RISK FACTORS FOR NEW JERSEY MUNICIPAL SECURITIES
New Jersey Municipal Securities are primarily issued by or on behalf of the
State of New Jersey, its political subdivisions, agencies and instrumentalities.
The concentration in obligations of New Jersey issuers by the New Jersey
Municipal Securities Fund subjects the Fund to special investment risks. In
particular, changes in economic conditions and governmental policies of the
State of New Jersey and its municipalities could adversely affect the value of
the Fund and the securities held by it. For a further description of these
risks, see "New Jersey Municipal Securities and Special Considerations Relating
Thereto" in the Statement of Additional Information.
ADDITIONAL RISK FACTORS FOR PENNSYLVANIA MUNICIPAL SECURITIES
Under normal conditions the Pennsylvania Municipal Securities Fund will be fully
invested in obligations that produce interest income exempt from federal income
tax and Pennsylvania state income tax. Accordingly, the Fund will have
considerable investments in Pennsylvania Municipal Securities. As a result, the
Fund will be more susceptible to factors that adversely affect issuers of
Pennsylvania obligations than a mutual fund which does not have as great a
concentration in Pennsylvania Municipal Securities.
An investment in the Fund will be affected by the many factors that affect the
financial condition of the Commonwealth of Pennsylvania. For example, financial
difficulties of the Commonwealth, its counties, municipalities and school
districts that hinder efforts to borrow and lower credit ratings are factors
which may affect the Fund. See "Pennsylvania Municipal Securities and Special
Considerations Relating Thereto" in the Statement of Additional Information.
The Equity and Balanced Funds
THE EQUITY GROWTH FUND
The investment objective of the Fund is long-term growth of capital.
The Fund will normally be as fully invested as practicable in equity securities
consisting of common stocks, warrants to purchase common stocks, debt
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
securities and preferred stocks that are convertible into common stocks and
ADRs, EDRs, CDRs and GDRs. The Advisor will invest in companies that it expects
will demonstrate greater long-term earnings growth than the average company
included in the Standard & Poor's 500 Composite Index (the "S&P 500 Index").
This method of investing is based upon the premise that growth in a company's
earnings will eventually translate into growth in the price of its stock.
To the extent that the Fund is not invested in equity securities, the Fund may
invest in the following fixed income securities for cash management purposes:
obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Securities");
corporate bonds and debentures rated in one of the three highest rating
categories by an NRSRO or determined by the Advisor to be of comparable quality
at the time of purchase, except that as part of its investment strategy, the
Fund may invest up to 5% of its total assets in lower rated bonds, commonly
referred to as "junk bonds," rated B or higher by an NRSRO or determined to be
of comparable quality by the Advisor; mortgage-backed securities consisting of
CMOs and REMICs that are rated in one of the top two rating categories by an
NRSRO and which are backed solely by GNMA certificates or other mortgage
pass-throughs issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and asset-backed securities secured by company receivables,
truck and auto loans, leases and credit card receivables that are rated in one
of the top two rating categories by an NRSRO. The Fund may also employ certain
hedging and risk management techniques, including the purchase and sale of
exchange-listed and over-the-counter ("OTC") options, futures and options on
futures involving equity and debt securities, aggregates of equity and debt
securities and other financial indices. The Fund may write options and invest in
futures only on a covered basis.
THE EQUITY VALUE FUND
The investment objective of this Fund is growth of both capital and income.
The Fund will normally be as fully invested as practicable in equity securities
consisting of common stocks, warrants to purchase common stocks, debt securities
and preferred stocks convertible into common stocks and ADRs. The Advisor will
purchase equity securities which, in the Advisor's opinion, are undervalued in
the marketplace at the time of purchase.
THE EQUITY INCOME FUND
The investment objective of this Fund is growth of capital consistent with an
emphasis on current income.
The Fund will normally be as fully invested as practicable in equity securities
consisting of common stocks, warrants to purchase common stocks, debt securities
and preferred stocks convertible into common stocks and ADRs.
THE MID CAP FUND
The investment objective of this Fund is growth of both capital and income.
The Fund will normally be as fully invested as practicable in equity securities
consisting of common stocks, warrants to purchase common stocks, debt securities
and preferred stocks convertible into common stocks and ADRs that, in the
Advisor's opinion, are significantly undervalued relative to their actual value
at the time of purchase. Under normal market conditions, the Fund will invest at
least 65% of its total assets in equity securities of mid cap issuers (i.e.,
companies with market capitalizations ranging between $700 million and $7
billion at the time of purchase). The Fund may also invest in equity securities
of small cap issuers (i.e., companies with market capitalizations between $100
million and $700 million at the time of purchase).
The Advisor will attempt to maintain a highly diversified portfolio in order to
reduce the risks associated with investments in smaller capitalization companies
which may be subject to greater volatility
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
than investments in companies with larger capitalizations.
THE BALANCED FUND
The investment objective of this Fund is growth of capital consistent with
current income.
The Fund seeks to achieve growth of capital and current income by investing in a
balanced portfolio of equity securities, fixed income securities and money
market securities. The actual blend will vary according to market and economic
conditions. However, under normal market conditions, at least 25% of the Fund's
total assets will be invested in fixed income securities. This investment policy
may be changed by the Trust's Board of Trustees (the "Trustees") at any time;
however, Shareholders will be notified of any such change in advance.
The Fund may invest in the following equity securities: common stocks, warrants
to purchase common stocks, debt securities and preferred stocks convertible into
common stocks and ADRs.
The Fund may invest in the following fixed income securities: (i) U.S.
Government Securities; (ii) corporate bonds and debentures rated in one of the
three highest rating categories by an NRSRO or determined by the Advisor to be
of comparable quality at the time of purchase; (iii) mortgage-backed securities
consisting of CMOs and REMICs that are rated in one of the top two rating
categories by an NRSRO and which are backed solely by GNMA certificates or other
mortgage pass-throughs issued or guaranteed by the U.S. Government, its agencies
or instrumentalities; and (iv) asset-backed securities secured by company
receivables, truck and auto loans, leases and credit card receivables which are
rated in one of the top two rating categories by an NRSRO. Securities rated A
are considered to be investment grade but could be more vulnerable to adverse
developments than obligations with higher ratings.
The Fund may invest in the money market securities described in the "Description
of Permitted Investments."
GENERAL INVESTMENT POLICIES--EQUITY AND BALANCED FUNDS
For temporary defensive purposes during periods when the Advisor determines that
market conditions warrant, each Equity and Balanced Fund may invest up to 100%
of its assets in the money market securities described in the "Description of
Permitted Investments" and may hold cash for liquidity purposes. To the extent
an Equity or Balanced Fund is engaged in temporary defensive investing, the Fund
will not be pursuing its investment objective.
Each of the Equity Value, Equity Income, Mid Cap and Balanced Funds seeks to
invest in equity securities that the Advisor believes are of high quality. In
evaluating the quality of such securities, the Advisor places particular
emphasis on the management history of the issuer and on ratio analyses which
focus on prospective earnings, book value and anticipated growth rates.
Securities purchased by the Equity and Balanced Funds may involve floating or
variable interest rates and may be acquired through a forward commitment or on a
when-issued basis.
In addition, each Equity and Balanced Fund reserves the right to engage in
securities lending. The Equity and Balanced Funds will purchase equity
securities, including ADRs, that are traded in the United States on registered
exchanges or the over-the-counter market. However, each of these five Funds
reserves the right to invest up to 25% of its assets in foreign equity
securities denominated in foreign currency and traded on foreign markets, but
has no present intention to do so.
RISK FACTORS--EQUITY AND BALANCED FUNDS
The value of the shares of the Equity and Balanced Funds will fluctuate due to
the underlying securities in which these Funds invest. The market value of the
convertible securities purchased by each Equity and Balanced Fund may also be
affected by changes in interest rates, the credit quality of the issuer and any
call provisions. In addition, investments in smaller, less well-established
companies may subject the Mid Cap Fund to certain special risks related to, for
example, limited product lines, markets or financial resources and dependence on
a small management group. Such securities may trade less frequently, in smaller
volumes and fluctuate more sharply in value than exchange listed securities of
larger companies.
The market value of the Equity Growth and Balanced Funds' fixed income
securities will fluctuate
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
in response to interest rate changes and other factors. See "Risk Factors--Fixed
Income Funds" above for a discussion of the risks associated with fixed income
investments.
Each Equity and Balanced Fund's investments in securities of foreign issuers may
subject that Fund to risks different than those attendant to investments in
securities of U.S. issuers, such as differences in accounting, auditing and
financial reporting standards applicable in foreign countries, the possibility
of expropriation or confiscatory taxation, political instability and greater
fluctuations in value due to changes in currency exchange rates. There may also
be less publicly available information with regard to foreign issuers than
domestic issuers. In addition, foreign markets may be characterized by less
liquidity, greater price volatility, less regulation and higher transaction
costs than U.S. markets. Moreover, the dividends payable on an Equity or
Balanced Fund's foreign securities may be subject to foreign withholding taxes,
thus reducing the net amount of income available for distribution to the Fund's
Shareholders. Also, it may be more difficult to obtain a judgment in a court
outside the United States. These risks could be greater in emerging markets than
in more developed foreign markets because emerging markets may have less stable
political environments than more developed countries.
The Equity Growth Fund may invest in lower rated bonds, which are commonly
referred to as "junk bonds." These securities are speculative and are subject to
a greater risk of loss of principal and interest than are investments in higher
rated bonds. The debt securities purchased by the Fund will be rated at least B
by an NRSRO or determined to be of comparable quality by the Advisor. Securities
rated B are considered highly speculative and while the issuer currently has the
capacity to meet debt service requirements, adverse business, financial or
economic conditions would likely impair its capacity or willingness to pay
interest and principal.
The Equity Growth Fund may invest in options and futures. There are various
risks associated with options and futures, including (i) that the success of a
hedging strategy may depend on an ability to accurately predict movements in
security prices, interest rates or currency exchange rates; (ii) there may be
little correlation between the changes in a security's value and the price of
futures or options; (iii) a related future or option may not be liquid; (iv) an
exchange may impose trading restrictions or limitations; (v) government
regulations may restrict trading in futures and options; and (vi) the possible
lack of full participation in a rise in the market value of the underlying
security.
RISK FACTORS--NON-DIVERSIFICATION
The New Jersey Municipal Securities and Pennsylvania Municipal Securities Funds
are non-diversified funds under the Investment Company Act of 1940, as amended
(the "1940 Act"), and each therefore may invest a greater proportion of its
assets in the securities of a smaller number of issuers and may, as a result, be
subject to greater risk with respect to its portfolio securities. Each of the
Funds intends to satisfy the diversification requirements necessary to qualify
as a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), by limiting its investments so that, at the close of each
quarter of the taxable year: (a) not more than 25% of the market value of the
Fund's total assets is invested in the securities (other than U.S. Government
securities) of a single issuer; and (b) at least 50% of the market value of the
Fund's total assets is represented by (i) cash and cash items, (ii) U.S.
Government securities and (iii) other securities limited in respect to any one
issuer to an amount not greater in value than 5% of the market value of the
Fund's total assets and to not more than 10% of the outstanding voting
securities of such issuer.
PORTFOLIO TURNOVER RATE
It is anticipated that the long-term average annual portfolio turnover rate for
each Fixed Income, Equity and Balanced Fund will not exceed 100%; however, there
may be times that the Advisor will sell securities depending on market
conditions and opportunities, and the portfolio turnover rate for each Fund may
reach higher levels. Higher portfolio turnover may increase the distributions
which a Fund is required to make to Shareholders and, therefore, lead to higher
tax liability for Shareholders with taxable accounts. Higher levels of portfolio
turnover will also lead to higher trading costs, which are reflected in each
Funds' operating expenses. With respect to the Balanced Fund, portfolio turnover
applies only to its investments in equity securities and non-money market, fixed
income securities,
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
which are calculated separately. The historical portfolio turnover rates for
each Non-Money Market Fund are set forth in the Financial Highlights above.
INVESTMENT LIMITATIONS
Money Market Funds: The investment objective and the following investment
limitations are fundamental policies of each Money Market Fund. In addition, it
is a fundamental policy of each Money Market Fund to use its best efforts to
maintain a constant net asset value of $1.00 per share although there can be no
assurance any Fund will be able to do so. It is also a fundamental policy of the
Tax-Exempt Money Market Fund to invest at least 80% of its assets in Municipal
Securities. Fundamental policies cannot be changed with respect to a Fund
without the consent of the holders of a majority of that Fund's outstanding
shares.
EACH MONEY MARKET 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 each Fund's total assets. See "Description
of Permitted Investments -- Restraint on Investments by Money Market Funds."
2. Purchase any securities which would cause more than 25% of the total assets
of any 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 the obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities,
repurchase agreements involving such securities and obligations issued by
domestic branches of U.S. banks or U.S. branches of foreign banks subject to
the same regulation as U.S. banks or to investments in tax-exempt securities
issued by governments or political subdivisions of governments.
3. Make loans, except that a Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; (b) enter into
repurchase agreements; and (c) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentage limitations apply at the time of the purchase of a
security.
It is a non-fundamental policy of each Money Market Fund to invest no more than
10% of its net assets in illiquid securities (as defined under "Description of
Permitted Investments").
Additional investment limitations are set forth in the Statement of Additional
Information.
Non-Money Market Funds: The investment objective and the following investment
limitations are fundamental policies of each Non-Money Market Fund. In addition,
it is a fundamental policy of the New Jersey and Pennsylvania Municipal
Securities Funds to invest at least 80% of their respective total assets in
municipal securities. Fundamental policies cannot be changed with respect to a
Fund without the consent of the holders of a majority of that Fund's outstanding
shares.
EACH NON-MONEY MARKET 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 each Fund's total assets. This restriction
does not apply to the New Jersey Municipal Securities and Pennsylvania
Municipal Securities Funds.
2. Purchase any securities which would cause more than 25% of the total assets
of any 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 the obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements involving such securities or, with respect to the Fixed
Income Funds only, to investments in tax-exempt securities issued by
governments or political subdivisions of
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
governments. For purposes of this limitation, (i) utility companies will be
classified according to their services, for example, gas, gas
transmissions, electric and telephone will each be considered a separate
industry; (ii) financial services 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; (iii) with respect to the Equity and Balanced Funds only,
supranational agencies will be deemed to be issuers conducting their
principal business activities in the same industry; and (iv) with respect
to the Equity and Balanced Funds only, governmental issuers within a
particular country will be deemed to be conducting their principal business
activities in the same industry.
3. Make loans, except that a Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; (b) enter into
repurchase agreements; and (c) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentage limitations apply at the time of the purchase of a
security.
It is a non-fundamental policy of each Non-Money Market Fund to invest no more
than 15% of its net assets in illiquid securities (as defined below under
"Description of Permitted Investments").
Additional investment limitations are set forth in the Statement of Additional
Information.
THE ADVISOR
Summit Bank Investment Management Division, a division of Summit Bank (the
"Advisor"), serves as the investment advisor to the Trust. The Advisor makes the
investment decisions for the assets of the Funds and continuously reviews,
supervises and administers each Fund's investment program subject to the
supervision of, and policies established by, the Trustees of the Trust.
Summit Bank, 210 Main Street, Hackensack, New Jersey 07601, was chartered in
1899 and has been exercising trust powers and managing money since 1916. The
Investment Management Division began as a separate operating division of the
Bank in 1973. The Bank's investment professionals have, on average, over 20
years of experience in investment management. As of December 31, 1997, total
assets under management were approximately $8.2 billion.
Summit Bank is a wholly-owned subsidiary of Summit Bancorp, an interstate bank
holding company with approximately $30 billion in assets and 426 banking
offices, predominantly in New Jersey and eastern Pennsylvania, as of December
31, 1997.
Fixed Income Fund--Joseph Markovich is a Vice President of the Advisor and
currently manages the Fixed Income Fund. Mr. Markovich has managed the Fixed
Income Fund since January 1, 1997. Prior to January, 1997, Mr. Markovich managed
the Fixed Income Common Trust Funds for Summit Bank. Mr. Markovich has had
investment responsibility for equity and fixed income portfolios since joining
Summit Bank in 1985.
Intermediate-Term Government Securities Fund--Frances M. Tendall is a Vice
President and Regional Manager (Princeton) of the Advisor. Mrs. Tendall has
managed the Intermediate-Term Government Securities Fund and has co-managed
the U.S. Treasury Securities Money Market Fund since their inceptions
in April, 1992. Mrs. Tendall joined Summit Bank in 1982.
New Jersey Municipal Securities and Tax-Exempt Money Market Funds--Charlene P.
Palmer is a Vice President of the Advisor and has managed the New Jersey
Municipal Securities Fund since its inception in May, 1992 and the Tax-Exempt
Money Market Fund since June, 1996. Mrs. Palmer's experience has emphasized
tax-exempt bonds. She joined Summit Bank in 1981.
Pennsylvania Municipal Securities and Mid Cap Funds--Randolph E. Lestyk is Vice
President and Regional Manager (Pennsylvania) of the Advisor and has managed the
Pennsylvania Municipal Securities Fund since its inception in May, 1993 and the
Mid
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Cap Fund since January, 1996. Prior to joining Summit Bank in January 1994, Mr.
Lestyk was involved in equity and fixed income investing at several financial
institutions, serving as Director of Fixed Income Investing, Head of Trust
Investments, and most recently as Senior Vice President and Chief Investment
Officer of a major insurance company in Pennsylvania.
Equity Growth and Mid Cap Funds--John Guarino is a Vice President and Regional
Manager (Summit) of the Advisor and has managed the Equity Growth Fund since its
inception in February, 1997 and co-managed the Fund with Chris Clark since July,
1997. Since February, 1997, he has also been a co-manager of the Mid Cap Fund.
Mr. Guarino joined Summit Bank in 1985.
Mr. Clark is an investment portfolio manager with the Advisor and has co-managed
the Equity Growth Fund since July, 1997. Mr. Clark joined Summit Bank in 1995
and prior to that was an investment portfolio manager with Merrill Lynch.
Equity Income and Mid Cap Funds--Richard H. Caro is a Vice President of the
Advisor and has managed the Equity Income Fund since January, 1996. Since
February, 1997, he has also been a co-manager of the Mid Cap Fund. Mr. Caro
joined Summit Bank in 1993 and currently has responsibility for managing both
equity and fixed income portfolios in the Investment Department.
Equity Value Fund--Fernando Garip is a Vice President and Regional Manager
(Hackensack) of the Advisor and has managed the Equity Value Fund since January,
1996. Mr. Garip joined Summit Bank in 1982.
Balanced Fund--Edward Kasperavich is a Vice President of the Advisor and has
managed the Balanced Fund since January, 1997. Mr. Kasperavich joined Summit
Bank in 1985.
U.S. Treasury Securities Money Market and Prime Obligation Money Market
Funds--Judith Wolk is a Vice President of the Advisor and has managed the Pillar
taxable money market funds and has co-managed the U.S. Treasury Securities Money
Market Fund with Mrs. Tendall since June, 1996. Prior to joining Summit
Bank in September, 1995, Ms. Wolk had substantial experience in money market
instruments with a large regional bank.
The Advisor is entitled to a fee from each Fund, which is calculated daily and
paid monthly at the annual rate of the respective Fund's average daily net
assets as set forth in the following table. The Advisor has voluntarily agreed
to waive all or a portion of its fees to limit the total operating expenses of
Class I Shares of each Fund to the respective levels set forth below. The
Advisor reserves the right to terminate any and all fee waivers at any time in
its sole discretion. Also set forth below are the advisory fees each Fund paid
to the Advisor (shown as a percentage of average daily net assets) for the
fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
Maximum Total Fees Received
Contractual Operating Expense In Fiscal
Fee After Fee Waiver 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
U.S. Treasury Securities
Money Market Fund .35% .65% .35%
Prime Obligation Money
Market Fund .35% .65% .34%
Tax-Exempt Money Market
Fund .35% .65% .33%
Fixed Income Fund .60% .80% .49%
New Jersey Municipal
Securities Fund .60% .80% .46%
Pennsylvania Municipal
Securities Fund .60% .80% .45%
Intermediate-Term
Government Securities Fund .60% .80% .46%
Equity Growth Fund .75% .80% .48%
Equity Value Fund .75% .80% .49%
Equity Income Fund .75% .80% .46%
Mid Cap Fund .75% .80% .46%
Balanced Fund .75% .80% .41%
</TABLE>
Summit Bank has also entered into a custodian agreement with the Trust, under
which it provides all securities safekeeping services as required by the Funds
and the 1940 Act. The Trust pays Summit Bank (referred to herein in its
custodial capacity as the "Custodian") a custodian fee, which is calculated
daily and paid monthly, at an annual rate of .025% of the average daily net
assets of each Fund.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The Administrator provides the Trust with administrative services, other
than investment advisory services, including all regulatory reporting, necessary
office space, equipment, personnel and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily net assets of each Fund.
THE TRANSFER AGENT
State Street Bank and Trust Company (the "Transfer Agent"), 225 Franklin St.,
Boston, Massachusetts 02110 is the Trust's transfer agent.
THE SHAREHOLDER SERVICING AGENT
Boston Financial Data Services, Two Heritage Drive, North Quincy, Massachusetts,
02171 is the Trust's dividend disbursing agent and shareholder servicing agent.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company, acts as the Distributor of the Trust's shares. No
compensation is paid to the Distributor for distribution services for the Class
I Shares of the Funds. Class I Shares of the Funds are offered without
distribution fees to: (i) institutional investors (including Summit Bank, its
affiliates and correspondent banks) for the investment of their own funds; (ii)
individuals and institutions (including Summit Bank, its affiliates and
correspondent banks) for the investment of funds held by such individuals or
institutions in a fiduciary, agency, custodial or other representative capacity
if such individuals or institutions are able to provide complete shareholder
recordkeeping services with respect to shares purchased and held in such
capacity; and (iii) any qualified customer who has entered into an agreement
with Summit Bank, its affiliates or correspondent banks ("Qualified Customers").
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs which will be paid by the Distributor from
the sales charge it receives or from any other source available to it. Under any
such program, the Distributor may provide promotional incentives in the form of
cash or other compensation, including merchandise, gifts and prizes, and payment
of travel expenses, meals and lodging, to all dealers selling shares of the
Funds. Such promotional incentives will be offered uniformly to all dealers and
predicated upon the number of shares of the Trust's portfolios sold by the
dealer.
PURCHASE AND REDEMPTION OF SHARES
Shares of each Fund are sold on a continuous basis and may be purchased on any
day that the New York Stock Exchange is open for trading (a "Business Day").
However, with respect to the Money Market Funds, a "Business Day" does not
include days when the Federal Reserve Bank is closed. Generally, (i) an investor
in the Class I Shares of a Fund must pay for shares by federal funds and (ii)
checks (including third party and credit card checks), credit cards and cash
will not be accepted for payment of Class I Shares.
A purchase or redemption order for shares of a Fund will be executed at a per
share price equal to the net asset value next determined after the appropriate
order is effective.
The net asset value per Class I Share of a Fund is determined by dividing the
total value of the Fund's investments and other assets that are allocated to its
Class I Shares, less any liabilities that are allocated to its Class I Shares,
by the Fund's total outstanding Class I Shares. The net asset value per share
for a Money Market Fund is calculated as of the earlier of 3:00 p.m., Eastern
time, or the regularly-scheduled close of normal trading on the New York Stock
Exchange each Business Day based on the amortized cost method as described under
"Determination of Net Asset Value" in the Statement of Additional Information.
The purchase and redemption prices for
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
each Money Market Fund is expected to remain constant at $1.00 per share. The
net asset value per share of the Non-Money Market Funds is determined as of the
regularly-scheduled close of normal trading on the New York Stock Exchange
(normally, 4:00 p.m., Eastern time) each Business Day. Purchases will be made in
full and fractional shares of a Fund calculated to three decimal places. A Fund
may use a pricing service to provide market quotations. A pricing service may
use a matrix system of valuation to value fixed income securities which
considers factors such as securities prices, yield features, ratings and
developments related to a specific security.
No certificates representing shares will be issued.
Neither the Trust nor the Transfer Agent will be responsible for any loss,
liability, cost or expense for acting upon instructions that it reasonably
believes to be genuine. The Trust and the Transfer Agent will each employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If market conditions are extraordinarily active, or other extraordinary
circumstances exist, Shareholders who experience difficulties placing redemption
orders by telephone may wish to consider placing the redemption order by other
means.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust, a Fund or its
Shareholders to accept such order. Qualified Customers should call the Transfer
Agent for information regarding requirements for purchase and redemption orders.
In addition, the Trust has approved Authorized Broker-Dealers to act as the
Funds' agent for the purposes of accepting purchase orders and redemption
requests. The Funds will be deemed to have received a purchase order or a
redemption request upon receipt of the order or request by an Authorized
Broker-Dealer.
Money Market Funds: A purchase order for a Money Market Fund will be effective
as of the Business Day received by the Distributor (or Authorized Broker-Dealer
discussed below) if the Distributor (or Authorized Broker-Dealer) receives the
order and payment in federal funds before the time the Fund calculates its net
asset value (normally 3:00 p.m., Eastern time). All other purchase orders will
be effective on the next Business Day. Purchased shares begin earning dividends
on the Business Day the purchase order for those shares is effective. Financial
institutions may impose an earlier cut-off time for receipt of purchase orders
directed through them to allow time for processing and transmittal of these
orders to the Distributor for effectiveness the
same day.
For redemption orders received before the time the Fund calculates its net asset
value (normally 3:00 p.m., Eastern time), payment will normally be made the same
day by the transfer of federal funds. Otherwise, payment will be made on the
next Business Day and, in any event, within seven Business Days after the
redemption order is effective. Redeemed shares are not entitled to dividends
declared the day the redemption order is effective.
Non-Money Market Funds: A purchase order for a Non-Money Market Fund will be
effective as of the Business Day received by the Distributor (or Authorized
Broker-Dealer) if the Distributor (or Authorized Broker-Dealer) receives the
order and payment in federal funds before the time the Fund calculates its net
asset value (normally 4:00 p.m., Eastern time). All other purchase orders
accompanied by payment, except those of certain types of investors as described
below, will be effective the next Business Day. Certain institutional investors
and financial institutions, such as Summit Bank, that have entered into a
settlement agreement with the Distributor, may make payment in federal funds for
purchases of Non-Money Market Funds to the Distributor by 3:00 p.m., Eastern
time, the Business Day following the effective date of the trade. A purchase
order may be canceled if the Distributor does not receive federal funds before
3:00 p.m., Eastern time, the next Business Day. Financial institutions may
impose an earlier cut-off time for receipt of purchase orders directed through
them to allow time for processing and transmittal of these orders to the
Distributor for effectiveness the same day.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Shareholders who desire to redeem shares of a Non-Money Market Fund must place
their redemption orders prior to the time the Fund calculates its net asset
value (normally 4:00 p.m., Eastern time), on any Business Day, for the order to
be effective on that Business Day. The redemption price of shares is the net
asset value of a Fund next determined after the redemption order is effective.
Otherwise, payment on redemption will be made by the next Business Day transfer
of federal funds as promptly as possible and, in any event, within seven days
after the redemption order is effective.
Each Fund intends to pay cash for all shares redeemed, but under abnormal
conditions that make payment in cash unwise, payment may be made wholly or
partly in portfolio securities with a market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
PERFORMANCE
Computation of Yield
From time to time the Money Market Funds may advertise "current yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "current yield" of a Money
Market Fund refers to the income generated by an investment in a Fund over a
seven-day period (which period will be stated in the advertisement). This income
is then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The "effective yield" will be slightly higher than the
"current yield" because of the compounding effect of this assumed reinvestment.
The Fixed Income Funds may also advertise yield and total return (described
below). The yield of a Fixed Income Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The yield
is calculated by assuming that the income generated by the investment during
that period is generated over one year and is shown as a percentage of the
investment.
The Tax-Exempt Money Market, New Jersey Municipal Securities and Pennsylvania
Municipal Securities Funds 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 respective
Fund's yield, assuming certain tax brackets for a Shareholder.
Computation of Total Return
Each of the Fixed Income, Equity and Balanced Funds may also advertise total
return. Total return figures are based on historical earnings and are not
intended to indicate future performance.
The total return of a Fund refers to the average compounded rate of return on a
hypothetical investment for designated time periods (including, but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each period
and assuming the reinvestment of all dividend and capital gain distributions.
A Fund may periodically compare its performance to that of: (i) other mutual
funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives. A Fund may quote
Morningstar, Inc., a service that ranks mutual
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
funds on the basis of risk adjusted performance. A Fund may use long-term
performance of the capital markets to demonstrate general long-term risk versus
reward scenarios and could include the value of a hypothetical investment in any
of the capital markets. A Fund may also quote financial and business
publications and periodicals as they relate to fund management, investment
philosophy and investment techniques.
A Fund may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial
or administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of a Fund or its
Shareholders. Accordingly, Shareholders are urged to consult their tax advisors
regarding specific questions as to federal, state and local income taxes.
Tax Status of the Funds
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other investment portfolios. Each Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies under Subchapter M of the Code, so as to be relieved of federal income
tax on that part of its net investment income and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) which is
distributed to Shareholders.
Tax Status of Distributions
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders.
Dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares and will not qualify for
the dividends-received deduction otherwise available to corporate shareholders.
Any dividends from net capital gain (the excess of net long-term capital gain
over net short-term capital loss) will be distributed annually and will be
treated as a 20% rate gain distribution (taxed at a rate of 20%) or a 28% rate
gain distribution (taxed at a rate of 28%), depending upon the designation by
the Fund (such designation being dependent upon the holding period of the Fund
in the underlying asset generating the net capital gain), regardless of how long
the Shareholder has held the Fund's shares. Capital gains distributions also
will not qualify for the dividends-received deduction. Each Fund will make
annual reports to Shareholders of the federal income tax status of all
distributions.
Interest received on direct U.S. Government obligations that is exempt from tax
at the state level when received directly may be exempt, depending on the state,
when received by a Shareholder from a Fund, provided certain conditions are
satisfied. Interest received on repurchase agreements normally is not exempt
from state taxation. Each Fund annually will inform Shareholders of the
percentage of income and distributions derived from direct U.S. Government
obligations. Shareholders should consult their tax advisors to determine whether
any portion of the income dividends received from a Fund is considered
tax-exempt in their particular states.
Certain securities purchased by the Funds (such as STRIPs, TRs, TIGRs and CATs
defined under "Description of Permitted Investments--Derivatives"), are sold at
original issue discount and thus generally do not make periodic cash interest
payments. A Fund will be required to include as part of its current income the
accreted interest on such obligations even though the Fund has not received any
interest payments on such obligations during that period. Because each Fund
distributes all of its net investment income to its Shareholders, a Fund may
have to sell portfolio securities to distribute such imputed income which may
occur at a time when the Advisor or Sub-Advisor would not have chosen to
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
sell such securities and which may result in a taxable gain or loss.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in these months will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 if
paid by the Fund at any time during the following January.
Each Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
The sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
Generally, gain or loss on the sale, exchange or redemption of a share will be
capital gain or loss which will be long-term if the share has been held for more
than eighteen months, mid-term if the share has been held for more than twelve,
but not more than eighteen months and otherwise will be short-term. 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 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
loss from the sale or exchange of a capital asset held for more than twelve
months to the extent of the amount of the prior capital gains distribution (or
any undistributed net capital gains of the Fund which 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). Investors should
particularly note that this loss disallowance rule will apply to shares received
through the reinvestment of dividends during the 61-day period.
Income derived by a Fund from obligations of foreign issuers may be subject to
foreign withholding taxes. The Funds will not be able to elect to treat
Shareholders as having paid their proportionate share of such foreign taxes.
Additional Considerations for the Tax-Exempt Money Market, New Jersey Municipal
Securities and Pennsylvania Municipal Securities Funds
The Tax-Exempt Money Market, New Jersey Municipal Securities and Pennsylvania
Municipal Securities Funds will each distribute all of their net investment
income (including net short-term capital gain) to their respective Shareholders.
If, at the close of each quarter of its taxable year, at least 50% of the value
of a Fund's assets consist of obligations the interest on which is excludable
from gross income, 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 federal income tax purposes,
but may have collateral consequences.
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 a Fund to purchase sufficient amounts of tax-exempt securities to
satisfy the Code's requirements for the payment of "exempt-interest dividends."
Interest on indebtedness incurred or continued by a Shareholder in order to
purchase or carry shares of the Tax-Exempt Money Market, New Jersey Municipal
Securities and Pennsylvania Municipal Securities Funds is not deductible for
federal income tax purposes. Furthermore, these Funds may not be an appropriate
investment for persons (including corporations and other business entities) who
are "substantial users" (or persons related to "substantial users") of
facilities financed by industrial development private activity bonds. Such
persons should consult their tax advisors before purchasing shares. A
"substantial user" is defined generally to
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
include "certain persons" who regularly use in their trade or business a part of
a facility financed from the proceeds of such bonds.
The Tax-Exempt Money Market Fund--Additional Considerations
The Tax-Exempt Money Market Fund does not expect to realize any net capital
gains (the excess of net long-term capital gains over net short-term capital
losses). To the extent that it does, however, it intends to distribute such
gains to Shareholders. Distributions of net capital gains will not qualify for
the dividends-received deduction for corporate shareholders and will be treated
as long-term capital gain. See the Statement of Additional Information for
information regarding a Shareholder's ability to receive foreign tax credits
with respect to any such taxes.
New Jersey Tax Considerations
Investors of the New Jersey Municipal Securities Fund will not be subject to the
New Jersey Gross Income Tax on distributions from the Fund attributable to
interest income from (and net gain, if any, from the disposition of) New Jersey
Municipal Securities or obligations of the United States, its territories and
possessions and certain of its agencies and instrumentalities ("Federal
Securities") held by the Fund, either when received by the Fund or when credited
or distributed to the investors, provided that the Fund meets the requirements
for a qualified investment fund by: 1) maintaining its registration as a
registered investment company with the SEC; 2) investing at least 80% of the
aggregate principal amount of the Fund's investments, excluding financial
options, futures, forward contracts, or other similar financial instruments
relating to interest-bearing obligations, obligations issued at a discount or
bond indexes related thereto to the extent such instruments are authorized under
the regulated investment company rules under the Code, cash and cash items,
which cash items shall include receivables, in New Jersey Municipal Securities
or Federal Securities at the close of each quarter of the tax year; 3) investing
100% of its assets in interest-bearing obligations, discount obligations, cash
and cash items, including receivables, financial options, futures, forward
contracts or other similar financial instruments relating to interest-bearing
obligations, discount obligations or bond indexes related thereto; and 4)
complying with certain continuing reporting requirements.
For New Jersey Gross Income Tax purposes, net income or gains and distributions
derived from investments in other than New Jersey Municipal Securities and
Federal Securities, and distributions from net realized capital gains in respect
of such investments, will be taxable. Gain on the disposition of shares is not
subject to New Jersey Gross Income Tax, provided that the Fund meets the
requirements for a qualified investment fund set forth above.
Pennsylvania Tax Considerations
For purposes of the Pennsylvania Personal Income Tax and the Philadelphia School
District Investment Net Income Tax, distributions which are attributable to
interest received by the Pennsylvania Municipal Securities Fund from its
investments in Pennsylvania Municipal Securities or Federal Securities are not
taxable. Distributions by the Fund to a Pennsylvania resident that are
attributable to most other sources may be subject to the Pennsylvania Personal
Income Tax and (for residents of Philadelphia) to the Philadelphia School
District Investment Net Income Tax.
Distributions paid by the Fund which are excludable as exempt income for federal
tax purposes are not subject to the Pennsylvania corporate net income tax. An
additional deduction from Pennsylvania taxable income is permitted for the
amount of distributions paid by the Fund attributable to interest received by
the Fund from its investments in Pennsylvania Municipal Securities and Federal
Securities to the extent included in federal taxable income, but such a
deduction is reduced by any interest on indebtedness incurred to carry the
securities and other expenses incurred in the production of such interest
income, including expenses deducted on the federal income tax return that would
not have been allowed under the Code if the interest were exempt from federal
income tax. Distributions by the Fund attributable to most other sources may be
subject to the Pennsylvania corporate net income tax. It is the current position
of the Pennsylvania Department of Revenue that Fund shares are considered exempt
assets (with a pro rata exclusion based on the value of the Fund attributable to
its investments in Pennsylvania Municipal Securities and Federal
- --------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Securities) for purposes of determining a corporation's capital stock value
subject to the Commonwealth's capital stock or franchise tax.
Shares purchased as an investment in the Pennsylvania Municipal Securities Fund
are exempt from Pennsylvania county personal property taxes to the extent that
the Fund's investments consist of obligations which are themselves exempt from
taxation in Pennsylvania.
The Fund intends to invest primarily in obligations which produce interest
exempt from federal and Pennsylvania taxes. If the Fund invests in obligations
that are not exempt for Pennsylvania purposes but are exempt for federal
purposes, a portion of the Fund's distributions will be subject to Pennsylvania
Personal Income Tax.
GENERAL INFORMATION
The Trust
The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated September 9, 1991. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each portfolio. In
addition to the Funds, the Trust currently consists of the Institutional Select
Money Market Fund, U.S. Treasury Securities Plus Money Market Fund and
International Growth Fund. Shares of the portfolios are offered through up to
four separate classes of Shares (Class A, B, I and S). All consideration
received by the Trust for shares of any portfolio and all assets of such
portfolio belong to that portfolio and would be subject to liabilities related
thereto.
Each Fund pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services, registering the shares
under federal laws and filing with state securities commissions, pricing,
insurance expenses, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses.
- --------------------------------------------------------------------------------
27
<PAGE>
The Advisor, in addition to providing investment advice to the Trust, provides
investment advice to other clients. Some of these clients' funds are maintained
in asset allocation accounts and may be invested in the Funds. From time to
time, the Funds may experience relatively large purchases or redemptions due to
asset allocation decisions made by the Advisor for its clients. These
transactions may have a material effect on the Funds, since Funds that
experience redemptions as a result of reallocations may have to sell portfolio
securities and because Funds that receive additional cash will have to invest
it. While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on portfolio management to the extent
that Funds may be required to sell securities at times when they would not
otherwise do so, or receive cash that cannot be invested in an expeditious
manner. There may be tax consequences associated with purchases and sales of
securities, and such sales may also increase transaction costs. The Advisor is
committed to minimizing the impact of these transactions on the Funds to the
extent it is consistent with pursuing the investment objectives of its asset
allocation decisions on the Funds.
Trustees of the Trust
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
Voting Rights
Each share held entitles a Shareholder of record to one vote. The Shareholders
of each Fund or class will vote separately on matters relating solely to that
Fund or class. As a Massachusetts business trust, the Trust is not required to
hold annual meetings of Shareholders, but approval will be sought for certain
changes in the operation of the Trust and for the election of Trustees under
certain circumstances. In addition, a Trustee may be removed by the remaining
Trustees or by Shareholders at a special meeting called upon written request of
Shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested the Trust will provide appropriate
assistance and information to the Shareholders requesting the meeting.
Reporting
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
Shareholder Inquiries
Shareholder inquiries should be directed to The Pillar Funds, P.O. Box 8523,
Boston, MA 02266-8523.
Dividends
Cash Sweep Shareholders automatically receive all income dividends and capital
gain distributions in cash. All other Shareholders automatically receive all
income dividends and capital gain distributions in additional Class I Shares at
the net asset value next determined following the record date, unless the
Shareholder has elected to take such payment in cash. Cash Sweep Shareholders
should refer to the Trust's cash sweep prospectus for more information.
Shareholders may change their election by providing written notice to the
Administrator at least 15 days prior to the distribution. If any capital gain is
realized, substantially all of it will be distributed at least annually.
Dividends and distributions of each Fund are paid on a per-share basis. The
value of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
Money Market Funds: The net investment income (exclusive of capital gains) of
each Money Market Fund is determined and declared on each Business Day as a
dividend to Shareholders of record as of the close of business on that day.
Dividends are paid by the Money Market Funds on or about the first
- --------------------------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Business Day of the following month. Redeemed shares are not entitled to
dividends declared the day the redemption order is effective.
Fixed Income Funds: Each Fixed Income Fund declares dividends of substantially
all of its net investment income (exclusive of capital gains) daily and
distributes such dividends on or about the first Business Day of the following
month. Shares purchased begin earning dividends on the Business Day following
the date of purchase, and accrue dividends through and including the effective
date of redemption.
Equity and Balanced Funds: Substantially all of the net investment income (not
including capital gain) of each Equity and Balanced Fund is distributed in the
form of quarterly dividends to Shareholders of record on the next to last
Business Day of each quarter.
Counsel and Independent Public Accountants
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain permitted investments and associated
risk factors for the Funds:
AMERICAN DEPOSITARY RECEIPTS ("ADRS"), EUROPEAN DEPOSITARY RECEIPTS ("EDRS"),
CONTINENTAL DEPOSITARY RECEIPTS ("CDRS") AND GLOBAL DEPOSITARY RECEIPTS
("GDRS")--ADRs are securities, typically issued by a U.S. financial institution
(a "depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
include American Depositary Shares and New York Shares. EDRs, which are
sometimes referred to as Continental Depositary Receipts, are securities,
typically issued by a non-U.S. financial institution, that evidence ownership
interests in a security or a pool of securities issued by either a U.S. or
foreign issuer. GDRs are issued globally and evidence a similar ownership
arrangement. Generally, ADRs are designed for trading in the U.S. securities
markets, EDRs are designed for trading in European securities markets and GDRs
are designed for trading in non-U.S. securities markets. ADRs, EDRs, CDRs and
GDRs may be available for investment through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
security underlying the receipt and a depositary, whereas an unsponsored
facility may be established by a depositary without participation by the issuer
of the receipt's underlying security. Holders of an unsponsored depositary
receipt generally bear all the costs of the unsponsored facility. The depositary
of an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited security or
to pass through to the holders of the receipts voting rights with respect to the
deposited securities.
ASSET-BACKED SECURITIES--Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-
- --------------------------------------------------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
backed securities raises risk considerations peculiar to the financing of
the instruments underlying such securities. For example, there is a risk that
another party could acquire an interest in the obligations superior to that of
the holders of the asset-backed securities. There also is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on those securities. Asset-backed securities entail prepayment
risk, which may vary depending on the type of asset, but is generally less than
the prepayment risk associated with mortgage-backed securities. In addition,
credit card receivables are unsecured obligations of the card holder. The market
for asset-backed securities is at a relatively early stage of development.
Accordingly, there may be a limited secondary market for such securities.
BANKERS ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. They 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 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 the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES--Convertible securities are corporate securities that are
exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provisions.
DERIVATIVES--Derivatives are securities that derive their value from other
securities, financial instruments or indices. The following are considered
derivative securities: options on futures, futures, options (e.g., puts and
calls), swap agreements, mortgage-backed securities (e.g., CMOs, REMICs,
interest-only ("IOs") and principal-only ("POs")), when-issued securities and
forward commitments, floating and variable rate securities, convertible
securities, "stripped" U.S. Treasury securities (e.g., Receipts and STRIPs), and
privately issued stripped securities (e.g., TGRs, TRs and CATs). See elsewhere
in this "Description of Permitted Investments" for discussions of these various
instruments, and see "Investment Objectives and Policies" for more information
about any investment policies and limitations applicable to their use.
EQUITY SECURITIES--Equity securities represent ownership interests in a company
and consist of common stocks, preferred stocks, warrants to acquire common stock
and securities convertible into common stock. Investments in equity securities
in general are subject to market risks that may cause their prices to fluctuate
over time. The value of convertible equity securities is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provision. Fluctuations in the value of equity securities in which a Fund
invests will cause the net asset value of a Fund to fluctuate.
FIXED INCOME SECURITIES--Fixed income securities consist of bonds, notes,
debentures and other interest-bearing securities that represent indebtedness.
The market value of the fixed income investments in which a 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,
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
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 a Fund's net
asset value.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS--A Fund may enter into
contracts for the purchase or sale of securities, including index contracts. A
purchase of a futures contract means the acquisition of a contractual right to
obtain delivery to the Fund of the securities called for by the contract at a
specified price during a specified future month. When a futures contract on
securities is sold, a Fund incurs a contractual obligation to deliver the
securities underlying the contract at a specified price on a specified date
during a specified future month. A Fund may sell stock index futures contracts
in anticipation of, or during a market decline to attempt to offset the decrease
in market value of its common stocks that might otherwise result; and it may
purchase such contracts in order to offset increases in the cost of common
stocks that it intends to purchase. A Fund may enter into futures contracts and
options thereon to the extent that not more than 5% of the Fund's assets are
required as futures contract margin deposits and premiums on options and may
engage in futures contracts to the extent that obligations relating to such
futures contracts represent not more than 20% of the Fund's total assets.
A Fund may also purchase and write options to buy or sell futures contracts. A
Fund may write options on futures only on a covered basis. Options on futures
are similar to options on securities except that options on futures give the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract, rather than actually to purchase or sell the futures contract,
at a specified exercise price at any time during the period of the option.
When a Fund enters into a futures transaction it must deliver to the futures
commission merchant selected by the Fund an amount referred to as "initial
margin." This amount is maintained in a segregated account at the custodian
bank. Thereafter, a "variation margin" may be paid by the Fund to, or drawn by
the Fund from, such account in accordance with controls set for such accounts,
depending upon changes in the price of the underlying securities subject to the
futures contract. In addition, a Fund will segregate liquid assets and/or cash
in an amount equal to its obligations under such contract. A Fund will enter
into such futures and options on futures transactions on domestic exchanges and,
to the extent such transactions have been approved by the Commodity Futures
Trading Commission for sale to customers in the United States, on foreign
exchanges.
Options and futures can be volatile investments and involve certain risks. If
the Advisor applies a hedge at an inappropriate time or judges interest rates
incorrectly, options and futures strategies may lower a Fund's return. A Fund
could also experience losses if the prices of its options and futures positions
were poorly correlated with its other instruments, or if it could not close out
its positions because of an illiquid secondary market.
ILLIQUID SECURITIES--Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at which they are being
carried on a Fund's books. Not more than 10% of the net assets of a Money Market
Fund or 15% of the net assets of a Non-Money Market Fund will be invested in
such instruments. An illiquid security includes a demand instrument with a
demand notice period exceeding seven days, if there is no secondary market for
such security. Restricted
- --------------------------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
securities, including Rule 144A securities, that meet the criteria
established by the Trustees of the Trust will be considered liquid.
INVESTMENT COMPANIES--A Fund may invest up to 10% of its total assets in
shares of other investment companies. Because of restrictions on direct
investment by U.S. entities in certain countries, investment in other investment
companies may be the most practical or only manner in which an international and
global fund can invest in the securities markets of those countries. Such
investments may involve the payment of substantial premiums above the net asset
value of such issuers' fund securities, and are subject to limitations under the
1940 Act.
A Fund does not intend to invest in other investment companies unless, in the
judgment of the Advisor, the potential benefits of such investment exceed the
associated costs relative to the benefits and costs associated with direct
investments in the underlying securities. As a shareholder in an investment
company, a Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees.
JUNK BONDS--Bonds rated below investment grade are often referred to as "junk
bonds." Such securities involve greater risk of default or price declines than
investment grade securities due to changes in the issuer's creditworthiness and
the outlook for economic growth. The market for these securities may be less
active, causing market price volatility and limited liquidity in the secondary
market. This may limit a Fund's ability to sell such securities at their market
value. In addition, the market for these securities may also be adversely
affected by legislative and regulatory developments. Credit quality in the junk
bond market can change suddenly and unexpectedly, and even recently issued
credit ratings may not fully reflect the actual risks imposed by a particular
security.
MONEY MARKET SECURITIES--Money market securities include short-term U.S.
Government Securities; custodial receipts evidencing separately traded interest
and principal components of securities issued by the U.S. Treasury; commercial
paper rated in the highest short-term rating category by an NRSRO or determined
by the Advisor to be of comparable quality at the time of purchase; short-term
bank obligations (certificates of deposit, time deposits and bankers'
acceptances) of U.S. commercial banks with assets of at least $1 billion as of
the end of their most recent fiscal year; and repurchase agreements involving
such securities.
MORTGAGE-BACKED SECURITIES--Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed-rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
Government Pass-Through Securities: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, Fannie Mae and FHLMC. Fannie Mae and FHLMC obligations are
not backed by the full faith and credit of the U.S. Government as GNMA
certificates are, but Fannie Mae and FHLMC securities are supported by the
instrumentalities right to borrow from the U.S. Treasury. GNMA, Fannie Mae and
FHLMC each guarantees timely distributions of interest to certificate holders.
GNMA and Fannie Mae also each guarantees timely distributions of scheduled
principal. FHLMC has in the past guaranteed only the ultimate collection of
principal of the underlying mortgage loan; however, FHLMC
- --------------------------------------------------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
now issues mortgage-backed securities (FHLMC Gold PCS) which also guarantee
timely payment of monthly principal reductions. Government and private
guarantees do not extend to the securities' value, which is likely to vary
inversely with fluctuations in interest rates.
Private Pass-Through Securities: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include CMOs and
REMICs that are rated in one of the top two rating categories. While they are
generally structured with one or more types of credit enhancement, private
pass-through securities typically lack a guarantee by an entity having the
credit status of a governmental agency or instrumentality.
Collateralized Mortgage Obligations ("CMOs"): CMOs are debt obligations or
multi-class pass-through certificates issued by agencies or instrumentalities of
the U.S. Government or by private originators or investors in mortgage loans. In
a CMO, series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
REMICs: A REMIC is a CMO that qualifies for special tax treatment under the Code
and invests in certain mortgages principally secured by interests in real
property. Investors may purchase beneficial interests in REMICs, which are known
as "regular" interests, or "residual" interests. Guaranteed REMIC pass-through
certificates ("REMIC Certificates") issued by FNMA or FHLMC represent beneficial
ownership interests in a REMIC trust consisting principally of mortgage loans or
Fannie Mae, FHLMC or GNMA-guaranteed mortgage pass-through certificates. For
FHLMC REMIC Certificates, FHLMC guarantees the timely payment of interest, and
also guarantees the payment of principal as payments are required to be made on
the underlying mortgage participation certificates. Fannie Mae REMIC
Certificates are issued and guaranteed as to timely distribution of principal
and interest by Fannie Mae. GNMA REMIC Certificates are supported by the full
faith and credit of the U.S. Treasury.
Parallel Pay Securities; PAC Bonds: Parallel pay CMOs and REMICs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which must be retired by
its stated maturity date or final distribution date, but may be retired earlier.
Planned Amortization Class CMOs ("PAC Bonds") generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.
REITs: REITs are trusts that invest primarily in commercial real estate or real
estate-related loans. The value of interests in REITs may be affected by the
value of the property owned or the quality of the mortgages held by the trust.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
IO, while the other class may receive all of the principal payments and is thus
termed the PO. The value of IOs tends to increase as rates rise and decrease as
rates fall; the opposite is true of POs. SMBs are extremely sensitive to changes
in interest rates because of the impact thereon of prepayment of principal on
the underlying mortgage securities and can experience wide swings in value in
response to changes in interest rates and associated mortgage prepayment rates.
During times when interest rates are experiencing fluctuations, such securities
can be difficult to price on a consistent basis. The market for SMBs is not as
fully developed as other markets; SMBs therefore may be illiquid.
Risk Factors: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known maturity.
In the absence of a known maturity, market participants generally refer to an
estimated average life. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants can
produce different average life estimates with regard to the same security. There
can be no assurance that estimated average life will be a security's actual
average life.
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 obligation 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 both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
OPTIONS--A put option gives the purchaser of the option the right to sell, and
the writer of the option the obligation to buy, the underlying security at any
time during the option period. A call option gives the purchaser of the option
the right to buy, and the writer of the option the obligation to sell, the
underlying security at any time during the option period. The premium paid to
the writer is the consideration for undertaking the obligations under the option
contract. The initial purchase (sale) of an option contract is an "opening
transaction." In order to close out an option position, a Fund may enter into a
"closing transaction," which is simply the sale (purchase) of an option contract
on the same security with the same exercise price and expiration date as the
option contract originally opened.
A Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to protect against an
increase in the cost of securities that the Fund may seek to purchase in the
future. A Fund pays a premium for purchasing put and call options. If price
movements in the underlying securities are such that exercise of
- --------------------------------------------------------------------------------
34
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
the options would not be profitable for a Fund, loss of the premium paid
may be offset by an increase in the value of the Fund's securities or by a
decrease in the cost of acquisition of securities by the Fund.
A Fund may write covered put and call options as a means of increasing the
yield on its portfolio and as a means of providing limited protection against
decreases in its market value. When a Fund sells an option, if the underlying
securities do not increase or decrease to a price level that would make the
exercise of the option profitable to the holder thereof, the option generally
will expire without being exercised and the Fund will realize as profit the
premium received for such option. When a call option of which a Fund is the
writer is exercised, the Fund will be required to sell the underlying securities
to the option holder at the strike price, and will not participate in any
increase in the price of such securities above the strike price. When a put
option of which a Fund is the writer is exercised, the Fund will be required to
purchase the underlying securities at the strike price, which may be in excess
of the market value of such securities.
A Fund may purchase and write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the SEC that OTC options are illiquid.
A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates.
Call options on securities or foreign currency written by a Fund will be
"covered," which means that the Fund will own an equal amount of the underlying
security or foreign currency. With respect to put options on securities or
foreign currency written by a Fund, the Fund will establish a segregated account
with its custodian bank consisting of liquid assets and/or cash in an amount
equal to the amount the Fund would be required to pay upon exercise of the put.
A Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. A Fund may choose to
terminate an option position by entering into a closing transaction. The ability
of a Fund to enter into closing transactions depends upon the existence of a
liquid secondary market for such transactions.
All options written on indices must be covered. When a Fund writes an option on
an index, it will establish a segregated account containing liquid assets and/or
cash with its custodian in an amount at least equal to the market value of the
option and will maintain the account while the option is open or will otherwise
cover the transaction.
- --------------------------------------------------------------------------------
35
<PAGE>
- --------------------------------------------------------------------------------
Risk Factors. Risks associated with options transactions include: (1) the
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while a Fund will receive a premium
when it writes covered call options, it may not participate fully in a rise in
the market value of the underlying security.
RECEIPTS--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. This discount is
accreted over the life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater interest rate
volatility than interest-paying investments.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The Fund will have actual or constructive possession
of the security as collateral for the repurchase agreement. A 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 securities or
if the Fund realizes a loss on the sale of the collateral securities. A 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.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS--Investments by a money market
fund are subject to limitations imposed under regulations adopted by the SEC.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risks and that are "eligible securities," which means
they are (i) rated, at the time of investment, by at least two NRSROs (one if it
is the only organization rating such obligation) in the highest short-term
rating category or, if unrated, determined to be of comparable quality (a "first
tier security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). Investments in second tier
securities (second tier conduit securities for the Tax-Exempt Money Market Fund)
are subject to the further constraint that (i) no more than 5% of a Fund's
assets may be invested in such securities in the aggregate, and (ii) any
investments in such securities of one issuer is limited to the greater of 1% of
a Fund's total assets or $1 million. A taxable money market fund may hold more
than 5% of its assets in the first tier securities of a single issuer for three
business days. A security is not considered to be unrated if its issuer has
outstanding obligations of comparable priority and security that have a
short-term rating. The Advisor will determine that an obligation presents
minimal credit risks or that unrated instruments are of comparable quality in
accordance with guidelines established by the Trustees. The securities that
money market funds may acquire may be supported by credit enhancements, such as
demand features or guarantees. SEC regulations limit the percentage of
securities that a money market fund may hold for which a single issuer provides
credit enhancements.
SECURITIES OF FOREIGN ISSUERS--There are certain risks connected with investing
in foreign securities. These include risks of adverse political and economic
developments, the possible imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting requirements, the
possibility that there will be less information on such securities and their
issuers
- --------------------------------------------------------------------------------
36
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
available to the public, the difficulty of obtaining or enforcing court
judgments abroad, restrictions on foreign investments in other jurisdictions,
difficulties in effecting repatriation of capital invested abroad and
difficulties in transaction settlements and the effect of delay on shareholder
equity. Foreign securities may be subject to foreign taxes, and may be less
marketable than comparable U.S. securities. Also it may be more difficult to
obtain a judgment in a court outside the United States.
SECURITIES LENDING--In order to generate additional income, a Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash, securities of the U.S.
Government or its agencies equal to at least 102% of the market value of the
securities lent. A Fund continues to receive interest on the securities lent
while simultaneously earning interest 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. A Fund pays lending and
other fees in connection with securities loans.
STANDBY COMMITMENTS AND PUTS--Securities subject to standby commitments or puts
permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to a Fund owning the security to which it relates. In certain cases,
a premium may be paid for a standby commitment or put, which premium will have
the effect of reducing the yield otherwise payable on the underlying security. A
Fund will limit standby commitment or put transactions to institutions believed
to present minimal credit risk.
TAXABLE MUNICIPAL SECURITIES--Taxable Municipal Securities are municipal
securities the interest on which is not exempt from federal income tax. Taxable
Municipal Securities include "private activity bonds" that are issued by or on
behalf of states or their political subdivisions to finance privately-owned or
operated facilities for business and manufacturing, housing, sports, and
pollution control and to finance activities of, and facilities for, charitable
institutions. Private activity bonds are also used to finance public facilities
such as airports, mass transit systems, ports, parking lots and low income
housing. The payment of principal and interest on private activity bonds is not
backed by a pledge of tax revenues, and is dependent solely on the ability of
the facility's operator to meet its financial obligations, and may be secured by
a pledge of the financed real and/or personal property.
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 with a withdrawal penalty or that
mature in more than seven days are considered to be illiquid securities.
U.S. GOVERNMENT AGENCIES--Obligations issued or guaranteed by agencies of the
U.S. 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 U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and credit of the U.S. Treasury, others are supported by the
right of the
- --------------------------------------------------------------------------------
37
<PAGE>
- --------------------------------------------------------------------------------
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 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 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 a
Fund's shares.
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").
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. 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 security.
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.
A Fund will maintain with the Custodian a separate account with liquid assets
and/or cash in an amount at least equal to these commitments. The interest rate
realized, if any, on these securities is fixed as of the purchase date and no
interest accrues to a Fund before settlement. These securities may be 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
a Fund generally purchases securities on a when-issued or forward commitment
basis with the intention of actually acquiring securities, a Fund may dispose of
a when-issued security or forward commitment prior to settlement if it deems
such action appropriate.
- --------------------------------------------------------------------------------
38
<PAGE>
The Pillar Funds
Class I Shares
U.S. Treasury Securities Money Market Fund
Prime Obligation Money Market Fund
Tax-Exempt Money Market Fund
Fixed Income Fund
Intermediate-Term Government Securities Fund
New Jersey Municipal Securities Fund
Pennsylvania Municipal Securities Fund
Equity Growth Fund
Equity Value Fund
Equity Income Fund
Mid Cap Fund
Balanced Fund
Advisor:
[SUMMIT BANK LOGO]
Distributor:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
1-800-932-7782
PIL-F-022-02
<PAGE>
[LOGO]
The Pillar Funds
Your Investment Foundation
PROSPECTUS
Class A and B Shares
International Growth Fund
April 30, 1998
<PAGE>
Table of Contents
Summary 2
Expense Summary 4
Financial Highlights 8
The Trust 9
Investment Objective and Policies 9
Investment Limitations 12
The Advisor 13
The Sub-Advisor 13
The Administrator 14
The Transfer Agent 14
The Shareholder Servicing Agent 14
The Distributor 14
Purchase and Redemption of Shares 15
Performance 24
Taxes 25
General Information 26
Description of Permitted Investments 28
The Pillar Funds and Pillar are registered service marks of Summit Bank. Your
Investment Foundation and the stylized "P" logo are service marks of Summit
Bank. Reach Higher, Summit, Summit Bancorp and Summit Financial Services Group
are registered service marks of Summit Bancorp. Summit Bank is a service mark of
Summit Bancorp.
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE PILLAR FUNDS
CLASS A AND CLASS B SHARES
Investment Advisor:
SUMMIT BANK INVESTMENT MANAGEMENT DIVISION,
A DIVISION OF SUMMIT BANK
THE PILLAR FUNDS (the "Trust") consists of mutual fund portfolios seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to
shares of the following fund (the "Fund"):
O INTERNATIONAL GROWTH FUND
The Trust's Class A Shares and Class B Shares are offered to all persons.
Persons who own Class A Shares or Class B Shares of the Fund are referred to
herein as "Shareholders." This Prospectus offers Class A Shares and Class B
Shares of the Fund. Class A Shares and Class B Shares differ with respect to the
method of paying distribution costs through sales charges, and distribution and
service fees.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
INSURED, ENDORSED OR GUARANTEED BY, ANY BANK (INCLUDING
SUMMIT BANK OR ITS AFFILIATES OR CORRESPONDENTS), ANY STATE
OR STATE AGENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION
(FDIC), THE U.S. GOVERNMENT OR ANY U.S. GOVERNMENT AGENCY.
Amounts invested in the Fund are subject to investment risks, including possible
loss of the principal amount invested.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated April 30, 1998 has been filed with the Securities and Exchange
Commission and is available without charge by writing to the Distributor, SEI
Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling
1-800-932-7782. The Statement of Additional Information is incorporated into
this Prospectus by reference.
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.
April 30, 1998
- --------------------------------------------------------------------------------
1
<PAGE>
Summary
The Pillar Funds (the "Trust") consists of open-end management investment
companies which provide a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about Class A
Shares and Class B of the Trust's International Growth Fund (the "Fund").
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund seeks long-term capital growth.
There is no assurance that the Fund will meet its investment objective. See
"Investment Objective and Policies."
WHAT ARE THE PERMITTED INVESTMENTS?
The Fund may invest in equity securities of U.S. and non-U.S. issuers consisting
of (i) common stocks; (ii) warrants to purchase common stocks; (iii) securities
convertible into common stocks; (iv) American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs"), Continental Depositary Receipts ("CDRs")
and Global Depositary Receipts ("GDRs"); and (v) foreign government debt
securities. Because securities fluctuate in value, the shares of the Fund will
also fluctuate in value. In addition, the value of shares of the Fund is subject
to market and interest rate fluctuations that affect the value of its fixed
income investments. The Fund is non-diversified and may, therefore, concentrate
its portfolio investments in a relatively small number of issuers and may, as a
result, be subject to greater risk with respect to its portfolio securities. The
Fund may also invest in options, futures and currency transactions. The Fund's
investments in securities of foreign issuers will subject the Fund to risks
associated with foreign investments. See "Investment Objective and Policies,"
"General Investment Policies," "Risk Factors" and "Description of Permitted
Investments."
Who are the Advisor and Sub-Advisor? Summit Bank Investment Management Division,
a division of Summit Bank, serves as the advisor (the "Advisor") to the Trust.
Wellington Management Company, LLP serves as the sub-advisor (the "Sub-Advisor")
to the Fund. See "The Advisor" and "The Sub-Advisor."
Who is the Administrator? SEI Fund Resources serves as the administrator (the
"Administrator") of the Trust. See "The Administrator."
Who is the Transfer Agent? State Street Bank and Trust Company acts as transfer
agent (the "Transfer Agent") for the Trust.
Who is the Shareholder Servicing and Dividend Disbursing Agent? Boston Financial
Data Services is the Trust's dividend disbursing agent and shareholder servicing
agent. See "The Shareholder Servicing Agent."
Who is the Distributor? SEI Investments Distribution Co. acts as distributor
(the "Distributor") of the Trust's shares. The Trust has adopted distribution
plans (the "Plans") on behalf of the Class A Shares and Class B Shares pursuant
to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). See "The Distributor."
How do I Purchase and Redeem Shares? Shares may be purchased and redeemed
directly from the Trust's Distributor or through an investment professional of a
securities broker or other financial institution, such as Summit Bank, that has
entered into a selling agreement with the Trust or the Distributor.
The Trust has authorized certain broker-dealers and other financial
intermediaries (collectively, "Authorized Broker-Dealers") to accept purchase
orders and redemption requests up to the times mentioned above on behalf of the
Fund.
Purchases and redemptions of the Fund shares may be made through the Distributor
or Authorized Broker-Dealer on any "Business Day." A "Business Day" for the Fund
is any day that the New York Stock Exchange is open for trading. A purchase
order will be effective as of the Business Day received by the Distributor (or
Authorized Broker-Dealer) if the Distributor (or Authorized Broker-Dealer)
receives the order and payment before the Fund calculates its net asset value
(normally, 4:00 p.m., Eastern time). The purchase price of Class A Shares of the
Fund is the net asset value next determined after the purchase order is
effective plus any applicable sales load. The purchase price of Class B Shares
is the net asset value next determined after the purchase order is effective.
Redemption orders must be placed before the Fund calculates its net
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
asset value (normally, 4:00 p.m., Eastern time), on any Business Day for
the order to be effective that day. All redemption orders are effected at the
net asset value per share next determined after receipt of a valid request for
redemption, reduced by any applicable contingent deferred sales charge, for
Class B Shares, and for certain Class A Shares that were purchased without an
initial sales load. See "Purchase and Redemption of Shares."
The Fund offers two classes of shares to the general public: Class A Shares and
Class B Shares. Class A Shares of the Fund are offered at net asset value per
share plus a maximum initial sales charge of 5.50%. Certain Class A Share
purchases are subject to reduced or waived sales charges and certain Class A
Share redemptions may be subject to a 1.00% contingent deferred sales charge.
Class B Shares of the Fund are offered at net asset value per share and are
subject to a maximum contingent deferred sales charge of 5.50% of redemption
proceeds during the first year, declining each year thereafter to 0% after the
sixth year. Class B Shares pay annual distribution and service fees of 1.00% of
their average daily net assets.
HOW ARE DIVIDENDS PAID?
Substantially all of the net investment income (exclusive of capital gains) of
the Fund is declared and distributed annually in the form of dividends to
Shareholders.
Any capital gains will be distributed at least annually. Dividends are paid in
additional shares unless the Shareholder elects to take the payment in cash. See
"Dividends."
- --------------------------------------------------------------------------------
3
<PAGE>
Expense Summary
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
INTERNATIONAL
GROWTH
FUND
- --------------------------------------------------------------------------------
Maximum Sales Load Imposed on Purchases*
(as a percentage of offering price) 5.50%
aximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Maximum Contingent Deferred Sales Charge*
(as a percentage of original purchase price or redemption
proceeds, as applicable) 1.00%
Wire Redemption Fee $ 10
Exchange Fee None
* The percentage shown is the maximum initial sales load. In certain
circumstances, shareholders may receive sales load waivers or reductions.
Purchases of $1,000,000 or more are at net asset value and shares redeemed
prior to 12 months from the date such shares were purchased are subject to a
contingent deferred sales charge of 1.00%.
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
INTERNATIONAL
GROWTH
FUND
- --------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1), (2) .80%
12b-1 Fees .25%
Other Expenses .70%
- --------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(2) 1.75%
- --------------------------------------------------------------------------------
(1) The Advisor and Sub-Advisor have agreed to voluntarily waive a portion of
their fees in an amount that operates to limit Total Operating Expenses of
Class A Shares of the Fund to not more than 1.75% of average daily net
assets. The Advisor and Sub-Advisor each reserve the right to terminate
their fee waivers at any time in their sole discretion.
(2) Absent fee waivers for the Fund, Advisory Fees would be 1.00%, and Total
Operating Expenses would be 1.95% of the Fund's average daily net assets.
Additional information may be found under "The Advisor," "The Sub-Advisor,"
"The Administrator" and "The Distributor."
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
EXAMPLE
An investor in a Fund would pay the following expenses on a $1,000 investment
assuming: (1) imposition of the maximum sales load; (2) a 5% annual return; and
(3) redemption at the end of each time period:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Growth Fund.......................... $72 $107 $145 $250
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE FUND. Financial institutions may impose fees on their
customers in addition to those described above. Additional information may be
found under "The Advisor," "The Sub-Advisor," "The Administrator" and "The
Distributor."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for a waiver or reduction of sales charges. See "Purchase and Redemption
of Shares."
Long-term Shareholders may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the Conduct Rules (the "Conduct Rules") of
the National Association of Securities Dealers, Inc. (the "NASD"). The Trust
intends to operate the Class A distribution plan in accordance with its terms
and the NASD Conduct Rules concerning sales charges.
- --------------------------------------------------------------------------------
5
<PAGE>
Expense Summary
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
INTERNATIONAL
GROWTH
FUND
- --------------------------------------------------------------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption
proceeds, as applicable) 5.50%
Wire Redemption Fee $ 10
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
INTERNATIONAL
GROWTH
FUND
- --------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1), (2) .80
12b-1/Shareholder Servicing Fees 1.00%
Other Expenses .70%
- --------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(2) 2.50
- --------------------------------------------------------------------------------
(1) The Advisor and Sub-Advisor have agreed to voluntarily waive a portion of
their fees in an amount that operates to limit Total Operating Expenses of
Class B Shares of the Fund to not more than 2.50% of average daily net
assets. The Advisor and Sub-Advisor each reserve the right to terminate
their fee waivers at any time in their sole discretion.
(2) Absent fee waivers for the Fund, Advisory Fees would be 1.00%, and Total
Operating Expenses would be 2.70% of the Fund's average daily net assets.
Additional information may be found under "The Advisor," "The Sub-Advisor,"
"The Administrator" and "The Distributor."
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
EXAMPLE -- CLASS B SHARES
An investor would pay the following expenses on a $1,000 investment in a Fund
assuming: (1) imposition of the maximum sales charge; (2) a 5% annual return;
and (3) redemption at the end of each time period:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH FUND
Assuming a complete redemption at end of period.... $80 $118 $153 $251
Assuming no redemptions............................ $25 $ 78 $133 $251
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN CLASS B SHARES OF THE FUND. Financial institutions may
impose fees on their customers in addition to those described above. Additional
information may be found under "The Advisor," "The Sub-Advisor," "The
Administrator" and "The Distributor."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, sales charges are reduced
for longer-term investors. See "Purchase and Redemption of Shares."
Long-term Shareholders may pay more than the equivalent of the maximum sales
charges otherwise permitted by the NASD Conduct Rules. The Trust intends to
operate the Class B distribution plan in accordance with its terms and the NASD
Conduct Rules concerning sales charges.
- --------------------------------------------------------------------------------
7
<PAGE>
Financial Highlights
THE PILLAR FUNDS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent public accountants, as indicated in their report dated February 6,
1998 on the Trust's financial statements as of December 31, 1997, which is
incorporated by reference into the Trust's Statement of Additional Information
under "Financial Information." Additional performance information is contained
in the Trust's 1997 Annual Report to Shareholders and is available upon request
and without charge by calling 1-800-932-7782. This table should be read in
conjunction with the Trust's financial statements and notes thereto.
<TABLE>
<CAPTION>
Realized
and Net Ratio of
Net Asset Unrealized Distributions Net Asset Assets Expenses
Value Net Gains or from Net Distributions Value Total End of to
Beginning Investment Losses on Investment from Capital End of Return Period Average
of Period Income Securities Income Gains Period (+) (000) Net Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 $11.22 $ 0.05 $(0.04) $(0.05) $(0.85) $10.33 0.00% $655 1.75%
1996 10.73 0.09 1.06 (0.04) (0.62) 11.22 10.88 788 1.75
1995(1) 10.00 0.01 0.75 (0.01) (0.02) 10.73 7.64 621 1.75
CLASS B
1997(2) $11.45 $(0.03) $(0.23) $(0.04) $(0.85) $10.30 (3.39)%* $118 2.50%
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of Ratio of
Expenses Net Income
Ratio of to Average to Average
Net Income Net Assets Net Assets Portfolio Average
to Average (Excluding (Excluding Turnover Commission
Net Assets Waivers) Waivers) Rate Rate++
<S> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
CLASS A
1997 0.70% 1.95% 0.50% 71.22% $.0052
1996 0.70 1.98 0.47 67.03 .0051
1995(1) 0.45* 2.38* (0.18)* 14.32 n/a
CLASS B
1997(2) (0.60)% 2.70% (0.80)% 71.22% $.0052
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
(+) Total Return does not reflect sales loads on Class A Shares.
(++) Average commission rate paid per share for security
purchases and sales during the period. Presentation of the
rate is only required for the fiscal years beginning after
September 1, 1995.
(1) The International Growth Fund (Class A Shares) commenced
operations on May 4, 1995. Ratios for this period have been
annualized.
(2) The International Growth Fund (Class B Shares) commenced
operations on May 7, 1997. Ratios for this period have been
annualized.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE TRUST
The Pillar Funds (the "Trust") is an open-end management investment company that
consists of diversified and non-diversified portfolios. The Trust currently
offers units of beneficial interest ("shares") in fifteen separate investment
portfolios. The Trust offers shares of the portfolios in up to four separate
classes of shares (Class A, Class B, Class I and Class S) which provide for
variations in distribution costs, voting rights, sales loads, minimum
investments, redemption fees, transfer agency fees and dividends. Except for
these differences between classes, each share of each portfolio represents an
undivided proportionate interest in that portfolio. This Prospectus relates to
the Class A Shares and Class B Shares of the International Growth Fund (the
"Fund"). The Fund is a non-diversified mutual fund. Information regarding the
Trust's other portfolios and the Class I Shares of the Trust's Fund is contained
in separate prospectuses that may be obtained by writing the Trust's
Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456 or by
calling 1-800-932-7782.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described below. For
additional information regarding risks and permitted investments of the Funds,
see "Risk Factors," "General Investment Policies" and "Description of Permitted
Investments" in this Prospectus and "Description of Permitted Investments" and
"Description of Ratings" in the Statement of Additional Information. There is no
assurance that the investment objective of the Fund will be met.
The investment objective of the Fund is long-term capital growth.
The Fund will normally invest at least 65% of its total assets in the following
equity securities of non-U.S. issuers: common stocks, warrants to purchase
common stocks, debt securities and preferred stocks convertible into common
stocks and ADRs, EDRs, CDRs and GDRs ("Depositary Receipts"). The Fund will
purchase equity securities, including Depositary Receipts, that are traded in
the United States on registered exchanges or the over-the-counter market and
securities traded on foreign exchanges. Furthermore, the Fund may purchase
equity securities in a foreign or domestic issuer's public offerings, including
an initial public offering (an "IPO"). The Fund may also invest up to 35% of its
assets in foreign government debt securities and securities issued by
supranational agencies when the Sub-Advisor believes that they are compatible
with the Fund's investment objective. Such securities will be rated investment
grade or better, i.e., rated in one of the four highest rating categories by an
NRSRO or, if not rated, determined to be of comparable quality as determined by
the Sub-Advisor. As part of its investment in foreign government debt
securities, the Fund may invest up to 10% of its assets in such foreign
government debt securities that are rated BB (or Ba) or B by a nationally
recognized statistical rating organization (an "NRSRO"), or, if not rated,
determined to be of comparable quality as determined by the Sub-Advisor. In
addition, the Fund may invest in money market instruments as defined in "General
Investment Policies" below.
The Fund will invest in securities of issuers in at least three countries other
than the United States. The Fund may invest in securities of issuers from
countries that are considered to be lesser-developed countries by the
international financial community, but that have securities markets meeting
acceptable standards of liquidity, financial disclosure, government regulation
and protection of foreign investors, as determined by the Sub-Advisor. Normally,
no more than 25% of the Fund's assets will be invested in such securities. The
Fund may also invest up to 10% of its assets in closed-end investment companies
that invest in the securities of
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
issuers in a single country or region (commonly referred to as "country
funds"). In addition, the Fund may invest in Brady Bonds. The Fund may invest in
smaller, less well-established companies (i.e., companies with market
capitalizations below $500 million) which may offer greater opportunities for
capital appreciation than larger, better established companies. The Fund is
non-diversified and may, therefore, concentrate its portfolio investments in a
relatively small number of issuers.
The Fund may engage in currency transactions for hedging purposes. Currency
transactions include forward currency contracts, exchange-listed and over-
the-counter ("OTC") currency futures contracts and options on futures contracts,
exchange-listed and OTC options on currencies, and currency swaps. The Fund may
also employ certain hedging, income enhancement and risk management techniques,
including the purchase and sale of exchange-listed and OTC options, futures and
options on futures involving equity and debt securities, aggregates of equity
and debt securities, and other financial indices. The Fund may write options and
invest in futures only on a covered basis.
In seeking to achieve its investment objective of long-term capital growth, the
Fund's investments will be selected on the basis of fundamental analysis to
identify those markets and securities that provide capital appreciation
potential.
Fundamental analysis involves assessing a company and its business environment,
management, balance sheet, income statement, anticipated earnings and dividends
and other related measures of value. In analyzing companies for investment, the
Sub-Advisor looks for, among other things, above-average earnings growth, a
strong balance sheet, attractive industry dynamics, strong competitive
advantages, and positive relative value within the context of a security's
primary trading market. In addition to fundamental analysis of companies and
industries, the Sub-Advisor evaluates the economic and political environments of
the countries in which the securities are traded.
GENERAL INVESTMENT POLICIES
For temporary defensive purposes during periods when the Advisor determines that
market conditions warrant, the Fund may invest up to 100% of its assets in money
market securities described in the "Description of Permitted Investments" and
may hold cash for liquidity purposes. The money market securities the Fund may
invest in may be denominated in foreign currencies or U.S. dollars and consist
of short-term U.S. Government obligations, obligations issued or guaranteed by
the agencies and instrumentalities of the U.S. Government and securities of
foreign governments; custodial receipts evidencing separately traded interest
and principal components of securities issued by the U.S. Treasury; short-term
corporate securities rated in the highest short-term rating category by an NRSRO
or determined by the Advisor or Sub-Advisor to be of comparable quality at the
time of purchase; short-term bank obligations (certificates of deposit, time
deposits and bankers' acceptances) of U.S. or foreign commercial banks with
assets of at least $1 billion as of the end of their most recent fiscal year;
Euro-currency instruments and securities; and repurchase agreements involving
such securities. Furthermore, the Fund may hold cash in U.S. dollars, foreign
currencies or multi-national currency units for liquidity purposes. To the
extent the Fund is engaged in defensive investing, the Fund will not be pursuing
its investment objective.
Securities purchased by the Fund may involve floating or variable interest rates
and may be acquired through a forward commitment or on a when-issued basis.
In addition, the Fund reserves the right to engage in securities lending.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
RISK FACTORS
The value of the Fund's shares will fluctuate due to the underlying securities
in which it invests. The market value of the convertible securities purchased by
the Fund may also be affected by changes in interest rates, the credit quality
of the issuer and any call provisions. In addition, investments in smaller, less
well-established companies may subject the Fund to certain special risks related
to, for example, limited product lines, markets or financial resources and
dependence on a small management group. Such securities may trade less
frequently, in smaller volumes and fluctuate more sharply in value than exchange
listed securities of larger companies.
The market value of the Fund's fixed income securities will fluctuate in
response to interest rate changes and other factors.
The Fund's investments in securities of foreign issuers may subject the
Fund to risks different than those attendant to investments in securities of
U.S. issuers, such as differences in accounting, auditing and financial
reporting standards applicable in foreign countries, the possibility of
expropriation or confiscatory taxation, political instability and greater
fluctuations in value due to changes in currency exchange rates. There may also
be less publicly available information with regard to foreign issuers than
domestic issuers. In addition, foreign markets may be characterized by less
liquidity, greater price volatility, less regulation and higher transaction
costs than U.S. markets. Moreover, the dividends payable on the Fund's foreign
securities may be subject to foreign withholding taxes, thus reducing the net
amount of income available for distribution to the Fund's Shareholders. Also, it
may be more difficult to obtain a judgment in a court outside the United States.
These risks could be greater in emerging markets than in more developed foreign
markets because emerging markets may have less stable political environments
than more developed countries.
Since the Fund may invest in foreign currency and securities denominated in
foreign currency, changes in exchange rates between the U.S. dollar and foreign
currencies affect the U.S. dollar value of the Fund's assets. Rates of exchange
are determined by forces of supply and demand on the foreign exchange markets.
These forces are in turn affected by the international balance of payments and
other economic, political and financial conditions, government intervention,
speculation and other factors. The Fund's net asset value will be reported, and
distributions from the Fund will be made, in U.S. dollars. Therefore, the Fund's
reported net asset value and distributions will be adversely affected by
depreciation of foreign currency relative to the U.S. dollar. A decline in the
value of foreign currency would adversely affect the value of the Fund in dollar
terms. While the Fund may try to hedge its currency risk using currency
transactions, there is no assurance that it will be successful.
The Fund may invest in lower rated bonds, which are commonly referred to as
"junk bonds." These securities are speculative and are subject to a greater risk
of loss of principal and interest than are investments in higher rated bonds.
The debt securities purchased by the Fund will be rated at least B by an NRSRO
or determined to be of comparable quality by the Advisor or Sub-Advisor.
Securities rated B are considered highly speculative and while the issuer
currently has the capacity to meet debt service requirements, adverse business,
financial or economic conditions would likely impair its capacity or willingness
to pay interest and principal.
The Fund may invest in options and futures. There are various risks associated
with options and futures, including (i) the success of a hedging strategy may
depend on an ability to accurately predict movements in security prices,
interest rates or currency exchange rates; (ii) there may be little correlation
between the changes in a security's value and the price of futures or options;
(iii) a related future or option may not be
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
liquid; (iv) an exchange may impose trading restrictions or limitations;
(v) government regulations may restrict trading in futures and options; and (vi)
the possible lack of full participation in a rise in the market value of the
underlying security.
In addition, the Fund may invest in equity securities by participating in an
issuer's IPO. Such investments have special risks associated with them. There is
often a high volume of trading in IPO securities, which can result in greater
price volatility. Companies offering such securities may not have operated
previously as a public company, and their share price may experience significant
volatility as the marketplace reacts to their financial results. Furthermore,
some IPO issuers have not conducted operations for a significant period of time,
and may not have developed a management structure sufficient to cope with the
pressures of running a public company.
RISK FACTORS--NON DIVERSIFICATION
The Fund is a non-diversified fund under the Investment Company Act of 1940, as
amended (the "1940 Act"), and therefore may invest a greater proportion of its
assets in the securities of a smaller number of issuers and may, as a result, be
subject to greater risk with respect to its portfolio securities. The Fund
intends to satisfy the diversification requirements necessary to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"), by limiting its investments so that, at the close of each quarter
of the taxable year: (a) not more than 25% of the market value of the Fund's
total assets is invested in the securities (other than U.S. Government
securities) of a single issuer; and (b) at least 50% of the market value of the
Fund's total assets is represented by (i) cash and cash items, (ii) U.S.
Government securities and (iii) other securities limited in respect to any one
issuer to an amount not greater in value than 5% of the market value of the
Fund's total assets and to not more than 10% of the outstanding voting
securities of such issuer.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of the Fund. Fundamental policies cannot be changed with
respect to the Fund without the consent of the holders of a majority of the
Fund's outstanding shares.
THE FUND MAY NOT:
1. Purchase any securities which would cause more than 25% 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 the 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, gas transmissions, electric and telephone will
each be considered a separate industry; (ii) financial services 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; (iii) supranational agencies will be deemed
to be issuers conducting their principal business activities in the same
industry; and (iv) governmental issuers within a particular country will be
deemed to be conducting their principal business activities in the same
industry.
2. Make loans, except that the Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; (b) enter into
repurchase agreements; and (c) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentage limitations apply at the time of the purchase of a
security.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
It is a non-fundamental policy of the Fund to invest no more than 15% of its net
assets in illiquid securities (as defined below under "Description of Permitted
Investments").
Additional investment limitations are set forth in the Statement of Additional
Information.
THE ADVISOR
Summit Bank Investment Management Division, a division of Summit Bank (the
"Advisor"), serves as the investment advisor to the Trust. The Advisor makes the
investment decisions for the assets of the Fund and continuously reviews,
supervises and administers each Fund's investment program subject to the
supervision of, and policies established by, the Trustees of the Trust.
Summit Bank, 210 Main Street, Hackensack, New Jersey 07601, was chartered in
1899 and has been exercising trust powers and managing money since 1916. The
Investment Management Division began as a separate operating division of the
Bank in 1973. The Bank's investment professionals have, on average, over 20
years of experience in investment management. As of December 31, 1997, total
assets under management were approximately $8.2 billion.
Summit Bank is a wholly-owned subsidiary of Summit Bancorp, an interstate bank
holding company with approximately $30 billion in assets and 426 banking
offices, predominantly in New Jersey and eastern Pennsylvania, as of December
31, 1997.
The Advisor is entitled to a fee from the Fund, which is calculated daily and
paid monthly at the annual rate of the Fund's average daily net assets as set
forth in the following table. The Advisor has voluntarily agreed to waive all or
a portion of its fees to limit the total operating expenses of the Fund to the
respective levels set forth below. The Advisor reserves the right to terminate
any and all fee waivers at any time in its sole discretion. Also set forth below
are the advisory fees the Fund paid to the Advisor (shown as a percentage of
average daily net assets) for the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
Maximum Total Fees Received
Contractual Operating Expense In Fiscal Year
Fee After Fee Waiver 1997
- ----------------------------------------------------------------------------
<CAPTION>
Class A Class B
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
International Growth Fund 1.00% 1.75% 2.50% .80%
</TABLE>
Summit Bank has also entered into a custodian agreement with the Trust, under
which it provides all securities safekeeping services as required by the Funds
and the 1940 Act. The Trust pays Summit Bank (referred to herein in its
custodial capacity as the "Custodian") a custodian fee, which is calculated
daily and paid monthly, at an annual rate of .17% of the Fund's average daily
net assets.
THE SUB-ADVISOR
Wellington Management Company, LLP ("WMC") serves as the investment sub-advisor
to the Fund. WMC is a professional investment counseling firm which provides
investment services to investment companies, employee benefit plans, endowments,
foundations and other institutions and individuals. As of December 31, 1997, WMC
has discretionary investment authority with respect to approximately $174.5
billion of assets. WMC's predecessor organizations have provided investment
advisory services to investment companies since 1928 and to investment
counseling clients since 1960. The principal address of WMC is 75 State Street,
Boston, MA 02109. WMC is a Massachusetts limited liability partnership, of which
the following persons are managing partners: Robert W. Doran, Duncan M.
McFarland and John R. Ryan.
The Fund has been managed since its inception in May, 1995 by a committee
composed of WMC's Global Equity Strategy Group, a group of global portfolio
managers and senior investment
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
professionals headed by Trond Skramstad, Senior Vice President and Partner
of WMC.
The Sub-Advisor is entitled to a fee payable by the Advisor from the
Advisor's fee, which is calculated daily and paid monthly, at an annual rate of
.60% of the average daily net assets of the Fund up to and including $50
million; .45% of the average daily net assets of the Fund in excess of $50
million up to and including $150 million; and .30% of the average daily net
assets of the Fund in excess of $150 million. The Sub-Advisor may from time to
time waive a portion of its fee in order to limit the operating expenses of
Class A Shares and Class B Shares of the Fund. The Sub-Advisor reserves the
right to terminate any such fee waiver at any time in its sole discretion. For
the fiscal year ended December 31, 1997, the Advisor paid WMC a sub-advisory fee
of .60% of the average daily net assets of the Fund.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The Administrator provides the Trust with administrative services, other
than investment advisory services, including all regulatory reporting, necessary
office space, equipment, personnel and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily net assets of the Fund.
THE TRANSFER AGENT
State Street Bank and Trust Company (the "Transfer Agent"), 225 Franklin Street,
Boston, Massachusetts 02110 is the Trust's transfer agent.
THE SHAREHOLDER SERVICING AGENT
Boston Financial Data Services, Two Heritage Drive North Quincy, Massachusetts
02171 is the Trust's dividend disbursing agent and shareholder servicing agent.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company, acts as the Distributor of the Trust's shares.
The Class A Shares of the Fund are subject to a distribution plan dated February
28, 1992 ("Class A Plan"). As provided in the Distribution Agreement and the
Class A Plan, the Trust will pay the Distributor a fee of .25% of the average
daily net assets of the Fund's Class A Shares. The Distributor may apply this
fee toward: a) compensation for its services in connection with distribution
assistance or provision of shareholder services; or b) payments to financial
institutions and intermediaries such as banks (including Summit Bank), savings
and loan associations, insurance companies, investment counselors,
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services or reimbursement of expenses incurred in connection
with distribution assistance or provision of shareholder services. The Class A
Plan is characterized as a compensation plan since the distribution fee will be
paid to the Distributor without regard to the distribution or shareholder
service expenses incurred by the Distributor or the amount of payments made to
financial institutions and intermediaries.
The Board of Trustees of the Trust has approved and adopted a distribution plan
dated February 20, 1997 for Class B Shares of the Fund (the "Class B Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Class B Plan, the
Distributor is entitled to receive from the Fund an annual distribution fee of
.75% of the average daily net assets of the Fund's Class B
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Shares. The Distributor may apply this fee toward: a) compensation for its
services in connection with distribution assistance or provision of shareholder
services; or b) payments to financial institutions and intermediaries such as
banks (including Summit Bank), savings and loan associations, insurance
companies, investment counselors, broker-dealers, and the Distributor's
affiliates and subsidiaries as compensation for services or reimbursement of
expenses incurred in connection with distribution assistance or provision of
shareholder services. Additionally, the Class B Plan provides that Class B
Shares are subject to a service fee at an annual rate of .25% of the average
daily net assets of the Fund's Class B Shares. The Class B Plan is characterized
as a compensation plan since the distribution fee will be paid to the
Distributor without regard to the distribution or shareholder service expenses
incurred by the Distributor or the amount of payments made to financial
institutions and intermediaries.
Class A Shares and Class B Shares of the Fund are offered to all persons.
Consequently, it is possible that individuals and institutions may offer
different classes of shares of the Fund to their customers and thus receive
different compensation with respect to different classes of shares. In addition,
individuals and institutions that are the record owner of shares for the account
of their customers may impose separate fees for account services to their
customers. The Fund may also execute brokerage or other agency transactions
through an affiliate of the Advisor or through the Distributor for which such
affiliate or the Distributor receives compensation.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs which will be paid by the Distributor from
the sales charge it receives or from any other source available to it. Under any
such program, the Distributor may provide promotional incentives in the form of
cash or other compensation, including merchandise, gifts and prizes, and payment
of travel expenses, meals and lodging, to all dealers selling shares of the
Fund. Such promotional incentives will be offered uniformly to all dealers and
predicated upon the number of shares of the Trust's portfolios sold by the
dealer.
PURCHASE AND REDEMPTION OF SHARES
Alternative Sales Charge Options
You may purchase shares of the Fund at a price equal to its net asset value per
share plus a sales charge which, at your election, may be imposed either (i) at
the time of the purchase (the Class A "initial sales charge alternative"), or
(ii) on a contingent deferred basis (the Class B "deferred sales charge
alternative"). Each class represents a portion of the Fund's interest in a
portfolio of investments. The classes have the same rights and are identical in
all respects except that (i) Class A Shares and Class B Shares bear different
distribution and service fees resulting from their respective sales
arrangements, (ii) each class has exclusive voting rights with respect to
approvals of any Rule 12b-1 distribution plan related to that specific class
(although Class B Shareholders may vote on any increase in distribution fees
imposed on Class A Shares so long as Class B Shares convert into Class A
Shares), (iii) only Class B Shares carry a conversion feature and (iv) each
class has different exchange privileges.
As a result of each class's differing sales arrangements, Class A Shares are not
subject to a shareholder service fee and are subject to a lower distribution fee
than Class B Shares, and accordingly, Class A Shares pay higher dividends per
share. The Trust adds front-end sales charges to the net asset value of Class A
Shares of the Fund and, therefore, unless a sales charge waiver is available, an
initial investment in Class A Shares will cost more per share than Class B
Shares. Class A Shareholders therefore would own fewer shares than they would
have owned if they had invested an identical sum in Class B Shares.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Sales personnel of broker-dealers distributing the Funds' shares, and other
persons entitled to receive compensation for selling such shares, may receive
differing compensation for selling Class A or Class B Shares.
How to Choose the Right Class of Shares
The decision as to which class of shares provides a more suitable investment for
an investor depends on a number of factors, including the amount and intended
length of investment. Investors making investments that qualify for reduced
sales charges might consider Class A Shares. Investors who prefer not to pay an
initial sales charge might consider Class B Shares. For more information about
these sales arrangements, consult the Distributor or your investment
professional who is a salesperson, financial planner, investment advisor or
trust officer of an entity, other than the Distributor, that has entered into a
selling agreement with the Trust or the Distributor ("Investment Professional").
Shares may only be exchanged for shares of the same class of another Pillar
Fund. See "Exchanges."
Front-End Sales Charge--Class A
The public offering price of Class A Shares equals the net asset value of the
shares plus any applicable initial sales charge. The sales charge as a
percentage of an investment decreases as the amount invested reaches the
succeeding levels set forth in the following tables. The table shows the initial
sales charge on Class A Shares of the Fund to a "single purchaser" (defined
below), the reallowance paid to dealers and the agency commission paid to
brokers (collectively, the "commission"):
Sales Charge Reallowance and
Sales Charge as a Brokerage
as a Percentage of Commission as
Percentage of Net Amount Percentage of
Amount of Purchase Offering Price Invested Offering Price
- -----------------------------------------------------------------------------
$0-49,999 5.50% 5.82% 5.00%
$50,000-99,999 4.75% 4.99% 4.25%
$100,000-249,999 3.75% 3.90% 3.25%
$250,000-499,999 2.75% 2.83% 2.50%
$500,000-999,999 2.00% 2.04% 1.75%
$1,000,000 and above* 0.00% 0.00% 0.00%**
- ------------------
* Purchases of $1,000,000 or more are at net asset value. However, a contingent
deferred sales charge will be imposed on such investments in the event such
shares are redeemed within 12 months from the date they were purchased. The
contingent deferred sales charge will be imposed at the rate of 1.00% of the
lesser of the current market value of the shares redeemed or the total cost
of such shares and is payable to the Distributor. In determining whether a
contingent deferred sales charge is payable, and, if so, the amount of the
charge, it is assumed that shares not subject to such charge are the first
redeemed.
** There is no initial sales charge on purchases of $1,000,000 or more; however,
the Distributor may pay a dealer concession and/or advance a service fee on
such transactions.
The commissions shown in the table above apply to sales through financial
institutions. From time to time, some financial institutions, including Summit
Bank and its affiliates, may be reallowed up to the entire sales charge imposed
on the purchase of Class A Shares. Firms that receive a reallowance of the
entire sales charge may be considered underwriters for purposes of federal
securities laws. Commission rates may vary among the Trust's portfolios.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
SALES CHARGE REDUCTIONS FOR PURCHASES OF CLASS A SHARES
Right of Accumulation
A "single purchaser" (defined below) may benefit from the reduced sales charges
set forth in the foregoing tables for current purchases by adding the amount of
any current purchase with the market value of the Fund that the purchaser
already owns. The calculation of the sales charge for the current purchase will
be based on the combined amount. A single purchaser can also combine purchases
of Class A Shares of different portfolios of the Trust ("Funds") if those Funds
are subject to a sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Funds for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Code, including related plans of the
same employer. To be entitled to a reduced sales charge based upon shares
already owned, the investor must identify eligible accounts at the time of
purchase and provide the account number(s) of the investor and, if applicable,
the investor and spouse, their minor children, as well as the ages of such
children. The Trust may amend or terminate this right of accumulation at any
time prior to subsequent purchases.
Letter of Intent
A single purchaser may obtain a reduced sales charge by means of a written
Letter of Intent (a "Letter") that expresses the investor's intention to invest
a specified amount within a 13-month period, which if invested at one time,
would qualify for a reduced sales charge.
A Letter is not a binding obligation upon the investor to purchase the full
amount indicated. An investor must invest, or have already invested, at least
$1,000 in Class A Shares of each applicable Fund when the Letter is submitted.
Only those Funds which are subject to a sales charge are eligible to be counted
towards the amount indicated in the Letter. Five percent of the shares purchased
under a Letter will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge that would have been
applicable to the shares actually purchased if the investor fails to purchase
the amount indicated in the Letter. In such a case, escrowed shares will be
involuntarily redeemed to pay any additional sales charge. When the full amount
indicated in the Letter has been purchased, the escrowed shares will be
released. A Letter may include purchases of shares made within 90 days prior to
the date the investor signs the Letter; however, the 13-month period during
which the Letter is in effect will begin on the date of the earliest purchase.
Waiver of Class A Sales Charges
No sales charge is imposed on Class A Shares of the Fund: (i) issued in plans of
reorganization, such as mergers, asset acquisitions and exchange offers, to
which the Trust is a party; (ii) sold to dealers or brokers that have a sales
arrangement with the Distributor, for their own account or for retirement plans
for their employees; (iii) sold to present employees of dealers or brokers that
certify to the Distributor at the time of purchase that such purchase is for
their own account; (iv) sold to present or retired employees of Summit Bancorp,
or one of its affiliates, and/or the spouses of such employees; (v) sold to
present employees of any entity that is a current service provider to the Trust;
(vi) sold to any qualified customer who has entered into an agreement with
Summit Bank, its affiliates or correspondent banks; (vii) sold to present or
retired Trustees of the Trust and their immediate families; (viii) sold to
present or retired Directors of Summit Bancorp or its affiliates, and their
immediate families; (ix) sold to beneficial owners of Class I Shares whose
interests are converted into Class A Shares; (x) purchased within 90 days of a
redemption of Class A Shares of a non-money market fund of the Trust (only to
the amount of
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
such redemption; or (xi) sold to 401(k) plans that have entered into service
arrangements with Summit Bank, its affiliates or correspondent banks).
Deferred Sales Charges--Class B
Class B Shares are offered at their net asset value per share. If you sell
shares within six years of purchase, a contingent deferred sales charge (a
"CDSC") is assessed at the rates set forth below. The CDSC is assessed on the
lesser of the current market value or the initial purchase price of the shares
being redeemed. As a result, no sales charge will be imposed on increases in the
net asset value above the initial purchase price or on shares derived from
reinvestment of dividends or capital gain distributions.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE
OF DOLLAR AMOUNT SUBJECT TO CHARGE
Years Since Purchase CDSC
-------------------------------------------
1 5.50%
2 5.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
7 0.00%
8 0.00%
Aging Schedule
In determining whether a particular redemption is subject to a CDSC, it is
assumed that Class B Shares are redeemed in the following order: (i) shares held
for over six years or shares acquired through reinvested dividends or capital
gain distributions and (ii) shares held longest during the six year period. This
method should result in the lowest possible sales charge.
Purchases will age based on the trade date of purchase. For example, a purchase
made on January 5 will be one year old on January 5 of the following year.
Waivers of Class B Sales Charges
The CDSC is waived on redemption of shares (i) following the death or disability
(as defined in the Code) of a Shareholder, or (ii) to the extent that the
redemption represents a minimum required distribution from an individual
retirement account or other retirement plan to a Shareholder who has attained
the age of 70 1/2. In addition, Shareholders who automatically reinvest their
dividends and distributions may redeem up to 10% of the value of their shares
each year without imposition of the CDSC. A Shareholder, or his or her
representative, must notify the Transfer Agent prior to the time of redemption
that the Shareholder is eligible for these waivers.
The CDSC is also waived on redemptions of shares held by Trustees, employees and
sales representatives of the Trust, the Distributor, or affiliates of the Trust
or the Distributor, and their immediate family members; employees of any
financial institution that sells shares of the Trust pursuant to a sales
agreement with the Distributor; and spouses and children under the age of 21 of
the aforementioned persons. Also, no CDSC will be imposed on the redemption of
shares originally purchased through a bank trust department, an investment
adviser registered under the Investment Advisers Act of 1940, or retirement
plans where the third party administrator has entered into certain arrangements
with the Distributor or any other financial institution, to the extent that no
payments were advanced for purchases made through such entities.
Additionally, shareholders of any mutual fund not affiliated with the Trust who
have paid a sales charge in that mutual fund may purchase Class B Shares of the
Trust, in an amount equal to the proceeds of the redemption of such unaffiliated
shares, by submitting such proceeds to the Distributor together with evidence of
the payment of a sales charge and the source of such proceeds. Purchases must
take place within 30 days of the redemption of the unaffiliated shares. Class B
Shares issued pursuant to this offer will not be subject to a CDSC.
Automatic Conversion of Class B Shares
Class B Shares of the Fund will automatically convert into Class A Shares
without a sales charge after eight years from the acquisition of the Class B
Shares. The
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
conversion will take place at the respective net asset values of each of
the classes. At that time the Shares will no longer be subject to the higher
distribution and service fees. When Class B Shares of the Fund convert, any
other Class B Shares that were acquired by the reinvestment of dividends and
distributions attributable to such Shares will also convert into Class A Shares.
Conversions are not taxable events to Shareholders.
How to Purchase Shares
Shares may be purchased directly from the Fund's Distributor or through an
investment professional of a securities broker or other financial institution,
such as Summit Bank, that has entered into a selling agreement with the Trust or
the Distributor. Shares of the Fund are sold on a continuous basis and may be
purchased on any business day that the New York Stock Exchange is open for
trading (a "Business Day").
A purchase order for shares of the Fund will be executed at a per share price
equal to the net asset value next determined after the purchase order is
effective (plus any applicable sales charge in the case of Class A Shares of the
Fund) (the "offering price").
The net asset value per share of each class of the Fund is determined by
dividing the total value of its investments and other assets that are allocated
to that class, less any liabilities that are allocated to that class, by the
class's total outstanding shares. Although the methodology and procedures are
identical, the net asset value per share of classes within the Fund may differ
because of the classes' different distribution and shareholder service expenses.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust, the Fund or its
Shareholders to accept such order. Investment Strategy Account Agreement
customers (Qualified Customers) should call the Transfer Agent for information
regarding requirements for purchase and redemption orders.
A purchase order for the Fund will be effective as of the Business Day received
by the Distributor (or Authorized Broker-Dealer discussed below) if the
Distributor (or Authorized Broker-Dealer) receives the order and payment before
the Fund calculates its net asset value (normally, 4:00 p.m., Eastern time). All
other purchase orders accompanied by payment, except those of certain types of
investors as described below, will be effective the next Business Day. Certain
institutional investors and financial institutions, such as Summit Bank, that
have entered into a settlement agreement with the Distributor, may make payment
in federal funds for purchases of the Fund to the Distributor by 12:00 noon,
Eastern time, the Business Day following the effective date of the trade. A
purchase order may be canceled if the Distributor does not receive federal funds
before 12:00 noon, Eastern time, the next Business Day.
The net asset value per share of the Fund is determined as of the
regularly-scheduled close of normal trading on the New York Stock Exchange
(normally, 4:00 p.m., Eastern time), each Business Day. Purchases will be made
in full and fractional shares of the Fund calculated to three decimal places.
The Fund may use a pricing service to provide market quotations. A pricing
service may use a matrix system of valuation to value fixed income securities
which considers factors such as securities prices, yield features, ratings and
developments related to a specific security.
Purchases Through Investment Professionals
A customer who purchases shares of the Fund through an Investment Professional
should contact that Investment Professional for information about purchasing
shares. Investment Professionals may charge fees for their services that are in
addition to, and unrelated to, the fees and expenses charged by the Fund. In
addition, the Trust has approved Authorized Broker-Dealers to act as the Fund's
agent for the purposes of accepting purchase orders. The Fund will be deemed to
have received a purchase order upon receipt of the order by an Authorized
Broker-Dealer. Other Investment Professionals may
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
impose an earlier cut-off time for receipt of purchase orders directed through
them to allow time for processing and transmittal of these orders to the
Distributor for effectiveness the same day. In addition, state securities laws
may require banks and financial institutions purchasing shares for their
customers to register as dealers pursuant to state laws.
Investment Requirements
The minimum initial investment is $1,000; however, the minimum initial
investment may be waived at the Distributor's discretion. All subsequent
investments must be at least $100. For investments made through the Automatic
Investment Plan, the minimum initial and subsequent investments must be at least
$50. All purchases made by check must be in U. S. dollars and made payable to
"The Pillar Funds," or in the case of a retirement account, to either the
Custodian or the retirement plan trustee. Third party checks, credit cards,
credit card checks and cash will not be accepted. When purchases are made by
check or Automated Clearing House ("ACH") transfer, redemption proceeds will not
be forwarded until the investment being redeemed has been in the account for 10
Business Days. If the check does not clear, the purchase will be canceled and
the investor could be liable for any losses or fees incurred.
No certificates representing shares will be issued. Customers must specify
whether they intend to purchase Class A or Class B Shares at the time of
investment. If a selection is not made, the investment will be made in Class A
Shares.
INVESTING DIRECTLY
Investing by Mail
Investors may purchase shares of the Fund by completing and signing an Account
Application form and mailing it, along with a check (or other negotiable bank
instrument or money order) to:
The Pillar Funds
P.O. Box 8523
Boston, MA 02266-8523
The following address may be used for overnight delivery:
The Pillar Funds
c/o Boston Financial Data Services
Two Heritage Drive
North Quincy, MA 02171-2144
Investors may obtain Account Application forms by calling the Distributor at
1-800-932-7782.
Investing by Telephone
Purchases may be made to an existing account by calling the Distributor at
1-800-932-7782. While telephone transaction privileges are automatic,
Shareholders may specifically request that no telephone transactions be accepted
for their account(s). This election may be made on the Account Application form
at the time of purchase or at any time thereafter by completing and returning
appropriate documentation supplied by the Transfer Agent.
By Wire: Shareholders must call the Distributor before wiring funds. Federal
funds should be wired to:
State Street Bank and Trust Company
ABA #011000028
For Credit To DDA Account #9905-150-0
For Further Credit To Account # (insert account
number, Shareholder name, and control number assigned by the Distributor)
The Trust does not impose a fee for purchase wire transactions, although the
Shareholder's financial institution may charge a fee for this service.
Shares cannot be purchased by Federal Reserve wire on days when either the New
York Stock Exchange or the Federal Reserve is closed.
Orders will not be executed until payment has been received by the Distributor.
By ACH: This service allows the purchase of additional shares through an
electronic transfer of money from a checking or savings account. When an
additional purchase is made by telephone, the Transfer Agent will automatically
debit the pre-designated bank account for the desired amount. Shareholders may
call
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
1-800-932-7782 to request an Optional Services
Form to establish this option.
By Automatic Investment Plan: A Shareholder may also arrange for periodic
additional investments in the Fund through automatic deductions by ACH transfer
by completing an Optional Services Form. The minimum pre-authorized investment
amount is $50 per month. Customers may call
1-800-932-7782 to request an Optional Services Form to establish an
Automatic Investment Plan.
Any employee of Summit Bancorp or any of its affiliates who elects to
participate in the Trust's Automatic Investment Plan for the purchase of Class A
shares of any of the Trust's portfolios, excluding the money market funds,
through an investment counselor of Summit Bank's Summit Financial Services Group
will receive $50 worth of shares of the portfolio of the Trust selected by the
investor. The offer is subject to the following additional conditions: (i)
limited to one payment per household and to one payment in the case of joint
accounts; (ii) Summit Bank must furnish to the Distributor the names and
addresses of each purchaser; and (iii) the offer may be terminated (as to
persons who have not yet purchased shares at the time of termination) at any
time by the Distributor without prior notice. The Distributor will not be
reimbursed by the Trust for any payment made pursuant to this offer.
Retirement Plans
The Fund may be used as part of a retirement portfolio. Investors can establish
their account under one of several tax-sheltered plans. Investors should contact
their Investment Professional or the Distributor at 1-800-932-7782 for details
regarding an IRA or other retirement plan.
How to Exchange Shares
Each portfolio of the Trust, other than the U.S. Treasury Securities Plus Money
Market Fund, (collectively, the "Eligible Funds") is eligible for exchange with
any other Eligible Fund.
Class A Shares of an Eligible Fund may be exchanged only for Class A Shares of
another Eligible Fund, usually without paying an additional sales charge.
However, exchanges from Class A Shares of an Eligible Money Market Fund, which
were purchased directly, to Class A Shares of an Eligible Non-Money Market Fund
are made at net asset value plus the appropriate sales load for that Eligible
Non-Money Market Fund.
Class B Shares of one Eligible Fund may be exchanged only for Class B Shares of
another Eligible Fund. Exchanges are made at relative net asset value per share
without the imposition at that time of a CDSC. For purposes of determining the
"age" of exchanged shares, exchanges will be treated as a transaction involving
a redemption of the original Eligible Fund followed by a purchase of the new
Eligible Fund, and shares will be exchanged in the same order as determined by
the aging hierarchy above (See "Aging Schedule"). The aging of Class B Shares
will continue uninterrupted regardless of an exchange.
If an exchange request is received in good order by the Transfer Agent by 4:00
p.m., Eastern time, on any Business Day, the exchange usually will occur on that
day. Exchanges are regarded as sales for federal and state income tax purposes
and could result in a gain or loss depending on the original cost of the shares
exchanged.
To exchange shares, several conditions must be met:
1. After the exchange is complete, the Shareholder must have at least $1,000
(the minimum account balance) in the new Eligible Fund.
2. Shares of Eligible Funds can only be exchanged between accounts with
identical registrations and tax identification numbers.
3. Shares in the original Eligible Fund must be held at least 10 Business Days
before an exchange can be made. Shares can be exchanged on any Business Day.
4. Shares of the new Eligible Fund selected for exchange must be available for
sale in the Shareholder's state of residence.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
5. Shareholders should have received the prospectus for the new Eligible Fund
prior to initiating an exchange.
6. The prospectuses of both Eligible Funds involved in the exchange must offer
the exchange privilege.
By Mail: An exchange will be honored by a written letter of request to the
Transfer Agent if signed by all registered owners of the account.
By Telephone: Telephone exchange requests may be made by Shareholders either
calling the Transfer Agent at 1-800-932-7782 or contacting their Investment
Professional. See "Investing Directly--Investing by Telephone" above for a
description of telephone transaction privileges.
Systematic Exchange Program
Shares of the Fund also may be exchanged through automatic monthly
deductions from an investor's account for the same class of shares of the Trust.
Under the Systematic Exchange Program, an investor initially purchases Class A
or Class B Shares of the Prime Obligation Money Market Fund in an amount equal
to the total amount of the investment the investor desires to make in the same
class of shares of a different portfolio of the Trust. On a monthly basis, a
specified dollar amount of the Prime Obligation Money Market Fund shares is
exchanged for shares of the same class of a specified Eligible Fund. Exchange of
Class A Shares will be subject to the applicable sales charge imposed by the
Eligible Fund and, accordingly, it may be beneficial for an investor to execute
a Letter in connection with a Class A Shares Systematic Exchange Program.
Exchanges of Class B Shares are not subject to a CDSC. The Systematic Exchange
Program of investing a fixed dollar amount at regular intervals over time in an
Eligible Fund may have the effect of reducing the average cost per share of the
shares of the Eligible Fund acquired. This effect may also be achieved through
the Trust's Automatic Investment Plan, which is described in the applicable
prospectuses. A Shareholder may apply for participation in the Systematic
Exchange Program through the Distributor or his or her Investment Professional.
Shares purchased through the Systematic Exchange Program are subject to the
conditions listed under "How to Exchange Shares," however, such shares are not
subject to the Trust's minimum investment limitations. Exchanges are considered
taxable events for Shareholders. If a Shareholder redeems, rather than
exchanges, Class B Shares of the Prime Obligation Money Market Fund, such shares
will be subject to the applicable CDSC.
How to Redeem Shares
Shares may be redeemed on any Business Day directly from the Transfer Agent or
through an Investment Professional. Each Fund intends to pay cash for all shares
redeemed, but under abnormal conditions that make payment in cash unwise,
payment may be made wholly or partly in portfolio securities with a market value
equal to the redemption price less any applicable CDSC. In such cases, an
investor may incur brokerage costs in converting such securities to cash.
When purchases are made by check or by ACH transfer, redemption proceeds will
not be forwarded until the investment being redeemed has been in the account for
10 Business Days. Otherwise, payment to Shareholders for shares redeemed will be
made as promptly as possible and, in any event, within seven days after the
Transfer Agent receives the redemption request in good order. A Shareholder may
request that the redemption proceeds are paid by check, by federal funds wire or
by ACH transfer.
A redemption order for shares of the Fund will be executed at a price per share
equal to the net asset value next determined after receipt of the redemption
order by the Transfer Agent (minus any applicable CDSC).
A redemption order for the Fund will be effective as of the Business Day
received by the Transfer Agent (or Authorized Broker-Dealer) if the Transfer
Agent (or Authorized Broker-Dealer) receives the order before the Fund
calculates its net asset value, (normally, 4:00 p.m., Eastern time). Requests
received after the Fund calculates its net asset value, will be effective on the
next Business Day.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Redemptions Through Investment Professionals
Shareholders should contact their Investment Professional for information about
redeeming shares of the Fund and any charges for services provided by the
Investment Professional. In addition, the Trust has approved Authorized
Broker-Dealers to act as the Fund's agent for the purposes of accepting
redemption requests. The Fund will be deemed to have received a redemption
request upon receipt of the request by an Authorized Broker-Dealer. Other
Investment Professionals may impose an earlier cut-off for receipt of redemption
orders directed through them to allow time for processing and transmittal of
these orders to the Transfer Agent for effectiveness the same Business Day.
By Mail: Shareholders may redeem shares of the Fund by mailing a letter of
instruction signed by all registered owners exactly as their names appear in the
registration to:
The Pillar Funds
P.O. Box 8523
Boston, MA 02266-8523
The following address may be used for overnight delivery:
The Pillar Funds
c/o Boston Financial Data Services
Two Heritage Drive
North Quincy, MA 02171-2144
A signature guarantee is required if any of the following conditions apply: (i)
the redemption is for more than $10,000 worth of shares, (ii) the redemption
check is payable to other than the Shareholder(s) of record, (iii) the
redemption check is mailed to other than the Shareholder(s) address of record,
or (iv) the redemption proceeds are to be forwarded by federal funds wire or ACH
transfer to a financial institution not pre-designated on the account. A
signature guarantee can be obtained from a commercial bank, a trust company, a
member firm of a domestic stock exchange or a member of a securities transfer
association medallion program. A signature guarantee cannot be provided by a
notary public. A signature guarantee is designed to protect the Shareholders,
the Trust and its agents from fraud.
To determine if any additional documentation may be required to consider a
redemption request in good order, Shareholders should contact their Investment
Professional or the Transfer Agent.
By Telephone: To redeem shares by telephone, Shareholders should call the
Transfer Agent at 1-800-932-7782. See "Investing Directly--Investing by
Telephone" above for a description of telephone transaction privileges. Neither
the Trust nor the Transfer Agent will be responsible for any loss, liability,
cost or expense for acting upon instructions that it reasonably believes to be
genuine. The Trust and the Transfer Agent will each employ reasonable procedures
to confirm that instructions communicated by telephone are genuine. If market
conditions are extraordinarily active, or other extraordinary circumstances
exist, Shareholders who experience difficulties placing redemption orders by
telephone may wish to consider placing the redemption order by other means.
By Check: Shares may be redeemed by check to the address of record for most
requests under $10,000. Requests received by the Transfer Agent by 4:00 p.m.,
Eastern time, will be processed that Business Day, and the check will be mailed
the following Business Day. For more information, call the Transfer Agent at
1-800-932-7782.
By Wire: Shares may be redeemed by federal funds wire and sent to a
pre-designated bank account. Shareholders may call 1-800-932-7782 to request an
Optional Services Form to establish this option.
A wire will be sent the Business Day after the redemption request is effective.
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
The Trust reserves the right to assess a wire redemption charge, currently
$10.00, for this transaction, which will be deducted from the redemption
proceeds. The Shareholder's receiving financial institution may also impose a
fee.
By ACH: Shares may be redeemed by ACH transfer and sent to a pre-designated
financial institution account. Shareholders may call 1-800-932-7782 to request
an Optional Services Form to establish this option. ACH transfers of redemption
proceeds may take up to two Business Days to credit to the Shareholder's
financial institution.
The Trust does not charge for ACH transfers, but the Shareholder's receiving
financial institution may charge for this service.
By Systematic Withdrawal Plan: Shareholders with an account value of at least
$2,000 may elect to receive automatic distributions of $50 or more by
establishing a Systematic Withdrawal Plan. Distributions can be received either
by check or ACH transfer on a monthly, quarterly, semi-annual or annual basis.
To participate in a Systematic Withdrawal Plan, Shareholders must elect to have
all dividends and distributions reinvested in additional shares.
Shareholders who have attained the age of 70 1/2 may want to establish a
Systematic Withdrawal Plan as a convenient means to satisfy mandatory
distribution requirements from a retirement plan.
It is not generally in the best interest of a Shareholder to participate in a
Systematic Withdrawal Plan at the same time that he or she is purchasing
additional Class A Shares if those purchases are subject to a sales load. In
addition, it may not be in the best interest of a Class B Shareholder to
participate in a Systematic Withdrawal Plan when Class B Shares are subject to a
CDSC.
Shareholders may obtain an Optional Services Form to establish a Systematic
Withdrawal Plan by calling the Transfer Agent at 1-800-932- 7782.
Minimum Balance Requirements
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem (with the exception of a retirement account) the
shares of any Shareholder if, because of redemptions of shares by or on behalf
of the Shareholder, the account of such Shareholder has a value of less than
$1,000, the minimum initial purchase amount. Before the Fund exercises its right
to redeem such shares and sends the proceeds to the Shareholder, the Shareholder
will be given 60 days' notice to reestablish the minimum balance. If the balance
does not increase within 60 days, the account may be closed and the proceeds
mailed to the address of record. Shares will be redeemed at the last calculated
net asset value on the day the account is closed.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
PERFORMANCE
Computation of Total Return
The Fund may advertise total return. Total return figures are based on
historical earnings and are not intended to indicate future performance.
The total return of the Fund refers to the average compounded rate of return on
a hypothetical investment, net of any initial or contingent deferred sales
charge, for designated time periods (including, but not limited to, the period
from which the Fund commenced operations through the specified date), assuming
that the entire investment is redeemed at the end of each period and assuming
the reinvestment of all dividend and capital gain distributions.
The Fund may periodically compare its performance to that of: (i) other mutual
funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may assume
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
investment of dividends but generally do not reflect deductions for
administrative and management costs; or (iv) other investment alternatives. The
Fund may quote Morningstar, Inc., a service that ranks mutual funds on the basis
of risk adjusted performance. The Fund may use long-term performance of the
capital markets to demonstrate general long-term risk versus reward scenarios
and could include the value of a hypothetical investment in any of the capital
markets. The Fund may also quote financial and business publications and
periodicals as they relate to fund management, investment philosophy and
investment techniques.
The Fund may quote various measures of volatility and benchmark correlation
in advertising and may compare these measures to those of other funds. Measures
of volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial
or administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisors regarding specific questions as to federal, state and local income
taxes.
Tax Status of the Fund
The Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other investment portfolios. The Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies under the Code, so as to be relieved of federal income tax on that
part of its net investment income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) which is distributed to
Shareholders.
Tax Status of Distributions
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders.
Dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares and will not qualify for
the dividends-received deduction otherwise available to corporate shareholders.
Any dividends from net capital gain (the excess of net long-term capital gain
over net short-term capital loss) will be distributed annually and will be
treated as a 20% rate gain distribution (taxed at a rate of 20%) or a 28% rate
gain distribution (taxed at a rate of 28%), depending upon the designation by
the Fund (such designation being dependent upon the holding period of the Fund
in the underlying asset generating the net capital gain), regardless of how long
the Shareholder has held the Fund's shares. Capital gains distributions also
will not qualify for the dividends received deduction. The Fund will make annual
reports to Shareholders of the federal income tax status of all distributions.
Interest received on direct U.S. Government obligations that is exempt from tax
at the state level when received directly may be exempt, depending on the state,
when received by a Shareholder from the Fund, provided certain conditions are
satisfied. Interest received on repurchase agreements normally is not exempt
from state taxation. The Fund annually will inform Shareholders of the
percentage of income and distributions derived from direct U.S. Government
obligations. Shareholders should consult their tax advisors to determine whether
any portion of the income dividends received from the Fund is considered
tax-exempt in their particular states.
- --------------------------------------------------------------------------------
25
<PAGE>
Certain securities purchased by the Fund (such as STRIPs, TRs, TIGRs and CATs,
defined under "Description of Permitted Investments--Derivatives") are sold at
original issue discount and thus generally do not make periodic cash interest
payments. The Fund will be required to include as part of its current income the
accreted 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 Advisor or Sub-Advisor would not have chosen to sell
such securities and which may result in a taxable gain or loss.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in these months will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 if
paid by the Fund at any time during the following January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
The sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
Generally, gain or loss on the sale, exchange or redemption of a share will be
capital gain or loss which will be long-term if the share has been held for more
than eighteen months, mid-term if the share has been held for more than twelve,
but not more than eighteen months and otherwise will be short-term. 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 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
loss from the sale or exchange of a capital asset held for more than twelve
months to the extent of the amount of the prior capital gains distribution (or
any undistributed net capital gains of the Fund which 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). Investors should
particularly note that this loss disallowance rule will apply to shares received
through the reinvestment of dividends during the 61-day period.
Income derived by the Fund from obligations of foreign issuers may be subject to
foreign withholding taxes. See the Statement of Additional Information for
information regarding a Shareholder's ability to receive foreign tax credits
with respect to any such taxes.
GENERAL INFORMATION
The Trust
The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated Sep-tember 9, 1991. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each portfolio. In
addition to the Fund, the Trust currently consists of the Institutional Select
Money Market Fund, U.S. Treasury Securities Plus Money Market Fund, U.S.
Treasury Securities Money Market Fund, Prime Obligation Money Market Fund,
Tax-Exempt Money Market Fund, Fixed Income Fund, New Jersey Municipal Securities
Fund, Pennsylvania Municipal Securities Fund, Equity Growth Fund, Equity Value
Fund, Equity Income Fund, Balanced Fund, Intermediate-Term Government Securities
Fund and Mid Cap Fund. Shares of the portfolios are offered through up to four
separate classes of shares (Class A, B, I and S). All consideration received by
the Trust for shares of any portfolio and all assets of such portfolio belong to
that portfolio and would be subject to liabilities related thereto.
The Fund pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services, registering the shares
under federal laws and filing with state securities commissions, pricing,
insurance expenses, litigation and other extraordinary
- --------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
expenses, brokerage costs, interest charges, taxes and organization
expenses.
The Advisor, in addition to providing investment advice to the Trust,
provides investment advice to other clients. Some of these clients' funds are
maintained in asset allocation accounts and may be invested in the Fund. From
time to time, the Fund may experience relatively large purchases or redemptions
due to asset allocation decisions made by the Advisor for its clients. These
transactions may have a material effect on the Fund, since portfolios that
experience redemptions as a result of reallocations may have to sell portfolio
securities and because portfolios that receive additional cash will have to
invest it. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management
to the extent that the Fund may be required to sell securities at times when
they would not otherwise do so, or receive cash that cannot be invested in an
expeditious manner. There may be tax consequences associated with purchases and
sales of securities, and such sales may also increase transaction costs. The
Advisor is committed to minimizing the impact of these transactions on the Fund
to the extent it is consistent with pursuing the investment objectives of its
asset allocation decisions on the Fund.
Trustees of the Trust
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
Voting Rights
Each share held entitles a Shareholder of record to one vote. The Shareholders
of each portfolio or class will vote separately on matters relating solely to
that portfolio or class. As a Massachusetts business trust, the Trust is not
required to hold annual meetings of Shareholders, but approval will be sought
for certain changes in the operation of the Trust and for the election of
Trustees under certain circumstances. In addition, a Trustee may be removed by
the remaining Trustees or by Shareholders at a special meeting called upon
written request of Shareholders owning at least 10% of the outstanding shares of
the Trust. In the event that such a meeting is requested, the Trust will provide
appropriate assistance and information to the Shareholders requesting the
meeting.
Reporting
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
Shareholder Inquiries
Shareholder inquiries should be directed to The Pillar Funds, P.O. Box 8523,
Boston, MA 02266-8523.
Dividends
Cash Sweep Shareholders automatically receive all income dividends and capital
gain distributions in cash. All other Shareholders automatically receive all
income dividends and capital gain distributions in Class A Shares or Class B
Shares, as appropriate, at the net asset value next determined following the
record date, unless the Shareholder has elected to take such payment in cash.
Cash Sweep Shareholders should refer to the Trust's cash sweep prospectus for
more information. Shareholders may change their election by providing written
notice to the Administrator at least 15 days prior to the distribution. If any
capital gain is realized, substantially all of it will be distributed at least
annually.
Dividends and distributions of the Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
The amount of dividends payable on Class A Shares and Class B Shares will be
less than the dividends payable on Class I Shares because of the distribution
expenses charged to Class A and Class B Shares.
- --------------------------------------------------------------------------------
27
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Substantially all of the net investment income (not including capital gains) of
the Fund is declared and distributed annually as a dividend to Shareholders of
record.
Counsel and Independent Public Accountants
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain permitted investments and associated
risk factors for the Fund:
AMERICAN DEPOSITARY RECEIPTS ("ADRS"), EUROPEAN DEPOSITARY RECEIPTS
("EDRS"), CONTINENTAL DEPOSITARY RECEIPTS ("CDRS") AND GLOBAL DEPOSITARY
RECEIPTS ("GDRS")--ADRs are securities, typically issued by a U.S. financial
institution (a "depositary"), that evidence ownership interests in a security or
a pool of securities issued by a foreign issuer and deposited with the
depositary. ADRs include American Depositary Shares and New York Shares. EDRs,
which are sometimes referred to as Continental Depositary Receipts, are
securities, typically issued by a non-U.S. financial institution, that evidence
ownership interests in a security or a pool of securities issued by either a
U.S. or foreign issuer. GDRs are issued globally and evidence a similar
ownership arrangement. Generally, ADRs are designed for trading in the U.S.
securities markets, EDRs are designed for trading in European securities markets
and GDRs are designed for trading in non-U.S. securities markets. ADRs, EDRs,
CDRs and GDRs may be available for investment through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the security underlying the receipt and a depositary, whereas an
unsponsored facility may be established by a depositary without participation by
the issuer of the receipt's underlying security. Holders of an unsponsored
depositary receipt generally bear all the costs of the unsponsored facility. The
depositary of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
security or to pass through to the holders of the receipts voting rights with
respect to the deposited securities.
BANKERS ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. They are used by corporations to
finance the shipment and storage of goods and to furnish dollar exchange.
Maturities are generally six months or less.
BRADY BONDS--Brady Bonds are debt securities issued under the framework of the
Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas
F. Brady in 1989 as a mechanism for debtor nations to restructure their
outstanding external commercial bank debt. In restructuring its external debt
under the Brady Plan framework, a debtor nation negotiates with its existing
bank lenders as well as multilateral institutions such as the International Bank
for Reconstruction and Development (the "World Bank") and the International
Monetary Fund (the "IMF"). The Brady Plan framework, as it has developed,
contemplates the exchange of commercial bank debt for newly issued bonds ("Brady
Bonds"). Brady Bonds may also be issued in respect of new money being advanced
by existing lenders in connection with debt restructuring. Agreements
implemented under the Brady Plan to date are designed to achieve debt and
debt-service reduction through specific options negotiated by a debtor nation
with its creditors. As a result, the financial packages offered by each country
differ. Brady Bonds issued to date may be purchased and sold in the secondary
markets through U.S. securities dealers and other financial institutions and are
generally maintained through European securities depositories.
CERTIFICATES OF DEPOSIT--Certificates of deposit are interest-bearing
instruments with a specific 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 the term used to designate unsecured
short-term promissory notes issued by corporations and other
- --------------------------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
entities. Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES--Convertible securities are corporate securities that are
exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provisions.
DERIVATIVES--Derivatives are securities that derive their value from other
securities, financial instruments or indices. The following are considered
derivative securities: options on futures, futures, options (e.g., puts and
calls), swap agreements, mortgage-backed securities (e.g., collateralized
mortgage obligations ("CMOs"), real estate mortgage investment conduits
("REMICs"), interest-only class ("IOs") and principal-only ("POs")), when-issued
securities and forward commitments, floating and variable rate securities,
convertible securities, "stripped" U.S. Treasury securities (e.g., Receipts and
STRIPs), and privately issued stripped securities (e.g., TGRs, TRs and CATs).
See elsewhere in this "Description of Permitted Investments" for discussions of
these various instruments, and see "Investment Objective and Policies" for more
information about any investment policies and limitations applicable to their
use.
EQUITY SECURITIES--Equity securities represent ownership interests in a company
and consist of common stocks, preferred stocks, warrants to acquire common stock
and securities convertible into common stock. Investments in equity securities
in general are subject to market risks that may cause their prices to fluctuate
over time. The value of convertible equity securities is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provision. Fluctuations in the value of equity securities in which the Fund
invests will cause the net asset value of the Fund to fluctuate.
FIXED INCOME SECURITIES--Fixed income securities consist of 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.
FORWARD CURRENCY CONTRACTS--The Fund may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into forward currency
contracts to protect against uncertainty in the level of future exchange rates
between a particular foreign currency and the U.S. dollar or between foreign
currencies in which the Fund's securities are or may be denominated. A forward
contract involves an obligation to purchase or sell a specific currency amount
at a future date, which may be any fixed number of days from the date of the
contract, agreed upon by the parties, at a price set at the time of the
contract. Forward currency contracts, along with futures contracts and option
transactions, are considered to be derivative securities and may present special
risks. Under normal circumstances, consideration of the prospect for changes in
currency exchange rates will be incorporated into the Fund's long-term
investment strategies. However, the Advisor and Sub-Advisor believe that it is
important to have the flexibility to enter into forward currency
- --------------------------------------------------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
contracts when it determines that the best interest of the Fund will be
served.
The Fund will convert currency on a spot basis from time to time, and investors
should be aware of the costs of currency conversion. When the Advisor or
Sub-Advisor believes that the currency of a particular country may suffer a
significant decline against the U.S. dollar or against another currency, the
Fund may enter into a currency contract to sell, for a fixed amount of U.S.
dollars or other appropriate currency, the amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency.
At the maturity of a forward contract, the Fund may either sell a portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader,
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions.
Generally, the Fund will enter into forward currency contracts only as a hedge
against foreign currency exposure affecting the Fund. If the Fund enters into
forward currency contracts to cover activities which are essentially
speculative, the Fund will segregate cash or readily marketable securities with
its Custodian, or a designated sub-custodian, in an amount at all times equal to
or exceeding the Fund's commitment with respect to such contracts.
To assure that the Fund's foreign currency contracts are not used for leverage,
the net amount the Fund may invest in forward currency contracts is limited to
the amount of the Fund's aggregate investments in foreign currencies.
By entering into forward foreign currency contracts, the Fund will seek to
protect the value of its investment securities against a decline in the value of
a currency. However, these forward foreign currency contracts will not eliminate
fluctuations in the underlying prices of the securities. Rather, they simply
establish a rate of exchange which one can achieve at some future point in time.
Additionally, although such contracts tend to minimize the rise of loss due to a
decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result should the value of such currency
increase.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS--The Fund may enter into
contracts for the purchase or sale of securities, including index contracts or
foreign currencies. A purchase of a futures contract means the acquisition of a
contractual right to obtain delivery to the Fund of the securities or foreign
currency called for by the contract at a specified price during a specified
future month. When a futures contract on securities or currency is sold, the
Fund incurs a contractual obligation to deliver the securities or foreign
currency underlying the contract at a specified price on a specified date during
a specified future month. The Fund may sell stock index futures contracts in
anticipation of, or during a market decline to attempt to offset the decrease in
market value of its common stocks that might otherwise result; and it may
purchase such contracts in order to offset increases in the cost of common
stocks that it intends to purchase. The Fund may enter into futures contracts
and options thereon to the extent that not more than 5% of the Fund's assets are
required as futures contract margin deposits and premiums on options and may
engage in futures contracts to the extent that obligations relating to such
futures contracts represent not more than 20% of the Fund's total assets.
The Fund may also purchase and write options to buy or sell futures contracts.
The Fund may write options on futures only on a covered basis. Options on
futures are similar to options on securities except that options on futures give
the purchaser the right, in return for the premium paid, to assume a position in
a futures contract, rather than actually to purchase or sell the futures
contract, at a specified exercise price at any time during the period of the
option.
When the Fund enters into a futures transaction it must deliver to the futures
commission merchant selected by the Fund an amount referred to as "initial
margin." This amount is maintained in a segregated account at the custodian
bank. Thereafter, a "variation margin" may be paid by the Fund to, or drawn by
the Fund from, such account in accordance with controls set for such accounts,
depending upon changes in the price of the underlying securities
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
subject to the futures contract. In addition, the Fund will segregate
liquid assets and/or cash in an amount equal to its obligations under such
contract. The Fund will enter into such futures and options on futures
transactions on domestic exchanges and, to the extent such transactions have
been approved by the Commodity Futures Trading Commission for sale to customers
in the United States, on foreign exchanges.
Options and futures can be volatile investments and involve certain risks.
If the Advisor or Sub-Advisor applies a hedge at an inappropriate time or judges
interest rates incorrectly, options and futures strategies may lower the Fund's
return. The Fund could also experience losses if the prices of its options and
futures positions were poorly correlated with its other instruments, or if it
could not close out its positions because of an illiquid secondary market.
ILLIQUID SECURITIES--Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at which they are being
carried on the Fund's books. Not more than 15% of the net assets of the Fund
will be invested in such instruments. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, if there is no
secondary market for such security. Restricted securities, including Rule 144A
securities, that meet the criteria established by the Trustees of the Trust will
be considered liquid.
INVESTMENT COMPANIES--The Fund may invest up to 10% of its total assets in
shares of other investment companies. Because of restrictions on direct
investment by U.S. entities in certain countries, investment in other investment
companies may be the most practical or only manner in which an international and
global fund can invest in the securities markets of those countries. Such
investments may involve the payment of substantial premiums above the net asset
value of such issuers' fund securities, and are subject to limitations under the
1940 Act.
The Fund does not intend to invest in other investment companies unless, in the
judgment of the Advisor or Sub-Advisor, the potential benefits of such
investment exceed the associated costs relative to the benefits and costs
associated with direct investments in the underlying securities. 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.
JUNK BONDS--Bonds rated below investment grade are often referred to as "junk
bonds." Such securities involve greater risk of default or price declines than
investment grade securities due to changes in the issuer's creditworthiness and
the outlook for economic growth. The market for these securities may be less
active, causing market price volatility and limited liquidity in the secondary
market. This may limit the Fund's ability to sell such securities at their
market value. In addition, the market for these securities may also be adversely
affected by legislative and regulatory developments. Credit quality in the junk
bond market can change suddenly and unexpectedly, and even recently issued
credit ratings may not fully reflect the actual risks imposed by a particular
security.
OPTIONS--A put option gives the purchaser of the option the right to sell, and
the writer of the option the obligation to buy, the underlying security at any
time during the option period. A call option gives the purchaser of the option
the right to buy, and the writer of the option the obligation to sell, the
underlying security at any time during the option period. The premium paid to
the writer is the
- --------------------------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
consideration for undertaking the obligations under the option contract.
The initial purchase (sale) of an option contract is an "opening transaction."
In order to close out an option position, the Fund may enter into a "closing
transaction," which is simply the sale (purchase) of an option contract on the
same security with the same exercise price and expiration date as the option
contract originally opened.
The Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to protect against an
increase in the cost of securities that the Fund may seek to purchase in the
future. The Fund pays a premium for purchasing put and call options. If price
movements in the underlying securities are such that exercise of the options
would not be profitable for the Fund, loss of the premium paid may be offset by
an increase in the value of the Fund's securities or by a decrease in the cost
of acquisition of securities by the Fund.
The Fund may write covered put and call options as a means of increasing
the yield on its portfolio and as a means of providing limited protection
against decreases in its market value. When the Fund sells an option, if the
underlying securities do not increase or decrease to a price level that would
make the exercise of the option profitable to the holder thereof, the option
generally will expire without being exercised and the Fund will realize as
profit the premium received for such option. When a call option of which the
Fund is the writer is exercised, the Fund will be required to sell the
underlying securities to the option holder at the strike price, and will not
participate in any increase in the price of such securities above the strike
price. When a put option of which the Fund is the writer is exercised, the Fund
will be required to purchase the underlying securities at the strike price,
which may be in excess of the market value of such securities.
The Fund may purchase and write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the SEC that OTC options are illiquid.
The Fund may purchase and write put and call options on foreign currencies
(traded on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates.
Call options on securities or foreign currency written by the Fund will be
"covered," which means that the Fund will own an equal amount of the underlying
security or foreign currency. With respect to put options on securities or
foreign currency written by the Fund, the Fund will establish a segregated
account with its custodian bank consisting of liquid assets and/or cash in an
amount equal to the amount the Fund would be required to pay upon exercise of
the put.
The Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. The Fund may choose to
terminate an option position by entering into a closing transaction. The ability
of the Fund to enter into closing transactions depends upon the existence of a
liquid secondary market for such transactions.
All options written on indices must be covered. When the Fund writes an option
on an index, it will establish a segregated account containing liquid assets
and/or cash with its custodian in an amount at least equal to the market value
of the option and will
- --------------------------------------------------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
maintain the account while the option is open or will otherwise cover the
transaction.
Risk Factors. Risks associated with options transactions include: (1) the
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while the Fund will receive a
premium when it writes covered call options, it may not participate fully in a
rise in the market value of the underlying security.
RECEIPTS--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. This discount is
accreted over the life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater interest rate
volatility than interest-paying investments.
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 on an agreed upon date within a number of days
from the date of purchase. The Fund will have actual or constructive possession
of the security as collateral for the repurchase agreement. 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
securities or if the Fund realizes a loss on the sale of the collateral
securities. 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 OF FOREIGN ISSUERS--There are certain risks connected with investing
in foreign securities. These include risks of adverse political and economic
developments, the possible imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting requirements, the
possibility that there will be less information on such securities and their
issuers available to the public, the difficulty of obtaining or enforcing court
judgments abroad, restrictions on foreign investments in other jurisdictions,
difficulties in effecting repatriation of capital invested abroad and
difficulties in transaction settlements and the effect of delay on shareholder
equity. Foreign securities may be subject to foreign taxes, and may be less
marketable than comparable U.S. securities. Also it may be more difficult to
obtain a judgment in a court outside the United States.
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, securities of the U.S.
Government or its agencies equal to at least 102% of the market value of the
securities lent. The Fund continues to receive interest on the securities lent
while simultaneously earning interest 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. The Fund pays lending and
other fees in connection with securities loans.
STANDBY COMMITMENTS AND PUTS--Securities subject to standby commitments or puts
permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to the Fund owning the security to which it relates. In
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
certain cases, a premium may be paid for a standby commitment or put, which
premium will have the effect of reducing the yield otherwise payable on the
underlying security. The Fund will limit standby commitment or put transactions
to institutions believed to present minimal credit risk.
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 with a withdrawal penalty or that
mature in more than seven days are considered to be illiquid securities.
U.S. GOVERNMENT AGENCIES--Obligations issued or guaranteed by agencies of
the U.S. 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 U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and credit of the U.S. 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 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 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. 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").
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. 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 security.
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.
The Fund will maintain with the Custodian a separate account with liquid assets
and/or cash in an amount at least equal to these commitments. The interest rate
realized, if any, on these securities is fixed as of the purchase date and no
interest accrues to the Fund before settlement. These securities may be 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, the Fund may dispose
of a when-issued security or forward commitment prior to settlement if it deems
such action appropriate.
- --------------------------------------------------------------------------------
34
<PAGE>
The Pillar Funds
Class A and B Shares
International Growth Fund
Advisor:
[SUMMIT BANK LOGO]
Distributor:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
1-800-932-7782
PIL-F-031-02
<PAGE>
[LOGO]
The Pillar Funds
Your Investment Foundation
PROSPECTUS
Class I Shares
International Growth Fund
April 30, 1998
<PAGE>
Table of Contents
Summary ................................................................... 2
Expense Summary ........................................................... 3
Financial Highlights ...................................................... 4
The Trust ................................................................. 5
Investment Objective and Policies ......................................... 5
Investment Limitations .................................................... 8
The Advisor ............................................................... 8
The Sub-Advisor ........................................................... 9
The Administrator ......................................................... 9
The Transfer Agent ........................................................ 9
The Shareholder Servicing Agent ........................................... 9
The Distributor ........................................................... 10
Purchase and Redemption of Shares ......................................... 10
Performance ............................................................... 11
Taxes ..................................................................... 12
General Information ....................................................... 13
Description of Permitted Investments ...................................... 15
The Pillar Funds and Pillar are registered service marks of Summit Bank. Your
Investment Foundation and the stylized "P" logo are service marks of Summit
Bank. Reach Higher, Summit, Summit Bancorp and Summit Financial Services Group
are registered service marks of Summit Bancorp. Summit Bank is a service mark of
Summit Bancorp.
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE PILLAR FUNDS
CLASS I SHARES
Investment Advisor:
SUMMIT BANK INVESTMENT MANAGEMENT DIVISION,
A DIVISION OF SUMMIT BANK
THE PILLAR FUNDS (the "Trust") consists of mutual fund portfolios seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to the
Class I Shares of the following fund (the "Fund"):
O INTERNATIONAL GROWTH FUND
The Trust's Class I Shares are offered without distribution fees to: (i)
institutional investors (including Summit Bank, its affiliates and correspondent
banks) for the investment of their own funds; (ii) any individual or institution
(including Summit Bank, its affiliates and correspondent banks) for the
investment of funds held by such individual or institution in a fiduciary,
agency, custodial or other representative capacity, if such individual or
institution is able to provide complete shareholder recordkeeping services with
respect to shares purchased and held in such capacity; and (iii) any "qualified
customer" who has entered into an agreement with Summit Bank, its affiliates or
correspondent banks ("Qualified Customers"). Persons who own Class I Shares of
the Fund are referred to herein as "Shareholders."
<TABLE>
<S> <C> <C>
| SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR |
| INSURED, ENDORSED OR GUARANTEED BY, ANY BANK (INCLUDING |
| SUMMIT BANK OR ITS AFFILIATES OR CORRESPONDENTS), ANY STATE |
| OR STATE AGENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION |
| (FDIC), THE U.S. GOVERNMENT OR ANY U.S. GOVERNMENT AGENCY. |
</TABLE>
Amounts invested in the Fund are subject to investment risks, including possible
loss of the principal amount invested.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated April 30, 1998 has been filed with the Securities and Exchange
Commission and is available without charge by writing to the Distributor, SEI
Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling 1-800-
932-7782. The Statement of Additional Information is incorporated into this
Prospectus by reference.
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.
April 30, 1998
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
Summary
The Pillar Funds (the "Trust") consists of open-end management investment
companies which provide a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about the
Class I Shares of the Trust's International Growth Fund (the "Fund").
WHAT IS THE INVESTMENT OBJECTIVE?
The Fund seeks long-term capital growth.
There is no assurance that the Fund will meet its investment objective. See
"Investment Objective and Policies."
WHAT ARE THE PERMITTED INVESTMENTS?
The Fund may invest in equity securities of U.S. and non-U.S. issuers consisting
of (i) common stocks; (ii) warrants to purchase common stocks; (iii) securities
convertible into common stocks; (iv) American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs"), Continental Depositary Receipts ("CDRs")
and Global Depositary Receipts ("GDRs"); and (v) foreign government debt
securities. Because securities fluctuate in value, the shares of the Fund will
also fluctuate in value. In addition, the value of shares of the Fund are
subject to market and interest rate fluctuations that affect the value of its
fixed income investments. The Fund is non-diversified and may, therefore,
concentrate its portfolio investments in a relatively small number of issuers
and may, as a result, be subject to greater risk with respect to its portfolio
securities. The Fund may also invest in options, futures and currency
transactions. The Fund's investments in securities of foreign issuers will
subject the Fund to risks associated with foreign investments. See "Investment
Objective and Policies," "General Investment Policies," "Risk Factors" and
"Description of Permitted Investments."
Who are the Advisor and Sub-Advisor? Summit Bank Investment Management Division,
a division of Summit Bank, serves as the advisor (the "Advisor") to the Trust.
Wellington Management Company, LLP serves as the sub-advisor (the "Sub-Advisor")
to the Fund. See "The Advisor" and "The Sub-Advisor."
Who is the Administrator? SEI Fund Resources serves as the administrator (the
"Administrator") of the Trust. See "The Administrator."
Who is the Transfer Agent? State Street Bank and Trust Company acts as transfer
agent (the "Transfer Agent") for the Trust. See "The Transfer Agent."
Who is the Shareholder Servicing and Dividend Disbursing Agent? Boston Financial
Data Services is the Trust's dividend disbursing agent and shareholder servicing
agent. See "The Shareholder Servicing Agent."
Who is the Distributor? SEI Investments Distribution Co. acts as distributor
(the "Distributor") of the Trust's shares. See "The Distributor."
How do I Purchase and Redeem Shares?
Purchases and redemptions of the Fund's shares may be made through the
Distributor on any "Business Day." A "Business Day" is any day that the New York
Stock Exchange is open for trading. A purchase order will be effective as of the
Business Day received by the Distributor if the Distributor receives the order
and payment in federal funds before the time the Fund calculates its net asset
value (normally, 4:00 p.m., Eastern time). Redemption orders must be placed
prior to the time the Fund calculates its net asset value (normally, 4:00 p.m.,
Eastern time), on any Business Day for the order to be effective that day. The
purchase and redemption price for shares is the net asset value per share
determined as of the end of the day the order is effective. The Trust has also
authorized certain broker-dealers and other financial intermediaries
(collectively, "Authorized Broker-Dealers") to accept purchase orders and
redemption requests up to the times mentioned above on behalf of the Fund. See
"Purchase and Redemption of Shares."
HOW ARE DIVIDENDS PAID?
Substantially all of the net investment income (exclusive of capital gains) of
the Fund is declared and distributed annually in the form of dividends to
Shareholders.
Any capital gains will be distributed at least annually. Dividends are paid in
additional shares, unless the Shareholder has elected to take the payments in
cash. See "Dividends."
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Expense Summary
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
INTERNATIONAL
GROWTH
FUND
- -------------------------------------------------------------------------
Advisory Fees (after fee waivers) (1),(2) .80%
Other Expenses .70%
- -------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers)(2) 1.50%
- -------------------------------------------------------------------------
(1) The Advisor and Sub-Advisor have agreed to voluntarily waive a portion of
their fees in an amount that operates to limit Total Operating Expenses of
Class I Shares of the Fund to not more than 1.50% of average daily net
assets. The Advisor and Sub-Advisor each reserve the right to terminate its
fee waiver at any time in its sole discretion.
(2) Absent fee waivers for the Fund, the Advisory Fee would be 1.00%, and Total
Operating Expenses would be 1.70% of the Fund's average daily net assets.
Additional information may be found under "The Advisor," "The Sub-Advisor,"
"The Administrator" and "The Distributor."
EXAMPLE
An investor in the Fund 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:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Growth Fund $15 $47 $82 $179
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in the Fund. Financial institutions may impose fees on their
customers in addition to those described above. Additional information may be
found under "The Advisor," "The Sub-Advisor," "The Administrator" and "The
Distributor."
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
THE PILLAR FUNDS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent public accountants, as indicated in their report dated February 6,
1998 on the Trust's financial statements as of December 31, 1997, which is
incorporated by reference into the Trust's Statement of Additional Information
under "Financial Information." Additional performance information is contained
in the Trust's 1997 Annual Report to Shareholders and is available upon request
and without charge by calling 1-800-932-7782. This table should be read in
conjunction with the Trust's financial statements and notes thereto.
<TABLE>
<CAPTION>
Realized
and
Net Asset Unrealized Distributions Net Asset
Value Net Gains or from Net Distributions Value Net Assets
Beginning Investment Losses on Investment from Capital End of Total End of Period
of Period Income Securities Income Gains Period Return (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $11.23 $0.08 $(0.04) $(0.08) $(0.85) $10.34 0.25% $14,143
1996 10.74 0.08 1.11 (0.08) (0.62) 11.23 11.17 14,822
1995(1) 10.00 0.03 0.75 (0.02) (0.02) 10.74 7.81 9,990
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets Portfolio Average
Average to Average (Excluding (Excluding Turnover Commission
Net Assets Net Assets Waivers) Waivers) Rate Rate+
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
- ------------------------------------------------------------------------------------------------------------
CLASS I
1997 1.50% 0.95% 1.69% 0.76% 71.22% $.0052
1996 1.50 0.85 1.73 0.62 67.03 .0051
1995(1) 1.50 0.79 2.11 0.18 14.32 n/a
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(+) Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for the fiscal
years beginning after September 1, 1995.
(1) Commenced operations on May 1, 1995. Ratios for this period have been
annualized.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE TRUST
The Pillar Funds (the "Trust") is an open-end management investment company that
consists of diversified and non-diversified portfolios. The Trust currently
offers units of beneficial interest ("shares") in fifteen separate investment
portfolios. The Trust offers shares of each portfolio through up to four
separate classes of shares (Class A, Class B, Class I and Class S) which provide
for variations in distribution costs, voting rights, sales loads, minimum
investments, redemption fees, transfer agency fees and dividends. Except for
these differences between classes, each share of each portfolio represents an
undivided proportionate interest in that portfolio. This Prospectus relates to
the Class I Shares of the Trust's International Growth Fund (the "Fund"). The
Fund is a non-diversified mutual fund. Information regarding the Trust's other
portfolios and the Class A Shares and Class B Shares of the Fund is contained in
separate prospectuses that may be obtained by writing the Trust's Distributor,
SEI Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling
1-800-932-7782.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described below. For
additional information regarding risks and permitted investments of the Fund,
see "Risk Factors," "General Investment Policies" and "Description of Permitted
Investments" in this Prospectus and "Description of Permitted Investments" and
"Description of Ratings" in the Statement of Additional Information. There is no
assurance that the investment objective of the Fund will be met.
The investment objective of the Fund is long-term capital growth.
The Fund will normally invest at least 65% of its total assets in the following
equity securities of non-U.S. issuers: common stocks, warrants to purchase
common stocks, debt securities and preferred stocks convertible into common
stocks and ADRs, EDRs, CDRs and GDRs ("Depositary Receipts"). The Fund will
purchase equity securities, including Depositary Receipts, that are traded in
the United States on registered exchanges or the over-the-counter market and
securities traded on foreign exchanges. Furthermore, the Fund may purchase
equity securities in a foreign or domestic issuer's public offerings, including
an initial public offering (an "IPO"). The Fund may also invest up to 35% of its
assets in foreign government debt securities and securities issued by
supranational agencies when the Sub-Advisor believes that they are compatible
with the Fund's investment objective. Such securities will be rated investment
grade or better, i.e., rated in one of the four highest rating categories by a
nationally recognized statistical rating organization (an "NRSRO") or, if not
rated, determined to be of comparable quality as determined by the Sub-Advisor.
As part of its investment in foreign government debt securities, the Fund may
invest up to 10% of its assets in such foreign government debt securities that
are rated BB (or Ba) or B by an NRSRO, or, if not rated, determined to be of
comparable quality as determined by the Sub-Advisor. In addition, the Fund may
invest in money market instruments as defined in "General Investment Policies"
below.
The Fund will invest in securities of issuers in at least three countries other
than the United States. The Fund may invest in securities of issuers from
countries that are considered to be lesser-developed countries by the
international financial community, but that have securities markets meeting
acceptable standards of liquidity, financial disclosure, government regulation
and protection of foreign investors, as determined by the Sub-Advisor. Normally,
no more than 25% of the Fund's assets will be invested in such securities. The
Fund may also invest up to 10% of its assets in closed-end investment companies
that invest in the securities of issuers in a single country or region (commonly
referred to as "country funds"). In addition, the Fund may invest in Brady
Bonds. The Fund may invest in smaller, less well-established companies
(i.e., companies with market capitalizations below $500 million) which may offer
greater opportunities for capital appreciation than larger, better established
companies. The Fund is non-diversified and may, therefore, concentrate its
portfolio investments in a relatively small number of issuers.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
The Fund may engage in currency transactions for hedging purposes. Currency
transactions include forward currency contracts, exchange-listed and over-
the-counter ("OTC") currency futures contracts and options on futures contracts,
exchange-listed and OTC options on currencies, and currency swaps. The Fund may
also employ certain hedging, income enhancement and risk management techniques,
including the purchase and sale of exchange-listed and OTC options, futures and
options on futures involving equity and debt securities, aggregates of equity
and debt securities, and other financial indices. The Fund may write options and
invest in futures only on a covered basis.
In seeking to achieve its investment objective of long-term capital growth, the
Fund's investments will be selected on the basis of fundamental analysis to
identify those markets and securities that provide capital appreciation
potential.
Fundamental analysis involves assessing a company and its business environment,
management, balance sheet, income statement, anticipated earnings and dividends
and other related measures of value. In analyzing companies for investment, the
Sub-Advisor looks for, among other things, above-average earnings growth, a
strong balance sheet, attractive industry dynamics, strong competitive
advantages, and positive relative value within the context of a security's
primary trading market. In addition to fundamental analysis of companies and
industries, the Sub-Advisor evaluates the economic and political environments of
the countries in which the securities are traded.
GENERAL INVESTMENT POLICIES
For temporary defensive purposes during periods when the Advisor determines that
market conditions warrant, the Fund may invest up to 100% of its assets in money
market securities described in the "Description of Permitted Investments" and
may hold cash for liquidity purposes. The money market securities the Fund may
invest in may be denominated in foreign currencies or U.S. dollars and consist
of short-term U.S. Government obligations, obligations issued or guaranteed by
the agencies and instrumentalities of the U.S. Government and securities of
foreign governments; custodial receipts evidencing separately traded interest
and principal components of securities issued by the U.S. Treasury; short-term
corporate securities rated in the highest short-term rating category by an NRSRO
or determined by the Advisor or Sub-Advisor to be of comparable quality at the
time of purchase; short-term bank obligations (certificates of deposit, time
deposits and bankers' acceptances) of U.S. or foreign commercial banks with
assets of at least $1 billion as of the end of their most recent fiscal year;
Euro-currency instruments and securities; and repurchase agreements involving
such securities. Furthermore, the Fund may hold cash in U.S. dollars, foreign
currencies or multi-national currency units for liquidity purposes. To the
extent the Fund is engaged in defensive investing, the Fund will not be pursuing
its investment objective.
Securities purchased by the Fund may involve floating or variable interest rates
and may be acquired through a forward commitment or on a when-issued basis.
In addition, the Fund reserves the right to engage in securities lending.
RISK FACTORS
The value of the Fund's shares will fluctuate due to the underlying securities
in which it invests. The market value of the convertible securities purchased by
the Fund also may be affected by changes in interest rates, the credit quality
of the issuer and any call provisions. In addition, investments in smaller, less
well-established companies may subject the Fund to certain special risks related
to, for example, limited product lines, markets or financial resources and
dependence on a small management group. Such securities may trade less
frequently, in smaller volumes and fluctuate more sharply in value than exchange
listed securities of larger companies.
The market value of the Fund's fixed income securities will fluctuate in
response to interest rate changes and other factors.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
The Fund's investments in securities of foreign issuers may subject it to risks
different than those attendant to investments in securities of U.S. issuers,
such as differences in accounting, auditing and financial reporting standards
applicable in foreign countries, the possibility of expropriation or
confiscatory taxation, political instability and greater fluctuations in value
due to changes in currency exchange rates. There may also be less publicly
available information with regard to foreign issuers than domestic issuers. In
addition, foreign markets may be characterized by less liquidity, greater price
volatility, less regulation and higher transaction costs than U.S. markets.
Moreover, the dividends payable on the Fund's foreign securities may be subject
to foreign withholding taxes, thus reducing the net amount of income available
for distribution to the Fund's Shareholders. Also, it may be more difficult to
obtain a judgment in a court outside the United States. These risks could be
greater in emerging markets than in more developed foreign markets because
emerging markets may have less stable political environments than more developed
countries.
Since the Fund may invest in foreign currency and securities denominated in
foreign currency, changes in exchange rates between the U.S. dollar and foreign
currencies affect the U.S. dollar value of the Fund's assets. Rates of exchange
are determined by forces of supply and demand on the foreign exchange markets.
These forces are in turn affected by the international balance of payments and
other economic, political and financial conditions, government intervention,
speculation and other factors. The Fund's net asset value will be reported, and
distributions from the Fund will be made, in U.S. dollars. Therefore, the Fund's
reported net asset value and distributions will be adversely affected by
depreciation of foreign currency relative to the U.S. dollar. A decline in the
value of foreign currency would adversely affect the value of the Fund in dollar
terms. While the Fund may try to hedge its currency risk using currency
transactions, there is no assurance that it will be successful.
The Fund may invest in lower rated bonds, which are commonly referred to as
"junk bonds." These securities are speculative and are subject to a greater risk
of loss of principal and interest than are investments in higher rated bonds.
The debt securities purchased by the Fund will be rated at least B by an NRSRO
or determined to be of comparable quality by the Advisor or Sub-Advisor.
Securities rated B are considered highly speculative and while the issuer
currently has the capacity to meet debt service requirements, adverse business,
financial or economic conditions would likely impair its capacity
or willingness to pay interest and principal.
The Fund may invest in options and futures. There are various risks associated
with options and futures, including (i) that the success of a hedging strategy
may depend on an ability to accurately predict movements in security prices,
interest rates or currency exchange rates; (ii) there may be little correlation
between the changes in a security's value and the price of futures or options;
(iii) a related future or option may not be liquid; (iv) an exchange may impose
trading restrictions or limitations; (v) government regulations may restrict
trading in futures and options; and (vi) the possible lack of full participation
in a rise in the market value of the underlying security.
In addition, the Fund may invest in equity securities by participating in an
issuer's IPO. Such investments have special risks associated with them. There is
often a high volume of trading in IPO securities, which can result in greater
price volatility. Companies offering such securities may not have operated
previously as a public company, and their share price may experience significant
volatility as the marketplace reacts to their financial results. Furthermore,
some IPO issuers have not conducted operations for a significant period of time,
and may not have developed a management structure sufficient to cope with the
pressures of running a public company.
RISK FACTORS--NON-DIVERSIFICATION
The Fund is a non-diversified fund under the Investment Company Act of 1940, as
amended (the "1940 Act"), and therefore may invest a greater proportion of its
assets in the securities of a smaller number of issuers and may, as a result, be
subject to greater risk with respect to its portfolio securities. The Fund
intends to satisfy the diversification requirements necessary to qualify as a
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"), by limiting its investments so that, at the close of each quarter
of the taxable year: (a) not more than 25% of the market value of the Fund's
total assets is invested in the securities (other than U.S. Government
securities) of a single issuer; and (b) at least 50% of the market value of the
Fund's total assets is represented by (i) cash and cash items, (ii) U.S.
Government securities and (iii) other securities limited in respect to any one
issuer to an amount not greater in value than 5% of the market value of the
Fund's total assets and to not more than 10% of the outstanding
voting securities of such issuer.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of the Fund. Fundamental policies cannot be changed with
respect to the Fund without the consent of the holders of a majority of the
Fund's outstanding shares.
THE FUND MAY NOT:
1. Purchase any securities which would cause more than 25% 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 the 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, gas transmissions, electric and telephone will
each be considered a separate industry; (ii) financial services 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; (iii) supranational agencies will be deemed
to be issuers conducting their principal business activities in the same
industry; and (iv) governmental issuers within a particular country will be
deemed to be conducting their principal business activities in the same
industry.
2. Make loans, except that the Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; (b) enter into
repurchase agreements; and (c) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentage limitations apply at the time of the purchase of a
security.
It is a non-fundamental policy of the Fund to invest no more than 15% of its net
assets in illiquid securities (as defined below under "Description of Permitted
Investments").
Additional investment limitations are set forth in the Statement of Additional
Information.
THE ADVISOR
Summit Bank Investment Management Division, a division of Summit Bank (the
"Advisor"), serves as the investment advisor to the Trust. The Advisor 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.
Summit Bank, 210 Main Street, Hackensack, New Jersey 07601, was chartered in
1899 and has been exercising trust powers and managing money since 1916. The
Investment Management Division began as a separate operating division of the
Bank in 1973. The Bank's investment professionals have, on average, over 20
years of experience in investment management. As of December 31, 1997, total
assets under management were approximately $8.2 billion.
Summit Bank is a wholly-owned subsidiary of Summit Bancorp, an interstate bank
holding company with approximately $30 billion in assets and 426 banking
offices, predominantly in New Jersey and eastern Pennsylvania, as of December
31, 1997.
The Advisor is entitled to a fee from each Fund, which is calculated daily and
paid monthly at the annual rate of the Fund's average daily net assets as set
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
forth in the following table. The Advisor has voluntarily agreed to waive all or
a portion of its fees to limit the total operating expenses of Class I Shares of
the Fund to the respective levels set forth below. The Advisor reserves the
right to terminate any and all fee waivers at any time in its sole discretion.
Also set forth below are the advisory fees the Fund paid to the Advisor (shown
as a percentage of average daily net assets) for the fiscal year ended December
31, 1997.
<TABLE>
<CAPTION>
Maximum Total Fees Received
Contractual Operating Expense In Fiscal
Fee After Fee Waiver Year 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
International Growth Fund 1.00% 1.50% .80%
</TABLE>
Summit Bank has also entered into a custodian agreement with the Trust, under
which it provides all securities safekeeping services as required by the Funds
and the 1940 Act. The Trust pays Summit Bank (referred to herein in its
custodial capacity as the "Custodian") a custodian fee, which is calculated
daily and paid monthly, at an annual rate of .17% of the Fund's average daily
net assets.
THE SUB-ADVISOR
Wellington Management Company, LLP ("WMC") serves as the investment sub-advisor
to the Fund. WMC is a professional investment counseling firm which provides
investment services to investment companies, employee benefit plans, endowments,
foundations and other institutions and individuals. As of December 31, 1997, WMC
has discretionary investment authority with respect to approximately $174.5
billion of assets. WMC's predecessor organizations have provided investment
advisory services to investment companies since 1928 and to investment
counseling clients since 1960. The principal address of WMC is 75 State Street,
Boston, MA 02109. WMC is a Massachusetts limited liability partnership, of which
the following persons are managing partners: Robert W. Doran, Duncan M.
McFarland and John R. Ryan.
The Fund has been managed since its inception in May, 1995 by a committee
composed of WMC's Global Equity Strategy Group, a group of global portfolio
managers and senior investment professionals headed by Trond Skramstad, Senior
Vice President and Partner of WMC.
The Sub-Advisor is entitled to a fee payable by the Advisor from the Advisor's
fee, which is calculated daily and paid monthly, at an annual rate of .60% of
the average daily net assets of the Fund up to and including $50 million; .45%
of the average daily net assets of the Fund in excess of $50 million up to and
including $150 million; and .30% of the average daily net assets of the Fund in
excess of $150 million. The Sub-Advisor may, from time to time, waive a portion
of its fee in order to limit the operating expenses of Class I Shares of the
Fund. The Sub-Advisor reserves the right to terminate any such fee waiver at any
time in its sole discretion. For the fiscal year ended December 31, 1997, the
Advisor paid WMC a sub-advisory fee of .60% of the average daily net assets of
the Fund.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The Administrator provides the Trust with administrative services, other
than investment advisory services, including all regulatory reporting, necessary
office space, equipment, personnel and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily net assets of the Fund.
THE TRANSFER AGENT
State Street Bank and Trust Company (the "Transfer Agent"), 225 Franklin St.,
Boston, Massachusetts 02110 is the Trust's transfer agent.
THE SHAREHOLDER SERVICING AGENT
Boston Financial Data Services, Two Heritage Drive, North Quincy, Massachusetts,
02171 is the Trust's dividend disbursing agent and shareholder servicing agent.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company, acts as the Distributor of the Trust's shares.
No compensation is paid to the Distributor for distribution services for the
Class I Shares of the Fund. Class I Shares of the Fund are offered without
distribution fees to: (i) institutional investors (including Summit Bank, its
affiliates and correspondent banks) for the investment of their own funds; (ii)
individuals and institutions (including Summit Bank, its affiliates and
correspondent banks) for the investment of funds held by such individuals or
institutions in a fiduciary, agency, custodial or other representative capacity
if such individuals or institutions are able to provide complete shareholder
recordkeeping services with respect to shares purchased and held in such
capacity; and (iii) any qualified customer who has entered into an agreement
with Summit Bank, its affiliates or correspondent banks ("Qualified Customers").
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs which will be paid by the Distributor from
the sales charge it receives or from any other source available to it. Under any
such program, the Distributor may provide promotional incentives in the form of
cash or other compensation, including merchandise, gifts and prizes, and payment
of travel expenses, meals and lodging, to all dealers selling shares of the
Fund. Such promotional incentives will be offered uniformly to all dealers and
predicated upon the number of shares of the Trust's portfolios sold by the
dealer.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are sold on a continuous basis and may be purchased on any
day that the New York Stock Exchange is open for trading (a "Business Day").
Generally, (i) an investor in the Class I Shares of the Fund must pay for shares
by federal funds and (ii) checks (including third party and credit card checks),
credit cards and cash will not be accepted for payment of Class I Shares.
A purchase or redemption order for shares of the Fund will be executed at a per
share price equal to the net asset value next determined after the appropriate
order is effective.
The net asset value per Class I Share of the Fund is determined by dividing the
total value of the Fund's investments and other assets that are allocated to its
Class I Shares, less any liabilities that are allocated to its Class I Shares,
by the Fund's total outstanding Class I Shares. The net asset value per share of
the Fund is determined as of the regularly-scheduled close of normal trading on
the New York Stock Exchange (normally, 4:00 p.m., Eastern time), each Business
Day. Purchases will be made in full and fractional shares of the Fund calculated
to three decimal places. The Fund may use a pricing service to provide market
quotations. A pricing service may use a matrix system of valuation to value
fixed income securities which considers factors such as securities prices, yield
features, ratings and developments related to a specific security.
No certificates representing shares will be issued.
Neither the Trust nor the Transfer Agent will be responsible for any loss,
liability, cost or expense for acting upon instructions that it reasonably
believes to be genuine. The Trust and the Transfer Agent will each employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If market conditions are extraordinarily active, or other extraordinary
circumstances exist, Shareholders who experience difficulties placing redemption
orders by telephone may wish to consider placing the redemption order by other
means.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust, the Fund or its
Shareholders to accept such order. Qualified Customers should call the Transfer
Agent for information regarding requirements for purchase and redemption orders.
In addition, the Trust has approved Authorized Broker-Dealers to act as the
Fund's agent for the purposes of accepting purchase orders and redemption
requests. The Fund will be deemed to have received a purchase order or
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
redemption request upon receipt of the order or request by an Authorized
Broker-Dealer.
A purchase order for the Fund will be effective as of the Business Day received
by the Distributor (or Authorized Broker-Dealer) if the Distributor (or
Authorized Broker-Dealer) receives the order and payment in federal funds before
the time the Fund calculates its net asset value (normally, 4:00 p.m., Eastern
time). All other purchase orders accompanied by payment, except those of certain
types of investors as described below, will be effective the next Business Day.
Certain institutional investors and financial institutions, such as Summit Bank,
that have entered into a settlement agreement with the Distributor, may make
payment in federal funds for purchases of the Fund to the Distributor by 3:00
p.m., Eastern time, the Business Day following the effective date of the trade.
A purchase order may be canceled if the Distributor does not receive federal
funds before 12:00 noon, Eastern time, the next Business Day. Financial
institutions may impose an earlier cut-off time for receipt of purchase orders
directed through them to allow time for processing and transmittal of these
orders to the Distributor for effectiveness the same day.
Shareholders who desire to redeem shares of the Fund must place their redemption
orders prior to the time the Fund calculates its net asset value (normally 4:00
p.m., Eastern time), on any Business Day, for the order to be effective on that
Business Day. The redemption price of shares is the net asset value of the Fund
next determined after the redemption order is effective. Otherwise, payment on
redemption will be made by the next Business Day transfer of federal funds as
promptly as possible and, in any event, within seven days after the redemption
order is effective.
The Fund intends to pay cash for all shares redeemed, but under abnormal
conditions that make payment in cash unwise, payment may be made wholly or
partly in portfolio securities with a market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
PERFORMANCE
Computation of Total Return
The Fund may advertise total return. Total return figures are based on
historical earnings and are not intended to indicate future performance.
The total return of the Fund refers to the average compounded rate of return on
a hypothetical investment for designated time periods (including, but not
limited to, the period from which the Fund commenced operations through the
specified date), assuming that the entire investment is redeemed at the end of
each period and assuming the reinvestment of all dividend and capital gain
distributions.
The Fund may periodically compare its performance to that of: (i) other mutual
funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives. The Fund may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of risk
adjusted performance. The Fund may use long-term performance of the capital
markets to demonstrate general long-term risk versus reward scenarios and could
include the value of a hypothetical investment in any of the capital markets.
The Fund may also quote financial and business publications and periodicals as
they relate to fund management, investment philosophy and investment techniques.
The Fund may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial
or administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisors regarding specific questions as to federal, state and local income
taxes.
Tax Status of the Fund
The Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other investment portfolios. The Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies under Subchapter M of the Code, so as to be relieved of federal income
tax on that part of its net investment income and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) which is
distributed to Shareholders.
Tax Status of Distributions
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders.
Dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares and will not qualify for
the dividends-received deduction otherwise available to corporate shareholders.
Any dividends from net capital gain (the excess of net long-term capital gain
over net short-term capital loss) will be distributed annually and will be
treated as a 20% rate gain distribution (taxed at a rate of 20%) or a 28% rate
gain distribution (taxed at a rate of 28%), depending upon the designation by
the Fund (such designation being dependent upon the holding period of the Fund
in the underlying asset generating the net capital gain), regardless of how long
the Shareholder has held the Fund's shares. Capital gains distributions also
will not qualify for the dividends-received deduction. The Fund will make annual
reports to Shareholders of the federal income tax status of all distributions.
Interest received on direct U.S. Government obligations that is exempt from tax
at the state level when received directly may be exempt, depending on the state,
when received by a Shareholder from the Fund, provided certain conditions are
satisfied. Interest received on repurchase agreements normally is not exempt
from state taxation. The Fund annually will inform Shareholders of the
percentage of income and distributions derived from direct U.S. Government
obligations. Shareholders should consult their tax advisors to determine whether
any portion of the income dividends received from the Fund is considered
tax-exempt in their particular states.
Certain securities purchased by the Fund (such as STRIPs, TRs, TIGRs and CATs
defined under "Description of Permitted Investments--Derivatives"), are sold at
original issue discount and thus generally do not make periodic cash interest
payments. The Fund will be required to include as part of its current income the
accreted 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 Advisor or Sub-Advisor would not have chosen to sell
such securities and which may result in a taxable gain or loss.
Dividends declared by the Fund in October, November or December of any year and
payable to Shareholders of record on a date in these months will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 if
paid by the Fund at any time during the following January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
The sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
Generally, gain or loss on the sale, exchange or redemption of a share will be
capital gain or loss which will be long-term if the share has been held for more
than eighteen months, mid-term if the share has been held for more than twelve,
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
but not more than eighteen months and otherwise will be short-term. 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 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 from the sale or exchange of a capital asset held for
more than twelve months to the extent of the amount of the prior capital gains
distribution (or any undistributed net capital gains of the Fund which 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). Investors should
particularly note that this loss disallowance rule will apply to shares received
through the reinvestment of dividends during the 61-day period.
Income derived by the Fund from obligations of foreign issuers may be subject to
foreign withholding taxes. See the Statement of Additional Information for
information regarding a Shareholder's ability to receive foreign tax credits
with respect to any such taxes.
GENERAL INFORMATION
The Trust
The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated September 9, 1991. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each portfolio. In
addition to the Fund, the Trust currently consists of the U.S. Treasury
Securities Plus Money Market Fund, Institutional Select Money Market Fund, U.S.
Treasury Securities Plus Money Market Fund, U.S. Treasury Securities Money
Market Fund, Prime Obligation Money Market Fund, Tax-Exempt Money Market Fund,
Fixed Income Fund, New Jersey Municipal Securities Fund, Pennsylvania Municipal
Securities Fund, Intermediate-Term Government Securities Fund, Equity Growth
Fund, Equity Value Fund, Equity Income Fund, Mid Cap Fund and Balanced Fund.
Shares of the portfolios are offered through up to four separate classes of
shares (Class A, B, I and S). All consideration received by the Trust for shares
of any portfolio and all assets of such portfolio belong to that portfolio and
would be subject to liabilities related thereto.
The Fund pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services, registering the shares
under federal laws and filing with state securities commissions, pricing,
insurance expenses, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
The Advisor, in addition to providing investment advice to the Trust, provides
investment advice to other clients. Some of these clients' funds are maintained
in asset allocation accounts and may be invested in the Fund. From time to time,
the Fund may experience relatively large purchases or redemptions due to asset
allocation decisions made by the Advisor for its clients. These transactions may
have a material effect on the Fund, since portfolios that experience redemptions
as a result of reallocations may have to sell portfolio securities and because
portfolios that receive additional cash will have to invest it. While it is
impossible to predict the overall impact of these transactions over time, there
could be adverse effects on portfolio management to the extent that the Fund may
be required to sell securities at times when they would not otherwise do so, or
receive cash that cannot be invested in an expeditious manner. There may be tax
consequences associated with purchases and sales of securities, and such sales
may also increase transaction costs. The Advisor is committed to minimizing the
impact of these transactions on the Fund to the extent it is consistent with
pursuing the investment objectives of its asset allocation decisions on the
Fund.
Trustees of the Trust
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
Voting Rights
Each share held entitles a Shareholder of record to one vote. The Shareholders
of each portfolio or class will vote separately on matters relating solely to
that portfolio or class. As a Massachusetts business trust, the Trust is not
required to hold annual meetings of Shareholders, but approval will be sought
for certain changes in the operation of the Trust and for the election of
Trustees under certain circumstances. In addition, a Trustee may be removed by
the remaining Trustees or by Shareholders at a special meeting called upon
written request of Shareholders owning at least 10% of the outstanding shares of
the Trust. In the event that such a meeting is requested the Trust will provide
appropriate assistance and information to the Shareholders requesting the
meeting.
Reporting
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
Shareholder Inquiries
Shareholder inquiries should be directed to The Pillar Funds, P.O. Box 8523,
Boston, MA 02266-8523.
Dividends
Cash Sweep Shareholders automatically receive all income dividends and capital
gain distributions in cash. All other shareholders automatically receive all
income dividends and capital gain distributions in additional Class I Shares at
the net asset value next determined following the record date, unless the
Shareholder has elected to take such payment in cash. Cash Sweep Shareholders
should refer to the Trust's cash sweep prospectus for more information.
Shareholders may change their election by providing written notice to the
Administrator at least 15 days prior to the distribution. If any capital gain is
realized, substantially all of it will be distributed at least annually.
Dividends and distributions of the Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
The amount of dividends payable on Class I will be more than the dividends
payable on Class A and Class B Shares because of the distribution expenses
charged to Class A and Class B Shares.
Substantially all of the net investment income (not including capital gain) of
the Fund is declared and distributed annually as a dividend to Shareholders of
record.
Counsel and Independent Public Accountants
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain permitted investments and associated
risk factors for the Fund:
AMERICAN DEPOSITARY RECEIPTS ("ADRS"), EUROPEAN DEPOSITARY RECEIPTS ("EDRS"),
CONTINENTAL DEPOSITARY RECEIPTS ("CDRS") AND GLOBAL DEPOSITARY RECEIPTS
("GDRS")--ADRs are securities, typically issued by a U.S. financial institution
(a "depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
include American Depositary Shares and New York Shares. EDRs, which are
sometimes referred to as Continental Depositary Receipts, are securities,
typically issued by a non-U.S. financial institution, that evidence ownership
interests in a security or a pool of securities issued by either a U.S. or
foreign issuer. GDRs are issued globally and evidence a similar ownership
arrangement. Generally, ADRs are designed for trading in the U.S. securities
markets, EDRs are designed for trading in European securities markets and GDRs
are designed for trading in non- U.S. securities markets. ADRs, EDRs, CDRs and
GDRs may be available for investment through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
security underlying the receipt and a depositary, whereas an unsponsored
facility may be established by a depositary without participation by the issuer
of the receipt's underlying security. Holders of an unsponsored depositary
receipt generally bear all the costs of the unsponsored facility. The depositary
of an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited security or
to pass through to the holders of the receipts voting rights with respect to the
deposited securities.
BANKERS ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. They are used by corporations to
finance the shipment and storage of goods and to furnish dollar exchange.
Maturities are generally six months or less.
BRADY BONDS--Brady Bonds are debt securities issued under the framework of the
Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas
F. Brady in 1989 as a mechanism for debtor nations to restructure their
outstanding external commercial bank debt. In restructuring its external debt
under the Brady Plan framework, a debtor nation negotiates with its existing
bank lenders as well as multilateral institutions such as the International Bank
for Reconstruction and Development (the "World Bank") and the International
Monetary Fund (the "IMF"). The Brady Plan framework, as it has developed,
contemplates the exchange of commercial bank debt for newly issued bonds ("Brady
Bonds"). Brady Bonds may also be issued in respect of new money being advanced
by existing lenders in connection with debt restructuring. Agreements
implemented under the Brady Plan to date are designed to achieve debt and
debt-service reduction through specific options negotiated by a debtor nation
with its creditors. As a result, the financial packages offered by each country
differ. Brady Bonds issued to date may be purchased and sold in the secondary
markets through U.S. securities dealers and other financial institutions and are
generally maintained through European securities depositories.
CERTIFICATES OF DEPOSIT--Certificates of deposit are interest-bearing
instruments with a specific 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 the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few to 270 days.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
CONVERTIBLE SECURITIES--Convertible securities are corporate securities that are
exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provisions.
DERIVATIVES--Derivatives are securities that derive their value from other
securities, financial instruments or indices. The following are considered
derivative securities: options on futures, futures, options (e.g., puts and
calls), swap agreements, mortgage-backed securities (e.g., collateralized
mortgage obligations ("CMOs"), real estate mortgage investment conduits
("REMICs"), interest-only class ("IOs") and principal-only ("POs")), when-issued
securities and forward commitments, floating and variable rate securities,
convertible securities, "stripped" U.S. Treasury securities (e.g., Receipts and
STRIPs), and privately issued stripped securities (e.g., TGRs, TRs and CATs).
See elsewhere in this "Description of Permitted Investments" for discussions of
these various instruments, and see "Investment Objective and Policies" for more
information about any investment policies and limitations applicable to their
use.
EQUITY SECURITIES--Equity securities represent ownership interests in a company
and consist of common stocks, preferred stocks, warrants to acquire common stock
and securities convertible into common stock. Investments in equity securities
in general are subject to market risks that may cause their prices to fluctuate
over time. The value of convertible equity securities is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provision. Fluctuations in the value of equity securities in which the Fund
invests will cause the net asset value of the Fund to fluctuate.
FIXED INCOME SECURITIES--Fixed income securities consist of 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.
FORWARD CURRENCY CONTRACTS--The Fund may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into forward currency
contracts to protect against uncertainty in the level of future exchange rates
between a particular foreign currency and the U.S. dollar or between foreign
currencies in which the Fund's securities are or may be denominated. A forward
contract involves an obligation to purchase or sell a specific currency amount
at a future date, which may be any fixed number of days from the date of the
contract, agreed upon by the parties, at a price set at the time of the
contract. Forward currency contracts, along with futures contracts and option
transactions, are considered to be derivative securities and may present special
risks. Under normal circumstances, consideration of the prospect for changes in
currency exchange rates will be incorporated into the Fund's long-term
investment strategies. However, the Advisor and Sub-Advisor believe that it is
important to have the flexibility to enter into forward currency contracts when
it determines that the best interest of the Fund will be served.
The Fund will convert currency on a spot basis from time to time, and investors
should be aware of the costs of currency conversion. When the Advisor or
Sub-Advisor believes that the currency of a particular country may suffer a
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
significant decline against the U.S. dollar or against another currency, the
Fund may enter into a currency contract to sell, for a fixed amount of U.S.
dollars or other appropriate currency, the amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency.
At the maturity of a forward contract, the Fund may either sell a portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader,
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions. Generally, the Fund will enter into forward currency contracts
only as a hedge against foreign currency exposure affecting the Fund. If the
Fund enters into forward currency contracts to cover activities which
are essentially speculative, the Fund will segregate cash or readily marketable
securities with its Custodian, or a designated sub-custodian, in an amount at
all times equal to or exceeding the Fund's commitment with respect to such
contracts.
To assure that the Fund's foreign currency contracts are not used for leverage,
the net amount the Fund may invest in forward currency contracts is limited to
the amount of the Fund's aggregate investments in foreign currencies.
By entering into forward foreign currency contracts, the Fund will seek to
protect the value of its investment securities against a decline in the value of
a currency. However, these forward foreign currency contracts will not eliminate
fluctuations in the underlying prices of the securities. Rather, they simply
establish a rate of exchange which one can achieve at some future point in time.
Additionally, although such contracts tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result should the value of such currency
increase.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS--The Fund may enter into
contracts for the purchase or sale of securities, including index contracts or
foreign currencies. A purchase of a futures contract means the acquisition of a
contractual right to obtain delivery to the Fund of the securities or foreign
currency called for by the contract at a specified price during a specified
future month. When a futures contract on securities or currency is sold, the
Fund incurs a contractual obligation to deliver the securities or foreign
currency underlying the contract at a specified price on a specified date during
a specified future month. The Fund may sell stock index futures contracts in
anticipation of, or during a market decline to attempt to offset the decrease in
market value of its common stocks that might otherwise result; and it may
purchase such contracts in order to offset increases in the cost of common
stocks that it intends to purchase. The Fund may enter into futures contracts
and options thereon to the extent that not more than 5% of the Fund's assets are
required as futures contract margin deposits and premiums on options and may
engage in futures contracts to the extent that obligations relating to such
futures contracts represent not more than 20% of the Fund's total assets.
The Fund may also purchase and write options to buy or sell futures contracts.
The Fund may write options on futures only on a covered basis. Options on
futures are similar to options on securities except that options on futures give
the purchaser the right, in return for the premium paid, to assume a position in
a futures contract, rather than actually to purchase or sell the futures
contract, at a specified exercise price at any time during the period of the
option.
When the Fund enters into a futures transaction it must deliver to the futures
commission merchant selected by the Fund an amount referred to as "initial
margin." This amount is maintained in a segregated account at the custodian
bank. Thereafter, a "variation margin" may be paid by the Fund to, or drawn by
the Fund from, such account in accordance with controls set for such accounts,
depending upon changes in the price of the underlying securities subject to the
futures contract. In addition, the Fund will segregate liquid assets and/or cash
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
in an amount equal to its obligations under such contract. The Fund will enter
into such futures and options on futures transactions on domestic exchanges and,
to the extent such transactions have been approved by the Commodity Futures
Trading Commission for sale to customers in the United States, on foreign
exchanges.
Options and futures can be volatile investments and involve certain risks. If
the Advisor or Sub-Advisor applies a hedge at an inappropriate time or judges
interest rates incorrectly, options and futures strategies may lower the Fund's
return. The Fund could also experience losses if the prices of its options and
futures positions were poorly correlated with its other instruments, or if it
could not close out its positions because of an illiquid secondary market.
ILLIQUID SECURITIES--Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at which they are being
carried on the Fund's books. Not more than 15% of the net assets of the Fund
will be invested in such instruments. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, if there is no
secondary market for such security. Restricted securities, including Rule 144A
securities, that meet the criteria established by the Trustees of the Trust will
be considered liquid.
INVESTMENT COMPANIES--The Fund may invest up to 10% of its total assets in
shares of other investment companies. Because of restrictions on direct
investment by U.S. entities in certain countries, investment in other investment
companies may be the most practical or only manner in which an international and
global fund can invest in the securities markets of those countries. Such
investments may involve the payment of substantial premiums above the net asset
value of such issuers' fund securities, and are subject to limitations under the
1940 Act.
The Fund does not intend to invest in other investment companies unless, in the
judgment of the Advisor or Sub-Advisor, the potential benefits of such
investment exceed the associated costs relative to the benefits and costs
associated with direct investments in the underlying securities. 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.
JUNK BONDS--Bonds rated below investment grade are often referred to as "junk
bonds." Such securities involve greater risk of default or price declines than
investment grade securities due to changes in the issuer's creditworthiness and
the outlook for economic growth. The market for these securities may be less
active, causing market price volatility and limited liquidity in the secondary
market. This may limit the Fund's ability to sell such securities at their
market value. In addition, the market for these securities may also be adversely
affected by legislative and regulatory developments. Credit quality in the junk
bond market can change suddenly and unexpectedly, and even recently issued
credit ratings may not fully reflect the actual risks imposed by a particular
security.
OPTIONS--A put option gives the purchaser of the option the right to sell, and
the writer of the option the obligation to buy, the underlying security at any
time during the option period. A call option gives the purchaser of the option
the right to buy, and the writer of the option the obligation to sell, the
underlying security at any time during the option period. The premium paid to
the writer is the consideration for undertaking the obligations under the option
contract. The initial purchase (sale) of an option contract is an "opening
transaction." In order to close out an option position, the Fund may enter into
a "closing transaction," which is simply the sale (purchase) of an option
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
contract on the same security with the same exercise price and expiration date
as the option contract originally opened.
The Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to protect against an
increase in the cost of securities that the Fund may seek to purchase in the
future. The Fund pays a premium for purchasing put and call options. If price
movements in the underlying securities are such that exercise of the options
would not be profitable for the Fund, loss of the premium paid may be offset by
an increase in the value of the Fund's securities or by a decrease in the cost
of acquisition of securities by the Fund.
The Fund may write covered put and call options as a means of increasing the
yield on its portfolio and as a means of providing limited protection against
decreases in its market value. When the Fund sells an option, if the underlying
securities do not increase or decrease to a price level that would make the
exercise of the option profitable to the holder thereof, the option generally
will expire without being exercised and the Fund will realize as profit the
premium received for such option. When a call option of which a Fund is the
writer is exercised, the Fund will be required to sell the underlying securities
to the option holder at the strike price, and will not participate in any
increase in the price of such securities above the strike price. When a put
option of which the Fund is the writer is exercised, the Fund will be required
to purchase the underlying securities at the strike price, which may be in
excess of the market value of such securities.
The Fund may purchase and write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the SEC that OTC options are illiquid.
The Fund may purchase and write put and call options on foreign currencies
(traded on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates.
Call options on securities or foreign currency written by the Fund will be
"covered," which means that the Fund will own an equal amount of the underlying
security or foreign currency. With respect to put options on securities or
foreign currency written by the Fund, the Fund will establish a segregated
account with its custodian bank consisting of liquid assets and/or cash in an
amount equal to the amount the Fund would be required to pay upon exercise of
the put.
The Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. The Fund may choose to
terminate an option position by entering into a closing transaction. The ability
of the Fund to enter into closing transactions depends upon the existence of a
liquid secondary market for such transactions.
All options written on indices must be covered. When the Fund writes an option
on an index, it will establish a segregated account containing liquid assets
and/or cash with its custodian in an amount at least equal to the market value
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
of the option and will maintain the account while the option is open or will
otherwise cover the transaction.
Risk Factors. Risks associated with options transactions include: (1) the
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while the Fund will receive a
premium when it writes covered call options, it may not participate fully in a
rise in the market value of the underlying security.
RECEIPTS--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. This discount is
accreted over the life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater interest rate
volatility than interest-paying investments.
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 on an agreed upon date within a number of days
from the date of purchase. The Fund will have actual or constructive possession
of the security as collateral for the repurchase agreement. 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
securities or if the Fund realizes a loss on the sale of the collateral
securities. 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 OF FOREIGN ISSUERS--There are certain risks connected with investing
in foreign securities. These include risks of adverse political and economic
developments, the possible imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting requirements, the
possibility that there will be less information on such securities and their
issuers available to the public, the difficulty of obtaining or enforcing court
judgments abroad, restrictions on foreign investments in other jurisdictions,
difficulties in effecting repatriation of capital invested abroad and
difficulties in transaction settlements and the effect of delay on shareholder
equity. Foreign securities may be subject to foreign taxes, and may be less
marketable than comparable U.S. securities. Also it may be more difficult to
obtain a judgment in a court outside the United States.
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, securities of the U.S.
Government or its agencies equal to at least 102% of the market value of the
securities lent. The Fund continues to receive interest on the securities lent
while simultaneously earning interest 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. The Fund pays lending and
other fees in connection with securities loans.
STANDBY COMMITMENTS AND PUTS--Securities subject to standby commitments or puts
permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to the Fund owning the security to which it relates. In certain
cases, a premium may be paid for a standby commitment or put, which premium will
have the effect of reducing the yield otherwise payable on the underlying
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
security. The Fund will limit standby commitment or put transactions to
institutions believed to present minimal credit risk.
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 with a withdrawal penalty or that
mature in more than seven days are considered to be illiquid securities.
U.S. GOVERNMENT AGENCIES--Obligations issued or guaranteed by agencies of the
U.S. 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 U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and credit of the U.S. 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 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 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. 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").
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. 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 security.
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.
The Fund will maintain with the Custodian a separate account with liquid assets
and/or cash in an amount at least equal to these commitments. The interest rate
realized, if any, on these securities is fixed as of the purchase date and no
interest accrues to the Fund before settlement. These securities may be 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, the Fund may dispose
of a when-issued security or forward commitment prior to settlement if it deems
such action appropriate.
- --------------------------------------------------------------------------------
21
<PAGE>
The Pillar Funds
Class I Shares
International Growth Fund
Advisor:
Distributor:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
1-800-932-7782
PIL-F-031-01
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE PILLAR FUNDS
Summit Asset Management Account
RETAIL CASH SWEEP PROSPECTUS
o U.S. TREASURY SECURITIES MONEY MARKET FUND (CLASS A SHARES)
o PRIME OBLIGATION MONEY MARKET FUND (CLASS S SHARES)
o TAX-EXEMPT MONEY MARKET FUND (CLASS A SHARES)
Investment Advisor:
SUMMIT BANK INVESTMENT MANAGEMENT DIVISION,
A DIVISION OF SUMMIT BANK
THE PILLAR FUNDS (the "Trust") consists of mutual fund portfolios seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to the
cash sweep program of Summit Bank (the "Cash Sweep Program") under which
investors may select shares of the funds listed above (each, a "Fund," and
collectively, the "Funds").
The Trust's Class A Shares are offered to all persons, except that Class A
Shares of the Prime Obligation Money Market Fund are not offered through the
Cash Sweep Program, and the Prime Obligation Money Market Fund's Class S Shares
are offered only to cash sweep customers of Summit Bank. This Prospectus offers
Class A Shares of the U.S. Treasury Securities Money Market and Tax-Exempt Money
Market Funds and Class S Shares of the Prime Obligation Money Market Fund. Class
A Shares and Class S Shares differ with respect to distribution fees. Persons
who own shares of a Fund are referred to herein as "Shareholders." This
Prospectus does not contain information regarding the procedures for purchasing
and redeeming Class A Shares for those investors who are not cash sweep
customers of Summit Bank. For a prospectus containing such information, please
call the phone number shown below.
| SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR |
| INSURED, ENDORSED OR GUARANTEED BY, ANY BANK (INCLUDING |
| SUMMIT BANK OR ITS AFFILIATES OR CORRESPONDENTS), ANY STATE |
| OR STATE AGENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION |
| (FDIC), THE U.S. GOVERNMENT OR ANY U.S. GOVERNMENT AGENCY. |
| Amounts invested in the Funds are subject to investment |
| risks, including possible loss of the principal amount |
| invested. |
| An investment in any of the Funds is neither insured nor |
| guaranteed by the U.S. Government and there can be no |
| assurance that a Fund will be able to maintain a stable net |
| asset value of $1.00 per share. |
This Prospectus sets forth concisely the information about the Trust that a
prospective investor in the Cash Sweep Program should know before investing.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated April 30, 1998 has been
filed with the Securities and Exchange Commission and is available without
charge by writing to the Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-932-7782. The Statement of Additional
Information is incorporated into this Prospectus by reference.
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.
April 30, 1998
1
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
The Pillar Funds (the "Trust") consists of open-end management investment
companies which provide a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about Class A
Shares of the Trust's U.S. Treasury Securities Money Market Fund and Tax-Exempt
Money Market Fund and Class S Shares of the Prime Obligation Money Market Fund
(collectively, the "Funds").
What are the Investment Objectives? Each Fund seeks to preserve principal value
and maintain a high degree of liquidity while providing current income. The Tax-
Exempt Money Market Fund also seeks to provide current income that is exempt
from federal income tax. There can be no assurance that a Fund will be able to
maintain a net asset value of $1.00 per share on a continuous basis or that a
Fund will meet its investment objective. See "Investment Objectives and
Policies."
What are the Permitted Investments? The U.S. Treasury Securities Money Market
Fund invests exclusively in short-term U.S. Treasury obligations. The Prime
Obligation Money Market Fund invests in short-term, U.S. dollar denominated
obligations of United States issuers and obligations of U.S. and London branches
of foreign banks. The Tax-Exempt Money Market Fund invests in short-term, U.S.
dollar denominated municipal securities of issuers located in all fifty states,
the District of Columbia, Puerto Rico and other U.S. territories and
possessions. See "Investment Objectives and Policies."
Who is the Advisor? Summit Bank Investment Management Division, a division of
Summit Bank, serves as the advisor (the "Advisor") to the Trust. See "The
Advisor."
Who is the Administrator? SEI Fund Resources serves as the administrator (the
"Administrator") of the Trust. See "The Administrator."
Who is the Transfer Agent? State Street Bank and Trust Company acts as transfer
agent (the "Transfer Agent") for the Trust. See "The Transfer Agent."
Who is the Shareholder Servicing and Dividend Disbursing Agent? Boston
Financial Data Services is the Trust's dividend disbursing agent and shareholder
servicing agent. See "The Shareholder Servicing Agent."
Who is the Distributor? SEI Investments Distribution Co. acts as distributor
(the "Distributor") of the Trust's shares. The Trust has adopted distribution
plans (the "Plans") on behalf of the Class A Shares and Class S Shares pursuant
to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). See "The Distributor."
How do I Purchase and Redeem Shares? Class A Shares of the U.S. Treasury
Securities Money Market Fund and Tax-Exempt Money Market Fund and Class S Shares
of the Prime Obligation Money Market Fund may be purchased for shareholders who
are cash sweep customers of Summit Bank ("Cash Sweep Shareholders"). Cash Sweep
Shareholders should be aware that (i) they can purchase Class A Shares of the
Prime Obligation Money Market Fund directly, however, such Class A Shares will
not be part of the Cash Sweep Program and (ii) such Class A Shares have lower
Total Operating Expenses than Class S Shares. For a prospectus containing
information about purchases and redemptions of Class A Shares for investors who
are not Cash Sweep Shareholders, please call 1-800-932-7782.
A purchase order for a Fund will be effective as of the "Business Day" received
by the Distributor (or an Authorized Broker-Dealer) if the Distributor (or an
Authorized Broker-Dealer) receives the order and payment in federal funds before
the Fund calculates its net asset value (normally, 3:00 p.m., Eastern time), on
such Business Day. A "Business Day" is any day on which both the New York Stock
Exchange is open for trading and the Federal Reserve Bank is open. A redemption
order for a Fund will be effective as of the Business Day received if such order
is received before the Fund calculates its net asset value (normally, 3:00 p.m.,
Eastern time), on such Business Day and the proceeds are to be sent in federal
funds. Purchases and redemptions on behalf of Cash Sweep Shareholders will be
made in accordance with their cash sweep agreement with Summit Bank. Please call
Summit Bank at 1-888-8SUMMIT for more information about cash sweep accounts. See
"Purchase and Redemption of Shares."
How are Dividends Paid? The net investment income (exclusive of capital gains)
of each Fund is determined and declared on each Business Day as a dividend for
Shareholders as of the close of business on that day. Any capital gains will be
distributed at least annually. Dividends are paid to Cash Sweep Shareholders in
cash. Dividends are paid to all other Shareholders in additional shares, unless
the Shareholder has elected to take the payment in cash. See "Dividends."
2
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
EXPENSE SUMMARY
U.S. TREASURY SECURITIES MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
Class A Shares
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Class A
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Load Imposed on Purchases None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None
(as a percentage of offering price)
Maximum Contingent Deferred Sales Charge None
(as a percentage of original purchase price or
redemption proceeds, as applicable)
Exchange Fee None
</TABLE>
- --------------------------------------------------------------------------------
*This fee is not applicable to Cash Sweep Program.
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<CAPTION>
U.S. TREASURY
SECURITIES TAX-EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1), (2) .35% .33%
12b-1/Fees .25% .25%
Other Expenses .30% .32%
- ---------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(2) .90% .90%
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of Class A Shares of
each Fund to not more than .90% of average daily net assets of that Fund.
The Advisor reserves the right to terminate its fee waiver at any time in
its sole discretion.
(2) Absent a fee waiver for the Tax-Exempt Money Market Fund, the Advisory Fee
would be .35% for the Fund and Total Operating Expenses would be .92% of
the Fund's average daily net assets.
Example -- Class A Shares
An investor in the U.S. Treasury Securities Money Market Fund or Tax Exempt
Money Market Fund 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:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CLASS A SHARES 1 YR. 3 YRS. 5 YRS. 10 YRS.
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund $9 $29 $50 $111
Tax Exempt Money Market Fund $9 $29 $50 $111
- ----------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
PURPOSE OF THE EXPENSE TABLE AND EXAMPLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT MAY BE DIRECTLY OR INDIRECTLY
BORNE BY INVESTORS IN THE RESPECTIVE FUNDS. Summit Bank may impose fees on their
customers for the Cash Sweep Program in addition to those described above.
Additional information may be found under "The Advisor," "The Administrator,"
"The Shareholder Servicing Agent" and "The Distributor."
3
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE SUMMARY
PRIME OBLIGATION MONEY MARKET FUND
Class S Shares
SHAREHOLDER TRANSACTION EXPENSES
Class S
- --------------------------------------------------------------------------------
Maximum Sales Load Imposed on Purchases None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None
(as a percentage of offering price)
Maximum Contingent Deferred Sales Charge None
(as a percentage of original purchase price or
redemption proceeds, as applicable)
Wire Redemption Fee None
Exchange Fee None
- --------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
PRIME
OBLIGATION
MONEY MARKET
FUND
-------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1), (2) .34%
12b-1/Fees (2) .35%
Other Expenses .31%
- --------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(2) 1.00%
- --------------------------------------------------------------------------------
(1) The Advisor and the Distributor have each agreed to voluntarily waive a
portion of their fees in an amount that operates to limit Total Operating
Expenses of Class S Shares of the Prime Obligation Money Market Fund to not
more than 1.00% of average daily net assets of the Fund. The Advisor and the
Distributor each reserves the right to terminate its fee waiver at any time
in its sole discretion.
(2) Absent a fee waiver, the Advisory Fee would be .35%, the Rule 12b-1 Fees
would be .60% and Total Operating Expenses for Class S Shares would be 1.26%
of the Fund's average daily net assets.
Example -- Class S Shares
An investor in the Prime Obligation Money Market Fund 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:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS S SHARES 1 YR. 3 YRS. 5 YRS. 10 YRS.
- ----------------------------------------------------------------------------------------------------------
Prime Obligation Money Market Fund $10 $32 $55 $122
- ----------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class S Shares of the Prime Obligation Money Market Fund.
Summit Bank may impose fees on their customers for the Cash Sweep Program in
addition to those described above. Additional information may be found under
"The Advisor," "The Administrator," "The Shareholder Servicing Agent" and "The
Distributor."
4
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Financial Highlights
THE PILLAR FUNDS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent public accountants, as indicated in their report dated February 6,
1998 on the Trust's financial statements as of December 31, 1997, which is
incorporated by reference into the Trust's Statement of Additional Information
under "Financial Information." Additional performance information is contained
in the Trust's 1997 Annual Report to Shareholders and is available upon request
and without charge by calling 1-800-932-7782. These tables should be read in
conjunction with the Trust's financial statements and notes thereto.
<TABLE>
<CAPTION>
Realized
and Net
Net Asset Unrealized Distributions Asset
Value Net Gains or from Net Distributions Value Net Assets
Beginning Investment Losses on Investment from Capital End of Total End of
of Period Income Securities Income Gains Period Return Period (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES MONEY MARKET FUND
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 $1.00 $ 0.04 -- $(0.04) -- $1.00 4.28% $12,492
1996 1.00 0.04 -- (0.04) -- 1.00 4.27 3,503
1995 1.00 0.05 -- (0.05) -- 1.00 4.80 3,532
1994 1.00 0.03 -- (0.03) -- 1.00 3.17 633
1993 1.00 0.02 -- (0.02) -- 1.00 2.21 834
1992(2) 1.00 0.02 -- (0.02) -- 1.00 2.56* 436
- -----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997 $1.00 $ 0.03 -- $(0.03) -- $1.00 2.84% $ 8,509
1996 1.00 0.03 -- (0.03) -- 1.00 2.70 3,852
1995 1.00 0.03 -- (0.03) -- 1.00 3.17 5,238
1994 1.00 0.02 -- (0.02) -- 1.00 2.02 2,790
1993 1.00 0.02 -- (0.02) -- 1.00 1.74 3,866
1992(2) 1.00 0.02 (0.02) -- 1.00 2.17* 2,273
- -----------------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATION MONEY MARKET FUND
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS S
1997(3) $1.00 $ 0.02 -- $(0.02) -- $1.00 4.69%* $30,520
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets
Average to Average (Excluding (Excluding
Net Assets Net Assets Waivers) Waivers)
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
U.S. TREASURY SECURITIES MONEY MARKET FUND
- ---------------------------------------------------------------------------
CLASS A
1997 0.90% 4.22% 0.90% 4.22%
1996 0.90 4.19 0.90 4.19
1995 0.90 4.66 0.90 4.66
1994 0.87 3.07 0.87 3.07
1993 0.89 2.17 0.89 2.17
1992(2) 0.90 2.27 0.95 2.22
- ---------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
- ---------------------------------------------------------------------------
CLASS A
1997 0.90% 2.82% 0.92% 2.80%
1996 0.90 2.65 0.93 2.62
1995 0.90 3.14 0.96 3.08
1994 0.90 1.97 0.92 1.95
1993 0.90 1.72 0.94 1.68
1992(2) 0.90 2.07 1.04 1.93
- ---------------------------------------------------------------------------
PRIME OBLIGATION MONEY MARKET FUND
- ---------------------------------------------------------------------------
CLASS S
1997(3) 1.00% 4.67% 1.02% 4.65%
- ---------------------------------------------------------------------------
</TABLE>
*Annualized.
(1) The U.S. Treasury Securities Money Market Fund commenced operations on April
1, 1992. Ratios for this period have been annualized.
(2) The Tax-Exempt Money Market Fund (Class A Shares) commenced operations on
April 6, 1992. Ratios for this period have been annualized.
(3) The Prime Obligation Money Market Fund (Class S Shares) commenced operations
on August 18, 1997. Ratios for this period have been annualized.
5
<PAGE>
- --------------------------------------------------------------------------------
THE TRUST
The Pillar Funds (the "Trust") is an open-end management investment company that
consists of diversified and non-diversified portfolios. The Trust currently
offers units of beneficial interest ("shares") in fifteen separate investment
portfolios. The Trust offers shares of each portfolio through up to four
separate classes of shares (Class A, Class B, Class I and Class S) which provide
for variations in distribution costs, voting rights, sales loads, minimum
investments, redemption fees, transfer agency fees and dividends. Except for
these differences between classes, each share of a portfolio represents an
undivided proportionate interest in that portfolio. This Prospectus relates to
the Class A Shares of the Trust's U.S. Treasury Securities Money Market Fund and
Tax-Exempt Money Market Fund; and Class S Shares of the Prime Obligation Money
Market Fund (each, a "Fund," and collectively, the "Funds"). Each of the Funds
described herein is a diversified mutual fund. Information regarding the Trust's
other portfolios, Class A Shares of the Prime Obligation Money Market Fund and
the Class B Shares and Class I Shares of the Funds is contained in separate
prospectuses that may be obtained by writing the Trust's Distributor, SEI
Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling
1-800-932-7782.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Fund are described below. For
additional information regarding risks and permitted investments of the Funds,
see "Description of Permitted Investments" in this Prospectus and "Description
of Permitted Investments" and "Description of Ratings" in the Statement of
Additional Information. There is no assurance that the investment objective of
any Fund will be met.
The investment objective of each Fund is to preserve principal value and
maintain a high degree of liquidity while providing current income. In addition,
the Tax-Exempt Money Market Fund seeks to provide current income that is exempt
from federal income tax.
Each money market fund intends to comply with regulations of the Securities and
Exchange Commission ("SEC") applicable to money market funds using the amortized
cost method for calculating net asset value. These regulations impose certain
quality, maturity and diversification restraints on investments by a money
market fund. Under these regulations, each Fund will invest only in U.S. dollar
denominated securities, will maintain an average maturity on a dollar-weighted
basis of 90 days or less, and will acquire only "eligible securities" that
present minimal credit risks and have a maturity of 397 days or less.
The U.S. Treasury Securities Money Market Fund
The U.S. Treasury Securities Money Market Fund will invest exclusively in (i)
bills, notes and bonds issued by the U.S. Treasury; (ii) separately traded
interest and principal component parts of such obligations that are transferable
through the federal book entry system ("U.S. Treasury Obligations"); and (iii)
repurchase agreements involving U.S. Treasury Obligations. The Fund may also
engage in securities lending.
6
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
The Prime Obligation Money Market Fund
The Prime Obligation Money Market Fund will invest in "eligible securities"
consisting of: (i) commercial paper and short-term corporate obligations of U.S.
issuers that satisfy the Fund's quality criteria; (ii) obligations (certificates
of deposit, time deposits and bankers' acceptances) of U.S. commercial banks,
U.S. savings and loan institutions and U.S. and London branches of foreign
banks, provided such institutions have total assets of $500 million or more as
shown on their last published financial statements at the time of investment and
are insured by the FDIC (the Fund may not invest more than 25% of its total
assets in obligations issued by foreign branches of U.S. banks and London
branches of foreign banks); (iii) U.S. Treasury Obligations; (iv) obligations
issued or guaranteed as to principal and interest by the agencies or
instrumentalities of the U.S. Government ("U.S. Government Agencies"); and (v)
repurchase agreements involving any such obligations. In addition, the Fund may
also engage in securities lending.
The Tax-Exempt Money Market Fund
The Tax-Exempt Money Market Fund will invest at least 80% of its total assets in
obligations 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, the interest of which, in the opinion of bond
counsel for the issuer, is exempt from federal income tax (collectively,
"Municipal Securities"). The Tax-Exempt Fund will primarily purchase municipal
bonds, notes and tax exempt commercial paper rated in one of the two highest
short-term rating categories by a nationally recognized statistical rating
organization (an "NRSRO") in accordance with SEC regulations at the time of
investment or, if not rated, as determined by the Advisor to be of comparable
quality. Because the Fund often purchases securities supported 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.
The Tax-Exempt Fund may purchase municipal obligations with demand features,
including floating or variable rate obligations. In addition, the Fund may
invest in commitments to purchase securities on a "when-issued" basis, and
reserves the right to purchase securities subject to a standby commitment. The
Advisor has discretion to invest up to a total of 20% of the Fund's assets in
taxable money market instruments (including repurchase agreements) and
securities subject to the federal alternative minimum tax. However, the Fund
generally intends to be fully invested in securities exempt from federal income
tax. The Fund may also engage in securities lending.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of each Fund. In addition, it is a fundamental policy of
each Fund to use its best efforts to maintain a constant net asset value of
$1.00 per share although there can be no assurance any Fund will be able to do
so. It is also a fundamental policy of the Tax-Exempt Money Market Fund to
invest at least 80% of its assets in Municipal Securities. Fundamental policies
cannot be changed with respect to a Fund without the consent of the
7
<PAGE>
- --------------------------------------------------------------------------------
holders of a majority of that Fund's outstanding shares.
Each 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 each Fund's total assets. See "Description of Permitted
Investments--Restraint on Investments by Money Market Funds."
2. Purchase any securities which would cause more than 25% of the total assets
of any 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 the obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, repurchase agreements
involving such securities and obligations issued by domestic branches of U.S.
banks or U.S. branches of foreign banks subject to the same regulation as U.S.
banks or to investments in tax exempt securities issued by governments or
political subdivisions of governments.
3. Make loans, except that a Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; (b) enter into repurchase
agreements; and (c) engage in securities lending as described in this Prospectus
and in the Statement of Additional Information.
The foregoing percentage limitations apply at the time of the purchase of a
security.
It is a non-fundamental policy of each Fund to invest no more than 10% of its
net assets in illiquid securities (as defined under "Description of Permitted
Investments").
Additional investment limitations are set forth in the Statement of Additional
Information.
THE ADVISOR
Summit Bank Investment Management Division, a division of Summit Bank (the
"Advisor"), serves as the investment advisor to the Trust. The Advisor makes the
investment decisions for the assets of the Funds and continuously reviews,
supervises and administers each Fund's investment program subject to the
supervision of, and policies established by, the Trustees of the Trust.
Summit Bank, 210 Main Street, Hackensack, New Jersey 07601, was chartered in
1899 and has been exercising trust powers and managing money since 1916. The
Investment Management Division began as a separate operating division of the
Bank in 1973. The Bank's investment professionals have, on average, over 20
years of experience in investment management. As of December 31, 1997, total
assets under management were approximately $8.2 billion.
Summit Bank is a wholly-owned subsidiary of Summit Bancorp, an interstate bank
holding company with approximately $30 billion in assets and 426 banking
offices, predominantly in New Jersey and eastern Pennsylvania, as of December
31, 1997.
U.S. Treasury Securities Money Market and Prime Obligation Money Market
Funds--Judith Wolk is a Vice President of the Advisor and has managed the Pillar
taxable money market funds and has co-managed the U.S. Treasury Securities Money
Market Fund with Frances M. Tendall since June, 1996. Prior to joining Summit
Bank in September, 1995, Ms. Wolk had substantial experience in money market
instruments with a large regional bank.
Mrs. Tendall is a Vice President and Regional Manager (Princeton) of the Advisor
and has co-managed the U.S. Treasury Securities Money Market Fund and managed
the Trust's Intermediate-Term Government Securities Fund since their inceptions
in April, 1992. Mrs. Tendall joined Summit Bank in 1982.
Tax-Exempt Money Market Fund--Charlene P. Palmer is a Vice President of the
Advisor and has managed the Tax-Exempt Money Market Fund since June, 1996 and
the Trust's New Jersey Municipal Securities Fund since its inception in May,
1992. Mrs. Palmer's experience has emphasized tax-exempt bonds. She joined
Summit Bank in 1991.
The Advisor is entitled to a fee from each Fund, which is calculated daily and
paid monthly at the annual rate of each respective Fund's average daily
net assets as set forth in the following table. The Advisor has voluntarily
agreed to waive all or a
8
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
portion of its fees to limit the total operating expenses of each Fund to the
respective levels set forth below. The Advisor reserves the right to terminate
any and all fee waivers at any time in its sole discretion. Also set forth below
are the advisory fees each Fund paid to the Advisor (shown as a percentage of
its average daily net assets) for the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
Maximum Fees
Total Received
Operating In
Expense Fiscal
Contractual After Fee Year
Fee Waiver 1997
----------- --------- --------
<S> <C> <C> <C>
Prime Obligation Money
Market Fund --
Class S................ .35% 1.00% .34%
U.S. Treasury Securities
Money Market Fund --
Class A................ .35% .90% .35%
Tax-Exempt Money Market
Fund -- Class A........ .35% .92% .33%
</TABLE>
Summit Bank has also entered into a custodian agreement with the Trust, under
which it provides all securities safekeeping services as required by the Funds
and the Investment Company Act of 1940 Act, as amended (the "1940 Act"). The
Trust pays Summit Bank (referred to herein in its custodial capacity as the
"Custodian") a custodian fee, which is calculated daily and paid monthly, at an
annual rate of .025% of the average daily net assets of each Fund.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The Administrator provides the Trust with administrative services, other
than investment advisory services, including all regulatory reporting, necessary
office space, equipment, personnel and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily net assets of each Fund.
THE TRANSFER AGENT
State Street Bank and Trust Company (the "Transfer Agent"), 225 Franklin Street,
Boston, Massachusetts 02110 is the Trust's transfer agent.
THE SHAREHOLDER SERVICING AGENT
Boston Financial Data Services, Two Heritage Drive, North Quincy, Massachusetts
02171 is the Trust's dividend disbursing agent and shareholder servicing agent.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company, acts as the Distributor of the Trust's shares.
The Class A Shares of the U.S. Treasury Securities Money Market and Tax-Exempt
Money Market Funds are subject to a distribution plan dated February 28, 1992
("Class A Plan"). As provided in the Distribution Agreement and the Class A
Plan, the Trust will pay the Distributor a fee of .25% of the average daily net
assets of each Fund's Class A Shares. The Distributor may apply this fee toward:
a) compensation for its services in connection with distribution assistance or
provision of shareholder services; or b) payments to financial institutions and
intermediaries such as banks (including Summit Bank), savings and loan
9
<PAGE>
- --------------------------------------------------------------------------------
associations, insurance companies, investment counselors, broker-dealers, and
the Distributor's affiliates and subsidiaries as compensation for services or
reimbursement of expenses incurred in connection with distribution assistance or
provision of shareholder services. The Class A Plan is characterized as a
compensation plan since the distribution fee will be paid to the Distributor
without regard to the distribution or shareholder service expenses incurred by
the Distributor or the amount of payments made to financial institutions and
intermediaries.
The Board of Trustees of the Trust has approved and adopted a distribution plan
dated May 15, 1997 for Class S Shares of the Funds (the "Class S Plan") pursuant
to Rule 12b-1 under the 1940 Act. Under the Class S Plan, the Distributor is
entitled to receive from the Funds an annual distribution fee of .60% of the
average daily net assets of each Fund's Class S Shares. The Distributor may
apply this fee toward payments to Summit Bank as compensation for services or
reimbursement of expenses incurred in connection with distribution assistance or
provision of shareholder services. The Class S Plan is characterized as a
compensation plan since the distribution fee will be paid to the Distributor
without regard to the distribution or shareholder service expenses incurred by
the Distributor or the amount of payments made to financial institutions and
intermediaries.
Class A Shares of the U.S. Treasury Securities Money Market and Tax-Exempt Money
Market Funds are offered to all persons. Class A Shares of the Prime Obligation
Money Market Fund are offered to all persons except cash sweep customers of
Summit Bank, while Class S Shares of the Prime Obligation Money Market Fund are
offered only to cash sweep customers of Summit Bank. It is possible that
individuals and institutions may offer different classes of shares of a Fund to
their customers and thus receive different compensation with respect to
different classes of shares. In addition, individuals and institutions that are
the record owner of shares for the account of their customers may impose
separate fees for account services to their customers. Each Fund may also
execute brokerage or other agency transactions through an affiliate of the
Advisor or through the Distributor for which such affiliate or the Distributor
receives compensation.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs which will be paid by the Distributor from
the sales charge it receives or from any other source available to it. Under any
such program, the Distributor may provide promotional incentives in the form of
cash or other compensation, including merchandise, gifts and prizes, and payment
of travel expenses, meals and lodging, to all dealers selling shares of the
Funds. Such promotional incentives will be offered uniformly to all dealers and
predicated upon the number of shares of the Trust's portfolios sold by the
dealer.
10
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
PURCHASE AND REDEMPTION OF SHARES
Cash Sweep Shareholders should consult their cash sweep agreement for more
information on purchases and redemptions.
Class A Shares of the U.S. Treasury Securities Money Market and Tax-Exempt Money
Market Funds and Class S Shares of the Prime Obligation Money Market Fund may be
purchased in accordance with a Shareholder's cash sweep agreement with Summit
Bank. Shares of each Fund are sold on a continuous basis and may be purchased on
any business day that the New York Stock Exchange is open for trading and the
Federal Reserve Bank is open (a "Business Day"). Generally, checks (including
third party and credit card checks), credit cards and cash will not be accepted
for payment of shares.
A purchase or redemption order for shares of a Fund will be executed at a per
share price equal to the net asset value next determined after the appropriate
order is effective.
The net asset value per share of each class of a Fund is determined by dividing
the total value of its investments and other assets that are allocated to that
class, less any liabilities that are allocated to that class, by the class's
total outstanding shares. The net asset value per share for a Fund is calculated
as of the earlier of 3:00 p.m., Eastern time or the regularly-scheduled close
of normal trading on the New York Stock Exchange each Business Day based on the
amortized cost method as described under "Determination of Net Asset Value" in
the Statement of Additional Information. The purchase and redemption prices for
each Fund are expected to remain constant at $1.00 per share. The Trust reserves
the right to reject a purchase order when the Distributor determines that it is
not in the best interest of the Trust, the Fund or its Shareholders to accept
such order.
A purchase order for a Fund will be effective as of the Business Day received by
the Distributor if the Distributor receives the order and payment in federal
funds before the Fund calculates its net asset value (normally, 3:00 p.m.,
Eastern time). All other purchase orders will be effective on the next Business
Day. Purchased shares of a Fund begin earning dividends on the Business Day the
purchase order for those shares is effective.
A redemption order for shares of a Fund will be executed at a price per share
equal to the net asset value next determined after receipt of the redemption
order. Redemption orders received before the Fund calculates its net asset value
(normally, 3:00 p.m., Eastern time), will be effective as of the Business Day
received and payment will normally be made the same day if proceeds are to be
sent in federal funds. Otherwise, redemption orders will be effective and
11
<PAGE>
- --------------------------------------------------------------------------------
payment will be made the following Business Day and, in any event, within seven
Business Days after the redemption order is effective. Redeemed
shares are not entitled to dividends declared the day the redemption order is
effective.
No certificates representing shares will be issued.
Each Fund intends to pay cash for all shares redeemed, but under abnormal
conditions that make payment in cash unwise, payment may be made wholly or
partially in portfolio securities with a market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
Minimum Balance Requirements
Summit Bank requires cash sweep customers to maintain minimum banking account
levels in order to participate in the Cash Sweep Program. The minimum levels are
subject to the terms of the customer's cash sweep agreement with Summit Bank. In
general, however, if a customer's banking account falls below such minimum
amount, their shares in the Funds may be redeemed or they may be charged
additional fees.
PERFORMANCE
Computation of Yield
From time to time, the Funds may advertise "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of a Fund refers to the
income generated by an investment in a Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in a Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment.
The Tax-Exempt Money Market 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 a Shareholder.
The Funds may periodically compare their performance to that of: (i) other
mutual funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives. The Fund may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance. The Funds may use long-term performance of the
capital markets to demonstrate general long-term risk versus reward scenarios
and could include the value of a hypothetical investment in any of the capital
markets. The Funds may also quote
12
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
financial and business publications and periodicals as they relate to fund
management, investment philosophy and investment techniques.
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial
or administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of a Fund or its
Shareholders. Accordingly, Shareholders are urged to consult their tax advisors
regarding specific questions as to federal, state and local income taxes.
Tax Status of the Funds
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other investment portfolios. Each Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), so as to be relieved of federal income tax on that part of its net
investment income and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) which is distributed to Shareholders.
Tax Status of Distributions
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders.
Dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares and will not qualify for
the dividends-received deduction otherwise available to corporate shareholders.
Any dividends from net capital gain (the excess of net long-term capital gain
over net short-term capital loss) will be distributed annually and will be
treated as a 20% rate gain distribution (taxed at a rate of 20%) or a 28% rate
gain distribution (taxed at a rate of 28%), depending upon the designation by
the Fund (such designation being dependent upon the holding period of the Fund
in the underlying asset generating the net capital gain), regardless of how long
the Shareholder has held the Fund's shares. Capital gains distributions also
will not qualify for the dividends-received deduction. Each Fund will make
annual reports to Shareholders of the federal income tax status of all
distributions.
Interest received on direct U.S. Government obligations that is exempt from tax
at the state level when received directly may be exempt, depending on the state,
when received by a Shareholder from a Fund, provided certain conditions are
satisfied. Interest received on repurchase agreements normally is not exempt
from state taxation. Each Fund annually will inform Shareholders of the
percentage of income and distributions derived from direct U.S. Government
obligations. Shareholders should consult their tax advisors to determine whether
any portion of the income dividends received from a Fund is considered
tax-exempt in their particular states.
Certain securities purchased by the Funds (such as STRIPs, defined under
"Description of Permitted
13
<PAGE>
- --------------------------------------------------------------------------------
Investments -- U.S. Treasury Obligations") are sold at original issue discount
and thus generally do not make periodic cash interest payments. A Fund will be
required to include as part of its current income the accreted interest on such
obligations even though the Fund has not received any interest payments on such
obligations during that period. Because each Fund distributes all of its net
investment income to its Shareholders, a Fund may have to sell portfolio
securities to distribute such imputed income which may occur at a time when the
Advisor would not have chosen to sell such securities and which may result in a
taxable gain or loss.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in these months will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 if
paid by the Fund at any time during the following January.
Each Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
The sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
Generally, gain or loss on the sale, exchange or redemption of a share will be
capital gain or loss which will be long-term if the share has been held for more
than eighteen months, mid-term if the share has been held for more than twelve,
but not more than eighteen months and otherwise will be short-term. 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 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
loss from the sale or exchange of a capital asset held for more than twelve
months to the extent of the amount of the prior capital gains distribution (or
any undistributed net capital gains of the Fund which 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). Investors should
particularly note that this loss disallowance rule will apply to shares received
through the reinvestment of dividends during the 61-day period.
The Tax-Exempt Money Market Fund--Additional Considerations
The dividends payable by the Tax-Exempt Money Market Fund from net tax-exempt
interest from municipal bonds and notes will qualify as "exempt-interest
dividends" if, at the close of each quarter of its taxable year, at least 50% of
the value of its total assets consists of securities, the interest on which is
excludable from gross income. The Tax-Exempt Money Market Fund intends to invest
a sufficient portion of its assets in municipal bonds and notes to qualify to
pay "exempt-interest dividends."
Exempt-interest dividends are excludable from a Shareholder's gross income for
regular income tax purposes. However, the receipt of such dividends may have
collateral federal income tax
14
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
consequences, including alternative minimum tax consequences. In addition, the
receipt of exempt-interest dividends may cause persons receiving Social Security
or Railroad Retirement benefits to be taxable on a portion of such benefits. See
the Statement of Additional Information. Current federal tax 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 requirement
for the payment of exempt-interest dividends.
All or a portion of the interest on indebtedness incurred or continued by an
investor to purchase or carry shares is not deductible for federal income tax
purposes. Furthermore, entities or persons who are "substantial users" (or
persons related to "substantial users") of facilities financed by "private
activity bonds" or "industrial development bonds" should consult their tax
advisors before purchasing shares of the Fund. See the Statement of Additional
Information.
The Fund will report annually to its Shareholders of dividends that are taxable
and the portion that is tax-exempt based on income received by the Fund during
the year to which the dividends relate.
The exemption of dividends paid by the Fund for federal income tax purposes may
not result in similar exemptions under the laws of a particular state or local
taxing authority. The Fund will report annually to its Shareholders the
percentage and source, on a state-by-state basis, of interest income earned on
municipal bonds and municipal notes held by the Fund during the preceding year.
GENERAL INFORMATION
The Trust
The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated September 9, 1991. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each portfolio. In
addition to the Funds, the Trust currently consists of the Institutional Select
Money Market Fund, U.S. Treasury Securities Plus Money Market Fund,
Intermediate-Term Government Securities Fund, Mid Cap Fund, Fixed Income Fund,
New Jersey Municipal Securities Fund, Pennsylvania Municipal Securities Fund,
Equity Growth Fund, Equity Value Fund, Equity Income Fund, Balanced Fund and
International Growth Fund. Shares of the portfolios are offered through up to
four separate classes of shares (Class A, B, I and S). All consideration
received by the Trust for shares of any portfolio and all assets of such
portfolio belong to that portfolio and would be subject to its liabilities.
Each Fund pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services, registering the shares
under federal laws and filing with state securities commissions, pricing,
insurance expenses, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses.
15
<PAGE>
- --------------------------------------------------------------------------------
The Advisor, in addition to providing investment advice to the Trust, provides
investment advice to other clients. Some of these clients' funds are maintained
in asset allocation accounts and may be invested in the Funds. From time to
time, the Funds may experience relatively large purchases or redemptions due to
asset allocation decisions made by the Advisor for its clients. These
transactions may have a material effect on the Funds, since Funds that
experience redemptions as a result of reallocations may have to sell portfolio
securities and because Funds that receive additional cash will have to invest
it. While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on portfolio management to the extent
that Funds may be required to sell securities at times when they would not
otherwise do so, or receive cash that cannot be invested in an expeditious
manner. There may be tax consequences associated with purchases and sales of
securities, and such sales may also increase transaction costs. The Advisor is
committed to minimizing the impact of these transactions on the Funds to the
extent it is consistent with pursuing the investment objectives of its asset
allocation decisions on the Funds.
Trustees of the Trust
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
Voting Rights
Each share held entitles a Shareholder of record to one vote. The Shareholders
of each portfolio or class will vote separately on matters relating solely to
that portfolio or class. As a Massachusetts business trust, the Trust is not
required to hold annual meetings of Shareholders, but approval will be sought
for certain changes in the operation of the Trust and for the election of
Trustees under certain circumstances. In addition, a Trustee may be removed by
the remaining Trustees or by Shareholders at a special meeting called upon
written request of Shareholders owning at least 10% of the outstanding shares of
the Trust. In the event that such a meeting is requested, the Trust will provide
appropriate assistance and information to the Shareholders requesting the
meeting.
Reporting
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
Shareholder Inquiries
Cash Sweep Shareholders should call Summit Bank at 1-888-8SUMMIT for inquiries
regarding their sweep account. Shareholders with inquiries regarding The Pillar
Funds should call 1-800-932-7782 or write to The Pillar Funds, P.O. Box 8523,
Boston, MA 02266-8523.
Dividends
Cash Sweep Shareholders automatically receive all income dividends and capital
gain distributions in cash. All other Shareholders automatically receive all
income dividends and capital gain distributions in additional shares, unless the
Shareholders has elected to take such payment in cash. If any
16
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
capital gain is realized, substantially all of it will be distributed at least
annually. Dividends and distributions of each Fund are paid on a per-share
basis.
The net investment income (exclusive of capital gains) of each Fund is
determined and declared on each Business Day as a dividend to Shareholders of
record as of the close of business on that day. Dividends are paid by the Funds
on or about the first Business Day of the following month. Redeemed shares are
not entitled to dividends declared the day the redemption order is effective.
Counsel and Independent Public Accountants
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain permitted investments and associated
risk factors for the Funds.
BANKERS' ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. They 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 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 the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few to 270 days.
ILLIQUID SECURITIES--Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at which they are being
carried on a Fund's books. Not more than 10% of the net assets of a Fund will be
invested in such instruments. An illiquid security includes a demand instrument
with a demand notice period exceeding seven days, if there is no secondary
market for such security. Restricted securities, including Rule 144A securities,
that meet the criteria established by the Trustees of the Trust will be
considered liquid.
INVESTMENT COMPANIES--A Fund may invest up to 10% of its total assets in shares
of other investment companies.
A Fund does not intend to invest in other investment companies unless, in the
judgment of the Advisor, the potential benefits of such investment exceed the
associated costs relative to the benefits and costs associated with direct
investments in the underlying securities. As a shareholder in an investment
company, a Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees.
MUNICIPAL SECURITIES--Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be
17
<PAGE>
- --------------------------------------------------------------------------------
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 obligation 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 both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes, and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The Fund will have actual or constructive possession
of the security as collateral for the repurchase agreement. A 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 securities or
if the Fund realizes a loss on the sale of the collateral securities. A 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.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS--Investments by a money market
fund are subject to limitations imposed under regulations adopted by the SEC.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risks and that are "eligible securities," which means
they are (i) rated, at the time of investment, by at least two NRSROs (one if it
is the only organization rating such obligation) in the highest short-term
rating category or, if unrated, determined to be of comparable quality (a "first
tier security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). A security is not considered to be
unrated if its issuer has outstanding obligations of comparable priority and
security that have a short-term rating. Investments in second tier securities
(second tier conduit securities for the Tax-Exempt Money Market Fund) are
subject to the further constraint that (i) no more than 5% of a Fund's assets
may be invested in such securities in the aggregate, and (ii) any investments in
such securities of one issuer is limited to the greater of
18
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
1% of a Fund's total assets or $1 million. A taxable money market fund may also
hold more than 5% of its assets in the first tier securities of a single issuer
for three Business Days. The Advisor will determine that an obligation presents
minimal credit risks or that unrated instruments are of comparable quality in
accordance with guidelines established by the Trustees. The securities that
money market funds may acquire may be supported by credit enhancements, such as
demand features or guarantees. SEC regulations limit the percentage of
securities that a money market fund may hold for which a single issuer provides
credit enhancements.
SECURITIES LENDING--In order to generate additional income, a Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash, securities of the U.S.
Government or its agencies equal to at least 102% of the market value of the
securities lent. A Fund continues to receive interest on the securities lent
while simultaneously earning interest 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. A Fund pays lending and
other fees in connection with securities loans.
STANDBY COMMITMENTS AND PUTS--Securities subject to standby commitments or puts
permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to a Fund owning the security to which it relates. In certain cases,
a premium may be paid for a standby commitment or put, which premium will have
the effect of reducing the yield otherwise payable on the underlying security. A
Fund will limit standby commitment or put transactions to institutions believed
to present minimal credit risk.
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 with a withdrawal penalty or that
mature in more than seven days are considered to be illiquid securities.
U.S. GOVERNMENT AGENCIES--Obligations issued or guaranteed by agencies of the
U.S. 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 U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and credit of the U.S. 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
19
<PAGE>
- --------------------------------------------------------------------------------
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 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 a Fund's shares.
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").
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. 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 security.
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.
A Fund will maintain with the Custodian a separate account with liquid assets or
cash in an amount at least equal to these commitments. The interest rate
realized, if any, on these securities is fixed as of the purchase date and no
interest accrues to a Fund before settlement. These securities may be 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
a Fund generally purchases securities on a when-issued or forward commitment
basis with the intention of actually acquiring securities, a Fund may dispose of
a when-issued security or forward commitment prior to settlement if it deems
such action appropriate.
20
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
TABLE OF CONTENTS
Summary...............................2
Expense Summary.......................3
Financial Highlights..................5
The Trust.............................6
Investment Objectives and Policies....6
Investment Limitations................7
The Advisor...........................8
The Administrator.....................9
The Transfer Agent....................9
The Shareholder Servicing Agent.......9
The Distributor.......................9
Purchase and Redemption of Shares....11
Performance..........................12
Taxes................................13
General Information..................15
Description of Permitted
Investments..........................17
The Pillar Funds and Pillar are
registered service marks of Summit
Bank. Your Investment Foundation and
the stylized "P" logo are service marks
of Summit Bank. Reach Higher, Summit,
Summit Bancorp and Summit Financial
Services Group are registered
service marks of Summit Bancorp. Summit
Bank is a service mark of Summit
Bancorp.
21
<PAGE>
Advisor:
[SUMMIT BANK LOGO]
Distributor:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
1-800-932-7782
PIL-F-030-02
[PILLAR FUND LOGO]
The Pillar Funds
Your Investment Foundation
PROSPECTUS
(Class A Shares)
And
(Class S Shares)
U.S. Treasury Securities
Money Market Fund (Class A Shares)
Prime Obligation
Money Market Fund (Class S Shares)
Tax-Exempt
Money Market Fund (Class A Shares)
April 30, 1998
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE PILLAR FUNDS
Summit Asset Management Account
COMMERCIAL CASH SWEEP PROSPECTUS
o INSTITUTIONAL SELECT MONEY MARKET FUND
o U.S. TREASURY SECURITIES MONEY MARKET FUND (CLASS I SHARES)
o PRIME OBLIGATION MONEY MARKET FUND (CLASS I SHARES)
Investment Advisor:
SUMMIT BANK INVESTMENT MANAGEMENT DIVISION,
A DIVISION OF SUMMIT BANK
THE PILLAR FUNDS (the "Trust") consists of mutual fund portfolios seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to the
cash sweep program of Summit Bank (the "Cash Sweep Program") under which
investors may select shares of the funds listed above (each, a "Fund," and
collectively, the "Funds").
Shares of the Institutional Select Money Market Fund are offered without
distribution fees to: (i) cash sweep customers of Summit Bank; (ii) any
individual or institution (including Summit Bank, its affiliates and
correspondent banks), for the investment of funds held by such individual or
institution in a fiduciary, agency, custodial or other representative capacity;
and (iii) any "qualified customer" who has entered into an agreement with Summit
Bank, its affiliates or correspondent banks ("Qualified Customers"). The Trust's
Class I Shares are offered without distribution fees to: (i) institutional
investors (including Summit Bank, its affiliates and correspondent banks) for
the investment of their own funds; (ii) any individual or institution (including
Summit Bank, its affiliates and correspondent banks) for the investment of funds
held by such individual or institution in a fiduciary, agency, custodial or
other representative capacity, if such individual or institution is able to
provide complete shareholder recordkeeping services with respect to shares
purchased and held in such capacity; and (iii) any Qualified Customers. Persons
who own shares of a Fund are referred to herein as "Shareholders." This
Prospectus does not contain information regarding the procedures for purchasing
and redeeming Class I Shares for those investors who are not cash sweep
customers of Summit Bank. For a prospectus containing such information, please
call the phone number shown below.
| SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR |
| INSURED, ENDORSED OR GUARANTEED BY, ANY BANK (INCLUDING |
| SUMMIT BANK OR ITS AFFILIATES OR CORRESPONDENTS), ANY STATE |
| OR STATE AGENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION |
| (FDIC), THE U.S. GOVERNMENT OR ANY U.S. GOVERNMENT AGENCY. |
| Amounts invested in the Funds are subject to investment |
| risks, including possible loss of the principal amount |
| invested. |
| An investment in any of the Funds is neither insured nor |
| guaranteed by the U.S. Government and there can be no |
| assurance that a Fund will be able to maintain a stable net |
| asset value of $1.00 per share. |
This Prospectus sets forth concisely the information about the Trust that a
prospective investor in the Cash Sweep Program should know before investing.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated April 30, 1998 has been
filed with the Securities and Exchange Commission and is available without
charge by writing to the Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456 or by calling 1-800-932-7782. The Statement of Additional
Information is incorporated into this Prospectus by reference.
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.
April 30, 1998
1
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
The Pillar Funds (the "Trust") consists of open-end management investment
companies which provide a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about shares
of the Trust's Institutional Select Money Market Fund and Class I Shares of the
Trust's U.S. Treasury Securities Money Market and Prime Obligation Money Market
Funds (collectively, the "Funds").
What are the Investment Objectives? Each Fund seeks to preserve principal value
and maintain a high degree of liquidity while providing current income. There
can be no assurance that a Fund will be able to maintain a net asset value of
$1.00 per share on a continuous basis or that a Fund will meet its investment
objective. See "Investment Objectives and Policies."
What are the Permitted Investments? The Institutional Select Money Market and
Prime Obligation Money Market Funds each invests in short-term, U.S. dollar-
denominated obligations of United States issuers and obligations of U.S. and
London branches of foreign banks. The U.S. Treasury Securities Money Market Fund
invests exclusively in short-term U.S. Treasury obligations. See "Investment
Objectives and Policies."
Who is the Advisor? Summit Bank Investment Management Division, a division of
Summit Bank, serves as the advisor (the "Advisor") to the Trust. See "The
Advisor."
Who is the Administrator? SEI Fund Resources serves as the administrator (the
"Administrator") of the Trust. See "The Administrator."
Who is the Transfer Agent? State Street Bank and Trust Company acts as transfer
agent (the "Transfer Agent") for the Trust. See "The Transfer Agent."
Who is the Shareholder Servicing and Dividend Disbursing Agent? Boston
Financial Data Services is the Trust's dividend disbursing agent and shareholder
servicing agent. See "The Shareholder Servicing Agent."
Who is the Distributor? SEI Investments Distribution Co. acts as distributor
(the "Distributor") of the Trust's shares. See "The Distributor."
How do I Purchase and Redeem Shares? In addition to the Distributor, the Trust
has also authorized certain broker-dealers and other financial intermediaries
(collectively, "Authorized Broker-Dealers") to accept purchase orders and
redemption requests up to the times mentioned below on behalf of the Fund. A
purchase order for a Fund will be effective as of the "Business Day" received by
the Distributor (or an Authorized Broker-Dealer) if the Distributor (or an
Authorized Broker-Dealer) receives the order and payment in federal funds before
the Fund calculates its net asset value (normally, 3:00 p.m., Eastern time), on
such Business Day. A "Business Day" for the Funds is any day on which both the
New York Stock Exchange is open for trading and the Federal Reserve Bank is
open. A redemption order for a Fund will be effective as of the Business Day
received if such order is received before the Fund calculates its net asset
value (normally, 3:00 p.m., Eastern time), on such Business Day and the proceeds
are to be sent in federal funds. Shares are purchased and redeemed for
shareholders who are cash sweep customers of Summit Bank ("Cash Sweep
Shareholders") in accordance with their cash sweep agreement with Summit Bank.
Investors may become Cash Sweep Shareholders by executing a cash sweep agreement
with Summit Bank. Please call Summit Bank at 1-888-8SUMMIT for more information
about cash sweep accounts. See "Purchase and Redemption of Shares."
Is There a Minimum Investment? The minimum initial investment is $5,000,000 for
shares of the Institutional Select Money Market Fund. Subsequent investments may
be made in any amount. The minimum aggregate account balance in the
Institutional Select Money Market Fund is also $5,000,000, which, if not
maintained, will trigger an automatic exchange feature for Class I Shares of the
Trust's Prime Obligation Money Market Fund. See "Minimum Investment Account
Sizes and Preauthorized Exchanges of Shares."
How are Dividends Paid? The net investment income (exclusive of capital gains)
of each Fund is determined and declared on each Business Day as a dividend for
Shareholders as of the close of business on that day. Any capital gains will be
distributed at least annually. Dividends are paid to Cash Sweep Shareholders in
cash. Dividends are paid to all other Shareholders in additional shares, unless
the Shareholder has elected to take the payments in cash. See "Dividends."
2
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
EXPENSE SUMMARY
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<CAPTION>
U.S. Treasury Prime
Securities Obligation
Institutional Money Market Money Market
Select Money Fund Fund
Market Fund (Class I Shares) (Class I Shares)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisory Fees (after fee waivers) (1) .05% .35% .34%
Other Expenses .25% .30% .31%
- ------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (1) .30% .65% .65%
======================================================================================================
</TABLE>
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of the Institutional
Select Money Market Fund to not more than .30% of average daily net assets
of the Fund. The Advisor has agreed to voluntarily waive a portion of its
fees in an amount that operates to limit Total Operating Expenses of Class I
Shares of the U.S. Treasury Securities Money Market and Prime Obligation
Money Market Funds to not more than .65% of average daily net assets of each
Fund. The Advisor reserves the right to terminate such fee waivers at any
time in its sole discretion. Absent fee waivers for the Institutional Select
Money Market Fund, the Advisory Fee would be .10% and Total Operating
Expenses would be .35% of the Fund's average daily net assets. Absent a fee
waiver for the Prime Obligation Money Market Fund, the Advisory Fee would be
.35% and Total Operating Expenses would be .66% of the Fund's average daily
net assets. Additional information may be found under "The Advisor," "The
Administrator" and "The Distributor."
Example
<TABLE>
<CAPTION>
=====================================================================================================
1 YR. 3 YRS. 5 YRS. 10 YRS.
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor in the Fund 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:
Institutional Select Money Market Fund $3 $10 $17 $38
Class I Shares:
U.S. Treasury Securities Money Market Fund $7 $21 $36 $81
Prime Obligation Money Market Fund $7 $21 $36 $81
=====================================================================================================
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in the Funds. Summit Bank and other financial institutions
may impose fees on their customers in addition to those described above.
Additional information may be found under "The Advisor," "The Administrator" and
"The Distributor."
3
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
THE PILLAR FUNDS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent public accountants, as indicated in their report dated February 6,
1998 on the Trust's financial statements as of December 31, 1997, which is
incorporated by reference into the Trust's Statement of Additional Information
under "Financial Information." Additional performance information is contained
in the Trust's 1997 Annual Report to Shareholders and is available upon request
and without charge by calling 1-800-932-7782. These tables should be read in
conjunction with the Trust's financial statements and notes thereto.
<TABLE>
<CAPTION>
Realized
and Net
Net Asset Unrealized Distributions Asset
Value Net Gains or from Net Distributions Value
Beginning Investment Losses on Investment from Capital End of Total Net Assets End
of Period Income Securities Income Gains Period Return of Period (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SELECT MONEY MARKET FUND
- ------------------------------------------------------------------------------------------------------------------------------------
1997(1) $1.00 $ 0.03 -- $(0.03) -- $1.00 5.38% $ 61,522
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES MONEY MARKET FUND
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $1.00 $ 0.04 -- $(0.04) -- $1.00 4.55% $487,196
1996 1.00 0.04 -- (0.04) -- 1.00 4.53 504,729
1995 1.00 0.05 -- (0.05) -- 1.00 5.05 463,531
1994 1.00 0.03 -- (0.03) -- 1.00 3.44 465,125
1993 1.00 0.02 -- (0.02) -- 1.00 2.46 420,947
1992(2) 1.00 0.02 -- (0.02) -- 1.00 2.81* 387,960
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATION MONEY MARKET FUND
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS I
1997 $1.00 $ 0.05 -- $(0.05) -- $1.00 5.02% $400,689
1996 1.00 0.05 -- (0.05) -- 1.00 4.83 401,423
1995 1.00 0.05 -- (0.05) -- 1.00 5.40 259,667
1994 1.00 0.04 -- (0.04) -- 1.00 3.67 157,378
1993 1.00 0.03 -- (0.03) -- 1.00 2.65 129,780
1992(2) 1.00 0.02 (0.02) -- 1.00 2.85* 124,811
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of Ratio of
Ratio of Expenses Net Income
Expenses Ratio of to Average to Average
to Net Income Net Assets Net Assets
Average to Average (Excluding (Excluding
Net Assets Net Assets Waivers) Waivers)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
INSTITUTIONAL SELECT MONEY MARKET FUND
- -------------------------------------------------------------------------------
1997(1) 0.30% 5.32% 0.35% 5.27%
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES MONEY MARKET FUND
- -------------------------------------------------------------------------------
CLASS I
1997 0.65% 4.45% 0.66% 4.44%
1996 0.65 4.44 0.65 4.44
1995 0.65 4.92 0.65 4.92
1994 0.62 3.39 0.62 3.39
1993 0.64 2.42 0.64 2.42
1992(1) 0.65 2.67 0.70 2.62
- ------------------------------------------------------------------------------
PRIME OBLIGATION MONEY MARKET FUND
- ------------------------------------------------------------------------------
CLASS I
1997 0.65% 4.90% 0.66% 4.89%
1996 0.65 4.73 0.67 4.71
1995 0.65 5.26 0.66 5.25
1994 0.62 3.68 0.62 3.68
1993 0.64 2.63 0.64 2.63
1992(2) 0.65 2.63 0.77 2.51
- ---------------------
</TABLE>
*Annualized.
(1) The Institutional Select Money Market Fund commenced operations on July 1,
1997. Ratios for this period have been annualized.
(2) The U.S. Treasury Securities Money Market Fund and Prime Obligation Money
Market Fund commenced operations on April 1, 1992. Ratios for this period
have been annualized.
4
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE TRUST
The Pillar Funds (the "Trust") is an open-end management investment company that
consists of diversified and non-diversified portfolios. The Trust currently
offers units of beneficial interest ("shares") in fifteen separate investment
portfolios. The Trust offers shares of each portfolio through up to four
separate classes of shares (Class A, Class B, Class I and Class S) which provide
for variations in distribution costs, voting rights, sales loads, minimum
investments, redemption fees, transfer agency fees and dividends. Except for
these differences between classes, each share of a portfolio represents an
undivided proportionate interest in that portfolio. This Prospectus relates to
shares of the Institutional Select Money Market Fund and Class I Shares of the
Prime Obligation Money Market Fund and U.S. Treasury Securities Money Market
Fund (each, a "Fund," and collectively, the "Funds"). Each of the Funds
described herein is a diversified mutual fund. Information regarding the Trust's
other portfolios and the Class A Shares, Class B Shares and Class S Shares, if
any, of the Funds is contained in separate prospectuses that may be obtained by
writing the Trust's Distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456 or by calling 1-800-932-7782.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Fund are described below. For
additional information regarding risks and permitted investments of the Funds,
see "Description of Permitted Investments" in this Prospectus and "Description
of Permitted Investments" and "Description of Ratings" in the Statement of
Additional Information. There is no assurance that the investment objective of
any Fund will be met.
The investment objective of each Fund is to preserve principal value and
maintain a high degree of liquidity while providing current income.
Each money market fund intends to comply with regulations of the Securities and
Exchange Commission ("SEC") applicable to money market funds using the amortized
cost method for calculating net asset value. These regulations impose certain
quality, maturity and diversification restraints on investments by a money
market fund. Under these regulations, each Fund will invest only in U.S.
dollar-denominated securities, will maintain an average maturity on a
dollar-weighted basis of 90 days or less, and will acquire only "eligible
securities" that present minimal credit risks and have a maturity of 397 days or
less.
The U.S. Treasury Securities Money Market Fund
The U.S. Treasury Securities Money Market Fund will invest exclusively in (i)
bills, notes and bonds issued by the U.S. Treasury; (ii) separately traded
interest and principal component parts of such obligations that are transferable
through the federal book entry system ("U.S. Treasury Obligations"); and (iii)
repurchase agreements involving U.S. Treasury Obligations. The Fund may also
engage in securities lending.
5
<PAGE>
- --------------------------------------------------------------------------------
The Prime Obligation Money Market Fund
The Institutional Select Money Market Fund
Each of the Prime Obligation Money Market Fund and Institutional Select Money
Market Fund will invest in "eligible securities" consisting of: (i) commercial
paper and short-term corporate obligations of U.S. issuers that satisfy the
Fund's quality criteria; (ii) obligations (certificates of deposit, time
deposits and bankers' acceptances) of U.S. commercial banks, U.S. savings and
loan institutions and U.S. and London branches of foreign banks, provided such
institutions have total assets of $500 million or more as shown on their last
published financial statements at the time of investment and are insured by the
FDIC (the Fund may not invest more than 25% of its total assets in obligations
issued by foreign branches of U.S. banks and London branches of foreign banks);
(iii) U.S. Treasury Obligations; (iv) obligations issued or guaranteed as to
principal and interest by the agencies or instrumentalities of the U.S.
Government ("U.S. Government Agencies"); and (v) repurchase agreements involving
any such obligations. In addition, each Fund may also engage in securities
lending.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of each Fund. In addition, it is a fundamental policy of
each Fund to use its best efforts to maintain a constant net asset value of
$1.00 per share although there can be no assurance any Fund will be able to do
so. Fundamental policies cannot be changed with respect to a Fund without the
consent of the holders of a majority of that Fund's outstanding shares.
Each 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 each Fund's total assets. See "Description of Permitted
Investments -- Restraint on Investments by Money Market Funds."
2. Purchase any securities which would cause more than 25% of the total assets
of any 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 the obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, repurchase agreements
involving such securities and obligations issued by domestic branches of U.S.
banks or U.S. branches of foreign banks subject to the same regulation as U.S.
banks or to investments in tax-exempt securities issued by governments or
political subdivisions of governments.
3. Make loans, except that a Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; (b) enter into repurchase
agreements; and (c) engage in securities lending as described in this Prospectus
and in the Statement of Additional Information.
The foregoing percentage limitations apply at the time of the purchase of a
security.
6
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
It is a non-fundamental policy of each Fund to invest no more than 10% of its
net assets in illiquid securities (as defined under "Description of Permitted
Investments").
Additional investment limitations are set forth in the Statement of Additional
Information.
THE ADVISOR
Summit Bank Investment Management Division, a division of Summit Bank (the
"Advisor"), serves as the investment advisor to the Trust. The Advisor makes the
investment decisions for the assets of the Funds and continuously reviews,
supervises and administers each Fund's investment program subject to the
supervision of, and policies established by, the Trustees of the Trust.
Summit Bank, 210 Main Street, Hackensack, New Jersey 07601, was chartered in
1899 and has been exercising trust powers and managing money since 1916. The
Investment Management Division began as a separate operating division of the
Bank in 1973. The Bank's investment professionals have, on average, over 20
years of experience in investment management. As of December 31, 1997, total
assets under management were approximately $8.2 billion.
Summit Bank is a wholly-owned subsidiary of Summit Bancorp, an interstate bank
holding company with approximately $30 billion in assets and 426 banking
offices, predominantly in New Jersey and eastern Pennsylvania, as of December
31, 1997.
Judith Wolk is a Vice President of the Advisor and has managed the Pillar
taxable money market funds and has co-managed the U.S. Treasury Securities Money
Market Fund with Frances M. Tendall since June, 1996. Prior to joining Summit
Bank in September, 1995, Ms. Wolk had substantial experience in money market
instruments with a large regional bank.
Mrs. Tendall is a Vice President and Regional Manager (Princeton) of the Advisor
and has co-managed the U.S. Treasury Securities Money Market Fund and managed
the Trust's Intermediate-Term Government Securities Fund since their inceptions
in April, 1992. Mrs. Tendall joined Summit Bank in 1982.
The Advisor is entitled to a fee from the Institutional Select Money Market
Fund, which is calculated daily and paid monthly at the annual rate of .10% of
the Fund's average daily net assets. The Advisor has voluntarily agreed to waive
all or a portion of its fees to limit the total operating expenses of the
Institutional Select Money Market Fund to .30% of the Fund's average daily net
assets. The Advisor reserves the right to terminate any and all fee waivers at
any time in its sole discretion. The Fund paid the Advisor an advisory fee of
.05% of its average daily net assets for the fiscal year ended December 31,
1997.
The Advisor is also entitled to a fee from each of the U.S. Treasury Securities
Money Market and Prime Obligation Money Market Funds, which is calculated daily
and paid monthly at the annual rate of .35% of each Fund's respective average
daily net assets. The Advisor has voluntarily agreed to waive all or a portion
of its fees to limit the total operating expenses of Class I Shares of the U.S.
Treasury Securities Money Market and Prime Obligation Money Market Funds to .65%
of each Fund's average daily net assets. The Advisor reserves the right to
terminate any and all fee waivers at any time in its sole discretion. The U.S.
Treasury Securities Money Market and Prime Obligation Money Market Funds paid
the Advisor advisory fees of .35% and .34% of average daily net assets,
respectively.
Summit Bank has also entered into a custodian agreement with the Trust, under
which it provides all securities safekeeping services as required by the Funds
and the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust
pays Summit Bank (referred to herein in its custodial capacity as the
"Custodian") a custodian fee,
7
<PAGE>
- --------------------------------------------------------------------------------
which is calculated daily and paid monthly, at an annual rate of .025% of the
average daily net assets of each Fund.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The Administrator provides the Trust with administrative services, other
than investment advisory services, including all regulatory reporting, necessary
office space, equipment, personnel and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% (.10% with respect to the Institutional
Select Money Market Fund) of the average daily net assets of each Fund.
THE TRANSFER AGENT
State Street Bank and Trust Company (the "Transfer Agent"), 225 Franklin Street,
Boston, Massachusetts 02110 is the Trust's transfer agent.
THE SHAREHOLDER SERVICING AGENT
Boston Financial Data Services, Two Heritage Drive, North Quincy, Massachusetts
02171 is the Trust's dividend disbursing agent and shareholder servicing agent.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company, acts as the distributor of the Trust's shares. No
compensation is paid to the Distributor for distribution services for shares of
the Institutional Select Money Market Fund or Class I Shares of the Prime
Obligation Money Market or U.S. Treasury Securities Money Market Funds.
Shares of the Institutional Select Money Market Fund are offered without
distribution fees to: (i) cash sweep customers of Summit Bank; (ii) any
individual or institution (including Summit Bank, its affiliates and
correspondent banks) for the investment of funds held by such individual or
institution in a fiduciary, agency, custodial or other representative capacity;
and (iii) any Qualified Customers.
Class I Shares of the Prime Obligation Money Market and U.S. Treasury Securities
Money Market Funds are offered without distribution fees to: (i) institutional
investors (including Summit Bank, its affiliates and correspondent banks) for
the investment of their own funds; (ii) individuals and institutions (including
Summit Bank, its affiliates and correspondent banks) for the investment of funds
held by such individuals or institutions in a fiduciary, agency, custodial or
other representative capacity if such individuals or institutions are able to
provide complete shareholder recordkeeping services with respect to shares
purchased and held in such capacity; and (iii) any Qualified Customers.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs which will be paid by the Distributor from
the sales charge it receives or from any other source available to it. Under any
such program, the Distributor may provide promotional incentives in the form of
cash or other compensation, including merchandise, gifts and prizes, and payment
of travel expenses, meals and lodging, to all dealers selling shares of the
8
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Funds. Such promotional incentives will be offered uniformly to all dealers and
predicated upon the number of shares of the Trust's portfolios sold by the
dealer.
PURCHASE AND REDEMPTION OF SHARES
Cash Sweep Shareholders should consult their cash sweep agreement for more
information on purchases and redemptions.
Shares of each Fund are sold on a continuous basis and may be purchased on any
day that both the New York Stock Exchange is open for trading and the Federal
Reserve Bank is open (a "Business Day"). Generally, (i) an investor in the Class
I Shares of a Fund must pay for shares by federal funds and (ii) checks
(including third party and credit card checks), credit cards and cash will not
be accepted for payment of Class I Shares.
A purchase or redemption order for shares of a Fund will be executed at a per
share price equal to the net asset value next determined after the appropriate
order is effective.
The net asset value per share of a Fund (or class thereof) is determined by
dividing the total value of the Fund's investments and other assets that are
allocated to its shares (or class thereof), less any liabilities that are
allocated to its shares (or class thereof), by the Fund's total outstanding
shares (or class thereof). The net asset value per share for a Fund is
calculated as of the earlier of 3:00 p.m., Eastern time, or the
regularly-scheduled close of normal trading on the New York Stock Exchange each
Business Day based on the amortized cost method as described under
"Determination of Net Asset Value" in the Statement of Additional Information.
The purchase and redemption prices for each Fund are expected to remain constant
at $1.00 per share.
No certificates representing shares will be issued.
Neither the Trust nor the Transfer Agent will be responsible for any loss,
liability, cost or expense for acting upon instructions that it reasonably
believes to be genuine. The Trust and the Transfer Agent will each employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If market conditions are extraordinarily active, or other extraordinary
circumstances exist, Shareholders who experience difficulties placing redemption
orders by telephone may wish to consider placing the redemption order by other
means.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust, the Fund or its
Shareholders to accept such order. Qualified Customers should call the Transfer
Agent for information regarding requirements for purchase and redemption orders.
In addition, the Trust has approved Authorized Broker-Dealers to act as the
Fund's agent for the purposes of accepting purchase orders and redemption
requests. The Fund will be deemed to have received a purchase order or
redemption request upon receipt of the order of request by an Authorized
Broker-Dealer.
A purchase order for a Fund will be effective as of the Business Day received by
the Distributor (or
9
<PAGE>
- --------------------------------------------------------------------------------
an Authorized Broker-Dealer) if the Distributor (or an Authorized Broker-Dealer)
receives the order and payment in federal funds before the Fund calculates its
net asset value (normally 3:00 p.m., Eastern time). All other purchase orders
will be effective on the next Business Day. Purchased shares begin earning
dividends on the Business Day the purchase order for those shares is effective.
Financial institutions may impose an earlier cut-off time for receipt of
purchase orders directed through them to allow time for processing and
transmittal of these orders to the Distributor (or an Authorized Broker-Dealer)
for effectiveness the same day.
For redemption orders received before the Fund calculates its net asset value
(normally, 3:00 p.m., Eastern time), payment will normally be made the same day
by the transfer of federal funds. Otherwise, payment will be made on the next
Business Day and, in any event, within seven Business Days after the redemption
order is effective. Redeemed shares are not entitled to dividends declared the
day the redemption order is effective.
Each Fund intends to pay cash for all shares redeemed, but under abnormal
conditions that make payment in cash unwise, payment may be made wholly or
partially in portfolio securities with a market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
Minimum Investment and Account Sizes and Preauthorized Exchanges of Shares
For an Institutional Select Money Market Fund account, the minimum initial
investment and minimum account sizes are $5,000,000. If a Shareholder has
multiple accounts in the Institutional Select Money Market Fund, the Trust will
aggregate the amounts held in those accounts when calculating the minimum
account requirements.
The Trust will automatically exchange a Shareholder's shares in the
Institutional Select Money Market Fund for Class I Shares of the Prime
Obligation Money Market Fund if the value of his or her Institutional Select
Money Market Fund account(s) falls below $5,000,000 because of Shareholder
redemption(s). In such a case, the Fund will notify the Shareholder, and if the
account value remains below $5,000,000 for a continuous 30-day period, the
shares in such account(s) will be subject to automatic exchange from the
Institutional Select Money Market Fund to Class I Shares of the Prime Obligation
Money Market Fund. Shareholders will receive a current prospectus of the Class I
Shares of the Prime Obligation Money Market Fund in connection with such an
exchange.
The Institutional Select Money Market Fund reserves the right to modify or
terminate the preauthorized exchange feature of the shares as stated above at
any time upon 60 days' notice to Shareholders. The foregoing initial investment
and account balance minimums and preauthorized exchange feature do not apply to
the Summit Bancorp Savings Incentive Plan. Additionally, the Institutional
Select Money Market Fund reserves the right to waive the initial investment and
10
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
account balance minimums and preauthorized exchange feature in its sole
discretion.
Minimum Balance Requirements
Summit Bank may require cash sweep customers to maintain minimum banking account
levels in order to participate in the Cash Sweep Program. The minimum levels
would be subject to the terms of the customer's cash sweep agreement with Summit
Bank. In general, however, if a customer's banking account falls below such
minimum amount, their shares in the Funds may be redeemed or they may be charged
additional fees.
PERFORMANCE
Computation of Yield
From time to time, the Funds may advertise "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of a Fund refers to the
income generated by an investment in a Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in a Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment.
The Funds may periodically compare their performance to that of: (i) other
mutual funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives. The Funds may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance. The Funds may use long-term performance of the
capital markets to demonstrate general long-term risk versus reward scenarios
and could include the value of a hypothetical investment in any of the capital
markets. The Funds may also quote financial and business publications and
periodicals as they relate to fund management, investment philosophy and
investment techniques.
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial
or administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of a Fund or its
Shareholders. Accordingly, Shareholders are urged to consult their tax advisors
regarding specific questions as to federal, state and local income taxes.
Tax Status of the Funds
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined
11
<PAGE>
- --------------------------------------------------------------------------------
with the Trust's other investment portfolios. Each Fund intends to continue to
qualify for the special tax treatment afforded regulated investment companies
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), so as to be relieved of federal income tax on that part of its net
investment income and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) which is distributed to Shareholders.
Tax Status of Distributions
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders.
Dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares and will not qualify for
the dividends-received deduction otherwise available to corporate shareholders.
Any dividends from net capital gain (the excess of net long-term capital gain
over net short-term capital loss) will be distributed annually and will be
treated as a 20% rate gain distribution (taxed at a rate of 20%) or a 28% rate
gain distribution (taxed at a rate of 28%), depending upon the designation by
the Fund (such designation being dependent upon the holding period of the Fund
in the underlying asset generating the net capital gain), regardless of how long
the Shareholder has held the Fund's shares. Capital gains distributions also
will not qualify for the dividends-received deduction. Each Fund will make
annual reports to Shareholders of the federal income tax status of all
distributions.
Interest received on direct U.S. Government obligations that is exempt from tax
at the state level when received directly may be exempt, depending on the state,
when received by a Shareholder from a Fund, provided certain conditions are
satisfied. Interest received on repurchase agreements normally is not exempt
from state taxation. Each Fund annually will inform Shareholders of the
percentage of income and distributions derived from direct U.S. Government
obligations. Shareholders should consult their tax advisors to determine whether
any portion of the income dividends received from a Fund is considered
tax-exempt in their particular states.
Certain securities purchased by the Funds (such as STRIPs, defined under
"Description of Permitted Investments -- U.S. Treasury Obligations") are sold at
original issue discount and thus generally do not make periodic cash interest
payments. A Fund will be required to include as part of its current income the
accreted interest on such obligations even though the Fund has not received any
interest payments on such obligations during that period. Because each Fund
distributes all of its net investment income to its Shareholders, a Fund may
have to sell portfolio securities to distribute such imputed income which may
occur at a time when the Advisor would not have chosen to sell such securities
and which may result in a taxable gain or loss.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in these months will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 if
paid by the Fund at any time during the following January.
12
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
Each Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
The sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
Generally, gain or loss on the sale, exchange or redemption of a share will be
capital gain or loss which will be long-term if the share has been held for more
than eighteen months, mid-term if the share has been held for more than twelve,
but not more than eighteen months and otherwise will be short-term. 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 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
loss from the sale or exchange of a capital asset held for more than twelve
months to the extent of the amount of the prior capital gains distribution (or
any undistributed net capital gains of the Fund which 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). Investors should
particularly note that this loss disallowance rule will apply to shares received
through the reinvestment of dividends during the 61-day period.
GENERAL INFORMATION
The Trust
The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated September 9, 1991. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each portfolio. In
addition to the Funds, the Trust currently consists of the Tax-Exempt Money
Market Fund, U.S. Treasury Securities Plus Money Market Fund, Fixed Income Fund,
New Jersey Municipal Securities Fund, Pennsylvania Municipal Securities Fund,
Intermediate-Term Government Securities Fund, Equity Growth Fund, Equity Value
Fund, Equity Income Fund, Mid Cap Fund, Balanced Fund and International Growth
Fund. Shares of the portfolios are offered through up to four separate classes
of shares (Class A, B, I and S). All consideration received by the Trust for
shares of any portfolio and all assets of such portfolio belong to that
portfolio and would be subject to its liabilities.
Each Fund pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services, registering the shares
under federal laws and filing with state securities commissions, pricing,
insurance expenses, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses.
The Advisor, in addition to providing investment advice to the Trust, provides
investment advice to other clients. Some of these clients' funds are
13
<PAGE>
- --------------------------------------------------------------------------------
maintained in asset allocation accounts and may be invested in the Funds. From
time to time, the Funds may experience relatively large purchases or redemptions
due to asset allocation decisions made by the Advisor for its clients. These
transactions may have a material effect on the Funds, since Funds that
experience redemptions as a result of reallocations may have to sell portfolio
securities and because Funds that receive additional cash will have to invest
it. While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on portfolio management to the extent
that Funds may be required to sell securities at times when they would not
otherwise do so, or receive cash that cannot be invested in an expeditious
manner. There may be tax consequences associated with purchases and sales of
securities, and such sales may also increase transaction costs. The Advisor is
committed to minimizing the impact of these transactions on the Funds to the
extent it is consistent with pursuing the investment objectives of its asset
allocation decisions on the Funds.
Trustees of the Trust
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
Voting Rights
Each share held entitles a Shareholder of record to one vote. The Shareholders
of each portfolio or class will vote separately on matters relating solely to
that portfolio or class. As a Massachusetts business trust, the Trust is not
required to hold annual meetings of Shareholders, but approval will be sought
for certain changes in the operation of the Trust and for the election of
Trustees under certain circumstances. In addition, a Trustee may be removed by
the remaining Trustees or by Shareholders at a special meeting called upon
written request of Shareholders owning at least 10% of the outstanding shares of
the Trust. In the event that such a meeting is requested, the Trust will provide
appropriate assistance and information to the Shareholders requesting the
meeting.
Reporting
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
Shareholder Inquiries
Cash Sweep Shareholders should call Summit Bank at 1-888-8SUMMIT for inquiries
regarding their sweep account. Shareholders with inquiries regarding The Pillar
Funds should call 1-800-932-7782 or write to The Pillar Funds, P.O. Box 8523,
Boston, MA 02266-8523.
Dividends
Cash Sweep Shareholders automatically receive all income dividends and capital
gain distributions in cash. All other Shareholders automatically receive all
income dividends and capital gain distributions in additional shares, unless the
Shareholders has elected to take such payment in cash. If any capital gain is
realized, substantially all of it will be distributed at least annually.
Dividends and distributions of each Fund are paid on a per-share basis.
14
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
The net investment income (exclusive of capital gains) of each Fund is
determined and declared on each Business Day as a dividend to Shareholders of
record as of the close of business on that day. Dividends are paid by the Funds
on or about the first Business Day of the following month. Redeemed shares are
not entitled to dividends declared the day the redemption order is effective.
Counsel and Independent Public Accountants
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain permitted investments and associated
risk factors for the Funds.
BANKERS' ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. They 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 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 the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few to 270 days.
ILLIQUID SECURITIES--Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at which they are being
carried on a Fund's books. Not more than 10% of the net assets of a Fund will be
invested in such instruments. An illiquid security includes a demand instrument
with a demand notice period exceeding seven days, if there is no secondary
market for such security. Restricted securities, including Rule 144A securities,
that meet the criteria established by the Trustees of the Trust will be
considered liquid.
INVESTMENT COMPANIES--A Fund may invest up to 10% of its total assets in shares
of other investment companies.
A Fund does not intend to invest in other investment companies unless, in the
judgment of the Advisor, the potential benefits of such investment exceed the
associated costs relative to the benefits and costs associated with direct
investments in the underlying securities. As a shareholder in an investment
company, a Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of
15
<PAGE>
- --------------------------------------------------------------------------------
days from the date of purchase. The Fund will have actual or constructive
possession of the security as collateral for the repurchase agreement. A 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
securities or if the Fund realizes a loss on the sale of the collateral
securities. A 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.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS--Investments by a money market
fund are subject to limitations imposed under regulations adopted by the SEC.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risks and that are "eligible securities," which means
they are (i) rated, at the time of investment, by at least two NRSROs (one if it
is the only organization rating such obligation) in the highest short-term
rating category or, if unrated, determined to be of comparable quality (a "first
tier security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). Investments in second tier
securities are subject to the further constraint that (i) no more than 5% of a
Fund's assets may be invested in such securities in the aggregate, and (ii) any
investments in such securities of one issuer is limited to the greater of 1% of
a Fund's total assets or $1 million. A taxable money market fund may also hold
more than 5% of its assets in first tier securities of a single issuer for three
Business Days. A security is not considered to be unrated if its issuer has
outstanding obligations of comparable priority and security that have a
short-term rating. The Advisor will determine that an obligation presents
minimal credit risks or that unrated instruments are of comparable quality in
accordance with guidelines established by the Trustees. The securities that
money market funds may acquire may be supported by credit enhancements, such as
demand features or guarantees. SEC regulations limit the percentage of
securities that a money market fund may hold for which a single issuer provides
credit enhancements.
SECURITIES LENDING--In order to generate additional income, a Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash, securities of the U.S.
Government or its agencies equal to at least 102% of the market value of the
securities lent. A Fund continues to receive interest on the securities lent
while simultaneously earning interest 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. A Fund pays lending and
other fees in connection with securities loans.
STANDBY COMMITMENTS AND PUTS--Securities subject to standby commitments or puts
permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby
16
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
commitment or put would only have value to a Fund owning the security to which
it relates. In certain cases, a premium may be paid for a standby commitment or
put, which premium will have the effect of reducing the yield otherwise payable
on the underlying security. A Fund will limit standby commitment or put
transactions to institutions believed to present minimal credit risk.
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 with a withdrawal penalty or that
mature in more than seven days are considered to be illiquid securities.
U.S. GOVERNMENT AGENCIES--Obligations issued or guaranteed by agencies of the
U.S. 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 U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and credit of the U.S. 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 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 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 a Fund's shares.
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").
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. 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 security.
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
17
<PAGE>
- --------------------------------------------------------------------------------
date of the purchase commitment. A Fund will maintain with the Custodian a
separate account with liquid assets or cash in an amount at least equal to these
commitments. The interest rate realized, if any, on these securities is fixed as
of the purchase date and no interest accrues to a Fund before settlement. These
securities may be 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 a Fund generally purchases securities on
a when-issued or forward commitment basis with the intention of actually
acquiring securities, a Fund may dispose of a when-issued security or forward
commitment prior to settlement if it deems such action appropriate.
18
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
TABLE OF CONTENTS
Summary...............................2
Expense Summary.......................3
Financial Highlights..................4
The Trust.............................5
Investment Objectives and Policies....5
Investment Limitations................6
The Advisor...........................7
The Administrator.....................8
The Transfer Agent....................8
The Shareholder Servicing Agent.......8
The Distributor.......................8
Purchase and Redemption of Shares.....9
Performance..........................11
Taxes................................11
General Information..................13
Description of Permitted
Investments..........................15
The Pillar Funds and Pillar are
registered service marks of Summit
Bank. Your Investment Foundation and
the stylized "P" logo are service marks
of Summit Bank. Reach Higher, Summit,
Summit Bancorp and Summit Financial
Services Group are registered service
marks of Summit Bancorp. Summit
Bank is a service mark of Summit
Bancorp.
19
<PAGE>
Advisor:
[SUMMIT BANK LOGO]
Distributor:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
1-800-932-7782
PIL-F-029-02
[PILLAR FUND LOGO]
The Pillar Funds
Your Investment Foundation
PROSPECTUS
Institutional Select
Money Market Fund
U.S. Treasury Securities
Money Market Fund
(Class I Shares)
Prime Obligation
Money Market Fund
(Class I Shares)
April 30, 1998
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE PILLAR FUNDS
Investment Advisor:
SUMMIT BANK INVESTMENT MANAGEMENT DIVISION,
A DIVISION OF SUMMIT BANK
The Pillar Funds (the "Trust") consists of mutual fund portfolios seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to
shares of the following fund (the "Fund"):
o INSTITUTIONAL SELECT MONEY MARKET FUND
The Fund's Shares are offered without distribution fees to: (i) cash sweep
customers of Summit Bank; (ii) any individual or institution (including Summit
Bank, its affiliates and correspondent banks), for the investment of funds held
by such individual or institution in a fiduciary, agency, custodial or other
representative capacity; and (iii) any "qualified customer" who has entered into
an agreement with Summit Bank, its affiliates or correspondent banks ("Qualified
Customers"). Persons who own shares of the Fund are referred to herein as
"Shareholders."
| SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR |
| INSURED, ENDORSED OR GUARANTEED BY, ANY BANK (INCLUDING |
| SUMMIT BANK OR ITS AFFILIATES OR CORRESPONDENTS), ANY STATE |
| OR STATE AGENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION |
| (FDIC), THE U.S. GOVERNMENT OR ANY U.S. GOVERNMENT AGENCY. |
| Amounts invested in the Fund are subject to investment |
| risks, including possible loss of the principal amount |
| invested. |
| An investment in the Fund is neither insured nor guaranteed |
| by the U.S. Government and there can be no assurance that |
| the Fund will be able to maintain a stable net asset value |
| of $1.00 per share. |
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated April 30, 1998 has been filed with the Securities and Exchange
Commission and is available without charge by writing to the Distributor, SEI
Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling
1-800-932-7782. The Statement of Additional Information is incorporated into
this Prospectus by reference.
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.
April 30, 1998
1
<PAGE>
SUMMARY
The Pillar Funds (the "Trust") consists of open-end management investment
companies which provide a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about the
Trust's Institutional Select Money Market Fund (the "Fund").
What is the Investment Objective? The Fund seeks to preserve principal value
and maintain a high degree of liquidity while providing current income. There
can be no assurance that the Fund will be able to maintain a net asset value of
$1.00 per share on a continuous basis or that the Fund will meet its investment
objective. See "Investment Objective and Policies."
What are the Permitted Investments? The Fund invests in short-term, U.S.
dollar-denominated obligations of United States issuers and obligations of U.S.
and London branches of foreign banks. See "Investment Objective and Policies."
Who is the Advisor? Summit Bank Investment Management Division, a division of
Summit Bank, serves as the advisor (the "Advisor") to the Trust. See "The
Advisor."
Who is the Administrator? SEI Fund Resources serves as the administrator (the
"Administrator") of the Trust. See "The Administrator."
Who is the Transfer Agent? State Street Bank and Trust Company acts as transfer
agent (the "Transfer Agent") for the Trust. See "The Transfer Agent."
Who is the Shareholder Servicing and Dividend Disbursing Agent? Boston
Financial Data Services is the Trust's dividend disbursing agent and shareholder
servicing agent. See "The Shareholder Servicing Agent."
Who is the Distributor? SEI Investments Distribution Co. acts as distributor
(the "Distributor") of the Trust's shares. See "The Distributor."
How do I Purchase and Redeem Shares? In addition to the Distributor, the Trust
has also authorized certain broker-dealers and other financial intermediaries
(collectively, "Authorized Broker-Dealers") to accept purchase orders and
redemption requests up to the times mentioned below on behalf of the Fund. A
purchase order for the Fund will be effective as of the "Business Day" received
by the Distributor (or an Authorized Broker-Dealer) if the Distributor (or an
Authorized Broker-Dealer) receives the order and payment in federal funds before
the Fund calculates its net asset value (normally, 3:00 p.m., Eastern time), on
such Business Day. A "Business Day" for the Fund is any day on which both the
New York Stock Exchange is open for trading and the Federal Reserve Bank is
open. A redemption order for the Fund will be effective as of the Business Day
received if such order is received before the Fund calculates its net asset
value on such Business Day and the proceeds are to be sent in federal funds.
Shares are purchased and redeemed for shareholders who are cash sweep customers
of Summit Bank ("Cash Sweep Shareholders") in accordance with their cash sweep
agreement with Summit Bank. Investors may become Cash Sweep Shareholders by
executing a cash sweep agreement with Summit Bank. Please call Summit Bank at
1-888-8SUMMIT for more information about cash sweep accounts. See "Purchase and
Redemption of Shares."
Is There a Minimum Investment? The minimum initial investment is $5,000,000 for
shares of the Fund. Subsequent investments may be made in any amount. The
minimum aggregate account balance in the Fund is also $5,000,000, which, if not
maintained, will trigger an automatic exchange feature for Class I Shares of the
Trust's Prime Obligation Money Market Fund. See "Minimum Investment and Account
Sizes and Preauthorized Exchanges of Shares."
How are Dividends Paid? The net investment income (exclusive of capital gains)
of the Fund is determined and declared on each Business Day as a dividend for
Shareholders as of the close of business on that day. Any capital gains will be
distributed at least annually. Dividends are paid to Cash Sweep Shareholders in
cash. Dividends are paid to all other Shareholders in additional shares, unless
the Shareholder has elected to take the payment in cash. See "Dividends."
2
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
EXPENSE SUMMARY
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<CAPTION>
Institutional
Select Money
Market Fund
- --------------------------------------------------------------------------------
<S> <C>
Advisory Fees (after fee waivers) (1) .05%
Other Expenses (2) .25%
- --------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (1) .30%
- --------------------------------------------------------------------------------
</TABLE>
(1) The Advisor has agreed to voluntarily waive a portion of its fees in an
amount that operates to limit Total Operating Expenses of the Fund to not
more than .30% of average daily net assets of the Fund. The Advisor reserves
the right to terminate its fee waiver at any time in its sole discretion.
Absent fee waivers for the Fund, the Advisory Fee would be .10% and Total
Operating Expenses would be .35% of the Fund's average daily net assets.
Additional information may be found under "The Advisor," "The Administrator"
and "The Distributor."
(2) Other Expenses for the Fund are based on estimated amounts for the current
fiscal year.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor in the Fund 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
Institutional Select Money Market Fund $3 $10 $17 $38
- ----------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in the Fund. Financial institutions may impose fees on their
customers in addition to those described above. Additional information may be
found under "The Advisor," "The Administrator" and "The Distributor."
3
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
THE PILLAR FUNDS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent public accountants, as indicated in their report dated February 6,
1998 on the Trust's financial statements as of December 31, 1997, which is
incorporated by reference into the Trust's Statement of Additional Information
under "Financial Information." Additional performance information is contained
in the Trust's 1997 Annual Report to Shareholders and is available upon request
and without charge by calling 1-800-932-7782. This table should be read in
conjunction with the Trust's financial statements and notes thereto.
For a Share Outstanding Throughout the Year
<TABLE>
<CAPTION>
Net Net Ratio of
Net Asset Distributions Asset Assets Expenses Ratio of
Value Net from Net Value End of to Net Income
Beginning Investment Investment End of Total Period Average to Average
of Period Income Income Period Return (000) Net Assets Net Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SELECT MONEY MARKET FUND
- -----------------------------------------------------------------------------------------------------------------
1997(1) $1.00 $0.03 $(0.03) $1.00 5.38% $61,522 0.30% 5.32%
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of Ratio of
Expenses Net Income
to Average to Average
Net Assets Net Assets
(Excluding (Excluding
Waivers) Waivers)
<S> <C> <C>
- -----------------------------------------------------
INSTITUTIONAL SELECT MONEY MARKET FUND
- -----------------------------------------------------
1997(1) 0.35% 5.27%
- -----------------------------------------------------
</TABLE>
(1) The Institutional Select Money Market Fund commenced operations on July 1,
1997. Ratios for this period have been annualized.
4
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE TRUST
The Pillar Funds (the "Trust") is an open-end management investment company that
consists of diversified and non-diversified portfolios. The Trust currently
offers units of beneficial interest ("shares") in fifteen separate investment
portfolios. The Trust offers shares of each portfolio through up to four
separate classes of shares (Class A, Class B, Class I and Class S) which provide
for variations in distribution costs, voting rights, sales loads, minimum
investments, redemption fees, transfer agency fees and dividends. Except for
these differences between classes, each share of a portfolio represents an
undivided proportionate interest in that portfolio. This Prospectus relates to
shares of the Institutional Select Money Market Fund (the "Fund"). The Fund is a
diversified mutual fund. Information regarding the Trust's other portfolios is
contained in separate prospectuses that may be obtained by writing the Trust's
Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456 or by
calling 1-800-932-7782.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to preserve principal value and maintain
a high degree of liquidity while providing current income. There is no assurance
that the Fund's investment objective will be met.
The Fund will invest in "eligible securities" consisting of: (i) commercial
paper and short-term corporate obligations of U.S. issuers that satisfy the
Fund's quality criteria; (ii) obligations (certificates of deposit, time
deposits and bankers' acceptances) of U.S. commercial banks, U.S. savings and
loan institutions and U.S. and London branches of foreign banks, provided such
institutions have total assets of $500 million or more as shown on their last
published financial statements at the time of investment and are insured by the
FDIC (the Fund may not invest more than 25% of its total assets in obligations
issued by foreign branches of U.S. banks and London branches of foreign banks);
(iii) 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 ("U.S. Treasury Obligations"); (iv)
obligations issued or guaranteed as to principal and interest by the agencies or
instrumentalities of the U.S. Government ("U.S. Government Agencies"); and (v)
repurchase agreements involving any of such obligations. In addition, the Fund
may also engage in securities lending.
The Fund intends to comply with regulations of the Securities and Exchange
Commission ("SEC") applicable to money market funds using the amortized cost
method for calculating net asset value. These regulations impose certain
quality, maturity and diversification restraints on investments by the Fund.
Under these regulations, the Fund will invest only in U.S. dollar-denominated
securities, will maintain an average maturity on a dollar-weighted basis of 90
days or less, and will acquire only "eligible securities" that present minimal
credit risks and have a maturity of 397 days or less.
For additional information regarding risks and permitted investments of the
Fund, see
5
<PAGE>
- --------------------------------------------------------------------------------
"Description of Permitted Investments" in this Prospectus and "Description of
Permitted Investments" and "Description of Ratings" in the Statement of
Additional Information.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of the Fund. In addition, it is a fundamental policy of the
Fund to use its best efforts to maintain a constant net asset value of $1.00 per
share although there can be no assurance the Fund will be able to do so.
Fundamental policies cannot be changed without the consent of the holders of a
majority of the Fund's outstanding shares.
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. See "Description of
Permitted Investments--Restraint on Investments by Money Market Funds."
2. Purchase any securities which would cause more than 25% of the total assets
of any 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 the obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, repurchase agreements
involving such securities and obligations issued by domestic branches of U.S.
banks or U.S. branches of foreign banks subject to the same regulation as U.S.
banks or to investments in tax exempt securities issued by governments or
political subdivisions of governments.
3. Make loans, except that the Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; (b) enter into repurchase
agreements; and (c) engage in securities lending as described in this Prospectus
and in the Statement of Additional Information.
The foregoing percentage limitations apply at the time of the purchase of a
security.
It is a non-fundamental policy of the Fund to invest no more than 10% of its net
assets in illiquid securities (as defined under "Description of Permitted
Investments").
Additional investment limitations are set forth in the Statement of Additional
Information.
THE ADVISOR
Summit Bank Investment Management Division, a division of Summit Bank (the
"Advisor"), serves as the investment advisor to the Trust. The Advisor 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.
Summit Bank, 210 Main Street, Hackensack, New Jersey 07601, was chartered in
1899 and has been exercising trust powers and managing money since 1916. The
Investment Management Division began as a separate operating division of the
Bank in 1973. The Bank's investment professionals have,
6
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
on average, over 20 years of experience in investment management. As of December
31, 1997, total assets under management were approximately $8.2 billion.
Judith Wolk is a Vice President of the Advisor and has managed the Pillar
taxable money market funds since June, 1996. Prior to joining Summit Bank in
September, 1995, Ms. Wolk had substantial experience in money market instruments
with a large regional bank.
Summit Bank is a wholly-owned subsidiary of Summit Bancorp, an interstate bank
holding company with approximately $30 billion in assets and 426 banking
offices, predominantly in New Jersey and eastern Pennsylvania, as of December
31, 1997.
The Advisor is entitled to a fee from the Fund, which is calculated daily and
paid monthly at the annual rate of .10% of the Fund's average daily net assets.
The Advisor has voluntarily agreed to waive all or a portion of its fees to
limit the total operating expenses of the Fund to .30% of the Fund's average
daily net assets. The Advisor reserves the right to terminate any and all fee
waivers at any time in its sole discretion. The Fund paid the Advisor an
advisory fee of .05% of its average daily net assets for the fiscal period ended
December 31, 1997.
Summit Bank has also entered into a custodian agreement with the Trust, under
which it provides all securities safekeeping services as required by the Fund
and the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust
pays Summit Bank (referred to herein in its custodial capacity as the
"Custodian") a custodian fee, which is calculated daily and paid monthly, at an
annual rate of .025% of the average daily net assets of the Fund.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The Administrator provides the Trust with administrative services, other
than investment advisory services, including all regulatory reporting, necessary
office space, equipment, personnel and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .10% of the average daily net assets of the Fund.
THE TRANSFER AGENT
State Street Bank and Trust Company (the "Transfer Agent"), 225 Franklin St.,
Boston, Massachusetts 02110 is the Trust's transfer agent.
THE SHAREHOLDER SERVICING AGENT
Boston Financial Data Services, Two Heritage Drive, North Quincy, Massachusetts,
02171 is the Trust's dividend disbursing agent and shareholder servicing agent.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company, acts as the distributor of the Trust's shares. No
compensation is paid to the Distributor for distribution services for shares of
the Fund. Shares of the Fund are offered without distribution fees to: (i) cash
sweep customers of Summit Bank; (ii) any individual or institution (including
Summit Bank, its affiliates and
7
<PAGE>
- --------------------------------------------------------------------------------
correspondent banks) for the investment of funds
held by such individual or institution in a fiduciary, agency, custodial or
other representative capacity; and (iii) any Qualified Customers.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs which will be paid by the Distributor from
the sales charge it receives or from any other source available to it. Under any
such program, the Distributor may provide promotional incentives in the form of
cash or other compensation, including merchandise, gifts and prizes, and payment
of travel expenses, meals
and lodging, to all dealers selling shares of the Fund. Such promotional
incentives will be offered uniformly to all dealers and predicated upon the
number of shares of the Trust's portfolios sold by the dealer.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are sold on a continuous basis and may be purchased on any
day that both the New York Stock Exchange is open for trading and the Federal
Reserve Bank is open (a "Business Day"). Generally, (i) an investor in the
shares of the Fund must pay for shares by federal funds and (ii) checks
(including third party and credit card checks), credit cards and cash will not
be accepted for payment of shares of the Fund. Cash Sweep Shareholders should
consult their cash sweep agreement for more information on purchases and
redemptions.
A purchase or redemption order for shares of the Fund will be executed at a per
share price equal to the net asset value next determined after the appropriate
order is effective.
The net asset value per share of the Fund is determined by dividing the total
value of the Fund's investments and other assets that are allocated to its
shares, less any liabilities that are allocated to its shares, by the Fund's
total outstanding shares. The net asset value per share for the Fund is
calculated as of the earlier of 3:00 p.m., Eastern time, or the
regularly-scheduled close of normal trading on the New York Stock Exchange each
Business Day based on the amortized cost method as described under
"Determination of Net Asset Value" in the Statement of Additional Information.
The purchase and redemption prices for the Fund are expected to remain constant
at $1.00 per share.
No certificates representing shares will be issued.
Neither the Trust nor the Transfer Agent will be responsible for any loss,
liability, cost or expense for acting upon instructions that it reasonably
believes to be genuine. The Trust and the Transfer Agent will each employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If market conditions are extraordinarily active, or other extraordinary
circumstances exist, Shareholders who experience difficulties placing redemption
orders by telephone may wish to consider placing the redemption order by other
means.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust, the Fund or its
Shareholders to accept such order.
In addition, the Trust has approved Authorized Broker-Dealers to act as the
Fund's agent for the purposes of accepting purchase orders and redemption
requests. The Fund will be deemed to have received a purchase order or
redemption
8
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
request upon receipt of the order or request by an Authorized Broker-Dealer.
A purchase order for the Fund will be effective as of the Business Day received
by the Distributor (or an Authorized Broker-Dealer) if the Distributor (or an
Authorized Broker-Dealer) receives the order and payment in federal funds before
the Fund calculates its net asset value (normally, 3:00 p.m., Eastern time). All
other purchase orders will be effective on the next Business Day. Purchased
shares begin earning dividends on the Business Day the purchase order for those
shares is effective. Financial institutions may impose an earlier cut-off time
for receipt of purchase orders directed through them to allow time for
processing and transmittal of these orders to the Distributor (or an Authorized
Broker-Dealer) for effectiveness the same day.
For redemption orders received before the Fund calculates its net asset value
(normally, 3:00 p.m., Eastern time), payment will normally be made the same day
by the transfer of federal funds. Otherwise, payment will be made on the next
Business Day and, in any event, within seven Business Days after the redemption
order is effective. Redeemed shares are not entitled to dividends declared the
day the redemption order is effective.
The Fund intends to pay cash for all shares redeemed, but under abnormal
conditions that make payment in cash unwise, payment may be made wholly or
partially in portfolio securities with a market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
Minimum Investment and Account Sizes and Preauthorized Exchanges of Shares
For a Fund account, the minimum initial investment and minimum account sizes are
$5,000,000. If a Shareholder has multiple accounts in the Fund, the Trust will
aggregate the amounts held in those accounts when calculating the minimum
account requirements.
The Trust will automatically exchange a Shareholder's shares in the Fund for
Class I Shares of the Trust's Prime Obligation money market Fund if the value of
his or her Fund account(s) falls below $5,000,000 because of Shareholder
redemption(s). In such a case, the Fund will notify the Shareholder, and if the
account value remains below $5,000,000 for a continuous 30-day period, the
shares in such account(s) will be subject to automatic exchange by the Fund for
Class I Shares of the Trust's Prime Obligation Money Market Fund. Shareholders
will receive a current prospectus of the Class I Shares of the Prime Obligation
Money Market Fund in connection with such an exchange.
The Fund reserves the right to modify or terminate the preauthorized exchange
feature of the shares as stated above at any time upon 60 days' notice to
Shareholders. The foregoing initial investment and account balance minimums and
preauthorized exchange feature do not apply to the Summit Bancorp Savings
Incentive Plan.
9
<PAGE>
- --------------------------------------------------------------------------------
Additionally, the Fund reserves the right to waive the initial investment and
account balance minimums and preauthorized exchange feature in its sole
discretion.
PERFORMANCE
Computation of Yield
From time to time the Fund may advertise "current yield" and "effective yield."
Both yield figures are based on historical earnings and are not
intended to indicate future performance. The "current yield" of the Fund refers
to the income generated by an investment in the Fund over a seven-day period
(which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment.
The Fund may periodically compare its performance to that of: (i) other mutual
funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives. The Fund may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance. The Fund may use long-term performance of the capital
markets to demonstrate general long-term risk versus reward scenarios and could
include the value of a hypothetical investment in any of the capital markets.
The Fund may also quote financial and business publications and periodicals as
they relate to fund management, investment philosophy and investment techniques.
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial
or administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisors regarding specific questions as to federal, state and local income
taxes.
Tax Status of the Fund
The Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other investment portfolios. The Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), so as to be relieved of federal income tax on that part of its net
investment income and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) which is distributed to Shareholders.
Tax Status of Distributions
The Fund will distribute substantially all of its net investment income
(including, for this purpose,
10
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
net short-term capital gain) to Shareholders. Dividends from net investment
income will be taxable to Shareholders as ordinary income whether received in
cash or in additional shares and will not qualify for the dividends-received
deduction otherwise available to corporate shareholders. Any dividends from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) will be distributed annually and will be treated as a 20% rate
gain distribution (taxed at a rate of 20%) or a 28% rate gain distribution
(taxed at a rate of 28%), depending upon the designation by the Fund (such
designation being dependent upon the holding period of the Fund in the
underlying asset generating the net capital gain), regardless of how long the
Shareholder has held the Fund's shares. Capital gains distributions also will
not qualify for the dividends-received deduction. The Fund will make annual
reports to Shareholders of the federal income tax status of all distributions.
Interest received on direct U.S. Government obligations that is exempt from tax
at the state level when received directly may be exempt, depending on the state,
when received by a Shareholder from the Fund, provided certain conditions are
satisfied. Interest received on repurchase agreements normally is not exempt
from state taxation. The Fund annually will inform Shareholders of the
percentage of income and distributions derived from direct U.S. Government
obligations. Shareholders should consult their tax advisors to determine whether
any portion of the income dividends received from the Fund is considered
tax-exempt in their particular states.
Certain securities purchased by the Fund (such as STRIPs, defined under
"Description of Permitted Investments--U.S. Treasury Obligations") are sold at
original issue discount and thus generally do not make periodic cash interest
payments. The Fund will be required to include as part of its current income the
accreted 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 Advisor would not have chosen to sell such securities
and which may result in a taxable gain or loss.
Dividends declared by the Fund in October, November or December of any year and
payable to Shareholders of record on a date in these months will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 if
paid by the Fund at any time during the following January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
The sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
Generally, gain or loss on the sale, exchange or redemption of a share will be
capital gain or loss which will be long-term if the share has been held for more
than eighteen months, mid-term if the share has been held for more than twelve,
but not more than eighteen months and otherwise will be short-term. However, if
a Shareholder realizes a
11
<PAGE>
- --------------------------------------------------------------------------------
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 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 loss from the sale or exchange of a capital
asset held for more than twelve months to the extent of the amount of the prior
capital gains distribution (or any undistributed net capital gains of the Fund
which 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).
Investors should particularly note that this loss disallowance rule will apply
to shares received through the reinvestment of dividends during the 61-day
period.
GENERAL INFORMATION
The Trust
The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated September 9, 1991. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each portfolio. In
addition to the Fund, the Trust currently consists of the U.S. Treasury
Securities Plus Money Market Fund, U.S. Treasury Securities Money Market Fund,
Prime Obligation Money Market Fund, Tax-Exempt Money Market Fund, Fixed Income
Fund, New Jersey Municipal Securities Fund, Pennsylvania Municipal Securities
Fund, Intermediate-Term Government Securities Fund, Equity Growth Fund, Equity
Value Fund, Equity Income Fund, Mid Cap Fund, Balanced Fund and International
Growth Fund. Shares of the portfolios are offered through four separate classes
of shares (Class A, B, I and S). All consideration received by the Trust for
shares of any portfolio and all assets of such portfolio belong to that
portfolio and would be subject to liabilities related thereto.
The Fund pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services, registering the shares
under federal laws and filing with state securities commissions, pricing,
insurance expenses, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses.
The Advisor, in addition to providing investment advice to the Trust, provides
investment advice to other clients. Some of these clients' funds are maintained
in asset allocation accounts and may be invested in the Fund. From time to time,
the Fund may experience relatively large purchases or redemptions due to asset
allocation decisions made by the Advisor for its clients. These transactions may
have a material effect on the Fund, since the Fund may experience redemptions as
a result of reallocations or since the Fund may receive additional cash and have
to invest it. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management
to the extent that the Fund may be required to sell securities at times when it
would not otherwise do so, or receive cash that cannot be invested in an
expeditious manner. There may be tax consequences associated with purchases and
sales of securities, and such sales may also increase transaction costs. The
Advisor is committed to minimizing the impact of these
12
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
transactions on the Fund to the extent it is consistent with pursuing the
investment objectives of its asset allocation decisions on the Trust's
portfolios.
Trustees of the Trust
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of
Massachusetts. The Trustees have approved contracts under which, as described
above, certain companies provide essential management services to the Trust.
Voting Rights
Each share held entitles a Shareholder of record to one vote. The Shareholders
of each portfolio or class will vote separately on matters relating solely to
that portfolio or class. As a Massachusetts business trust, the Trust is not
required to hold annual meetings of Shareholders, but approval will be sought
for certain changes in the operation of the Trust and for the election of
Trustees under certain circumstances. In addition, a Trustee may be removed by
the remaining Trustees or by Shareholders at a special meeting called upon
written request of Shareholders owning at least 10% of the outstanding shares of
the Trust. In the event that such a meeting is requested the Trust will provide
appropriate assistance and information to the Shareholders requesting the
meeting.
Reporting
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
Shareholder Inquiries
Shareholder inquiries should be directed to The Pillar Funds, P.O. Box 8523,
Boston, MA 02266-8523.
Dividends
Cash Sweep Shareholders automatically receive all income dividends and capital
gain distributions in cash. All other Shareholders automatically receive all
income dividends and capital gain distributions in additional shares, unless the
Shareholder has elected to take such payment in cash. If any capital gain is
realized, substantially all of it will be distributed at least annually.
Dividends and distributions of the Fund are paid on a per-share basis.
The net investment income (exclusive of capital gains) of the Fund is determined
and declared on each Business Day as a dividend to Shareholders of record as of
the close of business on that day. Dividends are paid by the Fund on or about
the first Business Day of the following month. Redeemed shares are not entitled
to dividends declared the day the redemption order is effective.
Counsel and Independent Public Accountants
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain permitted investments and associated
risk factors for the Fund.
BANKERS' ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
13
<PAGE>
- --------------------------------------------------------------------------------
drawn on and accepted by a commercial bank. They 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 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 the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few to 270 days.
ILLIQUID SECURITIES--Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at which they are being
carried on the Fund's books. Not more than 10% of the net assets of the Fund
will be invested in such instruments. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, if there is no
secondary market for such security. Restricted securities, including Rule 144A
securities, that meet the criteria established by the Trustees of the Trust will
be considered liquid.
INVESTMENT COMPANIES--The Fund may invest up to 10% of its total assets in
shares of other investment companies. The Fund does not intend to invest in
other investment companies unless, in the judgment of the Advisor, the potential
benefits of such investment exceed the associated costs relative to the benefits
and costs associated with direct investments in the underlying securities. As a
shareholder in an investment company, the Fund would bear its ratable share of
that investment company's expenses, including its advisory and adminis-
tration fees.
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 on an agreed upon date within a number of days
from the date of purchase. The Fund will have actual or constructive possession
of the security as collateral for the repurchase agreement. 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
securities or if the Fund realizes a loss on the sale of the collateral
securities. 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.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS--Investments by a money market
fund are subject to limitations imposed under regulations adopted by the SEC.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risks and that are "eligible securities," which means
they are (i) rated, at the time of investment, by at least two NRSROs (one if it
is the only organization rating such obligation) in the highest short-term
rating category or, if unrated, determined to be of comparable quality (a "first
tier security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). Investments in second tier
securities are subject to
14
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
the further constraint that (i) no more than 5% of the Fund's assets may be
invested in such securities in the aggregate, and (ii) any investments in such
securities of one issuer is limited to the greater of 1% of a Fund's total
assets or $1 million. A taxable money market fund may also hold more than 5% of
its assets in the first tier securities of a single issuer for three Business
Days. A security is not considered to be unrated if its issuer has outstanding
obligations of comparable priority and security that have a short-term rating.
The Advisor will determine that an obligation presents minimal credit risks or
that unrated instruments are of comparable quality in accordance with guidelines
established by the Trustees. The securities that money market funds may acquire
may be supported by credit enhancements, such as demand features or guarantees.
SEC regulations limit the percentage of securities that a money market fund may
hold for which a single issuer provides credit enhancements.
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, securities of the U.S.
Government or its agencies equal to at least 102% of the market value of the
securities lent. The Fund continues to receive interest on the securities lent
while simultaneously earning interest 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. The Fund pays lending and
other fees in connection with securities loans.
STANDBY COMMITMENTS AND PUTS--Securities subject to standby commitments or puts
permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to the Fund owning the security to which it relates. In certain
cases, a premium may be paid for a standby commitment or put, which premium will
have the effect of reducing the yield otherwise payable on the underlying
security. The Fund will limit standby commitment or put transactions to
institutions believed to present minimal credit risk.
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 with a withdrawal penalty or that
mature in more than seven days are considered to be illiquid securities.
U.S. GOVERNMENT AGENCIES--Obligations issued or guaranteed by agencies of the
U.S. 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 U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and
15
<PAGE>
- --------------------------------------------------------------------------------
credit of the U.S. 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 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 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. 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").
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. 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 security.
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.
The Fund will maintain with the Custodian a separate account with liquid assets
or cash in an amount at least equal to these commitments.
The interest rate realized, if any, on these securities is fixed as of the
purchase date and no interest accrues to the Fund before settlement. These
securities may be 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, the Fund may dispose of a when-issued security or forward
commitment prior to settlement if it deems such action appropriate.
16
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
TABLE OF CONTENTS
Summary...............................2
Expense Summary.......................3
Financial Highlights..................4
The Trust.............................5
Investment Objective and Policies.....5
Investment Limitations................6
The Advisor...........................6
The Administrator.....................7
The Transfer Agent....................7
The Shareholder Servicing Agent.......7
The Distributor.......................7
Purchase and Redemption of Shares.....8
Performance..........................10
Taxes................................10
General Information..................12
Description of Permitted
Investments..........................13
The Pillar Funds and Pillar are
registered service marks of Summit
Bank. Your Investment Foundation and
the stylized "P" logo are service marks
of Summit Bank. Reach Higher, Summit,
Summit Bancorp and Summit Financial
Services Group are registered service
marks of Summit Bancorp. Summit
Bank is a service mark of Summit
Bancorp.
17
<PAGE>
Advisor:
[SUMMIT BANK LOGO]
Distributor:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
1-800-932-7782
PIL-F-028-02
[PILLAR FUND LOGO]
The Pillar Funds
Your Investment Foundation
PROSPECTUS
Institutional Select
Money Market Fund
April 30, 1998
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE PILLAR FUNDS
Investment Advisor:
SUMMIT BANK INVESTMENT MANAGEMENT DIVISION,
A DIVISION OF SUMMIT BANK
The Pillar Funds (the "Trust") consists of mutual fund portfolios seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to the
following money market fund (the "Fund"):
o U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND
The Money Desk of the Bank Investment Division of Summit Bank (the "Money Desk")
offers the Fund's shares of the Fund on an agency basis and shares are available
exclusively to customers of the Money Desk. Persons who own shares of the Fund
are referred to herein as "Shareholders."
- ------------------------------------------------------------------------
| SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR |
| INSURED, ENDORSED OR GUARANTEED BY, ANY BANK (INCLUDING |
| SUMMIT BANK OR ITS AFFILIATES OR CORRESPONDENTS), ANY STATE |
| OR STATE AGENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION |
| (FDIC), THE U.S. GOVERNMENT OR ANY U.S. GOVERNMENT AGENCY. |
| An investment in the Fund is subject to investment risks, |
| including possible loss of the principal amount invested. |
| An investment in the Fund is neither insured nor guaranteed |
| by the U.S. Government and there can be no assurance that |
| the Fund will be able to maintain a stable net asset value |
| of $1.00 per share. |
- ------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated April 30, 1998 has been filed with the Securities and Exchange
Commission and is available without charge by writing to the Money Desk at
Summit Bank, Money Desk, 214 Main Street, Third Floor, Hackensack, New Jersey
07601 or by calling 1-800-243-8550. The Statement of Additional Information is
incorporated into this Prospectus by reference.
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.
April 30, 1998
1
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
The Pillar Funds (the "Trust") consists of open-end management investment
companies which provide a convenient way to invest in professionally managed
portfolios of securities. The following provides basic information about the
shares of the Trust's U.S. Treasury Securities Plus Money Market Fund (the
"Fund").
What is the Investment Objective? The Fund seeks to preserve principal value
and maintain a high degree of liquidity while providing current income. There
can be no assurance that the Fund will achieve its investment objective or be
able to maintain a net asset value of $1.00 per share on a continuous basis. See
"Investment Objective and Policies."
What are the Permitted Investments? The U.S. Treasury Securities Plus Money
Market Fund invests exclusively in short-term U.S. Treasury obligations and
repurchase agreements with respect to such obligations. See "Investment
Objective and Policies" and "Description of Permitted Investments."
Who is the Advisor? Summit Bank Investment Management Division, a division of
Summit Bank, serves as the advisor (the "Advisor") to the Trust. See "The
Advisor."
Who is the Administrator? SEI Fund Resources serves as the administrator (the
"Administrator") of the Trust. See "The Administrator."
Who is the Transfer Agent? State Street Bank and Trust Company acts as transfer
agent (the "Transfer Agent") for the Trust. See "The Transfer Agent."
Who is the Shareholder Servicing Agent? Boston Financial Data Services is the
Trust's dividend disbursing agent and shareholder servicing agent. See "The
Shareholder Servicing Agent."
Who is the Distributor? SEI Investments Distribution Co. acts as distributor of
the Trust's shares. The Trust has adopted a distribution plan on behalf of the
Fund pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended
(the "1940 Act"). See "The Distributor."
How do I Purchase and Redeem Shares? Purchases and redemptions may be made
through the Money Desk on any day on which both the New York Stock Exchange and
the Federal Reserve wire system are open for business (a "Business Day"). In
addition to the Distributor, the Trust has also authorized certain
broker-dealers and other financial intermediaries (collectively, "Authorized
Broker-Dealers") to accept purchase orders and redemption requests up to the
times mentioned below on behalf of the Fund. A purchase order will be effective
as of the Business Day received by the Distributor (or an Authorized
Broker-Dealer) if the Distributor (or an Authorized Broker-Dealer) receives an
order and federal funds prior to the time the Fund calculates its net asset
value (normally, 3:00 p.m., Eastern time), on such Business Day. Redemption
orders must be placed prior to the time the Fund calculates its net asset value
on any Business Day for the order to be effective that day. See "Purchase of
Shares" and "Redemption of Shares."
How are Dividends Paid? The net investment income (exclusive of capital gains)
of the Fund is determined and declared on each Business Day as a dividend for
Shareholders of record as of the close of business on that day. Any capital
gains will be distributed at least annually. Dividends are paid monthly in
additional shares unless the Shareholder elects to take the payment in cash. See
"Dividends."
2
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
EXPENSE SUMMARY
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
U.S. Treasury
Securities Plus
Money Market
Fund
- --------------------------------------------------------------------------------
Advisory Fees (after fee waivers) (1),(2) .05%
12b-1 Fees .03%
Other Expenses .47%
- --------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (2) .55%
- --------------------------------------------------------------------------------
(1) The Advisor has agreed to voluntarily waive fees in an amount that operates
to limit Total Operating Expenses of the Fund to not more than .55% of
average daily net assets. The Advisor reserves the right to terminate its
fee waiver at any time in its sole discretion.
(2) Absent fee waivers, Advisory Fees would be .15% and Total Operating Expenses
would be .65% of the Fund's average daily net assets. Additional information
may be found under "The Advisor," "The Administrator" and "The Distributor."
Example
- --------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- --------------------------------------------------------------------------------
An investor in the Fund 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 $6 $18 $31 $69
- --------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in the Fund. Financial institutions that are the record owner
of shares for the account of their customers may impose separate fees for
account services to their customers. Additional information may be found under
"The Advisor," "The Administrator" and "The Distributor."
3
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
THE PILLAR FUNDS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent public accountants, as indicated in their report dated February 6,
1998 on the Trust's financial statements as of December 31, 1997, which is
incorporated by reference into the Trust's Statement of Additional Information
under "Financial Information." Additional performance information is contained
in the Trust's 1997 Annual Report to Shareholders and is available upon request
and without charge by calling 1-800-932-7782. This table should be read in
conjunction with the Trust's financial statements and notes thereto.
For a Share Outstanding Throughout the Year
<TABLE>
<CAPTION>
Net Net Ratio of
Net Asset Distributions Asset Assets Expenses Ratio of
Value Net from Net Value End of to Net Income
Beginning Investment Investment End of Total Period Average to Average
of Period Income Income Period Return (000) Net Assets Net Assets
- ----------------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.05 $(0.05) $1.00 4.89% $68,658 0.55% 4.78%
1996 1.00 0.05 (0.05) 1.00 4.82 65,173 0.55 4.72
1995 1.00 0.05 (0.05) 1.00 5.40 64,697 0.55 5.26
1994 1.00 0.04 (0.04) 1.00 3.60 46,301 0.55 3.42
1993(1) 1.00 0.02 (0.02) 1.00 2.66* 89,278 0.55 2.62
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of Ratio of
Expenses Net Income
to Average to Average
Net Assets Net Assets
(Excluding (Excluding
Waivers) Waivers)
- -----------------------------------------------
U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND
- -----------------------------------------------
<S> <C> <C>
1997 0.65% 4.68%
1996 0.65 4.62
1995 0.62 5.19
1994 0.63 3.34
1993(1) 0.68 2.49
- -----------------------------------------------
</TABLE>
*Annualized
(1) The U.S. Treasury Securities Plus Money Market Fund commenced operations on
May 3, 1993. Ratios for this period have been annualized.
4
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
THE TRUST
The Pillar Funds (the "Trust") is an open-end management investment company that
consists of diversified and non-diversified portfolios. The Trust currently
offers units of beneficial interest ("shares") in fifteen separate investment
portfolios. Shareholders may purchase shares in each portfolio through up to
four separate classes (Class A, Class B, Class I and Class S) which provide for
variations in distribution costs, voting rights, sales load, minimum investment,
redemption fees, transfer agency fees and dividends. Except for these
differences between classes, each share of a portfolio represents an undivided,
proportionate interest. This Prospectus relates to the Trust's U.S. Treasury
Securities Plus Money Market Fund (the "Fund"). The Fund is a diversified mutual
fund. Information regarding the Trust's other portfolios is contained in
separate prospectuses that may be obtained by writing the Trust's Distributor,
SEI Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling
1-800-932-7782.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to preserve principal value and maintain
a high degree of liquidity while providing current income. There is no assurance
that the Fund's investment objective will be met.
The Fund intends to comply with regulations of the Securities and Exchange
Commission ("SEC") applicable to money market funds using the amortized cost
method for calculating net asset value. These regulations impose certain
quality, maturity and diversification restraints on investments by the Fund.
Under these regulations, the Fund will invest only in U.S. dollar denominated
securities, will maintain an average portfolio maturity on a dollar-weighted
basis of 90 days or less, and will acquire only "eligible securities" that
present minimal credit risks and have a maturity of 397 days or less. For a
further discussion of these rules, see "Description of Permitted Investments."
The Fund will invest in (i) bills, notes and bonds issued by the U.S. Treasury;
(ii) separately traded interest and principal component parts of such
obligations that are transferable through the federal book entry system
(together, "U.S. Treasury Obligations"); and (iii) repurchase agreements
involving U.S. Treasury Obligations.
For a description of the Fund's permitted investments, see "Description of
Permitted Investments" in this Prospectus and "Description of Permitted
Investments" and "Description of Ratings" in the Statement of Additional
Information.
Securities Lending
The Fund may make short-term loans of its portfolio securities under contracts
calling for collateral in cash or U.S. Government securities with a value at
least equal to 102% of the value of the loaned securities. The Fund will
continue to collect interest on the securities loaned and will also receive
either interest, through investment of cash collateral, or a fee, if the
collateral is U.S. Government securities. The Fund pays lending and other fees
in connection with securities loans.
5
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of the Fund. In addition, it is a fundamental policy of the
Fund to use its best efforts to maintain a constant net asset value of $1.00 per
share, although there can be no assurance the Fund will be able to do so.
Fundamental policies cannot be changed with respect to the Fund without the
consent of the holders of a majority of the Fund's outstanding shares.
The Fund may not make loans, except that it may (a) purchase or hold debt
instruments in accordance with its investment objective and policies; (b) enter
into repurchase agreements; and (c) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
It is a non-fundamental policy of the Fund to invest no more than 10% of its net
assets in illiquid securities (as defined under "Description of Permitted
Investments").
Additional investment limitations are set forth in the Statement of Additional
Information.
THE ADVISOR
Summit Bank Investment Management Division, a division of Summit Bank (the
"Advisor"), serves as the investment advisor to the Trust. The Advisor 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.
Summit Bank, 210 Main Street, Hackensack, New Jersey 07601, was chartered in
1899 and has been exercising trust powers and managing money since 1916. The
Investment Management Division began as a separate operating division of the
Bank in 1973. The Bank's investment experts have, on average, over 20 years of
experience in investment management. As of December 31, 1997, total assets under
management were approximately $8.2 billion.
Summit Bank is a wholly-owned subsidiary of Summit Bancorp, an interstate bank
holding company with approximately $30 billion in assets and 426 banking
offices, predominantly in New Jersey and eastern Pennsylvania, as of December
31, 1997.
Judith Wolk is a Vice President of the Advisor and has managed the Pillar
taxable money market funds since June, 1996. Prior to joining Summit Bank in
September, 1995, Ms. Wolk had substantial experience in money market instruments
with a large regional bank.
The Advisor is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .15% of the Fund's average daily net assets. The Advisor has
voluntarily agreed to waive all or a portion of its fees in order to limit the
total operating expenses to .55% of the average daily net assets of the Fund.
The Advisor reserves the right to terminate its fee waiver at any time in its
sole discretion. The Fund paid the Advisor an advisory fee of .05% of its
average daily net assets for the fiscal year ended December 31, 1997.
Summit Bank has also entered into a custodian agreement with the Trust, under
which it will provide all securities safekeeping services as required by the
Fund and the 1940 Act. The Trust pays Summit Bank (referred to herein in its
custodial capacity as the "Custodian") a fee, which is calculated daily and paid
monthly, at an annual rate of .025% of the average daily net assets of the Fund.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The Administrator provides the Trust with administrative services, other
than investment
6
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
advisory services, including regulatory reporting and all necessary office
space, equipment, personnel and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .35% of the average daily net assets of the Fund.
THE TRANSFER AGENT
State Street Bank and Trust Company (the "Transfer Agent"), 225 Franklin Street,
Boston, Massachusetts 02110 is the Trust's transfer agent.
THE SHAREHOLDER SERVICING AGENT
Boston Financial Data Services, Two Heritage Drive, North Quincy, Massachusetts
02171 is the Trust's dividend disbursing agent and shareholder servicing agent.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company, acts as the Distributor of the Trust's shares.
The Fund has a distribution plan dated April 30, 1993 (the "Plan"). As provided
in the Distribution Agreement and the Plan, the Trust will pay the Distributor a
fee of .03% of the Fund's average daily net assets. The Distributor may apply
this fee toward: a) compensation for its services in connection with
distribution assistance or provision of shareholder services; or b) payments to
financial institutions and intermediaries such as banks (including Summit Bank),
savings and loan associations, insurance companies, investment counselors,
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services or reimbursement of expenses incurred in connection
with distribution assistance or provision of shareholder services. The Plan is
characterized as a compensation plan since the distribution fee will be paid to
the Distributor without regard to the distribution or shareholder service
expenses incurred by the Distributor or the amount of payments made to financial
institutions and intermediaries. The Fund may also execute brokerage or other
agency transactions through an affiliate of the Advisor or through the
Distributor for which the affiliate or the Distributor receives compensation. In
addition, financial institutions that are the record owner of shares for the
account of their customers may impose separate fees for account services to
their customers.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs which will be paid by the Distributor from
the sales charge it receives or from any other source available to it. Under any
such program, the Distributor may provide promotional incentives in the form of
cash or other compensation, including merchandise, gifts and prizes, and payment
of travel expenses, meals and lodging, to all dealers selling shares of the
Fund. Such promotional incentives will be offered uniformly to all dealers and
predicated upon the number of shares of the Trust's portfolios sold by the
dealer.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Fund may be made on any Business Day.
State securities laws may require banks and financial institutions
7
<PAGE>
- --------------------------------------------------------------------------------
purchasing shares for their customers to register as dealers pursuant to state
laws.
The Trust has approved Authorized Broker-Dealers to act as the Fund's agent for
the purposes of accepting purchase orders and redemption requests. The Fund will
be deemed to have received a purchase order or redemption request upon receipt
of the order or request by an Authorized Broker-Dealer.
A purchase order will be effective as of the Business Day received by the Money
Desk if the Money Desk receives an order and the Custodian receives federal
funds before the Fund calculates its net asset value (normally, 3:00 p.m.,
Eastern time), on such Business Day. Otherwise, the purchase order will be
effective the next Business Day. Financial institutions may impose an earlier
cut-off time for receipt of purchase orders directed through them to allow time
for processing and transmittal of these orders to the Money Desk for
effectiveness the same day.
The purchase price is the net asset value per share next computed after the
order is effective. The net asset value per share of the Fund is determined by
dividing the total value of its investments and other assets, less any
liabilities, by its total outstanding shares. The net asset value per share is
calculated as of the earlier of 3:00 p.m., Eastern time, or the
regularly-scheduled close of normal trading on the New York Stock Exchange each
Business Day based on the amortized cost method as described in the Statement of
Additional Information. Purchased shares are first entitled to dividends the day
the purchase order is effective. No certificates representing shares will be
issued.
The minimum initial investment in the Fund is $100,000; however, the minimum
investment may be waived at the Distributor's discretion.
Neither the Trust nor the Transfer Agent will be responsible for any loss,
liability, cost or expense for acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The Trust 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 instructions. If market conditions are extraordinarily
active, or other extraordinary circumstances exist, Shareholders who experience
difficulties placing redemption orders by telephone may wish to consider placing
the redemption order by other means.
The Trust reserves the right to reject a purchase order when the Distributor or
the Money Desk determines that it is not in the best interest of the Trust, the
Fund or its Shareholders to accept such order.
For redemption orders received before the Fund calculates its net asset value
(normally, 3:00 p.m., Eastern time), payment will normally be made the same day
by transfer of federal funds. Otherwise, payment will be made on the next
Business Day and, in any event, within seven Business Days after the redemption
order is effective. The redemption price is the net asset value per share of the
Fund next determined after receipt by the Distributor (or an Authorized
Broker-Dealer) of the redemption order. Redeemed shares are not entitled to
dividends declared the day the redemption order is effective.
The purchase price and the redemption price are expected to remain constant at
$1.00 per share.
The Fund intends to pay cash for all shares redeemed, but under abnormal
conditions which
8
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
make payment in cash unwise, payment may be made wholly or partly in fund
securities with a market value equal to the redemption price. In such cases, an
investor may incur brokerage costs in converting such securities to cash.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
COMPUTATION OF YIELD
From time to time the Fund may advertise "current yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "current yield" of the Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment.
The Fund may periodically compare its performance to that of: (i) other mutual
funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; (ii) broad groups of
comparable mutual funds; (iii) unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or (iv) other investment alternatives. The Fund may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance. The Fund may use long-term performance of the capital
markets to demonstrate general long-term risk versus reward scenarios and could
include the value of a hypothetical investment in any of the capital markets.
The Fund may also quote financial and business publications and periodicals as
they relate to fund management, investment philosophy and investment techniques.
TAXES
The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial
or administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisors regarding specific questions as to federal, state and local income
taxes.
Tax Status of the Fund
The Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other portfolios. The Fund intends to qualify for
the special tax treatment afforded regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), so
as to be relieved of federal income tax on that part of its net investment
income which is distributed to Shareholders. The Fund also intends to make
sufficient distributions each calendar year to avoid liability for federal
excise tax.
Tax Status of Distributions
The Fund will distribute all of its net investment income (including, for this
purpose, net short-term
9
<PAGE>
- --------------------------------------------------------------------------------
capital gain) to Shareholders. Dividends from net investment income will be
taxable to Shareholders as ordinary income whether received in cash or in
additional shares and will not qualify for the dividends-received deduction
otherwise available to corporate shareholders. Dividends from net capital gain
(the excess of net long-term capital gain over net short-term capital loss) also
will not qualify for the dividends-received deduction and will be treated as a
20% rate gain distribution (taxed at a rate of 20%) or a 28% rate gain
distribution (taxed at a rate of 28%), depending upon the designation by the
Fund (such designation being dependent upon the holding period of the Fund in
the underlying asset generating the net capital gain), regardless of how long
the Shareholder has held the Fund's shares. The Fund will make annual reports to
Shareholders of the federal income tax status of all distributions.
Dividends declared by the Fund in December of any year and payable to
Shareholders of record on a date in that month will be deemed to have been paid
by the Fund and received by the Shareholders on the last day of that month if
paid by the Fund during the following January.
Interest received on direct U.S. obligations that is exempt from tax at the
state level when received directly may be exempt, depending on the state, when
received by a Shareholder from the Fund, provided certain conditions are
satisfied. The Fund will inform Shareholders annually of the percentage of
income and distributions derived from direct U.S. obligations. Shareholders
should consult their tax advisors to determine whether any portion of the income
dividends received from the Fund is considered tax-exempt in their particular
states.
Certain securities purchased by the Fund (such as STRIPS, defined under
"Description of Permitted Investments--U.S. Treasury Obligations") are sold at
original issue discount and thus do not make periodic cash interest payments.
The Fund will be required to include as part of its current income the accreted
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
Fund securities to distribute such imputed income which may occur at a time when
the Advisor would not have chosen to sell such securities and which may result
in a taxable gain or loss.
The sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
Generally, gain or loss on the sale, exchange or redemption of a share will be
capital gain or loss which will be long-term if the share has been held for more
than eighteen months, mid-term if the share has been held for more than twelve,
but not more than eighteen months and otherwise will be short-term. 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 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
loss from the sale of a capital asset held for more than twelve months to the
extent of the amount of the prior capital gains distribution (or any
undistributed net capital gains of the Fund which 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
10
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
after the disposition of the shares). Investors should particularly note that
this loss disallowance rule will apply to shares received through the
reinvestment of dividends during the 61-day period.
GENERAL INFORMATION
The Trust
The Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated September 9, 1991. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each Fund. In
addition to the Fund, the Trust currently consists of the following funds:
Institutional Select Money Market Fund, U.S. Treasury Securities Money Market
Fund, Prime Obligation Money Market Fund, Tax-Exempt Money Market Fund, Fixed
Income Fund, New Jersey Municipal Securities Fund, Pennsylvania Municipal
Securities Fund, Intermediate-Term Government Securities Fund, Equity Growth
Fund, Equity Value Fund, Equity Income Fund, Mid Cap Fund, Balanced Fund and
International Growth Fund. Shares of the portfolios are offered through up to
four separate classes of shares (Class A, B, I and S). All consideration
received by the Trust for shares of any portfolio and all assets of such
portfolio belong to that portfolio and would be subject to liabilities related
thereto.
The Fund pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
The Advisor, in addition to providing investment advice to the Trust, provides
investment advice to other clients. Some of these clients' funds are maintained
in asset allocation accounts and may be invested in the Fund. From time to time,
the Fund may experience relatively large purchases or redemptions due to asset
allocation decisions made by the Advisor for its clients. These transactions may
have a material effect on the Fund, since the Fund may experience redemptions as
a result of reallocations and have to sell portfolio securities or since the
Fund may receive additional cash and have to invest it. While it is impossible
to predict the overall impact of these transactions over time, there could be
adverse effects on portfolio management to the extent that the Fund may be
required to sell securities at times when it would not otherwise do so, or
receive cash that cannot be invested in an expeditious manner. There may be tax
consequences associated with purchases and sales of securities, and such sales
may also increase transaction costs. The Advisor is committed to minimizing the
impact of these transactions on the Fund to the extent it is consistent with
pursuing the investment objectives of its asset allocation decisions on the
Trust's portfolios.
Trustees of the Trust
The management and affairs of the Trust are supervised by a Board of Trustees
(the "Trustees") under the laws governing business trusts in the Commonwealth of
Massachusetts. The Trustees have approved contracts under which, as described
above, certain companies provide essential management services to the Trust.
Voting Rights
Each share held entitles a Shareholder of record to one vote. The Shareholders
of each portfolio or class will vote separately on matters relating solely to
that portfolio or class. As a Massachusetts
11
<PAGE>
- --------------------------------------------------------------------------------
business trust, the Trust is not required to hold annual meetings of
Shareholders, but approval will be sought for certain changes in the operation
of the Trust and for the election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining Trustees or by Shareholders
at a special meeting called upon written request of Shareholders owning at least
10% of the outstanding shares of the Trust. In the event that such a meeting is
requested, the Trust will provide appropriate assistance and information to the
Shareholders requesting the meeting.
Reporting
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
Shareholder Inquiries
Shareholder inquiries should be directed to Summit Bank, 214 Main Street, Third
Floor, Hackensack, New Jersey 07601, Attn: Bank Investments or to the Money Desk
at 1-800-243-8550.
Dividends
The net investment income (exclusive of capital gains) of the Fund is determined
and declared on each Business Day as a dividend to Shareholders of record as of
the close of business on that day. Dividends are paid by the Fund in additional
shares on or about the first Business Day of the following month, unless the
Shareholder has elected to take such payment in cash. Shareholders may change
their election by providing written notice to the Administrator at least 15 days
prior to the distribution. Currently, capital gains of the Fund, if any, are
distributed at least annually. Redeemed shares are not entitled to dividends
declared the day the redemption order is effective.
Counsel and Independent Public Accountants
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of the permitted investments for the Fund.
ILLIQUID SECURITIES--Illiquid securities are securities which cannot be disposed
of within seven Business Days at approximately the price at which they are being
carried on the Fund's books. Not more than 10% of the net assets of the Fund
will be invested in such instruments. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, if there is no
secondary market for such security. Restricted securities, including Rule 144A
securities, that meet the criteria established by the Board of Trustees of the
Trust will be considered liquid.
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 on an agreed-upon date within a number of days
from the date of purchase. The Fund will have actual or constructive possession
of the security as collateral for the repurchase agreement. 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
securities or if the Fund realizes a loss on the sale of the collateral
securities. 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.
12
<PAGE>
- --------------------------------------------------------------------------------
April 30, 1998
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS--Investments by a money market
fund are subject to limitations imposed under regulations adopted by the SEC.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risks and that are "eligible securities," which means
that they are (i) rated, at the time of investment, by at least two nationally
recognized statistical rating organizations (one if it is the only organization
rating such obligation) in the highest short-term rating category or, if
unrated, determined to be of comparable quality (a "first tier security"), or
(ii) rated according to the foregoing criteria in the second highest short-term
rating category or, if unrated, determined to be of comparable quality ("second
tier security"). Investments in second tier securities are subject to the
further constraints that (i) not more than 5% of the Fund's assets may be
invested in second tier securities and (ii) any investment in securities of any
one such issuer is limited to the greater of 1% of the Fund's total assets or $1
million. A taxable money market fund may also hold more than 5% of its assets in
first tier securities of a single issuer for three Business Days. A security is
not considered to be unrated if its issuer has outstanding obligations of
comparable priority and maturity that have a short-term rating. The Advisor will
determine that an obligation presents minimal credit risks or that unrated
instruments are of comparable quality in accordance with guidelines established
by the Trustees. The securities that money market funds may acquire may be
supported by credit enhancements, such as demand features or guarantees. SEC
regulations limit the percentage of securities that a money market fund may hold
for which a single issuer provides credit enhancements.
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").
13
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Summary.................................2
Expense Summary.........................3
Financial Highlights....................4
The Trust...............................5
Investment Objective and Policies.......5
Investment Limitations..................6
The Advisor.............................6
The Administrator.......................6
The Transfer Agent......................7
The Shareholder Servicing Agent.........7
The Distributor.........................7
Purchase and Redemption of Shares.......7
Computation of Yield....................9
Taxes...................................9
General Information....................11
Description of Permitted Investments...12
The Pillar Funds and Pillar are
registered service marks of Summit
Bank. Your Investment Foundation and
the stylized "P" logo are service marks
of Summit Bank. Reach Higher, Summit,
Summit Bancorp and Summit Financial
Services Group are registered service
marks of Summit Bancorp. Summit
Bank is a service mark of Summit
Bancorp.
14
<PAGE>
Advisor:
[LOGO]
Distributor:
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
1-800-932-7782
PIL-F-024-02
[LOGO]
The Pillar Funds
Your Investment Foundation
[LOGO]
U.S. Treasury
Securities Plus
Money Market Fund
April 30, 1998
<PAGE>
THE PILLAR FUNDS
Investment Advisor:
Summit Bank Investment Management Division,
a division of Summit Bank
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of The
Pillar Funds (the "Trust") and should be read in conjunction with the Trust's
Prospectuses dated April 30, 1998, as may be amended or supplemented from time
to time, for the following: U.S. Treasury Securities Plus Money Market, U.S.
Treasury Securities Money Market, Prime Obligation Money Market, Institutional
Select Money Market, Tax-Exempt Money Market, Fixed Income, Intermediate-Term
Government Securities, New Jersey Municipal Securities, Pennsylvania Municipal
Securities, Balanced, Equity Growth, Equity Value, Equity Income, Mid Cap and
International Growth Funds. Prospectuses may be obtained through the
Distributor, SEI Investments Distribution Co., Oaks, PA 19456, or by calling
1-800-932-7782.
TABLE OF CONTENTS
The Trust.................................................................. S-3
Year 2000 Issue............................................................ S-4
Investment Objectives and Policies......................................... S-4
Description of Permitted Investments.............................. S-4
Investment Limitations............................................S-14
Management of the Trust....................................................S-17
Trustees and Officers.............................................S-17
The Advisor.......................................................S-20
The Sub-Advisor...................................................S-21
The Administrator.................................................S-22
Custodians........................................................S-23
Fund Transactions..........................................................S-23
Trading Practices and Brokerage...................................S-23
The Distributor and the Distribution Plans.................................S-28
Performance................................................................S-33
Computation of Yield..............................................S-33
Calculation of Total Return.......................................S-35
Purchase and Redemption of Shares..........................................S-38
Shareholder Services.......................................................S-39
Determination of Net Asset Value...........................................S-39
General Information and History............................................S-41
Description of Shares.............................................S-41
Shareholder Liability.............................................S-47
Limitation of Trustees' Liability.................................S-47
Taxes......................................................................S-47
Federal Taxes.....................................................S-47
State Taxes.......................................................S-51
Legal Matters..............................................................S-51
Experts....................................................................S-51
Financial Statements.......................................................S-51
Appendix................................................................... A-1
Description of Ratings ........................................... A-1
April 30, 1998
PIL-F-027-03
<PAGE>
The Pillar Funds and Pillar are registered service marks of Summit Bank. Your
Investment Foundation and the stylized "P" logo are service marks of Summit
Bank. Reach Higher, Summit, Summit Bancorp and Summit Discount Brokerage are
registered service marks of Summit Bancorp. Summit Bank is a service mark of
Summit Bancorp.
S - 2
<PAGE>
THE TRUST
The Trust is an open-end management investment company established under
Massachusetts law as a Massachusetts business trust under a Declaration of Trust
dated September 9, 1991. The Declaration of Trust permits the Trust to offer
separate series of units of beneficial interest ("shares") and different classes
of shares of each series. This Statement of Additional Information relates to
the shares of the Trust's:
<TABLE>
<CAPTION>
Fund Classes
---- -------
<S> <C>
U.S. Treasury Securities Plus Money Market Fund N/A
- ----------------------------------------------------------------------------------
Institutional Select Money Market Fund N/A
- ----------------------------------------------------------------------------------
U.S. Treasury Securities Money Market Fund I/A
- ----------------------------------------------------------------------------------
Tax-Exempt Money Market Fund I/A
- ----------------------------------------------------------------------------------
New Jersey Municipal Securities Fund I/A
- ----------------------------------------------------------------------------------
Pennsylvania Municipal Securities Fund I/A
- ----------------------------------------------------------------------------------
Intermediate-Term Government Securities Fund I/A
- ----------------------------------------------------------------------------------
Fixed Income Fund I/A/B
- ----------------------------------------------------------------------------------
Equity Growth Fund I/A/B
- ----------------------------------------------------------------------------------
Equity Value Fund I/A/B
- ----------------------------------------------------------------------------------
Equity Income Fund I/A/B
- ----------------------------------------------------------------------------------
International Growth Fund I/A/B
- ----------------------------------------------------------------------------------
Balanced Fund I/A/B
- ----------------------------------------------------------------------------------
Prime Obligation Money Market Fund I/A/B/S
- ----------------------------------------------------------------------------------
Mid Cap Fund I
- ----------------------------------------------------------------------------------
</TABLE>
Shareholders may purchase shares of the Funds through the different classes as
indicated above. The different classes provide for variations in distribution
and transfer agent costs, voting rights and dividends. In addition, a sales load
is imposed on the sale and/or redemption of Class A and Class B Shares of
certain of the Funds. See "Description of Shares."
S - 3
<PAGE>
YEAR 2000 ISSUE
The Trust 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 Trust 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 Trust is
in the process of asking 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 it is devoting significant resources
to prevent, and it expects its system to accommodate the year 2000 without,
material adverse consequences to the Trust. The Trust 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 Trust does business.
INVESTMENT OBJECTIVES AND POLICIES
DESCRIPTION OF PERMITTED INVESTMENTS
Asset Backed Securities. The Fixed Income, Equity Growth and Balanced Funds may
invest in asset-backed securities including company receivables, truck and auto
loans, leases, and credit card receivables. These securities, like
mortgage-backed securities, represent ownership of a pool of obligations. The
payment of principal and interest on non-mortgage asset-backed securities may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit issued by a financial institution (such as a bank or insurance company)
unaffiliated with the issuers of such securities. In addition, these issues
typically have a short to intermediate maturity structure depending on the
paydown characteristics of the underlying financial assets that are passed
through to the security holder. The purchase of non-mortgage asset-backed
securities raises risk considerations peculiar to the financing of the
instruments underlying such securities. For example, due to the manner in which
the issuing organizations may perfect their interests in their respective
obligations, there is a risk that another party could acquire an interest in the
obligations superior to that of the holders of the asset-backed securities.
Also, in most states the security interest in a motor vehicle must be noted on
the certificate of title to perfect a security interest against competing claims
of other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset-backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the asset-backed securities. Therefore, the possibility exists that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and federal laws give
the motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related asset-backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owned on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike most
other asset-backed securities, credit card receivables are unsecured obligations
of the card holder. Asset-backed securities entail prepayment risk, which may
vary depending on the type of asset but is generally less than the prepayment
risk associated with mortgage-backed securities.
The development of non-mortgage asset-backed securities is at an earlier stage
than that of mortgage-backed securities. While the market for asset-backed
securities is becoming increasingly liquid, the market for non-mortgage
asset-backed securities is not as well developed as that for mortgage-backed
securities guaranteed by government agencies or
S - 4
<PAGE>
instrumentalities. The Advisor intends to limit purchases of non-mortgage
asset-backed securities to a securities that are readily marketable at the time
or purchase.
Foreign Securities. The Fixed Income, Equity Growth and International Growth
Funds may invest in the securities of foreign issuers. In addition, the Equity
Growth, Equity Value, Equity Income, Mid Cap, Balanced and International Growth
Funds may invest in American Depositary Receipts, American Depositary Shares and
New York Shares, and each reserves the right to invest up to 25% of its assets
in foreign equity securities denominated in foreign currencies, except for the
International Growth Fund which will invest at least 65% of its assets in
foreign equity securities. The Equity Growth and International Growth Funds may
also invest in European Depositary Receipts, Continental Depositary Receipts and
Global Depositary Receipts. These instruments may subject the Funds to
investment risks that differ in some respects from those related to investments
in obligations of U.S. domestic issuers. Such risks include future adverse
political and economic developments, the possible imposition of withholding
taxes on interest or other income, possible seizure, nationalization, or
expropriation of foreign deposits, the possible establishment of exchange
controls or taxation at the source, greater fluctuations in value due to changes
in currency exchange rates, or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and interest
on such obligations. Such investments may also entail higher custodial fees and
sales commission than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks. In addition, foreign markets may be characterized by
lower liquidity, greater price volatility, less regulation and higher
transaction costs than U.S. markets.
Forward Foreign Currency Contracts. The International Growth Fund may invest in
forward foreign currency contracts. Forward foreign currency contracts involve
an obligation to purchase or sell a specified currency at a future date at a
price set at the time of the contract. Forward currency contracts do not
eliminate fluctuations in the values of portfolio securities but rather allow
the Fund to establish a rate of exchange for a future point in time.
When entering into a contract for the purchase or sale of a security in a
foreign currency, the Fund may enter into a foreign forward currency contract
for the amount of the purchase or sale price to protect against variations,
between the date the security is purchased or sold and the date on which payment
is made or received, in the value of the foreign currency relative to the United
States dollar or other foreign currency.
Also, when the Sub-Advisor anticipates that a particular foreign currency may
decline substantially relative to the United States dollar or other leading
currencies, in order to reduce
S - 5
<PAGE>
risk, the Fund may enter into a forward contract to sell, for a fixed amount,
the amount of foreign currency approximating the value of its securities
denominated in such foreign currency. With respect to any such forward foreign
currency contract, it will not generally be possible to match precisely the
amount covered by that contract and the value of the securities involved due to
changes in the values of such securities resulting from market movements between
the date the forward contract is entered into and the date it matures. In
addition, while forward currency contracts may offer protection from losses
resulting from declines in value of a particular foreign currency, they also
limit potential gains which might result from increases in the value of such
currency. The Fund will also incur costs in connection with forward foreign
currency contracts and conversions of foreign currencies into U.S. dollars.
Lower Rated Securities. The Equity Growth and International Growth Funds may
invest in lower-rated bonds commonly referred to as "junk bonds" or
high-yield/high-risk securities. These securities are rated "Ba" or lower by
Moody's Investors Service, Inc. ("Moody's") or "BB" or lower by Standard &
Poor's Ratings Group ("S&P"), Fitch Investors Services, Inc. ("Fitch"), Duff &
Phelps, Inc. ("Duff"), IBCA Limited ("IBCA") and Thomson BankWatch ("Thomson").
These ratings indicate that the obligations are speculative and may be in
default. See the Appendix for a description of the foregoing agencies' ratings.
In addition, the Funds may invest in unrated securities subject to the
restrictions stated in the Prospectus.
Certain Risk Factors Relating to High-Yield, High-Risk Securities. The
descriptions below are intended to supplement the discussion in the Prospectus
under "Risk Factors."
Growth of High-Yield Bond, High-Risk Bond Market. The widespread expansion
of government, consumer and corporate debt within the U.S. economy has made the
corporate sector more vulnerable to economic downturns or increased interest
rates. Further, an economic downturn could severely disrupt the market for lower
rated bonds and adversely affect the value of outstanding bonds and the ability
of the issuers to repay principal and interest.
Sensitivity to Interest Rate and Economic Changes. Lower rated bonds are
very sensitive to adverse economic changes and corporate developments. During an
economic downturn or substantial period of rising interest rates, highly
leveraged issuers may experience financial stress that would adversely affect
their ability to service their principal and interest payment obligations, to
meet projected business goals, and to obtain additional financing. If the issuer
of a bond defaulted on its obligations to pay interest or principal or entered
into bankruptcy proceedings, a Fund may incur losses or expenses in seeking
recovery of amounts owed to it. In addition, periods of economic uncertainty and
change can be expected to result in increased volatility of market prices of
high-yield, high-risk bonds and a Fund's net asset value.
S - 6
<PAGE>
Payment Expectations. High-yield, high-risk bonds may contain redemption or
call provisions. If an issuer exercised these provisions in a declining interest
rate market, a Fund would likely have to replace the security with a lower
yielding security, resulting in a decreased return for investors. Conversely, a
high-yield, high-risk bond's value will decrease in a rising interest rate
market, as will the value of the Fund's assets. If a Fund experiences
significant unexpected net redemptions, this may force it to sell high-yield,
high-risk bonds without regard to their investment merits, thereby decreasing
the asset base upon which expenses can be spread and possibly reducing the
Fund's rate of return.
Liquidity and Valuation. There may be little trading in the secondary
market for particular bonds, which may adversely affect a Fund's ability to
value accurately or dispose of such bonds. Adverse publicity and investor
perception, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
Legislation. Federal laws require the divestiture by federally insured
savings and loan associations of their investments in lower rated bonds and
limit the deductibility of interest by certain corporate issuers of high yield
bonds. These laws could adversely affect a Fund's net asset value and investment
practices, the secondary market for high-yield securities, the financial
condition of issuers of these securities and the value of outstanding high-yield
securities.
Taxes. The Funds may purchase debt securities (such as zero-coupon or
pay-in-kind securities) that contain original issue discount. Original issue
discount that accrues in a taxable year is treated as earned by a Fund and
therefore is subject to the distribution requirements of the Internal Revenue
Code of 1986, as amended (the "Code"). Because the original issue discount
earned by a Fund in a taxable year may not be represented by cash income, the
Funds may have to dispose of other securities and use the proceeds to make
distributions to Shareholders.
Illiquid Securities. All Funds may invest in illiquid securities up to the
limits described in the appropriate prospectus. An illiquid security is a
security which cannot be disposed of within seven days in the usual course of
business at approximately the price at which it is being carried on a Fund's
books, and includes repurchase agreements maturing in more than seven days, time
deposits with a withdrawal penalty, non-negotiable instruments and instruments
for which no market exists.
Mortgage-Backed Securities. Each of the Funds except the U.S. Treasury
Securities Money Market and U.S. Treasury Securities Plus Money Market Funds may
invest in mortgage- backed securities issued or guaranteed by U.S. Government
agencies or instrumentalities such as the Government National Mortgage
Association ("GNMA"), Fannie Mae and the Federal
S - 7
<PAGE>
Home Loan Mortgage Corporation ("FHLMC"). In addition, the Fixed Income Fund may
invest in privately issued mortgage-backed securities. Obligations of GNMA are
backed by the full faith and credit of the U.S. Government. Obligations of
Fannie Mae, FHLMC and Federal Home Loan Banks are not backed by the full faith
and credit of the U.S. Government but are considered to be of high quality since
they are considered to be instrumentalities of the United States. The market
value and interest yield of these mortgage-backed securities can vary due to
market interest rate fluctuations and early prepayments of underlying mortgages.
These securities represent ownership in a pool of federally insured mortgage
loans with a maximum maturity of 30 years. However, due to scheduled and
unscheduled principal payments on the underlying loans, these securities have a
shorter average maturity and, therefore, less principal volatility than a
comparable 30-year bond. Since prepayment rates vary widely, it is not possible
to predict accurately the average maturity of a particular mortgage-backed
security. The scheduled monthly interest and principal payments relating to
mortgages in the pool will be "passed through" to investors. Government
mortgage-backed securities differ from conventional bonds in that principal is
paid back to the certificate holders over the life of the loan rather than at
maturity. As a result, there will be monthly scheduled payments of principal and
interest. In addition, there may be unscheduled principal payments representing
prepayments on the underlying mortgages. Although these securities may offer
yields higher than those available from other types of U.S. Government
securities, mortgage-backed securities may be less effective than other types of
securities as a means of "locking in" attractive long-term rates because of the
prepayment feature. For instance, when interest rates decline, the value of
these securities likely will not rise as much as comparable debt securities due
to the prepayment feature. In addition, these prepayments can cause the price of
a mortgage-backed security originally purchased at a premium to decline in price
to its par value, which may result in a loss.
CMOs. The Fixed Income and Balanced Funds may also invest in mortgage-backed
securities issued by non-governmental entities. The mortgage-backed securities
these Funds may purchase are collateralized mortgage obligations ("CMOs") and
real estate mortgage investment conduits ("REMICs") that are rated in one of the
two top categories by S&P or Moody's and which are backed solely by GNMA
certificates or other mortgage pass-throughs issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. CMOs are securities
collateralized by mortgages, mortgage pass-throughs, mortgage "pay-through"
bonds (bonds representing an interest in a pool of mortgages where the cash flow
generated from the mortgage collateral pool is dedicated to bond repayment), and
"mortgage-backed" bonds (general obligations of the issuers payable out of the
issuers' general funds and additionally secured by a first lien on a pool of
single family detached properties). Many CMOs are issued with a number of
classes or series which have different maturities and are retired in sequence.
Investors purchasing such CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying
S - 8
<PAGE>
mortgages plus all unscheduled prepayments of principal up to a predetermined
portion of the total CMO obligation. Until that portion of such CMO obligation
is repaid, investors in the longer maturities receive interest only.
Accordingly, the CMOs in the longer maturity series are less likely than other
mortgage pass-throughs to be prepaid prior to their stated maturity. Although
some of the mortgages underlying CMOs may be supported by various types of
insurance, and some CMOs may be backed by GNMA certificates or other mortgage
pass-throughs issued or guaranteed by U.S. Government agencies or
instrumentalities, the CMOs themselves are not generally guaranteed by U.S.
Government agencies or instrumentalities.
REMICs. REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
Due to prepayments of the underlying mortgage instruments, mortgage-backed
securities do not have a known actual maturity. In the absence of a known
maturity, market participants generally refer to an estimated average life. The
Advisor believes that the estimated average life is the most appropriate measure
of the maturity of a mortgage-backed security. Accordingly, in order to
determine the average maturity of a Fund, the Advisor will use an estimate of
the average life of a mortgage-backed security. An average life estimate is a
function of an assumption regarding anticipated prepayment patterns. The
assumption is based upon current interest rates, current conditions in the
relevant housing markets and other factors. The assumption is necessarily
subjective, and thus different market participants could produce somewhat
different average life estimates with regard to the same security. There can be
no assurance that the average life as estimated by the Advisor will be the
actual average life.
Municipal Securities. The Tax-Exempt Money Market, New Jersey Municipal
Securities and Pennsylvania Municipal Securities Funds may invest in the
following:
Municipal notes consist of general obligation notes, tax anticipation notes
(notes sold to finance working capital needs of the issuer in anticipation of
receiving taxes on a future date), revenue anticipation notes (notes sold to
provide needed cash prior to receipt of expected non-tax revenues from a
specific source), bond anticipation notes, certificates of indebtedness, demand
notes and construction loan notes.
Municipal bonds consist of general obligation bonds, revenue or special
obligation bonds and private activity bonds, the interest paid on which is
excludable from federal income tax. Private activity bonds are issued by or on
behalf of states or political subdivisions thereof to finance privately-owned or
operated facilities for business and manufacturing, housing, sports, and
pollution control and to finance activities of and facilities for charitable
institutions. Private activity bonds are also used to finance public facilities
such as airports, mass transit
S - 9
<PAGE>
systems, ports, parking and low-income housing. The payment of the principal and
interest on private activity bonds is not backed by a pledge of tax revenues and
is dependent solely on the ability of the facility's operator to meet its
financial obligations and may be secured by a pledge of real and personal
property so financed.
The Funds may also purchase variable and floating rate demand notes and
synthetic variable rate demand notes. Investments in such floating rate
instruments will normally involve industrial development or revenue bonds which
provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate) at a major commercial bank, and
that the Fund involved can demand payment of the obligation at all times or at
stipulated dates on short notice (not to exceed 30 days) at par plus accrued
interest. Such obligations are frequently secured by letters of credit or other
credit support arrangements provided by banks. The Advisor will monitor the
earning power, cash flow and liquidity ratios of the issuers of such instruments
and the ability of an issuer of a demand instrument to pay principal and
interest on demand. The Funds may also purchase participation interests in
municipal securities (such as industrial development bonds and municipal
lease/purchase agreements). A participation interest gives the Fund an undivided
interest in the underlying municipal security. If it is unrated, the
participation interest will be backed by an irrevocable letter of credit or
guarantee of a creditworthy financial institution or the payment obligation
otherwise will be collateralized by U.S. Government securities. Participation
interests may have fixed, variable or floating rates of interest and may include
a demand feature. A participation interest without a demand feature or a
participation interest or demand note with a demand feature exceeding seven days
may be deemed to be an illiquid security subject to each Fund's investment
limitations restricting its purchases of illiquid securities to not more than
15% (10% with respect to the Tax-Exempt Money Market Fund) of its total assets.
The Advisor may purchase other types of tax-exempt instruments as long as they
are of a quality equivalent to the bond or commercial paper ratings applicable
to each Fund and satisfy other applicable requirements.
New Jersey Municipal Securities and Special Considerations Relating Thereto. The
New Jersey Municipal Securities Fund invests primarily in the obligations of New
Jersey State government and various local governments, including counties,
cities, special districts, agencies and authorities. In general, the credit
quality and credit risk of any issuer's debt depend on the state and local
economy, the health of the issuer's finances, the amount of the issuer's debt,
the quality of management, and the strength of legal provisions in debt
documents that protect debt holders. Credit risk is usually lower wherever the
economy is strong, growing and diversified; financial operations are sound; and
the debt burden is reasonable.
The average rating among American states for full faith and credit state debt is
"Aa" and "AA" by Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group, respectively.
S - 10
<PAGE>
Against this measure and the criteria listed above, the credit risk associated
with direct obligations of the State of New Jersey and state agencies, including
general obligation and revenue bonds, and lease debt, compares very favorably.
For most of the last two decades, the State's general obligation bonds have
enjoyed the highest rating by either Moody's Investors Service, Inc. or Standard
& Poor's. In the early 1990s, however, both Moody's and Standard & Poor's both
slightly downgraded the State's credit rating to the high "AA" level due to an
economy and state finances weakened by recession. In general, New Jersey's high
credit quality over time reflects the strong growth and diversification of its
economy, a moderate debt position, wealth levels much higher than the national
average, and a historically sound and stable financial position.
New Jersey's economy continues to gradually emerge from the depths of the
1990-92 national recession. Between 1989 and 1992, the State lost 8.7% of its
employment total or about one job in 12. Significant job losses occurred in the
construction, manufacturing, wholesale and retail trades, and in financial and
real estate services. The only sectors to experience growth during the period
were the healthcare and government sectors. Unemployment rates exceeded the
national averages and reached a high of 9.8% in July of 1992. Economic variables
indicate a slowly improving New Jersey economy, as evidenced by a decrease in
the unemployment rate since 1993. However, this progress could be mitigated by
layoffs in the pharmaceutical industry and AT&T, New Jersey's largest employer.
The most recent cyclical weakening of the New Jersey economy follows an
unprecedented period of diversification and growth for the State in the 1980s.
Like many other northeastern and "rust-belt" states, New Jersey's economy
declined during the 1970s. This set the stage for a remarkable period of
transformation in the 1980s. The State economy changed from a
manufacturing-dominated base to an economy balanced among manufacturing, trade
and services, closely mirroring the U.S. economy. Population growth exceeded the
regional average during this time, and growth in employment and income outpaced
the U.S. average. This growth occurred not only in the developed northeastern
and Delaware River Valley areas, but also in central New Jersey around Princeton
and the Atlantic coastal region. Despite the recession of 1990 to 1992, New
Jersey remains a wealthy state, and continues to be the second wealthiest after
Connecticut. Per capita state income is over a third higher than the U.S.
average.
The State's debt burden is moderate in relation to the State's wealth and
resources, but has increased significantly since 1991 as the State has financed
capital outlays previously funded out of current revenues and stepped up debt
issuance to stimulate a weakened economy. Tax-supported debt as measured against
income and population is close to average levels among the states. Debt
retirement is rapid even though debt service has a modest claim on State
revenues. New debt issuance is expected to be manageable.
S - 11
<PAGE>
After a decade of sound financial operations in the 1980s, characterized by
robust increases in revenues and fund balances, the State faced several years of
budgetary distress in the early 1990s. Declining tax revenues and swelling
expenditures for Medicaid, public assistance, and corrections generated repeated
budget gaps that the State was able to close only by utilizing non-recurring
revenue sources. Continued high credit quality will depend on the resolve of
State leaders and taxpayers to maintain fiscal balance while diminishing a
reliance on one-time revenue sources. Most recently an improving state and
national economy has resulted in increased revenues and some moderation in
budgeting strain. However, the significant income tax cuts recently enacted in
the State may prove to strain state finances if an economic slowdown were to
occur.
A positive credit factor for local government in New Jersey is the strong State
oversight of local government operations. The State can and has seized control
of mismanaged jurisdictions. In general, the high level of wealth and the strong
economic base in the State have resulted in credit quality for local government
that is among the highest in the U.S. In addition, the State guarantees the debt
service of many local government bond issues. As state finances remain under
pressure, however, local governments may see levels of state aid reduced, a
development that could result in a dilution of local credit quality. Successful
tax appeals by property owners in many municipalities have also reduced revenues
for some local governments.
Despite the strengths of New Jersey credit quality, there are risks. New Jersey
has a number of older urban centers, including Newark and Camden, that present a
continuing vulnerability with respect to economic and social problems. The State
is facing educational finance reforms which could affect the credit quality of
certain school districts as well as state financial operations. State taxes were
increased in 1990 to balance the State's budget and then reduced in 1992 after a
"taxpayer revolt" reversed the political power balance in the state legislature.
Finally, overbuilding in the residential and commercial real estate sector has
weakened property values as well as the general health of the construction
industry and related financial institutions.
Pennsylvania Municipal Securities and Special Considerations Relating Thereto.
The Pennsylvania Municipal Securities Fund invests primarily in the obligations
of Pennsylvania state government, state agencies and various local governments,
including counties, cities, townships, special districts, and authorities. In
general, the credit quality and credit risk of any issuer's debt depend on the
state and local economy, the health of the issuer's finances, the amount of the
issuer's debt, the quality of management, and the strength of legal provisions
in debt documents that protect debt holders. Credit risk is usually lower
wherever the economy is strong, growing and diversified; financial operations
are sound; and the debt burden is reasonable.
S - 12
<PAGE>
The average rating among American states for full faith and credit state debt is
"Aa" and "AA" by Moody's Investors Service, Inc. and Standard & Poor's Ratings
Group, respectively. Against this measure and the criteria listed above, the
credit risk associated with direct obligations of Pennsylvania and state
agencies, including general obligation and revenue bonds, lease debt, and notes,
compares slightly unfavorably. During most of the last two decades,
Pennsylvania's general obligation bonds have been rated just below this average
by both rating agencies. Nonetheless, during this period Pennsylvania's
obligations could still be characterized as providing upper medium grade
security, with a strong capacity for timely repayment of debt. Recently, the
State's rating was upgraded by Moody's Investors Service and the State now has
ratings of "Aa3"/"AA-".
Factors contributing positively to credit quality in Pennsylvania include a
favorable debt structure, a diversifying economic base, and conservatively
managed financial operations on the part of state government. Tax-supported debt
is only slightly above average state levels on a per capita basis and as a
percent of state personal income. Over the past two decades, this debt burden
has improved considerably in Pennsylvania, and debt continues to be rapidly
retired, while state borrowing plans are modest.
In the past twenty years, Pennsylvania's economy has undergone a healthy, though
traumatic, transformation. Manufacturing employment has declined from 35% of
total state employment in 1970 to 17.9% of total employment in 1995, only
slightly above the U.S. average. Growth in service sector jobs offset the loss
of manufacturing jobs, and Pennsylvania's economy is now much more closely
aligned with the national economy. In the future, economic booms and busts
should be milder than in the past and more closely follow national averages. The
positive change in the economy has not been without costs. Growth levels in
employment, population and personal income lagged behind U.S. averages in the
1980s. During this period, per capita personal income slipped to about the U.S.
average. Many communities dominated by a single industry were particularly hurt,
and recent growth in the state economy has bypassed much of the state outside of
the immediate Philadelphia and Pittsburgh metropolitan areas. As a result, the
credit quality of these areas is often marginal.
During the 1991-1992 national economic recession, Pennsylvania fared a bit worse
than the U.S. average, but better than many neighboring Northeastern and
Mid-Atlantic states. Led by continuing declines in manufacturing, employment
decreased about 4%, or double the U.S. loss rate. Pennsylvania has subsequently
experienced economic recovery in line with the U.S. More recently, the State's
economy has shown some growth with current unemployment rates approximating
those of the nation.
Fiscally, Pennsylvania has historically maintained balanced budgets, a result of
sound and conservative budgeting policies. During the period of economic growth
in the late 1980s, operating surpluses were recorded, and a "rainy day" fund was
established. That recent
S - 13
<PAGE>
recession tested these policies, but the Commonwealth emerged from the recession
with its finances and credit quality intact. In 1990 and 1991, as the recession
worsened, budget balances were eliminated, and the Commonwealth ended fiscal
1991 in a deficit position. However, a combination of expenditure restraint and
broad-based tax increases enabled the Commonwealth to end 1992 with a surplus.
Finances are now stable and healthy, and the State has a comfortable accumulated
surplus. Due to this improvement, cash flow borrowing has been substantially
reduced. Tax revenue is coming in above forecasted levels.
The risk factors in Pennsylvania's credit quality may be summarized as slow
growth, an aging population, average income, and a continuing challenge to
maintain balanced budgets. In addition, a number of local governments in the
Commonwealth, most notably Philadelphia, face continuing fiscal stress, and were
unable to address serious economic, social and healthcare problems within
revenue constraints. Philadelphia's credit prospects have recently improved
significantly but remain a challenge to the credit quality of Pennsylvania,
longer term.
INVESTMENT LIMITATIONS
The following investment limitations are fundamental policies of each Fund which
cannot be changed with respect to a Fund without the consent of the holders of a
majority of that Fund's outstanding shares. The term "majority of the
outstanding shares" means the vote of (i) 67% or more of a Fund's shares present
at a meeting, if more than 50% of the outstanding shares of a Fund are present
or represented by proxy, or (ii) more than 50% of a Fund's outstanding shares,
whichever is less.
Each Fund may not:
1. Acquire more than 10% of the voting securities of any one issuer, with the
exception of the International Growth Fund which may invest more than 5% of
its total assets in the securities of a single issuer.
2. Invest in companies for the purpose of exercising control; provided, that
this limitation does not apply to the Equity Growth Fund.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 10% 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
S - 14
<PAGE>
included for temporary liquidity or emergency purposes. All borrowings in
excess of 5% of the value of a Fund's total assets 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 10% 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,
futures contracts, commodities or commodities contracts; provided that this
shall not prevent a Fund from investing in readily marketable securities of
issuers which own or invest in real estate, or commodities or commodities
contracts; and provided that the Equity Growth Fund and the International
Growth Fund can invest in futures contracts, commodities and commodities
contracts.
6. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits
as necessary for the clearance of security transactions.
7. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a Fund security.
8. 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. Under these rules and regulations, as
currently in effect, a Fund is prohibited from acquiring the securities of
other investment companies if, as a result of such acquisition, the Fund
owns more than 3% of the total voting stock of the company; securities
issued by any one investment company represent more than 5% of the Fund's
total assets; or securities (other than treasury stock) issued by all
investment companies represent more than 10% of the Fund's total assets.
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. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment advisor of the Trust owns beneficially more than 1/2 of 1% of
the shares or securities of such issuer and all such officers, trustees,
partners and directors owning more than 1/2 of 1% of such shares or
S - 15
<PAGE>
securities together own more than 5% of such shares or securities; provided
that limitation does not apply to the Equity Growth Fund.
Non-Fundamental Policies. The following investment policies are non-fundamental
policies that may be changed by the Board of Trustees without shareholder
approval.
No Fund may:
1. Invest in interests in oil, gas or other mineral exploration or development
programs and oil, gas or mineral leases; provided that this limitation does
not apply to the Equity Growth Fund.
2. Except for the Equity Growth Fund and the International Growth Fund, write
or purchase puts, calls, options, warrants, or combinations thereof; except
that (i) the Tax-Exempt Money Market, New Jersey Municipal Securities and
Pennsylvania Municipal Securities Funds may purchase securities subject to
a put and (ii) the Equity Value, Equity Income, Mid Cap and Balanced Funds
may purchase warrants. However, the Equity Value, Equity Income, Mid Cap
and Balanced Funds each may not invest more than 5% of its net assets in
warrants; provided that of this 5%, no more than 2% may be in warrants not
listed on the New York Stock Exchange or the American Stock Exchange.
The following non-fundamental policies are additional policies with respect to
the Equity Growth Fund only.
The Equity Growth Fund may not:
1. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment advisor of the Trust owns beneficially more than 1/2 of 1% of
the shares or securities of such issuer and all such officers, trustees,
partners and directors owning more than 1/2 of 1% of such shares or
securities together own more than 5% of such shares or securities.
2. Invest in companies for the purpose of exercising control.
The foregoing percentages apply at the time of the purchase of a security.
S - 16
<PAGE>
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
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, The Advisors' Inner Circle Fund, The Arbor Fund,
ARK Funds, Bishop Street Funds, Boston 1784 Funds(R), CoreFunds, Inc.,
CrestFunds, Inc., CUFUND, The Expedition Funds, FMB Funds, Inc., First American
Funds, Inc., First American Investment Funds, Inc., First American Strategy
Funds, Inc., HighMark Funds, Marquis Funds(R), Monitor Funds, Morgan Grenfell
Investment Trust, Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance
Series Fund, Inc., 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.
JAMES B. GRECCO - Trustee - Date of Birth: 02/17/33 - President, Grecco Auto
Body Inc. (1986 - present); President, Grecco Auto Imports, Inc. (1970 -
present); President, Joyce Motor Corp. (1979 - present); President, Grecco Auto
Leasing Inc. (1964 - present); President, Grecco Lincoln Mercury Inc. (1964 -
present).
CHRISTINE H. YACKMAN - Trustee - Date of Birth: 12/30/61 - Executive and
Corporate Officer, Edgeboro Disposal, Inc. and Affiliated Companies (1991 -
present); Officer Manager, Herbert Sand Co., Inc. (1981 - 1986).
ARTHUR L. BERMAN - Trustee - Date of Birth: 07/27/27 - President of Bertek, Inc.
(1972- 1994).
RAY KONRAD - Trustee - Date of Birth: 09/17/36 - Chairman and Chief Executive
Officer of American Compressed Gases, Inc. (1961 - present).
THOMAS D. SAYLES, Jr. -Trustee* - Date of Birth: 01/16/32 - Consultant (1995 -
present); Chairman of Summit Bank (1971-1995).
S - 17
<PAGE>
ROBERT A. NESHER - Chairman of the Board of Trustees* - Date of Birth: 08/17/46
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 Advisors' Inner Circle Fund, The Arbor Fund, Boston
1784 Funds(R), The Expedition Funds, Marquis Funds(R), 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.
KEVIN P. ROBINS - Vice President and Assistant Secretary - Date of Birth:
04/15/61 - 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.
KATHRYN L. STANTON - Vice President and Assistant Secretary - Date of Birth:
11/19/58 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.
RICHARD W. GRANT - Secretary - Date of Birth: 10/25/45 - 2000 One Logan Square,
Philadelphia, PA 19103, Partner of Morgan, Lewis & Bockius LLP (law firm),
counsel to the Trust, Administrator and Distributor.
SANDRA K. ORLOW - Vice President and Assistant Secretary - Date of Birth:
10/18/53 - Vice President and Assistant Secretary of the Administrator and
Distributor since 1983.
MARK E. NAGLE - Controller and Chief Financial Officer - Date of Birth: 10/20/59
- - 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.
TODD B. CIPPERMAN - Vice President and Assistant Secretary - Date of Birth:
02/14/66 - 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).
S - 18
<PAGE>
JOSEPH M. O'DONNELL -Vice President and Assistant Secretary - Date of Birth:
01/13/54 - 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).
LYDIA A. GAVALIS -Vice President and Assistant Secretary - Date of Birth:
06/5/64 - 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).
LYNDA J. STRIEGEL -Vice President and Assistant Secretary - Date of Birth:
10/30/48 - 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).
KATHY HEILIG -Vice President and Assistant Secretary - Date of Birth: 12/21/58 -
Treasurer of SEI Investments Company since 1997; Assistant Controller of SEI
Investments Company since 1995; Vice President of SEI Investments Company since
1991; Director of Taxes of SEI Investments Company 1987 to 1991; Tax Manager
- -Arthur Anderson LLP prior to 1987.
- --------------------
* "Interested person" within the meaning of the 1940 Act.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for Trustees who are not affiliated
with the Administrator. During the fiscal year ended December 31, 1997, the
Trust paid approximately $54,000 in fees to the unaffiliated Trustees.
Compensation of officers and Trustees of the Trust affiliated with the
Administrator is paid by the Administrator.
<TABLE>
<CAPTION>
Compensation Table
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Name of Person, Aggregate Pension or Retirement Estimated Annual Total Compensation
Position Compensation From Benefits Accrued As Benefits Upon From Registrant and
Registrant(1) Part of Fund Expenses Retirement Fund Complex Paid to
Trustees for the Fiscal
Year Ended
December 31, 1997(2)
- --------------------------------------------------------------------------------------------------------------------------
Arthur L. Berman, $12,000 N/A N/A $12,000 for services on
Trustee 1 board
- --------------------------------------------------------------------------------------------------------------------------
Ray Konrad, Trustee $12,000 N/A N/A $12,000 for services on
1 board
- --------------------------------------------------------------------------------------------------------------------------
James B. Grecco, $12,000 N/A N/A $12,000 for services on
Trustee 1 board
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
S - 19
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Name of Person, Aggregate Pension or Retirement Estimated Annual Total Compensation
Position Compensation From Benefits Accrued As Benefits Upon From Registrant and
Registrant(1) Part of Fund Expenses Retirement Fund Complex Paid to
Trustees for the Fiscal
Year Ended
December 31, 1997(2)
- --------------------------------------------------------------------------------------------------------------------------
Christine H. Yackman, $12,000 N/A N/A $12,000 for services on
Trustee 1 board
- --------------------------------------------------------------------------------------------------------------------------
Thomas D. Sayles, Jr., $6,000 N/A N/A $6,000 for services on
Trustee(3),(4) 1 board
- --------------------------------------------------------------------------------------------------------------------------
Robert A. Nesher, $0 N/A N/A $0
Trustee(3)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts do not include travel expenses.
(2) There are no other investment companies in the "Fund Complex" (as that term
is defined in the Securities and Exchange Act of 1934, as amended).
(3) Messrs. Sayles and Nesher are "interested persons" as defined in the 1940
Act.
(4) Elected to Board on August 21, 1997.
THE ADVISOR
The Trust and Summit Bank Investment Management Division, a division of Summit
Bank (the "Advisor"), have entered into an advisory agreement (the "Advisory
Agreement"). The Advisory Agreement provides that the Advisor 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.
The Advisor will not be required to bear expenses of the Trust to an extent
which would result in a Fund's inability to qualify as a regulated investment
company under provisions of the Code.
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, 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 Funds 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 Advisor,
or by the Advisor on 90 days' written notice to the Trust.
The Glass-Steagall Act restricts the securities activities of banks such as
Summit Bank, but federal regulatory authorities permit such banks to provide
investment advisory and other services to mutual funds. Should this position be
challenged successfully in court or reversed by legislation, the Trust might
have to make other investment advisory arrangements.
S - 20
<PAGE>
For the fiscal years ended December 31, 1995, 1996 and 1997, the Funds paid the
following advisory fees:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Fees Paid Fees Waived
Fund ---------------------------------------------------------------------------------------
1995 (000) 1996 1997 1995 (000) 1996 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund $1,379,851 $1,483,256 $1,647,200 $11,367 $13,685 $74,551
- -----------------------------------------------------------------------------------------------------------------------------------
Prime Obligation Money Market Fund $775,370 $1,249,323 $1,494,179 $11,245 $59,285 $58,224
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $169,810 $235,721 $249,145 $28,362 $19,962 $13,948
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Select Money Market Fund * * $9,681 * * $9,249
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Securities Plus Money $43,958 $35,739 $36,157 $41,490 $65,612 $78,082
Market Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $549,172 $548,757 $1,152,778 $116,572 $132,719 $275,261
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities Fund $68,649 $169,521 $629,451 $214,460 $117,210 $193,912
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Securities Fund $0 $0 $173,734 $18,779 $23,653 $55,630
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate-Term Government $112,419 $164,062 $159,825 $77,884 $20,823 $49,402
Securities Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund * * $809,370 * * $460,947
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value Fund $367,084 $503,319 $1,149,769 $208,115 $300,124 $610,793
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $208,394 $282,807 $587,414 $135,831 $181,061 $365,524
- -----------------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund $191,285 $228,182 $241,395 $129,856 $149,082 $151,223
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $166,657 $161,262 $133,549 $115,294 $110,920 $117,387
- -----------------------------------------------------------------------------------------------------------------------------------
International Growth Fund $15,494 $103,626 $129,179 $25,007 $30,671 $31,555
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An asterisk indicates that the Fund had not commenced operations as of the
period indicated.
THE SUB-ADVISOR
The Advisor and Wellington Management Company, LLP, which acts as investment
sub-advisor to the International Growth Fund (the "Sub-Advisor"), have entered
into a sub-advisory agreement (the "Sub-Advisory Agreement"). The Sub-Advisory
Agreement provides that the Sub-Advisor 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.
The continuance of the Sub-Advisory Agreement, after 2 years, 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
S - 21
<PAGE>
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 the Fund on not
less than 30 days', nor more than 60 days', written notice to the Sub-Advisor,
or by the Sub-Advisor on 90 days' written notice to the Trust.
For the fiscal periods ended December 31, 1995, 1996 and 1997, the Sub-Advisor
received the following fees from the Advisor:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fees Paid Fees Waived
Fund -----------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
International Growth Fund $12,151 $81,600 $96,000 $12,151 $0 $0
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ADMINISTRATOR
The Trust and SEI Fund Resources (the "Administrator") are parties to an
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 Trust 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 for
a period of five years after the date of the Agreement; thereafter shall
continue in effect for a period of three years; and thereafter for successive
periods of two years subject to review at least annually by the Trustees of the
Trust. The Administration Agreement is also subject to termination by either
party on not less than 90 days' written notice to the other party.
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(R), CoreFunds, Inc., CrestFunds, Inc., CUFUND, The
Expedition Funds, FMB Funds, Inc., First American Funds, Inc., First American
Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds,
Marquis Funds(R), Monitor Funds, Morgan Grenfell Investment Trust, Oak
Associates Funds, The
S - 22
<PAGE>
PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., 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.
For the fiscal years ended December 31, 1995, 1996 and 1997, the Funds paid the
following administrative fees:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Fees Paid Fees Waived
Fund ---------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund $794,951 $855,185 $984,420 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Prime Obligation Money Market Fund $449,500 $747,383 $887,094 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $112,391 $146,103 $150,340 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Securities Plus Money Market Fund $199,381 $235,806 $266,568 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Select Money Market Fund * * $19,094 * * $0
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $221,916 $227,160 $476,002 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities Fund $56,645 $86,863 $274,456 $33,587 $8,714 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Securities Fund $0 $0 $76,478 $ 5,076 $7,884 $6,505
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate-Term Government Securities Fund $63,435 $61,629 $69,742 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund * * $338,754 * * $0
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value Fund $153,388 $214,253 $469,484 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $91,794 $123,705 $254,120 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund $85,638 $100,599 $104,699 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $75,188 $72,586 $66,885 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
International Growth Fund $8,100 $26,860 $32,086 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSTODIANS
Summit Bank serves as the custodian of the Trust's assets. In addition,
with respect to the International Growth Fund, The Bank of California, N.A.
serves as sub-custodian for the Fund's assets maintained in foreign countries.
FUND TRANSACTIONS
TRADING PRACTICES AND BROKERAGE
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Advisor and/or Sub-Advisor 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
S - 23
<PAGE>
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 Advisor and/or Sub-Advisor generally seeks reasonably
competitive spreads or commissions, the Trust will not necessarily be paying the
lowest spread or commission available.
The money market securities in which the Funds invest 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 Advisor
and/or Sub-Advisor 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.
The Advisor and/or Sub-Advisor 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 execute transactions at best
price and execution. Best price and execution refers to 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 Advisor's and/or Sub-Advisor's determination
of what are reasonably competitive rates is based upon the professional
knowledge of the Advisor's and/or Sub-Advisor's trading department as to rates
paid and charged for similar transactions throughout the securities industry. In
some instances, the Trust pays a minimal share transaction cost when the
transaction presents no difficulty.
As described above, bonds, debentures and money market securities are bought and
sold directly with a dealer without payment of a brokerage commission. In these
instances, while there is no direct commission charged, there is a spread (the
difference between the buy and sell price) which is the equivalent of a
commission.
The Advisor and/or Sub-Advisor may allocate, out of all commission business
generated by all of the funds and accounts under management by the Advisor
and/or Sub-Advisor, brokerage business to brokers or dealers who provide
brokerage and research services. These research services include advice, either
directly or through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing of
analyses and reports concerning issuers, securities or industries; providing
information on economic factors and
S - 24
<PAGE>
trends, assisting in determining portfolio strategy, providing computer software
used in security analyses, and providing portfolio performance evaluation and
technical market analyses. Such services are used by the Advisor and/or
Sub-Advisor in connection with its investment decision-making process with
respect to one or more funds and accounts managed by it, and may not be used
exclusively with respect to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934, higher commissions may be
paid to brokers or dealers who provide brokerage and research services than to
brokers or dealers who do not provide such services if such higher commissions
are deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to brokers or dealers who
provide such brokerage and research services, the Trust believes that the
commissions paid to such brokers or dealers are not, in general, higher than
commissions that would be paid to brokers or dealers not providing such services
and that such commissions are reasonable in relation to the value of the
brokerage and research services provided. In addition, portfolio transactions
which generate commissions or their equivalent are directed to brokers or
dealers who provide daily portfolio pricing services to the Trust or who have
agreed to defray other Trust expenses such as custodian fees. Subject to best
price and execution, commissions used for pricing may or may not be generated by
the funds receiving the pricing service.
For the fiscal year ended December 31, 1997, the following commissions were paid
on brokerage transactions, pursuant to an agreement or understanding, to brokers
because of research services provided by the brokers:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Total Dollar Amount of Brokerage Commissions for Total Dollar Amount of Transactions Involving Directed
Research Services Brokerage Commissions for Research Services
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
$499,360 $651,890,616
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
S - 25
<PAGE>
The Advisor and/or Sub-Advisor 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 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
generally will 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 trust
may obtain, it is the opinion of the Advisor and/or Sub-Advisor and the Trust's
Board of Trustees that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Advisor
and/or Sub-Advisor may, at the request of the Distributor, give consideration to
sales of shares of the Trust as a factor in the selection of brokers and dealers
to execute Trust portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or Summit Discount Brokerage Co., an affiliate of the
Advisor, both of which are registered brokers or dealers, for a commission in
conformity with the 1940 Act, the Securities Exchange Act of 1934, as amended,
and rules promulgated by the Securities and Exchange Commission (the "SEC").
Under these provisions, the Distributor or Summit Discount Brokerage Co. is
permitted to receive and retain compensation for effecting portfolio
transactions for the Trust on an exchange if a written contract is in effect
between the Distributor and the Trust expressly permitting the Distributor or
Summit Discount Brokerage Co. to receive and retain such compensation. These
rules further require that commissions paid to the Distributor by the Trust 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.
S - 26
<PAGE>
For the fiscal years ended December 31, 1995, 1996 and 1997, the Funds paid the
following brokerage commissions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Brokerage Commissions Amount Paid to SEI Investments(1)
Fund ----------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund N/A N/A N/A N/A N/A $2,134
- -----------------------------------------------------------------------------------------------------------------------------------
Prime Obligation Money Market Fund N/A N/A N/A N/A $53,399 $47,306
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Securities Plus Money Market Fund N/A N/A N/A N/A $16,774 $17,304
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Select Money Market Fund * * N/A * * $2,625
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities Fund N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Securities Fund N/A N/A $5,987 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate-Term Government Securities Fund N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund * * $392,850 * * N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value Fund $210,169 $289,752 $359,684 $13,000 $6,360 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $96,146 $194,728 $269,004 $750 $1,000 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund $83,236 $129,497 $127,629 $660 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $35,560 $50,970 $57,835 $180 $1,008 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
International Growth Fund $44,707 $60,818 $61,452 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An asterisk indicates that the Fund had not commenced operations for the
period indicated.
(1) The amounts paid to SEI Investments reflect fees paid in connection with
repurchase agreement transactions.
For the fiscal years indicated, the Funds paid the following brokerage
commissions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
% of Total % of Total
Total $ Amount of Brokerage Brokerage Brokerage
Fund Total $ Amount of Brokerage Commissions Paid to Affiliated Commissions Transactions
Commissions Paid Brokers Paid to the Effected
Affiliated Through
Brokers Affiliated
Brokers
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997 1997 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money N/A N/A N/A N/A N/A N/A N/A N/A
Market Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Prime Obligation Money Market Fund N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Securities Plus Money N/A N/A N/A N/A $16,774 N/A N/A N/A
Market Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Select Money Market Fund * * N/A * * N/A * *
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S - 27
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
% of Total % of Total
Total $ Amount of Brokerage Brokerage Brokerage
Fund Total $ Amount of Brokerage Commissions Paid to Affiliated Commissions Transactions
Commissions Paid Brokers Paid to the Effected
Affiliated Through
Brokers Affiliated
Brokers
1995 1996 1997 1995 1996 1997 1997 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Income Fund $0 $0 $0 $0 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities Fund $0 $0 $0 $0 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Securities Fund $0 $0 $5,987 $0 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate-Term Government $0 $0 $0 $0 $0 $0 $0 $0
Securities Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund * * $392,850 * * $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value Fund $210,169 $289,752 $359,684 $13,100 $6,360 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $96,146 $194,728 $269,004 $750 $1,000 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund $83,236 $129,497 $127,629 $660 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $35,560 $50,970 $57,835 $180 $1,008 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
International Growth Fund $44,707 $60,818 $61,452 $0 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An asterisk indicates that the Fund had not commenced operations as of the
period indicated.
"Regular brokers or dealers" of the Trust are the ten brokers or dealers that,
during the most recent fiscal year, (i) received the greatest dollar amounts of
brokerage commissions from the Trust's portfolio transactions, (ii) engaged as
principal in the largest dollar amounts of portfolio transactions of the Trust,
or (iii) sold the largest dollar amounts of the Trust's shares. At December 31,
1997, the Balanced Fund held securities of the Trust's "regular brokers or
dealers" as follows: $709,500 in common stock of Morgan Stanley Dean Witter.
THE DISTRIBUTOR AND THE DISTRIBUTION PLANS
SEI Investments Distribution Co., a wholly owned subsidiary of SEI Investments,
and the Trust are parties to: a distribution agreement (the "Distribution
Agreement") dated February 28, 1992 which applies to Class A Shares and Class I
Shares of the Funds; a distribution and service agreement (the "Class B
Distribution Agreement") dated February 20, 1997, which applies to the Class B
Shares of the Funds; and a distribution agreement dated May 15, 1997 (the "Class
S Distribution Agreement"), which applies to the Class S Shares of the Funds.
The Distributor has an obligation to use its best efforts to distribute shares
of the Fund on a continuous basis. The Distributor receives no compensation for
distribution of Class I shares, although it does receive compensation pursuant
to a distribution plan with respect to the U.S. Treasury Securities Plus Money
Market Fund as described below.
S - 28
<PAGE>
The Distribution Agreement, the Class B Distribution Agreement and the Class S
Distribution Agreement are renewable annually and may be terminated by the
Distributor, the Qualified Trustees, or by a majority vote of the outstanding
securities of the Trust upon not more than 60 days' written notice by either
party. "Qualified Trustees" are Trustees of the Trust who are not interested
persons and have no financial interest in the Distribution Agreement, Class B
Distribution Agreement, Class S Distribution Agreement or any related agreement
or plan.
The Distribution Plan adopted by the U.S. Treasury Securities Plus Money Market
Fund shareholders (the "Distribution Plan") provides that the Trust will pay the
Distributor a fee of up to .03% of the Portfolio's average daily net assets
which the Distributor can use to compensate brokers or dealers and service
providers, including Summit Bank and its affiliates, which provide distribution
related services to shareholders or their customers who beneficially own shares
of the Fund.
The distribution plan for Class A Shares (the "Class A Distribution Plan")
provides that the Trust will pay the Distributor a fee of up to .25% of the
Class A Shares average daily net assets which the Distributor can use to
compensate brokers or dealers and service providers, including Summit Bank and
its affiliates, which provide distribution related services to Class A
shareholders or their customers who beneficially own Class A Shares.
The distribution and service plan for Class B Shares (the "Class B Distribution
Plan") provides that the Trust will pay the Distributor a Rule 12b-1 fee of up
to .75% of the Class B Shares' average daily net assets, which the Distributor
can use to compensate brokers or dealers and service providers, including Summit
Bank and its affiliates, that provide distribution-related services to Class B
Shareholders or their customers who beneficially own Class B Shares. In
addition, the Class B Distribution Plan provides that the Trust will pay the
Distributor a shareholder servicing fee of up to .25% of the Class B Shares,
average daily net assets, which the Distributor can use to compensate service
providers, including Summit Bank and its affiliates.
The distribution and service plan for Class S Shares (the "Class S Distribution
Plan") provides that the Trust will pay the Distributor a Rule 12b-1 fee of up
to .60% of the Class S Shares' average daily net assets, which the Distributor
can use to compensate brokers or dealers, including Summit Bank and its
affiliates, that provide distribution-related services to Class S Shares or
their customers who beneficially own Class S Shares.
Services under the Distribution Plan, the Class A Distribution Plan, the Class B
Distribution Plan and the Class S Distribution Plan (collectively, the "Plans")
may include establishing and maintaining customer accounts and records;
aggregating and processing purchase and redemption requests from customers;
placing net purchase and redemption orders with the Distributor; automatically
investing customer account cash balances; providing periodic statements to
customers; arranging for wires; answering customer inquiries concerning their
investments; assisting customers in changing dividend options, account
designations, and addresses; performing sub-accounting functions; processing
dividend payments from the Trust
S - 29
<PAGE>
on behalf of customers; and forwarding shareholder communications from the Trust
(such as proxies, shareholder reports, and dividend distribution and tax
notices) to these customers with respect to investments in the Trust. Certain
state securities laws may require those financial institutions providing such
distribution services to register as dealers pursuant to state law.
Although banking laws and regulations prohibit banks from distributing shares of
open-end investment companies such as the Trust, according to an opinion issued
to the staff of the SEC by the Office of the Comptroller of the Currency,
financial institutions are not prohibited from acting in other capacities for
investment companies, such as providing shareholder services. Should future
legislative, judicial or administrative action prohibit or restrict the
activities of financial institutions in connection with providing shareholder
services, the Trust may be required to alter materially or discontinue its
arrangements with such financial institutions.
The Trust has adopted each Plan in accordance with the provisions of Rule 12b-1
under the 1940 Act which regulates circumstances under which an investment
company may directly or indirectly bear expenses relating to the distribution of
its shares.
Continuance of each Plan must be approved annually by a majority of the Trustees
of the Trust and by a majority of the Qualified Trustees. Each Plan requires
that quarterly written reports of amounts spent under the respective Plan and
the purposes of such expenditures be furnished to and reviewed by the Trustees.
No Plan may be amended to increase materially the amount which may be spent
thereunder without approval by a majority of the outstanding shares of the
Trust. All material amendments of a Plan will require approval by a majority of
the Trustees of the Trust and of the Qualified Trustees.
The following Funds imposed a front-end sales charge upon their Class A shares
in the amounts shown for the fiscal years ended December 31, 1995, 1996 and
1997:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Fund Dollar Amount of Loads Dollar Amount of Loads
Retained by SEI Investments
-----------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Income Fund $54,106 $45,951 $5,218 $2,113 $6,252 $730
- ----------------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities Fund $75,388 $26,191 $17,033 $3,083 $3,531 $1,995
- ----------------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Securities Fund $560 $648 $1,877 $36 $72 $221
- ----------------------------------------------------------------------------------------------------------------------------
Intermediate-Term Government $54,745 $19,783 $0 $1,768 $2,774 $0
Securities Fund
- ----------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund * * $1,275 * * $122
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
S - 30
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Fund Dollar Amount of Loads Dollar Amount of Loads
Retained by SEI Investments
-----------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Value Fund $133,599 $57,084 $81,148 $4,978 $8,140 $9,933
- ----------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $111,481 $99,330 $75,235 $4,040 $13,726 $8,933
- ----------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund $46,673 $18,446 $1,495 $1,351 $2,605 $215
- ----------------------------------------------------------------------------------------------------------------------------
Balanced Fund $54,484 $38,379 $27,532 $1,315 $5,421 $3,510
- ----------------------------------------------------------------------------------------------------------------------------
International Growth Fund $17,356 $13,212 $830 $673 $1,868 $91
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An asterisk indicates that the Fund had not commenced operations as of the
period indicated.
The U.S. Treasury Securities Money Market Fund, Prime Obligation Money Market
Fund and Tax-Exempt Money Market Fund offer Class A Shares without a sales
charge, and therefore, no information is provided with respect to such Funds.
Class B Shares do not impose front-end sales charges. Class S Shares and Class I
Shares, the U.S. Treasury Securities Plus Money Market Fund and the
Institutional Select Money Market Fund do not impose sales charges.
The following Funds imposed a CDSC sales charge upon their Class B shares in the
amounts shown for the fiscal years ended December 31, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Fund Dollar Amount of Loads Dollar Amount of Loads
Retained by SEI Investments
-----------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prime Obligation Money Market Fund * * $ 0 * * $0
- ----------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund * * $4,845 * * $0
- ----------------------------------------------------------------------------------------------------------------------------
Equity Value Fund * * $4,796 * * $0
- ----------------------------------------------------------------------------------------------------------------------------
Equity Income Fund * * $2,783 * * $0
- ----------------------------------------------------------------------------------------------------------------------------
Balanced Fund * * $1,250 * * $0
- ----------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund * * $ 49 * * $0
- ----------------------------------------------------------------------------------------------------------------------------
International Growth Fund * * $ 0 * * $0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An asterisk indicates that the Class B Shares of the Fund had not commenced
operations as of the period indicated.
For the fiscal year ended December 31, 1997, the Class A Shares of the Funds
incurred the following distribution expenses:
S - 31
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distribution Total Distribution
Expenses Expenses (as a % Sales Expenses Printing Other
Fund of net assets) Costs Costs
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund $14,348 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Prime Obligation Money Market Fund $37,039 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $13,218 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $10,656 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities Fund $45,335 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Securities Fund $891 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate-Term Government Securities Fund $4,749 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund $425 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value Fund $30,599 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $36,993 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund $13,217 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $24,118 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
International Growth Fund $1,806 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the fiscal year ended December 31, 1997, the Class B Shares of the Funds
incurred the following distribution expenses:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distribution Total Distribution
Expenses Expenses (as a % Sales Expenses Printing Other
Fund of net assets) Costs Costs
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime Obligation Money Market Fund $0 1.00% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $1,109 1.00% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value Fund $16,331 1.00% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $23,145 1.00% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $11,123 1.00% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund $664 1.00% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
International Growth Fund $467 1.00% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the fiscal year ended December 31, 1997, the Class S Shares of the Prime
Obligation Money Market Fund incurred the following distribution expenses:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Total Total Distribution
Distribution Expenses (as a % Sales Expenses Printing Costs Other Costs
Expenses of net assets)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime Obligation Money Market Fund $18,426 .35% N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S - 32
<PAGE>
Class I Shares do not have distribution expenses.
For the fiscal year ended December 31, 1997, the U.S. Treasury Securities Plus
Money Market Fund incurred the following distribution expenses:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Total Total Distribution
Distribution Expenses (as a % Sales Expenses Printing Costs Other Costs
Expenses of net assets)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities Plus $22,842 .03% N/A N/A N/A
Money Market Fund
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE
COMPUTATION OF YIELD
Money Market Funds. From time to time the U.S. Treasury Securities Money Market,
U.S. Treasury Securities Plus Money Market, Prime Obligation Money Market,
Tax-Exempt Money Market and Institutional Select Money Market Funds advertise
their "current yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Funds refers to the income generated by an investment in a Fund
over a seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
a Fund is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this assumed
reinvestment.
The current yield of the Funds will be calculated daily based upon the seven
days ending on the date of calculation ("base period"). The yield is computed by
determining the net change (exclusive of capital changes) in the value of a
hypothetical pre-existing shareholder account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing such net change by the value
of the account at the beginning of the same period to obtain the base period
return and multiplying the result by (365/7). Realized and unrealized gains and
losses are not included in the calculation of the yield. The effective compound
yield of the Funds is determined by computing the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula: Effective Yield = [(Base
Period Return
S - 33
<PAGE>
+ 1) 365/7)] - 1. The current and the effective yields reflect the reinvestment
of net income earned daily on portfolio assets.
The Tax-Exempt Money Market Fund may also calculate its tax equivalent yield as
described under "Other Yields" below.
For the 7-day period ended December 31, 1997, the Money Market Funds' current,
effective and tax-equivalent yields were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fund Class Current Yield Effective Yield Tax-Equivalent
(%) (%) Yield
(%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund I 4.64 4.74 N/A
----------------------------------------------------------------
A 4.38 4.47 N/A
- ----------------------------------------------------------------------------------------------------------------------
Prime Obligation Money Market Fund I 5.14 5.27 N/A
----------------------------------------------------------------
A 4.88 5.00 N/A
----------------------------------------------------------------
B 1.33 1.34 N/A
----------------------------------------------------------------
S 4.79 4.90 N/A
- ----------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund I 3.22 3.27 5.37
----------------------------------------------------------------
A 2.97 3.01 4.95
- ----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Securities Plus Money Market Fund N/A 4.85 4.97 N/A
- ----------------------------------------------------------------------------------------------------------------------
Institutional Select Money Market Fund N/A 5.51 5.66 N/A
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Other Yields. The Fixed Income, New Jersey Municipal Securities, Pennsylvania
Municipal Securities, Intermediate-Term Government Securities, Equity Value,
Equity Income, Mid Cap, Balanced and International Growth Funds may advertise a
30-day yield. These figures will be based on historical earnings and are not
intended to indicate future performance. The yield of these Funds refers to the
annualized income generated by an investment in the Funds over a specified
30-day period and is shown as a percentage of the investment. In particular,
yield will be calculated according to the following formula:
Yield = 2[{(a-b)/cd + 1}6 - 1] where a = dividends and interest earned during
the period; b = expenses accrued for the period (net of reimbursement); c = the
average daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.
The tax equivalent yield for the Tax-Exempt Money Market, New Jersey Municipal
Securities and Pennsylvania Municipal Securities Funds is computed by dividing
that portion of the Fund's yield which is tax-exempt by one minus a stated
federal and/or state income tax rate and adding the product to that portion, if
any, of the Fund's yield that is not tax-exempt. (Tax equivalent yields
S - 34
<PAGE>
assume the payment of federal income taxes at a rate of 39.6% and, if
applicable, New Jersey income taxes at a rate of 6.37% and Pennsylvania income
taxes at a rate of 2.8%).
Yields are one basis upon which investors may compare the Funds with other
funds; however, yields of other funds and other investment vehicles may not be
comparable because of the factors set forth above and differences in the methods
used in valuing portfolio instruments.
The yield of these Funds fluctuates, and the annualization of a week's dividend
is not a representation by the Trust as to what an investment in the Fund will
actually yield in the future. Actual yields will depend on such variables as
asset quality, average asset maturity, the type of instruments the Fund invests
in, changes in interest rates on money market instruments, changes in the
expenses of the Fund and other factors.
For the 30-day period ended December 31, 1997 the yields on the Fixed Income
Funds were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Fund Class Current Tax Equivalent
Yield Yield
(%) (%)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed Income Fund I 5.83 N/A
--------------------------------------------
A 5.33 N/A
--------------------------------------------
B 5.22 N/A
- --------------------------------------------------------------------------------------------
New Jersey Municipal Securities Fund I 3.89 7.20
--------------------------------------------
A 3.60 6.67
- --------------------------------------------------------------------------------------------
Pennsylvania Municipal Securities Fund I 4.22 7.28
--------------------------------------------
A 3.85 6.64
- --------------------------------------------------------------------------------------------
Intermediate-Term Government Securities Fund I 5.50 N/A
--------------------------------------------
A 5.04 N/A
- --------------------------------------------------------------------------------------------
</TABLE>
CALCULATION OF TOTAL RETURN
From time to time, the Fixed Income, New Jersey Municipal Securities,
Pennsylvania Municipal Securities, Intermediate-Term Government Securities,
Equity Growth, Equity Value, Equity Income, Mid Cap, Balanced and International
Growth Funds may advertise total return on an "average annual total return"
basis and on an "aggregate total return" basis for various periods. Average
annual total return reflects the average annual percentage change in the value
of an investment in a Fund over the particular measuring period. Aggregate total
return reflects the cumulative percentage change in value over the measuring
period. Aggregate total return is computed according to a formula prescribed by
the SEC. The formula can be expressed as follows: 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 of a hypothetical
S - 35
<PAGE>
$1,000 payment made at the beginning of the designated time period as of the end
of such period or the life of the fund. The formula for calculating aggregate
total return can be expressed as (ERV/P)-1.
The calculation of total return assumes reinvestment of all dividends and
capital gains distributions on the reinvestment dates during the period and that
the entire investment is redeemed at the end of the period. In addition, the
maximum sales charge for each Fund is deducted from the initial $1,000 payment.
Total return may also be shown without giving effect to any sales charges.
Based on the foregoing, the average total returns for the Funds from inception
through December 31, 1997 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Fund Class Average Annual Total Return
-----------------------------------------------
One Year Five Ten Since
Year Year Inception(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fixed Income Fund I 7.78 6.48 ** 7.15
-----------------------------------------------------------------------
A (no load) 7.41 6.17 ** 6.85
-----------------------------------------------------------------------
A (load) 2.87 5.26 ** 6.06
-----------------------------------------------------------------------
B (no load) ** ** ** 9.61
-----------------------------------------------------------------------
B (load) ** ** ** .68
- ---------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities Fund I 6.76 5.85 ** 6.21
-----------------------------------------------------------------------
A (no load) 6.31 5.50 ** 5.83
-----------------------------------------------------------------------
A (load) 3.13 4.86 ** 5.26
- ---------------------------------------------------------------------------------------------------------------------
I 7.18 ** ** 5.04
-----------------------------------------------------------------------
Pennsylvania Municipal Securities Fund A (no load) 6.63 ** ** 4.79
-----------------------------------------------------------------------
A (load) 3.48 ** ** 4.10
- ---------------------------------------------------------------------------------------------------------------------
I 6.96 5.53 ** 5.85
-----------------------------------------------------------------------
Intermediate-Term Government Securities Fund A (no load) 6.60 5.23 ** 5.58
-----------------------------------------------------------------------
A (load) 2.36 4.37 ** 4.82
- ---------------------------------------------------------------------------------------------------------------------
I ** ** ** 14.17
-----------------------------------------------------------------------
A (no load) ** ** ** 14.13
-----------------------------------------------------------------------
Equity Growth Fund A (load) ** ** ** 7.31
-----------------------------------------------------------------------
B (no load) ** ** ** 13.39
-----------------------------------------------------------------------
B (load) ** ** ** 5.19
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
S - 36
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Fund Class Average Annual Total Return
-----------------------------------------------
One Year Five Ten Since
Year Year Inception(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Value Fund I 25.71 15.94 ** 15.23
-----------------------------------------------------------------------
A (no load) 25.51 15.62 ** 14.93
-----------------------------------------------------------------------
A (load) 18.58 14.32 ** 13.81
-----------------------------------------------------------------------
B (no load) ** ** ** 19.91
-----------------------------------------------------------------------
B (load) ** ** ** 12.01
- ---------------------------------------------------------------------------------------------------------------------
I 25.04 16.67 ** 16.17
-----------------------------------------------------------------------
Equity Income Fund A (no load) 24.68 16.38 ** 15.88
-----------------------------------------------------------------------
A (load) 17.80 15.08 ** 14.75
-----------------------------------------------------------------------
B (no load) ** ** ** 23.86
-----------------------------------------------------------------------
B (load) ** ** ** 15.58
- ---------------------------------------------------------------------------------------------------------------------
Balanced Fund I 19.68 12.36 ** 11.86
-----------------------------------------------------------------------
A (no load) 19.46 12.08 ** 11.56
-----------------------------------------------------------------------
A (load) 12.92 10.82 ** 10.48
-----------------------------------------------------------------------
B (no load) ** ** ** 20.18
-----------------------------------------------------------------------
B (load) ** ** ** 11.26
- ---------------------------------------------------------------------------------------------------------------------
I .25 ** ** 7.12
-----------------------------------------------------------------------
International Growth Fund A (no load) 0.00 ** ** 6.85
-----------------------------------------------------------------------
A (load) (5.47) ** ** 4.63
-----------------------------------------------------------------------
B (no load) ** ** ** (3.64)
-----------------------------------------------------------------------
B (load) ** ** ** (11.03)
- ---------------------------------------------------------------------------------------------------------------------
I 20.49 10.91 ** 11.37
-----------------------------------------------------------------------
Mid Cap Fund A (no load) 20.16 10.62 ** 11.09
-----------------------------------------------------------------------
A (load) 15.39 9.72 ** 10.30
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class I and Class A Shares of the Funds commenced operations on April 1,
1992, except: the New Jersey Municipal Securities Fund-Class I and Class A
Shares, commenced operations on May 4, 1992; the Pennsylvania Municipal
Securities Fund-Class I Shares and Class A Shares, commenced operations on
May 3, 1993 and May 13, 1993, respectively; the International Growth
Fund-Class I and Class A Shares, commenced operations on May 1, 1995 and
May 4, 1995, respectively; and the Equity Growth Fund-Class I and Class A
Shares, commenced operations on February 3, 1997.
Class B Shares of the Funds commenced operations as follows: Fixed Income
Fund, May 16, 1997; the Equity Growth Fund, May 21, 1997; Equity Value
Fund, May 12, 1997; the Equity Income Fund and Balanced Fund, May 8, 1997;
and the International Growth Fund, May 7, 1997.
** Not in operation during period.
S - 37
<PAGE>
The Funds' performance may from time to time be compared to other mutual funds
tracked by mutual fund rating services (such as Lipper Analytical Services) or
financial and business publications and periodicals, broad groups of comparable
mutual funds, unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs or
to other investment alternatives. The Funds may quote Morningstar, Inc., a
service that ranks mutual funds on the basis of risk-adjusted performance. The
Funds may quote Ibbotson Associates of Chicago, Illinois, which provides
historical returns of the capital markets in the U.S. The Funds may use long
term performance of these capital markets to demonstrate general long-term risk
versus reward scenarios and could include the value of a hypothetical investment
in any of the capital markets. The Funds may also quote financial and business
publications and periodicals as they relate to fund management, investment
philosophy, and investment techniques.
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
PURCHASE AND REDEMPTION OF SHARES
It is currently the Trust's policy to pay for each Fund's 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 Funds in lieu of cash. Shareholders may incur brokerage charges on the sale
of any such securities so received in payment of redemptions. However, a
shareholder will at all times be entitled to aggregate cash redemptions from all
Funds 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
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 a Fund for any period during
which the New York Stock Exchange, the Advisor and/or Sub-Advisor, the
Administrator and/or the Custodian are not open for business. The New York Stock
Exchange will not open 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; Thanksgiving; and Christmas.
S - 38
<PAGE>
In addition, as it relates to the Money Market Funds, the Federal Reserve will
not open when the following holidays are observed: Columbus Day and Veterans'
Day.
SHAREHOLDER SERVICES
Distribution Investment Option: Distributions of dividends and capital gains
made by the Funds may be automatically invested in shares of one of the Funds if
shares of the Funds are available for sale. Such investments will be subject to
initial investment minimums, as well as additional purchase minimums. A
shareholder considering the Distribution Investment Option should obtain and
read the prospectus of the other Funds and consider the differences in
objectives and policies before making any investment. This option is not
available for Cash Sweep Shareholders.
Reinstatement Privilege: In addition to a similar Class A shares' sales load
waiver described in the prospectus, a shareholder who has redeemed his or her
shares of any of the Funds has a one-time right to reinvest the redemption
proceeds in shares of any of the Funds at their net asset value as of the time
of reinvestment. Such a reinvestment must be made within 30 days of the
redemption and is limited to the amount of the redemption proceeds. Although
redemptions and repurchases of shares are taxable events, a reinvestment within
such 30-day period in the same Fund is considered a "wash sale" and results in
the inability to recognize currently all or a portion of a loss realized on the
original redemption for federal income tax purposes. The investor must notify
the transfer agent at the time the trade is placed that the transaction is a
reinvestment.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Money Market Funds is calculated by adding
the value of securities and other assets, subtracting liabilities and dividing
by the number of outstanding shares. Securities will be valued by the amortized
cost method which involves valuing a security at its cost on the date of
purchase and thereafter (absent unusual circumstances) assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuations in general market rates of interest on the value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which a security's value, as determined by this method, is higher or
lower than the price a Fund would receive if it sold the instrument. During
periods of declining interest rates, the daily yield of a Fund may tend to be
higher than a similar computation made by a company with identical investments
utilizing a method of valuation based upon market prices and estimates of market
prices for all of its portfolio securities. Thus, if the use of amortized cost
by a Fund resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in that Fund would be able to obtain a somewhat higher
yield than would result from investment in a
S - 39
<PAGE>
company utilizing solely market values, and existing investors in the Fund would
experience a lower yield. The converse would apply in a period of rising
interest rates.
The Money Market Funds' use of amortized cost and the maintenance of each Fund's
net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7
under the 1940 Act, provided that certain conditions are met. The regulations
also require the Trustees to establish procedures which are reasonably designed
to stabilize the net asset value per share at $1.00 for the Funds. Such
procedures include the determination of the extent of deviation, if any, of the
Funds current net asset value per share calculated using available market
quotations from the Funds amortized cost price per share at such intervals as
the Trustees deem appropriate and reasonable in light of market conditions and
periodic reviews of the amount of the deviation and the methods used to
calculate such deviation. In the event that such deviation exceeds 1/2 of 1%,
the Trustees are required to consider promptly what action, if any, should be
initiated, and, if the Trustees believe that the extent of any deviation may
result in material dilution or other unfair results to shareholders, the
Trustees are required to take such corrective action as they deem appropriate to
eliminate or reduce such dilution or unfair results to the extent reasonably
practicable. Such actions may include the sale of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends; redeeming shares in kind; or establishing a net
asset value per share by using available market quotations. In addition, if the
Funds incur a significant loss or liability, the Trustees have the authority to
reduce pro rata the number of shares of the Funds in each shareholder's account
and to offset each shareholder's pro rata portion of such loss or liability from
the shareholder's accrued but unpaid dividends or from future dividends while
each other Fund must annually distribute at least 90% of its investment company
taxable income.
Shares will normally be issued for cash only. Transactions involving the
issuance of shares for securities or assets other than cash will be limited to a
bona fide reorganization, statutory merger or will be limited to other
acquisitions of portfolio securities (except for municipal debt securities
issued by state political subdivisions or their agencies or instrumentalities)
which: meet the investment objectives and policies of the investment company;
are acquired for investment and not for resale; are liquid securities which are
not restricted as to transfer either by law or liquidity of market; and have a
value which is readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the American Stock Exchange, the New
York Stock Exchange or NASDAQ.
The securities of the Equity and Balanced Funds are valued by the Administrator.
The Administrator may 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
S - 40
<PAGE>
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. Although the methodology and procedures are identical, the net asset
value per share of Class I, Class A, Class B and Class S shares of the Funds may
differ because of the distribution expenses and shareholders servicing fees
charged to Class A shares, Class B shares and/or Class S shares.
A pricing service values portfolio securities, which are primarily traded on a
domestic exchange, at the last sale price on that exchange or, if there is no
recent sale, at the last current bid quotation. A Fund security that is
primarily traded on a foreign securities exchange is generally valued at its
preceding closing value on the exchange, provided that if an event occurs after
the security is so valued that is likely to have changed its value, then the
fair value of those securities will be determined through consideration of other
factors by or under the direction of the Board of Trustees. A security that is
listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for such security. For valuation
purposes, quotations of foreign securities in foreign currency are converted to
U.S. dollars equivalent at the prevailing market rate on the day of valuation.
Certain of the securities acquired by a Fund may be traded on foreign exchanges
or over-the-counter markets on days on which the Fund's net asset value is
calculated. In such cases, the net asset value of the Fund's shares may be
significantly affected on days when investors can neither purchase nor redeem
shares of the Fund.
GENERAL INFORMATION AND HISTORY
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of the Funds each of which represents an equal proportionate interest in
that Fund with each other share. Shares are entitled upon liquidation to a pro
rata share in the net assets of the Funds; shareholders have no preemptive
rights. The Declaration of Trust provides that the Trustees of the Trust may
create additional series of shares or classes of a series. 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.
The names and addresses of the holders of 5% or more of the outstanding shares
of any Fund as of April 17, 1998 and the percentage of outstanding shares of
such Fund held by such shareholders as of such date are, to Trust management's
knowledge, as follows:
S - 41
<PAGE>
<TABLE>
<CAPTION>
Percent of
Beneficial
Fund Name and Address Ownership
- ---- ---------------- ---------
<S> <C> <C>
Institutional Select Money Summit Bank 79.26%
Market Fund Attn: Patricia Kyritz
P.O. Box 821
Hackensack, NJ 07602-0821
Acct # 1181-1
Summit Asset Management 20.74%
c/o Laurie Minervini
P.O. Box 821
Hackensack, NJ 07602-0821
Acct #2283-9
U.S. Treasury Securities Summit Bank 92.87%
Money Market Fund: Attn: Patricia Kyritz
P.O. Box 821
Hackensack, NJ 07602-0821
Acct # 1181-1
Prime Obligation Summit Bank 66.04%
Money Market Fund: Attn: Patricia Kyritz
P.O. Box 821
Hackensack, NJ 07602-0821
Acct # 1181-
Summit Discount Brokerage 18.40%
Attn: Richard Jennings
1457 MacArthur Road
Whitehall, PA 18052-5787
Acct # 2016795
Summit Asset Management 9.21%
c/o Laurie Minervini
P.O. Box 821
Hackensack, NJ 07602-0821
Acct #2283-9
</TABLE>
S - 42
<PAGE>
<TABLE>
<CAPTION>
Percent of
Beneficial
Fund Name and Address Ownership
- ---- ---------------- ---------
<S> <C> <C>
Tax-Exempt Money Market Summit Bank 65.83%
Fund: Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181-1
Summit Discount Brokerage 21.42%
Attn: Richard Jennings
P.O. Box 22227
Lehigh Valley, PA 18002-2227
Acct # 2016795-2
Summit Asset Management 7.99%
c/o Laurie Minervini
P.O. Box 821
Hackensack, NJ 07602-0821
Acct #2283-9
Equity Growth Fund: Summit Bank 79.67%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182-4
Summit Bank 19.22%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118-0
Fixed Income Fund: Summit Bank 34.81%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182-4
</TABLE>
S - 43
<PAGE>
<TABLE>
<CAPTION>
Percent of
Beneficial
Fund Name and Address Ownership
- ---- ---------------- ---------
<S> <C> <C>
Summit Bank 29.66%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118-0
Summit Bank 29.44%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181-1
New Jersey Municipal Summit Bank 43.02%
Securities Fund: Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182-4
Summit Bank 7.63%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118-0
Equity Value Fund: Summit Bank 45.43%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182-4
Summit Bank 42.45%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118-0
</TABLE>
S - 44
<PAGE>
<TABLE>
<CAPTION>
Percent of
Beneficial
Fund Name and Address Ownership
- ---- ---------------- ---------
<S> <C> <C>
Equity Income Fund: Summit Bank 54.14%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182-4
Summit Bank 19.76%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118-0
Mid Cap Fund: Summit Bank 78.71%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118-0
Summit Bank 13.79%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182-4
Balanced Fund: Summit Bank 50.98%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118-0
Summit Bank
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181
</TABLE>
S - 45
<PAGE>
<TABLE>
<CAPTION>
Percent of
Beneficial
Fund Name and Address Ownership
- ---- ---------------- ---------
<S> <C> <C>
Pennsylvania Municipal Summit Bank 61.88%
Securities Fund: Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181-1
Summit Bank 35.80%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182-4
International Growth Fund: Summit Bank 45.07%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118-0
Summit Bank 25.84%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181-1
Summit Bank 17.62%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182-4
</TABLE>
Beneficial owners of 25% or more of a Fund may be deemed a "controlling person"
of such Fund within the meaning of the 1940 Act.
The Trust believes that most of the shares referred to above held by Summit Bank
were held in accounts for its fiduciary, agency or custodial customers.
S - 46
<PAGE>
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
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 advisors, 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.
TAXES
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Funds' prospectuses. No attempt has been made to present a detailed
explanation of the tax treatment of the Funds or their shareholders and the
discussion here and in the Funds' prospectuses is not intended as a substitute
for careful tax planning.
FEDERAL INCOME TAX
All Funds. In order to qualify for treatment as a regulated investment company
("RIC") under the Code, each Fund must distribute annually to its shareholders
at least the sum of 90% of its net interest income excludable from gross income
plus 90% of its investment company taxable
S - 47
<PAGE>
income (generally, net investment income plus the excess, if any, of net
short-term capital gain over net long-term capital loss) (the "Distribution
Requirement") 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 foreign currencies, 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 which the
Fund controls and which are engaged in the same, similar or related trades of
businesses.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), a
Fund will be subject to a nondeductible 4% excise tax to the extent it fails to
distribute by the end of any calendar year 98% of its ordinary income for that
year and 98% of its capital gain net income for the one-year period ending on
October 31 of that year, plus certain other amounts. Each Fund intends to make
sufficient distributions prior to the end of each calendar year to avoid
liability for federal excise tax.
Any gain or loss recognized on a sale or redemption of shares of a Fund by a
shareholder who is not a dealer in securities generally will be treated as a
long-term capital gain or loss if the shares have been held for more than
eighteen months, mid-term capital gain or loss if the shares have been held for
more than twelve, but not more than eighteen months and otherwise will be
treated as a short-term capital gain or loss.
If shares on which a capital gain distribution has been received are
subsequently sold or redeemed and such shares have been held for six months or
less, any loss recognized will be treated as a loss from the sale or exchange of
a capital asset held for more than twelve months.
Distributions from the Funds generally will not be eligible for the dividends
received deduction available to corporate shareholders.
S - 48
<PAGE>
If for any taxable year a Fund does not qualify for the special tax treatment
afforded RICs, all of the taxable income of that Fund will be subject to federal
income tax at regular corporate rates (without any deduction for distributions
to Fund shareholders). In such event, all distributions made by the Fund
(whether or not derived from tax-exempt interest) would be taxable to
shareholders as dividends to the extent of the Fund's earnings and profits, and
such dividend distributions would be eligible for the dividends received
deduction available to corporate shareholders.
Additional Consideration for the International Growth, Equity Growth and Fixed
Income Funds. Dividends and interest received by a Fund may be subject to
income, withholding or other taxes imposed by foreign countries and United
States possessions that would reduce the yield on a Fund's securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these taxes. Foreign countries generally do not impose taxes on
capital gains on investments by foreign investors. If more than 50% of the value
of a Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, a Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign and
United States possessions income taxes paid by a Fund. Pursuant to an election,
a Fund will treat those taxes as dividends paid to its shareholders. Each
shareholder will be required to include a proportionate share of those taxes in
gross income as income received from a foreign source and must treat the amount
so included as if the shareholder had paid the foreign tax directly. The
shareholder may then either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit (subject to significant
limitations) against the shareholder's federal income tax. If a Fund makes the
election, it will report annually to its shareholders the respective amounts per
share of the Fund's income from sources within, and taxes paid to, foreign
countries and United States possessions.
Additional Considerations for the Tax-Exempt Money Market, New Jersey Municipal
Securities and Pennsylvania Municipal Securities Funds (the "Tax-Exempt Funds").
As noted in the prospectuses for the Tax-Exempt Money Market, New Jersey
Municipal Securities and Pennsylvania Municipal Securities Funds,
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 a maximum rate of 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"
S - 49
<PAGE>
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 a
Tax-Exempt 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 a Tax-Exempt 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.
A Tax-Exempt 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 a Tax-Exempt Fund.
Issuers of bonds purchased by a Tax-Exempt 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.
S - 50
<PAGE>
STATE TAXES
A 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 Funds
to shareholders and the ownership of shares may be subject to state and local
taxes.
LEGAL MATTERS
Morgan Lewis & Bockius LLP serves as legal counsel to the Trust.
EXPERTS
The financial statements of the Trust, incorporated by reference into this
Statement of Additional Information, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
FINANCIAL STATEMENTS
The Trust's audited financial statements and the notes thereto and the Report of
the Independent Public Accountants dated February 6, 1998 for the fiscal year
ended December 31, 1997, relating to the financial statements and financial
highlights of the Trust are incorporated by reference herein. A copy of the
Trust's 1997 Annual Report to Shareholders must accompany delivery of this
Statement of Additional Information.
S - 51
<PAGE>
APPENDIX
DESCRIPTION OF CORPORATE BOND RATINGS
Moody's Investors Services, Inc.'s corporate bond ratings:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
A-1
<PAGE>
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a rating in the lower end of
that generic rating category.
Standard & Poor's Ratings Group's corporate bond ratings:
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only to a small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these may be outweighed by
large uncertainties or major risk exposures to adverse conditions.
The C rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this obligation
are being continued.
Debt rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The D rating also will be used upon the filing of
a bankruptcy petition of the taking of a similar action if payments on a
obligation are jeopardized.
A-2
<PAGE>
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's Investor Services, Inc.'s commercial paper ratings:
PRIME-1 - Issues rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2 - Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3 - Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Standard & Poor's Ratings Group's commercial paper ratings:
A-1 - This is the highest category and indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory and the obligation is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories.
A-3 - Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
A-3
<PAGE>
B - Issues rated B are regarded as having significant speculative
characteristics for timely payment.
C - This rating is assigned to short-term debt obligations that is
currently vulnerable to nonpayment.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
A-4
