<PAGE>
As filed with the Securities and Exchange Commission on April 30, 1999.
File No. 33-44712
File No. 811-6509
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20546
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 20 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 22 /X/
THE PILLAR FUNDS
(Exact Name of Registrant as Specified in Charter)
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, including Area Code (800) 932-7781
MARK E. NAGLE
C/O SEI INVESTMENTS COMPANY
OAKS, PENNSYLVANIA 19456
(Name and Address of Agent for Service)
COPIES TO:
RICHARD W. GRANT, ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP
1701 MARKET STREET
PHILADELPHIA, PA 19103
It is proposed that this filing will become effective (check appropriate box)
/X/ immediately upon filing pursuant to Paragraph (b)
/ / on (date) pursuant to Paragraph (b)
/ / 60 days after filing pursuant to Paragraph (a)
/ / 75 days after filing pursuant to Paragraph (a)
/ / on (date) pursuant to Paragraph (a) of Rule 485
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE PILLAR FUNDS
Class I Shares
PROSPECTUS
APRIL 30, 1999
MONEY MARKET FUNDS
U.S. TREASURY SECURITIES MONEY MARKET FUND
PRIME OBLIGATION MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
FIXED INCOME FUNDS
FIXED INCOME FUND
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
NEW JERSEY MUNICIPAL SECURITIES FUND
PENNSYLVANIA MUNICIPAL SECURITIES FUND
HIGH YIELD BOND FUND
EQUITY AND BALANCED FUNDS
EQUITY GROWTH FUND
EQUITY VALUE FUND
EQUITY INCOME FUND
EQUITY INDEX FUND
INTERNATIONAL EQUITY FUND
MID CAP FUND
BALANCED FUND
INVESTMENT ADVISOR
SUMMIT BANK
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1 of 74
<PAGE>
HOW TO READ THIS PROSPECTUS
The Pillar Funds is a mutual fund family that offers different classes of shares
in separate investment portfolios (Funds). The Funds have individual investment
goals and strategies. This prospectus gives you important information about the
Class I Shares of the Funds that you should know before investing. Please read
this prospectus and keep it for future reference.
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. IN THE INTRODUCTION SECTION, THERE IS SOME
GENERAL INFORMATION YOU SHOULD KNOW ABOUT THE FUNDS. FOR MORE DETAILED
INFORMATION ABOUT EACH FUND, PLEASE SEE:
PAGE
INSTITUTIONAL SELECT MONEY MARKET FUND XXX
U.S. TREASURY SECURITIES MONEY MARKET FUND XXX
PRIME OBLIGATION MONEY MARKET FUND XXX
TAX-EXEMPT MONEY MARKET FUND XXX
FIXED INCOME FUND XXX
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND XXX
NEW JERSEY MUNICIPAL SECURITIES FUND XXX
PENNSYLVANIA MUNICIPAL SECURITIES FUND XXX
HIGH YIELD BOND FUND XXX
EQUITY GROWTH FUND XXX
EQUITY VALUE FUND XXX
EQUITY INCOME FUND XXX
EQUITY INDEX FUND XXX
INTERNATIONAL EQUITY FUND XXX
MID CAP FUND XXX
BALANCED FUND XXX
MORE INFORMATION ABOUT RISK XXX
EACH FUND'S OTHER INVESTMENTS XXX
THE INVESTMENT ADVISOR, SUB-ADVISOR
AND PORTFOLIO MANAGERS XXX
PURCHASING, SELLING AND EXCHANGING FUND SHARES XXX
DIVIDENDS AND DISTRIBUTIONS XXX
TAXES XXX
FINANCIAL HIGHLIGHTS XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
THE PILLAR FUNDS Back Cover
Page 2 of 74
<PAGE>
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
Each Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help each
Fund achieve its goal. Still, investing in each Fund involves risk and there is
no guarantee that a Fund will achieve its goal. The investment managers'
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in a
Fund, just as you could with other investments. A FUND SHARE IS NOT A BANK
DEPOSIT AND IT IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY GOVERNMENT
AGENCY.
The value of your investment in a Fund (other than a Money Market Fund) is based
on the market value of the securities the Fund holds. These prices change daily
due to economic and other events that affect particular companies and other
issuers. These price movements, sometimes called volatility, may be greater or
lesser depending on the types of securities a Fund owns and the markets in which
they trade. The effect on a Fund of a change in the value of a single security
will depend on how widely the Fund diversifies its holdings.
THE U.S. TREASURY SECURITIES MONEY MARKET FUND, PRIME OBLIGATION MONEY
MARKET FUND, AND TAX-EXEMPT MONEY MARKET FUND TRY TO MAINTAIN A
CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS NO GUARANTEE THAT
A MONEY MARKET FUND WILL ACHIEVE THIS GOAL.
Page 3 of 74
<PAGE>
U.S. TREASURY SECURITIES MONEY MARKET FUND
FUND SUMMARY
INVESTMENT GOAL Preserve principal value and maintain a
high degree of liquidity while providing
current income
INVESTMENT FOCUS Money market instruments issued by the
U.S. Treasury
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in short-term U.S.
dollar-denominated obligations of the
U.S. Treasury and repurchase agreements
INVESTOR PROFILE Conservative investors who want to
receive income through a liquid
investment
INVESTMENT STRATEGY OF THE U.S. TREASURY SECURITIES MONEY MARKET FUND
The Fund invests exclusively in short-term U.S. dollar-denominated money market
instruments issued by the U.S. Treasury and repurchase agreements that are fully
collateralized by U.S. Treasury securities. The Fund will maintain an average
dollar weighted maturity of 60 days or less, and will only acquire securities
that have a remaining maturity of 397 days or less. The Advisor's investment
selection process seeks to increase the Fund's potential for current income
through analysis of the available yields among the Fund's permitted investments
and "positioning on the yield curve" - that is, balancing the desire to earn
attractive rates of interest with the need to maintain an appropriate maturity
level. The Advisor actively manages the maturity of the Fund based on current
market interest rates and its outlook on the various economic factors which
influence the market for short-term fixed income instruments and future interest
rate predictions.
PRINCIPAL RISKS OF INVESTING IN THE U.S. TREASURY SECURITIES MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market fund seeks to keep a
constant price per share of $1.00, you may lose money by investing in the Fund.
Page 4 of 74
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 2.46%
1994 3.44%
1995 5.05%
1996 4.53%
1997 4.55%
1998 4.70%
BEST QUARTER WORST QUARTER
1.29% 0.59%
(6/30/95) (6/30/95)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Securities Money Market Fund 4.70% 4.45% 3.97%*
</TABLE>
* Since 4/1/92
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Management Fees .35%
Other Expenses .28%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .63%
</TABLE>
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
Page 5 of 74
<PAGE>
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$64 $202 $351 $786
</TABLE>
Page 6 of 74
<PAGE>
PRIME OBLIGATION MONEY MARKET FUND
FUND SUMMARY
INVESTMENT GOAL Preserve principal value and maintain a
high degree of liquidity while providing
current income
INVESTMENT FOCUS Money market instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a broad range of short-term
high quality U.S. dollar-denominated
debt securities
INVESTOR PROFILE Conservative investors who want to
receive current income through a liquid
investment
INVESTMENT STRATEGY OF THE PRIME OBLIGATION MONEY MARKET FUND
The Fund invests in a broad range of high quality short-term U.S.
dollar-denominated money market instruments, such as obligations of the U.S.
Treasury; agencies and instrumentalities of the U.S. government; domestic and
foreign banks; domestic and foreign corporations; supranational entities; and
foreign governments. The Fund may also enter into fully collateralized
repurchase agreements. The Fund's portfolio is comprised only of short-term debt
securities that are rated in the two highest categories by nationally recognized
rating organizations or securities that the Advisor determines are of equal
quality. The Fund will maintain an average dollar weighted maturity of 90 days
or less, and will only acquire securities that have a remaining maturity of 397
days or less.
The Advisor's investment selection process seeks to increase the Fund's
potential for current income through (i) security selection; (ii) managing the
Fund's mix of government, corporate and bank obligations; and (iii) "positioning
on the yield curve" - that is, balancing the desire to earn attractive rates of
interest with the need to maintain an appropriate maturity level. Securities are
chosen based on the issuer's financial condition, the financial condition of any
person or company which guarantees the credit of the issuer, liquidity and
competitive yield. The Advisor carefully evaluates and monitors the
creditworthiness of each issuer and any person or company providing credit
support.
PRINCIPAL RISKS OF INVESTING IN THE PRIME OBLIGATION MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market
Page 7 of 74
<PAGE>
fund seeks to keep a constant price per share of $1.00, you may lose money by
investing in the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 2.65%
1994 3.67%
1995 5.40%
1996 4.83%
1997 5.02%
1998 5.02%
BEST QUARTER WORST QUARTER
1.35% 0.64%
(6/30/95) (6/30/93)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime Obligation Money Market Fund 5.02% 4.79% 4.25%*
</TABLE>
* Since 4/1/92
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Management Fees .35%
Other Expenses .28%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .63%
</TABLE>
For more information about these fees, see "Investment Advisor."
Page 8 of 74
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$64 $202 $351 $786
</TABLE>
Page 9 of 74
<PAGE>
TAX-EXEMPT MONEY MARKET FUND
SUMMARY
INVESTMENT GOAL Preserve principal value and maintain a
high degree of liquidity while providing
current income that is exempt from
federal income tax
INVESTMENT FOCUS Tax-free money market instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing substantially all of its
assets in a well diversified portfolio
of short-term municipal securities which
pay interest that is exempt from federal
income taxes
INVESTOR PROFILE Conservative taxable investors who want
to receive current income exempt from
federal taxes through a liquid
investment
INVESTMENT STRATEGY OF THE TAX-EXEMPT MONEY MARKET FUND
The Fund invests substantially all of its assets in a broad range of high
quality short-term municipal money market instruments that pay interest that is
exempt from Federal income taxes. The issuers of these securities may be state
and local governments and agencies located in any of the fifty states, the
District of Columbia, Puerto Rico and other U.S. territories and possessions.
The Fund's portfolio will be well diversified among these issuers, and will be
comprised only of short-term debt securities that are rated in the two highest
categories by nationally recognized rating organizations, or have been
determined by the Advisor to be of equal quality. The Fund will maintain an
average dollar weighted maturity of 90 days or less, and will only acquire
securities that have a remaining maturity of 397 days or less.
The Advisor's investment selection process seeks to increase the Fund's
potential for current income through a strategy that takes advantage of pricing
inefficiencies that often occur in the market for municipal securities. The
Advisor actively manages the maturity of the Fund based on current market
interest rates and its outlook on the various economic factors which influence
the market for short-term municipal instruments and future interest rate
predictions. Securities are chosen based on the issuer's financial condition,
the financial condition of any person or company which guarantees the credit of
the issuer, liquidity and competitive yield. The Fund attempts to avoid
purchasing or holding securities that are subject to a decline in credit quality
of the issue through ongoing monitoring of the credit quality of each issuer and
any person or company providing credit support.
Page 10 of 74
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE TAX-EXEMPT MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market fund seeks to keep a
constant price per share of $1.00, you may lose money by investing in the Fund.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase 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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 1.99%
1994 2.27%
1995 3.42%
1996 2.94%
1997 3.10%
1998 2.98%
BEST QUARTER WORST QUARTER
0.91% 0.45%
(6/30/95) (3/31/94)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Exempt Money Market Fund 2.98% 2.94% 2.74%*
</TABLE>
* Since 4/6/92
Page 11 of 74
<PAGE>
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- ---------------------------------------------------------------------
<S> <C>
Management Fees .35%
Other Expenses .34%
- ---------------------------------------------------------------------
Total Annual Fund Operating Expenses .69%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
Tax-Exempt Money Market Fund - Class I .65%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$70 $221 $384 $859
</TABLE>
Page 12 of 74
<PAGE>
FIXED INCOME FUND
FUND SUMMARY
INVESTMENT GOAL High level of total return, through
current income and capital appreciation,
consistent with preservation of
capital
INVESTMENT FOCUS Fixed income securities
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing in fixed income securities
issued by the U.S. government and U.S.
corporate debt obligations
INVESTOR PROFILE Investors who seek a high level of total
return consistent with the preservation
of capital
INVESTMENT STRATEGY OF THE FIXED INCOME FUND
The Fund pursues its investment goal by investing primarily in U.S. Treasury and
U.S. government agency obligations, including mortgage-backed securities, and
corporate debt securities that are rated in one of the three highest ratings
categories by a nationally recognized rating organization. The Advisor's
investment selection process begins with a top-down analysis of general economic
conditions to determine how the Fund's investments will be weighted among the
U.S. Treasury, government agency and corporate sectors. The Advisor conducts
credit analysis of the corporate issues to find companies which may be poised
for credit upgrades. In doing so, the Advisor considers not only the yields of
particular issues, but also the potential for price appreciation due to improved
credit standing of a security's issuer. The Advisor diversifies the Fund's
investments in corporate debt among the major industry sectors. The Advisor
continually monitors the sector weighting of the Fund and may sell a security
when there is a fundamental change in a company's or sector's prospects or
better investment opportunities become available. If a security's credit rating
is downgraded, the Advisor will immediately review that security and take
appropriate action, including the possible sale of that security. The Advisor
may purchase securities with any stated remaining maturity, but under normal
circumstances, the Fund will maintain a dollar-weighted average maturity of less
than 15 years. The Advisor may vary maturity if it believes interest rates will
change in the future.
PRINCIPAL RISKS OF INVESTING IN THE FIXED INCOME FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers. Generally, the Fund's fixed
income securities will decrease in value if interest rates rise and vice versa,
and the volatility of lower rated securities is even greater than that of higher
rated securities. Also, longer-term securities are generally more volatile, so
the average maturity or duration of these securities affects risk.
Page 13 of 74
<PAGE>
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
The Fund is also subject to the risk that its investment approach, which focuses
on U.S. government and corporate fixed income securities, may perform
differently than other mutual funds which focus on different fixed income market
segments or other asset classes.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 11.06%
1994 -5.66%
1995 17.76%
1996 2.94%
1997 7.78%
1998 7.80%
BEST QUARTER WORST QUARTER
6.03% -4.13%
(6/30/95) (3/31/94)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed Income Fund 7.80% 5.85% 7.25%*
Lehman Brothers Intermediate 8.42% 6.59% 7.35%**
Government/Corporate Bond Index
</TABLE>
* Since 4/1/92
** Since 4/30/92
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an
Page 14 of 74
<PAGE>
index had expenses, its performance would be lower. The Lehman Brothers
Intermediate Government/Corporate Bond Index is a widely-recognized, market
value-weighted (higher market value bonds have more influence than lower market
value bonds) index of U.S. Treasury securities, U.S. government agency
obligations, corporate debt backed by the U. S. government, fixed-rate
nonconvertible corporate debt securities, Yankee bonds and nonconvertible debt
securities issued by or guaranteed by foreign governments and agencies. All
securities in the index are rated investment grade (BBB) or higher, with
maturities of 1 to 10 years.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- ------------------------------------------------------------------------
<S> <C>
Management Fees .60%
Other Expenses .31%
- ------------------------------------------------------------------------
Total Annual Fund Operating Expenses .91%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
Fixed Income Fund - Class I .80%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$93 $290 $504 $1,120
</TABLE>
Page 15 of 74
<PAGE>
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
FUND SUMMARY
INVESTMENT GOAL Preserve principal value and maintain a
high degree of liquidity while providing
current income
INVESTMENT FOCUS Intermediate-term fixed income
obligations of the U.S. Treasury and
U.S. government agencies
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of U.S.
Treasury obligations and U.S. government
agency obligations to attempt to
maximize return while limiting risk
INVESTOR PROFILE Conservative investors who want to
receive income through a liquid
investment
INVESTMENT STRATEGY OF THE INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
The Fund attempts to invest fully in fixed income obligations issued by the U.S.
Treasury and U.S. government agencies. In selecting investments for the Fund,
the Advisor analyzes current market conditions and anticipated changes in bond
prices to attempt to obtain the highest possible yield with the least amount of
risk. The Advisor attempts to invest the Fund's assets approximately 66% in U.S.
Treasury obligations and 33% in U.S. government agency obligations. The Advisor
actively manages the maturity of the Fund's portfolio and purchases securities
with competitive yields in relation to other available securities which will
mature in three to ten years. Under normal circumstances, the Advisor
anticipates that the Fund's dollar-weighted average maturity will be
approximately three years; however, the Advisor may vary this average maturity
substantially in anticipation of a change in the interest rate environment, but
in no event will it exceed ten years. The Advisor continually monitors the
securities held by the Fund and may sell a security to adjust the maturity of
the Fund or if better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes. Generally, the Fund's fixed
income securities will decrease in value if interest rates rise and vice versa.
Also, longer-term securities are generally more volatile, so the average
maturity or duration of these securities affects risk.
Page 16 of 74
<PAGE>
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
The Fund is also subject to the risk that its investment approach, which focuses
on U.S. government fixed income securities, may perform differently than mutual
funds which focus on different fixed income market segments or other asset
classes.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 8.32%
1994 -4.85%
1995 15.00%
1996 3.26%
1997 6.96%
1998 6.60%
BEST QUARTER WORST QUARTER
4.86% -3.14%
(6/30/95) (3/31/94)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Intermediate-Term Government Securities Fund 6.60% 5.20% 5.96%*
Lehman Brothers Intermediate Government/Corporate Bond Index 8.42% 6.59% 7.35%**
</TABLE>
* Since 4/1/92
** Since 4/30/92
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers Intermediate
Government/Corporate Bond Index is a widely-recognized, market value-weighted
(higher market value bonds have more influence than lower market value bonds)
index of U.S. Treasury securities, U.S. government agency obligations, corporate
debt backed by the U. S. government, fixed-rate nonconvertible corporate debt
Page 17 of 74
<PAGE>
securities, Yankee bonds and nonconvertible debt securities issued by or
guaranteed by foreign governments and agencies. All securities in the index are
rated investment grade (BBB) or higher, with maturities of 1 to 10 years.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- ----------------------------------------------------------------------------
<S> <C>
Management Fees .60%
Other Expenses .37%
- ----------------------------------------------------------------------------
Total Annual Fund Operating Expenses .97%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
Intermediate-Term Government Securities Fund -Class I .80%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$99 $309 $536 $1,190
</TABLE>
Page 18 of 74
<PAGE>
NEW JERSEY MUNICIPAL SECURITIES FUND
FUND SUMMARY
INVESTMENT GOAL Current income exempt from both federal
and New Jersey state income tax,
consistent with preservation of capital
INVESTMENT FOCUS Tax-free New Jersey municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Invests in municipal obligations which
pay interest that is exempt from both
federal and New Jersey state income tax
INVESTOR PROFILE Conservative taxable investors who want
to receive current income exempt from
federal and New Jersey state income tax
and are willing to bear the risk of
investing in a portfolio of securities
affected by changes in economic
conditions and governmental policies
within New Jersey
INVESTMENT STRATEGY OF THE NEW JERSEY MUNICIPAL SECURITIES FUND
The Fund pursues its investment goal by investing substantially all of its
assets in municipal securities that generate income exempt from federal and
New Jersey state income taxes. These securities include securities of
municipal issuers located in New Jersey, the District of Columbia, Puerto
Rico and other U.S. territories and possessions. The Fund intends to invest
as much of its assets as possible in securities that are not subject to
federal taxes, but it may invest up to 20% of its total assets in taxable
securities, including those subject to alternative minimum tax. The Fund's
Advisor will purchase municipal securities rated in one of the three highest
rating categories by a nationally recognized rating organization and attempt
to maintain an average weighted portfolio maturity of less than 15 years. In
selecting securities for the Fund, the Advisor will consider each security's
creditworthiness, yield relative to comparable issuers and maturities,
appreciation potential and liquidity. The Advisor continually monitors the
securities held by the Fund and may sell a security to adjust the maturity of
the Fund or if better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE NEW JERSEY MUNICIPAL SECURITIES FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than
Page 19 of 74
<PAGE>
that of higher rated securities. Also, longer-term securities are generally more
volatile, so the average maturity or duration of these securities affects risk.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political occurrence affecting one or more of these
issuers, and may experience increased volatility due to its investments in those
securities.
The Fund's concentration of investments in securities of issuers located in New
Jersey subjects the Fund to economic conditions and government policies within
that state. As a result, the Fund will be more susceptible to factors which
adversely affect issuers of New Jersey obligations than a mutual fund which does
not have as great a concentration in New Jersey municipal obligations.
The Fund is also subject to the risk that its market segment, New Jersey
municipal debt securities, may underperform other fixed income market segments
or the fixed income markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 10.48%
1994 -4.12%
1995 13.57%
1996 3.42%
1997 6.76%
1998 4.79%
BEST QUARTER WORST QUARTER
5.54% -4.56%
(3/31/95) (3/31/94)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS 5-YEAR GENERAL
OBLIGATION BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New Jersey Municipal Securities Fund 4.79% 4.73% 6.00%*
Lehman Brothers 5-Year General Obligation 5.85% 5.36% 6.22%**
Bond Index
</TABLE>
* Since 5/4/92
** Since 5/31/92
Page 20 of 74
<PAGE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers 5-Year General Obligation Bond
Index is a widely-recognized, market value-weighted index of intermediate
investment grade general obligation bonds with maturities between 4 and 6 years.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- ------------------------------------------------------------------------
<S> <C>
Management Fees .60%
Other Expenses .32%
- ------------------------------------------------------------------------
Total Annual Fund Operating Expenses .92%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
New Jersey Municipal Securities Fund -Class I .80%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$94 $293 $509 $1,131
</TABLE>
Page 21 of 74
<PAGE>
PENNSYLVANIA MUNICIPAL SECURITIES FUND
FUND SUMMARY
INVESTMENT GOAL Current income exempt from both federal
and Pennsylvania state income tax,
consistent with preservation of capital
INVESTMENT FOCUS Tax-free Pennsylvania municipal
securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Invests in municipal obligations which
pay interest that is exempt from both
federal and Pennsylvania state income
tax
INVESTOR PROFILE Conservative taxable investors who want
to receive current income exempt from
federal and Pennsylvania state income
tax and are willing to bear the risk of
investing in a portfolio of securities
affected by changes in economic
conditions and governmental policies
within Pennsylvania
INVESTMENT STRATEGY OF THE PENNSYLVANIA MUNICIPAL SECURITIES FUND
The Fund pursues its investment goal by investing substantially all of its
assets in municipal securities that generate income exempt from federal and
Pennsylvania state income taxes. These securities include securities of
municipal issuers located in Pennsylvania, the District of Columbia, Puerto
Rico and other U.S. territories and possessions. The Fund intends to invest
as much of its assets as possible in securities that are not subject to
federal taxes, but it may invest up to 20% of its total assets in taxable
securities, including those subject to alternative minimum tax. The Fund's
Advisor will purchase municipal securities rated in one of the three highest
rating categories by a nationally recognized rating organization and attempt
to maintain an average weighted portfolio maturity of less than 15 years. In
selecting securities for the Fund, the Advisor will consider each security's
creditworthiness, yield relative to comparable issuers and maturities,
appreciation potential and liquidity. The Advisor continually monitors the
securities held by the Fund and may sell a security to adjust the maturity of
the Fund or if better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE PENNSYLVANIA MUNICIPAL SECURITIES FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than
Page 22 of 74
<PAGE>
that of higher rated securities. Also, longer-term securities are generally more
volatile, so the average maturity or duration of these securities affects risk.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political occurrence affecting one or more of these
issuers, and may experience increased volatility due to its investments in those
securities.
The Fund's concentration of investments in securities of issuers located in
Pennsylvania subjects the Fund to economic conditions and government policies
within that state. As a result, the Fund will be more susceptible to factors
which adversely affect issuers of Pennsylvania obligations than a mutual fund
which does not have as great a concentration in Pennsylvania municipal
obligations.
The Fund is also subject to the risk that its market segment, Pennsylvania
municipal debt securities, may underperform other fixed income market segments
or the fixed income markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1994 -2.58%
1995 11.53%
1996 3.89%
1997 7.18%
1998 4.84%
BEST QUARTER WORST QUARTER
4.77% -3.30%
(3/31/95) (3/31/94)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS 5-YEAR MUNICIPAL BOND
INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pennsylvania Municipal Securities Fund 4.84% 4.87% 5.00%*
Lehman Brothers 5-Year Municipal Bond Index 5.85% 5.22% 5.59%**
</TABLE>
* Since 5/3/93
** Since 5/31/93
Page 23 of 74
<PAGE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers 5-Year Municipal Bond Index is a
widely-recognized index of intermediate investment grade tax-exempt bonds. The
index includes general obligation bonds, revenue bonds, insured bonds and
prefunded bonds with maturities between 4 and 6 years.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------
<S> <C>
Management Fees .60%
Other Expenses .36%
- --------------------------------------------------------------------
Total Annual Fund Operating Expenses .96%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
Pennsylvania Municipal Securities Fund - Class I .80%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$98 $306 $531 $1,178
</TABLE>
Page 24 of 74
<PAGE>
HIGH YIELD BOND FUND
FUND SUMMARY
INVESTMENT GOAL Maximize total return
INVESTMENT FOCUS High-yield fixed income securities
("junk bonds")
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing the Fund's assets in another
mutual fund with an identical investment
objective
INVESTOR PROFILE Investors who want the potential for
high total return and who can tolerate
the high risk of share price volatility
INVESTMENT STRATEGY OF THE HIGH YIELD BOND FUND
The Fund pursues its investment objective through what is sometimes called a
"master-feeder" arrangement. The Fund invests substantially all of its assets in
the SEI Institutional Managed Trust (SIMT) High Yield Bond Fund. As a result,
the Fund has an indirect interest in all the securities owned by the SIMT Fund
and the Fund's investment results will be the same as those of the SIMT Fund,
adjusted for the Fund's expenses. The Advisor monitors the performance of the
SIMT Fund and may choose to invest the Fund's assets in another mutual fund or
manage the Fund directly if it determines that doing so would be in the best
interest of the shareholders.
The SIMT Fund invests directly in a portfolio of fixed income securities rated
below investment grade ("junk bonds"), including corporate bonds and debentures,
convertible and preferred securities, and zero coupon obligations. The SIMT
Fund's advisor chooses securities that offer a high current yield as well as
total return potential. The SIMT Fund's securities are diversified as to issuers
and industries. The SIMT Fund's average weighted maturity may vary, and
generally will not exceed ten years, and there is no limit on the maturity or on
the credit quality of any security.
PRINCIPAL RISKS OF INVESTING IN THE HIGH YIELD BOND FUND
The prices of the SIMT Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the SIMT Fund's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is even greater than that of higher rated securities. Also, longer-term
securities are generally more volatile, so the average maturity or duration of
these securities affects risk.
Junk bonds involve greater risks of default or downgrade and are more volatile
than investment grade securities. Junk bonds involve greater risk of price
declines than investment grade securities due to actual or perceived changes in
an issuer's creditworthiness. In addition, issuers
Page 25 of 74
<PAGE>
of junk bonds may be more susceptible than other issuers to economic downturns.
Junk bonds are subject to the risk that the issuer may not be able to pay
interest or dividends and ultimately to repay principal upon maturity.
Discontinuation of these payments could substantially adversely affect the
market value of the security.
The Fund is also subject to the risk that its market segment, junk bonds, may
underperform other fixed income market segments or the fixed income markets as a
whole. In addition, because the Fund invests indirectly in junk bonds through
another mutual fund, the Fund's investment returns depend not only on the
performance of the SIMT Fund, but also may be lower than other mutual funds that
pursue the same investment goal directly due to expenses deducted from Fund
assets at both the master and feeder levels.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1996 7.72%
1997 3.83%
1998 -5.27%
BEST QUARTER WORST QUARTER
3.77% -6.90%
(3/31/96) (9/30/98)
</TABLE>
The performance for the periods prior to 9/1/98 represents the performance of
the SIMT Fund adjusted for the expenses of the Fund.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE CS FIRST BOSTON HIGH YIELD INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -----------------------------------------------------------------------------
<S> <C> <C>
High Yield Bond Fund -5.27% 1.99%*
CS First Boston High Yield Index 0.58% 10.52%**
</TABLE>
* Since 1/11/95
** Since 1/31/95
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The CS First Boston High Yield Index is an
unmanaged, trader priced portfolio constructed to mirror the public high yield
debt market. Revisions to the Index are effected weekly. The Index reflects the
reinvestment of dividends.
Page 26 of 74
<PAGE>
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------
<S> <C>
Management Fees 1.09%
Other Expenses 4.59%
- -------------------------------------------------------------------
Total Annual Fund Operating Expenses 5.68%
</TABLE>
* This table and Example include both the fees paid by the Fund and its share of
the fees of the SIMT Fund. The Fund's total actual annual fund operating
expenses for the most recent fiscal year were less than the amount shown above
because the Advisor and other service providers to the Fund are waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Advisor or another service provider may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are as follows:
High Yield Bond Fund -Class I 1.25%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$566 $1,687 $2,792 $5,491
</TABLE>
Page 27 of 74
<PAGE>
EQUITY GROWTH FUND
FUND SUMMARY
INVESTMENT GOAL Long-term growth of capital
INVESTMENT FOCUS Large capitalization U.S. common stocks
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in a diversified portfolio of
common stocks of established U.S.
companies that demonstrate long-term
earnings growth
INVESTOR PROFILE Investors who seek growth of capital and
are willing to bear the risk of
investing in equity securities
INVESTMENT STRATEGY OF THE EQUITY GROWTH FUND
The Fund pursues its investment goal by investing primarily in common stocks of
established U.S. companies with large market capitalizations (in excess of $5
billion). In selecting investments for the Fund, the Advisor seeks to buy
companies that have consistently grown earnings above the S&P 500 earnings
growth rate and are attractively priced relative to their growth prospects. The
Advisor's investment selection process begins with a top-down analysis of
general economic conditions to determine how the investments will be weighted
among industry sectors. The Fund normally invests in all major industry sectors
represented in the S&P 500. The Advisor then conducts analysis of fundamental
growth characteristics (such as return on equity, earnings growth and
consistency, and price/earnings ratio) of the companies within those sectors to
identify stocks which are likely to appreciate in value. The Advisor continually
monitors the securities held by the Fund and may sell a security when it
achieves a designated price target, there is a fundamental change in a company's
prospects or better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE EQUITY GROWTH FUND
Since it purchases common stocks, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
The Fund is also subject to the risk that its market segment, large
capitalization growth stocks, may underperform other equity market segments or
the equity markets as a whole.
Page 28 of 74
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1998 31.81%
BEST QUARTER WORST QUARTER
20.71% -10.71%
(12/31/98) (9/30/98)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C>
Equity Growth Fund 31.81% 23.06%*
S&P 500 Index 28.60% 28.38%**
</TABLE>
* Since 2/3/97
** Since 1/31/97
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------
<S> <C>
Management Fees .75%
Other Expenses .31%
- -------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.06%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
Page 29 of 74
<PAGE>
Equity Growth Fund -Class I 1.00%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$108 $337 $585 $1,294
</TABLE>
Page 30 of 74
<PAGE>
EQUITY VALUE FUND
FUND SUMMARY
INVESTMENT GOAL Growth of capital and income
INVESTMENT FOCUS Large capitalization U.S. common stocks
which pay dividends
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in stocks which have an
above-average dividend yield relative to
the Standard & Poor's 500 Index (S&P
500) and are undervalued by the market
INVESTOR PROFILE Investors who want growth of capital and
income who can tolerate some share price
volatility
INVESTMENT STRATEGY OF THE EQUITY VALUE FUND
The Fund pursues its investment goal by investing primarily in dividend-paying
common stocks of established U.S. companies with large market capitalizations
(in excess of $5 billion). In selecting investments for the Fund, the Advisor
seeks to buy companies that are fundamentally sound but have a market price
which the Advisor believes is less than a company's intrinsic value relative to
its growth prospects. The Advisor's investment selection process begins with a
top-down analysis of general economic conditions to determine how the
investments will be weighted among industry sectors. The Fund normally invests
in all major industry sectors represented in the S&P 500. The Advisor then
conducts analysis of fundamental value characteristics (such as price/earnings
ratios that are below a company's long-term earnings growth rate, price to book
value and return on equity) of the companies within those sectors to identify
stocks which represent "bargains" with the potential to appreciate in value in
the near-term. The Advisor continually monitors the securities held by the Fund
and may sell a security when it achieves a designated price target, there is a
fundamental change in a company's prospects or better investment opportunities
become available.
PRINCIPAL RISKS OF INVESTING IN THE EQUITY VALUE FUND
Since it purchases common stocks, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
Page 31 of 74
<PAGE>
The Fund is also subject to the risk that its market segment, large
capitalization value stocks, may underperform other equity market segments or
the equity markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 6.12%
1994 -5.61%
1995 36.71%
1996 21.69%
1997 25.71%
1998 27.58%
BEST QUARTER WORST QUARTER
22.58% -10.34%
(12/31/98) (9/30/98)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund 27.58% 20.29% 16.98%*
S&P 500 Index 28.60% 24.05% 20.50%**
</TABLE>
* Since 4/1/92
** Since 4/30/92
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------------------------
<S> <C>
Management Fees .75%
Other Expenses .32%
- -------------------------------------------------------------------------------------------
Page 32 of 74
<PAGE>
Total Annual Fund Operating Expenses 1.07%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
Equity Value Fund -Class I 1.00%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$109 $340 $590 $1,306
</TABLE>
Page 33 of 74
<PAGE>
EQUITY INCOME FUND
FUND SUMMARY
INVESTMENT GOAL Growth of capital consistent with an
emphasis on current income
INVESTMENT FOCUS Dividend-paying U.S. stocks
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in stocks which have an
above-average dividend yield relative
to the Standard & Poor's 500 Index
(S&P 500)
INVESTOR PROFILE Investors who want growth of capital
and income and who can tolerate
moderate share price volatility
INVESTMENT STRATEGY OF THE EQUITY INCOME FUND
The Fund pursues its investment goal by investing primarily in dividend-paying
common stocks and other equity securities of established U.S. companies with
large market capitalizations (in excess of $5 billion). The Fund invests in
companies operating in a broad range of industries based on their ability to
grow both earnings and dividends. The Advisor's investment selection process
begins with a top-down analysis of general economic conditions to determine how
the investments will be weighted among industry sectors. The Fund normally
invests in all major industry sectors represented in the S&P 500. The Advisor
then conducts analysis of individual companies' historical earnings and dividend
trends and chooses those companies that have historical dividend yields which
are normally higher than the dividend yield of the average company in the S&P
500 or have the ability to grow their dividends in future years. The Advisor
continually monitors the securities held by the Fund and may sell a security
when it achieves a designated price target, there is a fundamental change in a
company's prospects or better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE EQUITY INCOME FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer
a decline in response. These factors contribute to price volatility, which is
the principal risk of investing in the Fund.
Page 34 of 74
<PAGE>
The Fund is also subject to the risk that its market segment, large
capitalization income stocks, may underperform other equity market segments or
the equity markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 10.27%
1994 -4.41%
1995 35.55%
1996 21.01%
1997 25.04%
1998 11.42%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
13.94% -11.67%
(12/31/98) (9/30/98)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Income Fund 11.42% 16.92% 15.45%*
S&P 500 Index 28.60% 24.05% 20.50%**
</TABLE>
* Since 4/1/92
** Since 4/30/92
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
Page 35 of 74
<PAGE>
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- ----------------------------------------------------------------------------
<S> <C>
Management Fees .75%
Other Expenses .36%
- ----------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.11%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are as
follows:
Equity Income Fund - Class I 1.00%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$113 $353 $612 $1,352
</TABLE>
Page 36 of 74
<PAGE>
EQUITY INDEX FUND
FUND SUMMARY
INVESTMENT GOAL Investment results that correspond to
the Standard & Poor's 500 Index (S&P
500)
INVESTMENT FOCUS Large capitalization U.S. common
stocks
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing the Fund's assets in another
mutual fund with an identical
investment objective
INVESTOR PROFILE Investors who want growth of capital
and who can tolerate some share price
volatility
INVESTMENT STRATEGY OF THE EQUITY INDEX FUND
The Fund pursues its investment objective through what is sometimes called a
"master-feeder" arrangement. The Fund invests substantially all of its assets
in the SEI Index Funds (SIF) S&P 500 Index Fund, a separate mutual fund with the
same investment objective. As a result, the Fund has an indirect interest in
all of the securities owned by the SIF Fund and the Fund's investment results
will be the same as those of the SIF Fund, adjusted for the Fund's expenses.
The Advisor monitors the performance of the SIF Fund and may choose to invest
the Fund's assets in another mutual fund or manage the Fund directly if it
determines that doing so would be in the best interest of the shareholders.
The SIF Fund invests exclusively in securities listed in the S&P 500, which
is comprised of 500 selected securities (mostly common stocks). The SIF
Fund's ability to replicate the performance of the S&P 500 will depend to
some extent on the size and timing of cash flows into and out of the Fund, as
well as on the level of the Fund's expenses. The SIF Fund's advisor makes no
attempt to "manage" the Fund in the traditional sense (i.e., by using
economic, financial or market analyses). However, the SIF Fund's advisor may
sell an investment if, in the judgment of the advisor, the merit of the
investment has been substantially impaired by extraordinary events or adverse
financial conditions.
PRINCIPAL RISKS OF INVESTING IN THE EQUITY INDEX FUND
Since it purchases equity securities, the SIF Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically,
the equity markets have moved in cycles, and the value of the SIF Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer
a decline in response. These factors contribute to price volatility, which is
the principal risk of investing in the SIF Fund, but also may be lower than
other mutual funds that pursue the
Page 37 of 74
<PAGE>
same investment goal directly due to expenses deducted from Fund assets at both
the master and feeder levels.
The Fund is also subject to the risk that its investment approach, which
attempts to duplicate the performance of the S&P 500, may perform differently
than other mutual funds which focus on particular equity market segments or
invest in other asset classes. In addition, because the Fund indirectly
attempts to match the performance of the S&P 500 through investing in another
mutual fund, the Fund's investment returns depend not only on the performance of
the SIF Fund, but also may be lower than other mutual funds that pursue the same
investment goal directly due to expenses deducted from Fund assets at both the
master and feeder levels. The SIF Fund may not be able to match the performance
of the S&P 500.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1989 30.87%
1990 -3.70%
1991 29.20%
1992 6.75%
1993 9.20%
1994 0.40%
1995 36.55%
1996 21.90%
1997 32.29%
1998 22.50%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <S>
19.60% -13.91%
(12/31/98) (9/30/90)
</TABLE>
The performance for the periods prior to 9/1/98 represents the performance of
the SIF Fund adjusted for the expenses of the Fund.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Index Fund 22.50% 22.05% 17.79% 20.44%*
S&P 500 Index 28.60% 24.05% 19.19% 18.26%**
</TABLE>
* Since 8/1/85
** Since 7/31/85
Page 38 of 74
<PAGE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------------
<S> <C>
Management Fees .78%
Other Expenses 3.72%
- -------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 4.50%
</TABLE>
* This table and Example include both the fees paid by the Fund and its share
of the fees of the SIF Fund. The Fund's total actual annual fund operating
expenses for the most recent fiscal year were less than the amount shown above
because the Advisor and other service providers to the Fund are waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Advisor or another service provider may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are as follows:
Equity Index Fund -Class I .80%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$451 $1,360 $2,278 $4,614
</TABLE>
Page 39 of 74
<PAGE>
INTERNATIONAL EQUITY FUND
FUND SUMMARY
Investment Goal Long-term capital appreciation
Investment Focus Common stocks of medium to large sized
companies in Europe and the Pacific
Basin
Share Price Volatility High
Principal Investment Strategy Investing in a diversified portfolio
of common stocks of companies that
have a history of consistent growth
and little or no debt
Investor Profile Investors who want capital
appreciation, who are willing to
accept the risks of international
investing and who want to diversify
their investments by investing
overseas
INVESTMENT STRATEGY OF THE INTERNATIONAL EQUITY FUND
The Fund pursues its investment goal by investing primarily in common stocks of
medium to large capitalization companies (in excess of $500 million) located in
Europe and the Pacific basin countries, including Japan. The Advisor has
engaged Vontobel USA Inc. as sub-advisor (Sub-Advisor) to manage the Fund on a
day-to-day basis. The Fund focuses on companies that have a history of
consistent growth in cash flow, sales, operating profits, returns on equity and
returns on invested capital, and little or no debt. The Fund intends to be well
diversified among industry sectors and have a low turnover ratio, generally
holding its core positions for at least two years. The Sub-Advisor continually
monitors the securities held by the Fund and may sell a security when it
achieves a designated price target, there is a fundamental change in a company's
or country's prospects or better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE INTERNATIONAL EQUITY FUND
Since it purchases common stocks, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer
a decline in response. These factors contribute to price volatility, which is
the principal risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily
Page 40 of 74
<PAGE>
affect the U.S. economy or similar issuers located in the United States. In
addition, investments in foreign countries are generally denominated in a
foreign currency. As a result, changes in the value of those currencies
compared to the U.S. dollar may affect (positively or negatively) the value of a
Fund's investments. These currency movements may happen separately from and in
response to events that do not otherwise affect the value of the security in the
issuer's home country. These various risks will be even greater for investments
in emerging market countries since political turmoil and rapid changes in
economic conditions are more likely to occur in these countries.
The medium capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these medium-sized companies may have limited product lines,
markets and financial resources, and may depend upon a relatively small
management group. Therefore, mid cap stocks may be more volatile than those of
larger companies. These securities may be traded over-the-counter or listed on
an exchange and may or may not pay dividends.
The Fund is also subject to the risk that its investment approach, which focuses
on international equity securities, may underperform other mutual funds which
invest in domestic equity market segments or the equity markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1996 11.17%
1997 0.25%
1998 8.98%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
17.08% -18.65%
(12/31/98) (9/30/98)
</TABLE>
The performance for the periods prior to 9/1/98 represents the performance of
the Fund's previous Sub-Advisor.
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Morgan Stanley EAFE Index.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C>
International Equity Fund 8.98% 7.63%*
Morgan Stanley EAFE Index 20.00% 9.39%**
</TABLE>
* Since 5/1/95
** Since 5/31/95
Page 41 of 74
<PAGE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Morgan Stanley EAFE Index is a
widely-recognized, capitalization-weighted (companies with larger market
capitalizations have more influence than those with smaller market
capitalizations) index of over 1,000 securities listed on the stock exchanges in
Europe, Australia and the Far East.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------------
<S> <C>
Management Fees 1.00%
Other Expenses .72%
- -------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.72%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor and
Sub-Advisor are waiving a portion of the fees in order to keep total operating
expenses at a specified level. The Advisor or Sub-Advisor may discontinue all
or part of this waiver at any time. With this fee waiver, the Fund's actual
total operating expenses are as follows:
International Equity Fund -Class I 1.50%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$175 $542 $933 $2,030
</TABLE>
Page 42 of 74
<PAGE>
MID CAP FUND
FUND SUMMARY
INVESTMENT GOAL Growth of capital and income
INVESTMENT FOCUS Common stocks of medium and small sized
U.S. companies
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in companies that have a
significant growth potential
INVESTOR PROFILE Investors who want growth of capital and
income and who can tolerate the share
price volatility that accompanies
investing in smaller companies
INVESTMENT STRATEGY OF THE MID CAP FUND
The Fund pursues its investment goal by investing primarily in common stocks and
other equity securities of U.S. companies with medium and small market
capitalizations (between $700 million and $7 billion). In selecting investments
for the Fund, the Advisor chooses stocks of companies that the Advisor believes
have not yet reached maturity and that have significant growth potential based
on analysis of fundamental growth characteristics (such as return on equity,
earnings growth and consistency, and price/earnings ratio). The Advisor's
investment selection process begins with a top-down analysis of general economic
conditions to determine which industry sectors have the best growth potential in
the current economic environment and how the investments will be weighted among
those industry sectors. The Fund normally invests in all major industry sectors
represented in the S&P 500. The Advisor continually monitors the securities held
by the Fund and may sell a security when it achieves a designated price target,
there is a fundamental change in a company's prospects or better investment
opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE MID CAP FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
The smaller capitalization companies the Fund invests in may be more
vulnerable to adverse business or economic events than larger, more
established companies. In particular, these small companies may have limited
product lines, markets and financial resources, and may depend upon a
relatively small management group. Therefore, small cap stocks may be more
volatile than those of larger companies. These securties may be traded over-
the-counter or listed on an exchange and may or may not pay dividends.
Page 43 of 74
<PAGE>
The Fund is also subject to the risk that its market segment, medium and small
capitalization growth stocks, may underperform other equity market segments or
the equity markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 13.22%
1994 -9.34%
1995 19.49%
1996 13.56%
1997 20.49%
1998 7.77%
BEST QUARTER WORST QUARTER
27.42% -21.32%
(12/31/98) (9/30/98)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 400 MID-CAP INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mid Cap Fund 7.77% 9.82% 10.83%*
S&P 400 Mid-Cap Index 19.12% 18.84% 18.34%**
</TABLE>
* Since 4/1/92
** Since 4/30/92
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 400 Mid-Cap Index is a widely-recognized,
capitalization-weighted (companies with larger market capitalizations have more
influence than those with smaller market capitalizations) index of 400 domestic
mid cap stocks chosen for market size, liquidity, and industry group
representation.
Page 44 of 74
<PAGE>
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- ---------------------------------------------------------------------
<S> <C>
Management Fees .75%
Other Expenses .46%
- ---------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.21%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
Mid Cap Fund -Class I .80%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$123 $384 $665 $1,466
</TABLE>
Page 45 of 74
<PAGE>
BALANCED FUND
FUND SUMMARY
INVESTMENT GOAL Growth of capital consistent with current
income
INVESTMENT FOCUS Common stocks and fixed income securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in a blended portfolio of
equity and fixed income securities
designed to help maximize the Fund's
total return in both up and down markets
INVESTOR PROFILE Investors who want total return, but who
are unwilling to tolerate the price
volatility of a fund that invests solely
in equity securities
INVESTMENT STRATEGY OF THE BALANCED FUND
The Fund pursues its investment goal by investing primarily in a blended
portfolio of U.S. common stocks and fixed income securities rated in one of the
top three ratings categories by a nationally recognized rating organization. In
selecting investments for the Fund, the Advisor purchases common stocks, as well
as fixed income securities issued by the U.S. government and its agencies and
instrumentalities and by U.S. corporations. The Advisor seeks to buy equity
securities of companies that have consistently grown their earnings per share
above the S&P 500 earnings growth rate and are attractively priced relative to
their growth prospects based on analysis of fundamental growth characteristics
(such as return on equity, earnings growth and consistency, and price/earnings
ratio). For the fixed income portion of the Fund, the Advisor conducts a
top-down analysis of general economic conditions to determine how the Fund's
investments will be weighted among the government and corporate sectors. The
Advisor conducts credit analysis of the corporate issues it buys and diversifies
the Fund's investments in corporate debt among the major industry sectors. The
Advisor attempts to manage the Fund to minimize share price declines during
falling equity markets by reallocating assets from equity investments to fixed
income investments. The Advisor's allocation of investments between equity
securities and fixed income securities is designed to maintain a portfolio which
is not dependent on either the equity market or the fixed income market alone to
produce total return. The Advisor continually monitors the securities held by
the Fund and may sell a security when it achieves a designated price target,
there is a fundamental change in a company's prospects, in an effort to adjust
the weighting of the Fund's investments in equity or fixed income securities, or
better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE BALANCED FUND
Since it purchases common stocks, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the
Page 46 of 74
<PAGE>
value of the Fund's equity securities may fluctuate drastically from day-to-day.
Individual companies may report poor results or be negatively affected by
industry and/or economic trends and developments. The prices of securities
issued by such companies may suffer a decline in response. These factors
contribute to price volatility, which is the principal risk of investing in the
Fund.
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that the Advisor's asset allocation
decisions will not anticipate market trends successfully. For example, weighting
common stocks too heavily during a stock market decline may result in a failure
to preserve capital. Conversely, investing too heavily in fixed income
securities during a period of stock market appreciation may result in lower
total return. In fact, since the Fund will always have a portion of its assets
invested in fixed income securities, it may not perform as well during periods
of stock market appreciation as funds that invest only in stocks.
The Fund is also subject to the risk that its investment approach, which blends
equity and fixed income investments, may perform differently than other mutual
funds which focus on a particular market segment or other asset classes.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<CAPTION>
<S> <C>
1993 7.89%
1994 -4.61%
1995 27.76%
1996 13.77%
1997 19.68%
1998 18.65%
BEST QUARTER WORST QUARTER
16.98% -9.45%
(12/31/98) (9/30/98)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX, THE LEHMAN BROTHERS
INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX, AND A 50/50 BLEND OF THOSE TWO
INDICES.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Fund 18.65% 14.51% 12.84%*
S&P 500 Index 28.60% 24.05% 20.50%**
Lehman Brothers Intermediate 8.42% 6.59% 7.35%**
Page 47 of 74
<PAGE>
Government/Corporate Bond Index
50/50 Blend 18.85% 15.27% 13.96%**
</TABLE>
* Since 4/1/92
** Since 4/30/92
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings. The Lehman Brothers Intermediate Government/Corporate Bond
Index is a widely-recognized, market value-weighted (higher market value stocks
have more influence than lower market value stocks) index of U.S. Treasury
securities, U.S. government agency obligations, corporate debt backed by the
U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee
bonds and nonconvertible debt securities issued by or guaranteed by foreign
governments and agencies. All securities in the index are rated investment grade
(BBB) or higher, with maturities of 1 to 10 years.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------
<S> <C>
Management Fees .75%
Other Expenses .43%
- --------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.18%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
Balanced Fund -Class I Shares 1.00%
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
Page 48 of 74
<PAGE>
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$120 $375 $649 $1,432
</TABLE>
Page 49 of 74
<PAGE>
MORE INFORMATION ABOUT RISK
EQUITY RISK - Equity securities include public and privately issued equity
securities, common and preferred stocks, warrants, rights to subscribe to common
stock and convertible securities, as well as instruments that attempt to track
the price movement of equity indices. Investments in equity securities and
equity derivatives in general are subject to market risks that may cause their
prices to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, 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 mutual fund invests
will cause a fund's net asset value to fluctuate. An investment in a portfolio
of equity securities may be more suitable for long-term investors who can bear
the risk of these share price fluctuations.
Equity Growth Fund
Equity Value Fund
Equity Income Fund
Equity Index Fund
International Equity Fund
Mid Cap Fund
Balanced Fund
FIXED INCOME RISK - The market value of fixed income investments 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. 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. In addition to
these fundamental risks, different types of fixed income securities may be
subject to the following additional risks:
Fixed Income Fund
Intermediate-Term Government Securities Fund
New Jersey Municipal Securities Fund
Pennsylvania Municipal Securities Fund
High Yield Bond Fund
Balanced Fund
CALL RISK - During periods of falling interest rates,
certain debt obligations with high interest rates may be
prepaid (or "called") by the issuer prior to maturity.
This may cause a Fund's average weighted maturity to
fluctuate, and may require a Fund to invest the resulting
proceeds at lower interest rates.
Fixed Income Fund
Intermediate-Term Government Securities Fund
New Jersey Municipal Securities Fund
Pennsylvania Municipal Securities Fund
High Yield Bond Fund
Balanced Fund
CREDIT RISK - The possibility that an issuer will be
unable to make timely payments of either principal or
interest.
Fixed Income Fund
Intermediate-Term Government Securities Fund
New Jersey Municipal Securities Fund
Pennsylvania Municipal Securities Fund
High Yield Bond Fund
Balanced Fund
Page 50 of 74
<PAGE>
EVENT RISK - Securities may suffer declines in credit
quality and market value due to issuer restructurings or
other factors. This risk should be reduced because of
a Fund's multiple holdings.
Fixed Income Fund
Intermediate-Term Government Securities Fund
New Jersey Municipal Securities Fund
Pennsylvania Municipal Securities Fund
High Yield Bond Fund
Balanced Fund
HIGH-YIELD, LOWER RATED SECURITIES (or "junk bonds") are subject to
additional risks associated with investing in high-yield securities,
including:
- High-yield, lower rated securities involve greater
risk of default or price declines than investments in
investment grade securities (E.G., securities rated
BBB or higher by S&P or Baa or higher by Moody's) due
to changes in the issuer's creditworthiness.
- The market for high-yield, lower rated securities may
be thinner and less active, causing market price
volatility and limited liquidity in the secondary
market. This may limit the ability of a Fund to sell
these securities at their fair market values either
to meet redemption requests, or in response to
changes in the economy or the financial markets.
- Market prices for high-yield, lower rated securities
may also be affected by investors' perception of the
issuer's credit quality and the outlook for economic
growth. Thus, prices for high-yield, lower rated
securities may move independently of interest rates
and the overall bond market.
- The market for high-yield, lower rated securities may
be adversely affected by legislative and regulatory
developments.
High Yield Bond Fund
Page 51 of 74
<PAGE>
MORTGAGE-BACKED SECURITIES -Mortgage-backed securities
are fixed income securities representing an interest in a
pool of underlying mortgage loans. They are sensitive to
changes in interest rates, but may respond to these
changes differently than other fixed income securities
due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to
determine in advance the actual maturity date or average
life of a mortgage-backed security. Rising interest
rates tend to discourage refinancings, with the result
that the average life and volatility of the security will
increase, exacerbating its decrease in market price.
When interest rates fall, however, mortgage-backed
securities may not gain as much in market value because
of the expectation of additional mortgage prepayments
that must be reinvested at lower interest rates.
Prepayment risk may make it difficult to calculate the
average maturity of a portfolio of mortgage-backed
securities and, therefore, to assess the volatility risk
of that portfolio.
Fixed Income Fund only.
MUNICIPAL ISSUER RISK - There may be economic or political changes
that impact the ability of municipal issuers to repay principal
and to make interest payments on municipal securities. Changes to
the financial condition or credit rating of municipal issuers may
also adversely affect the value of a Fund's municipal securities.
Constitutional or legislative limits on borrowing by municipal
issuers may result in reduced supplies of municipal securities.
Moreover, certain municipal securities are backed only by a
municipal issuer's ability to levy and collect taxes. In
addition, each Fund's concentration of investments in issuers
located in a single state makes each Fund more susceptible to
adverse political or economic developments affecting that state.
Each Fund also may be riskier than mutual funds that buy
securities of issuers in numerous states.
New Jersey Municipal Securities Fund
Pennsylvania Municipal Securities Fund
FOREIGN SECURITY RISKS - Investments in securities of foreign
companies or governments can be more volatile than investments in
U.S. companies or governments. Diplomatic, political, or economic
developments, including nationalization or appropriation, could
affect investments in foreign countries. Foreign securities
markets generally have less trading volume and less liquidity than
U.S. markets. In addition, the value of securities denominated in
foreign currencies, and of
Page 52 of 74
<PAGE>
dividends from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign companies or
governments generally are not subject to uniform accounting, auditing, and
financial reporting standards comparable to those applicable to domestic U.S.
companies or governments. Transaction costs are generally higher than those in
the U.S. and expenses for custodial arrangements of foreign securities may be
somewhat greater than typical expenses for custodial arrangements of similar
U.S. securities. Some foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a portion of these
taxes are recoverable, the non-recovered portion will reduce the income received
from the securities comprising the portfolio.
International Equity Fund
In addition to these risks, certain foreign securities may be subject to the
following additional risk factors:
CURRENCY RISK - Investments in foreign securities denominated in
foreign currencies involve additional risks, including:
- The value of a Fund's assets measured in
U.S. dollars may be affected by changes in
currency rates and in exchange control
regulations.
- A Fund may incur substantial costs in
connection with conversions between various
currencies.
- A Fund may be unable to hedge against
possible variations in foreign exchange
rates or to hedge a specific security
transaction or portfolio position.
- Only a limited market currently exists for
hedging transactions relating to currencies
in certain emerging markets.
International Equity Fund
TRACKING ERROR RISK - Factors such as Fund operating expenses, imperfect
correlation between the Fund's investments and those of its benchmark, rounding
of share prices, changes to the benchmark, regulatory policies, and leverage,
may affect its ability to achieve perfect correlation. The magnitude of any
tracking error may be affected by a higher portfolio turnover rate.
Equity Index Fund
Page 53 of 74
<PAGE>
YEAR 2000 RISK - The Funds depend on the smooth functioning of
computer systems in almost every aspect of their business. Like
other mutual funds, businesses and individuals around the world,
the Funds could be adversely affected if the computer systems used
by their service providers do not properly process dates on and
after January 1, 2000, and distinguish between the year 2000 and
the year 1900. The Funds have asked their service providers
whether they expect to have their computer systems adjusted for
the year 2000 transition, and are seeking assurances from each
service provider that they are devoting significant resources to
prevent material adverse consequences to the Funds. While it is
likely that such assurances will be obtained, the Funds and their
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
Funds do business. Furthermore, many foreign countries are not as
prepared as the U.S. for the year 2000 transition. As a result,
computer difficulties in foreign markets and with foreign
institutions as a result of the year 2000 may add to the
possibility of losses to the International Equity Fund and its
shareholders.
All Funds
Page 54 of 74
<PAGE>
EACH FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, each Fund may invest up to 100%
of its assets in cash or money market instruments that would not ordinarily be
consistent with the Fund's objectives (other than the Money Market Funds). A
Fund will do so only if the Advisor or Sub-Advisor believes that the risk of
loss outweighs the opportunity for capital gains or higher income. Of course, we
cannot guarantee that any Fund will achieve its investment goal.
INVESTMENT ADVISOR AND SUB-ADVISOR
The Investment Advisor makes investment decisions for each of the Funds, other
than the International Equity Fund, and continuously reviews, supervises and
administers the Funds' respective investment programs. The Advisor oversees the
Sub-Advisor for the International Equity Fund to ensure compliance with that
Fund's investment policies and guidelines, and monitors the Sub-Advisor's
adherence to its investment style. The Advisor pays the Sub-Advisor out of the
investment advisory fees it receives (described below). The Advisor also
monitors the performance of the SIMT Fund and the SIF Fund. The Board of
Trustees of The Pillar Funds supervises the Advisor and Sub-Advisor and
establishes policies that the Advisor and Sub-Advisor must follow in their
management activities.
Summit Bank serves as the Advisor to the Funds. As of December 31, 1998, Summit
Bank had approximately $9.5 billion in assets under management. For the year
ended December 31, 1998, Summit Bank received advisory fees as a percentage of
average daily net assets of:
<TABLE>
<S> <C>
U.S. TREASURY SECURITIES MONEY MARKET FUND 0.35%
PRIME OBLIGATION MONEY MARKET FUND 0.35%
TAX-EXEMPT MONEY MARKET FUND 0.31%
FIXED INCOME FUND 0.49%
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND 0.43%
NEW JERSEY MUNICIPAL SECURITIES FUND 0.48%
PENNSYLVANIA MUNICIPAL SECURITIES FUND 0.44%
HIGH YIELD BOND FUND 0.00%
EQUITY GROWTH FUND 0.49%
EQUITY VALUE FUND 0.48%
EQUITY INCOME FUND 0.44%
EQUITY INDEX FUND 0.00%
INTERNATIONAL EQUITY FUND 0.18%
MID CAP FUND 0.33%
BALANCED FUND 0.37%
</TABLE>
Page 55 of 74
<PAGE>
Vontobel USA Inc. (Vontobel), 450 Park Avenue, New York, NY 10022, manages the
International Equity Fund on a day-to-day basis. Vontobel selects, buys and
sells securities for the Fund under the supervision of the Advisor and the Board
of Trustees of The Pillar Funds.
Fabrizio Pierallini serves as a Senior Vice President of Vontobel. He has
managed the International Equity Fund since September, 1998. He has more than 10
years of investment experience. Prior to joining Vontobel in 1994, Mr.
Pierallini served as Associate-Director/Portfolio Manager with Swiss Bank
Corporation, New York.
Rajiv Jain serves as Vice President of Vontobel. He has served as associate
portfolio manager for the International Equity Fund since September, 1998. He
has more than 6 years of investment experience. Prior to joining Vontobel, Mr.
Jain served as an analyst for Swiss Bank Corporation, New York.
SEI Investments Management Corporation (SEI), One Freedom Valley Drive, Oaks, PA
19456, is the advisor of the SIMT Fund and has engaged Credit Suisse Asset
Management (Credit Suisse) as sub-advisor to manage the SIMT Fund on a
day-to-day basis. Credit Suisse selects, buys and sells securities for the SIMT
Fund under the supervision of SEI and the SIMT Board of Trustees.
Richard J. Lindquist, C.F.A., serves as portfolio manager of the High Yield Bond
Fund. Mr. Lindquist joined Credit Suisse in 1995 as a result of Credit Suisse's
acquisition of CS First Boston Investment Management, and has had 15 years of
investment management experience, all of which were with high yield bonds. Prior
to joining CS First Boston, Mr. Lindquist was with Prudential Insurance Company
of America where he managed high yield funds totaling approximately $1.3
billion. Prior to joining Prudential, Mr. Lindquist managed high yield funds at
T. Rowe Price.
World Asset Management (World) manages the SIF Fund on a day-to-day basis. World
selects, buys and sells securities for the SIF Fund under the supervision of the
SIF Board of Trustees.
All investment decisions for the SIF Fund are made by a committee of investment
professionals and no persons are primarily responsible for making
recommendations to that committee.
PORTFOLIO MANAGERS
Judith Wolk serves as a Vice President of the Advisor. She has managed the
Prime Obligation Money Market Fund and the U.S. Treasury Securities Money
Market Fund since June, 1996. Ms. Wolk also advises the U.S. Treasury
Securities Plus Money Market Fund and the Institutional Select Money Market
Fund. Prior to joining the Advisor in 1995, Ms. Wolk managed money market
instruments for a large regional bank for a number of years.
Frances M. Tendall serves as a Senior Vice President of the Advisor. She has
managed the Intermediate-Term Government Securities Fund since April, 1992. She
joined the Advisor in 1982 and has managed investments for the Advisor for the
past 17 years.
Charlene P. Palmer serves as a Vice President of the Advisor. She has managed
the Tax-Exempt Money Market Fund since June, 1996 and the New Jersey Municipal
Securities Fund since May, 1992. She joined the Advisor in 1981 and has managed
investments for the Advisor for the past 18 years, with an emphasis on
tax-exempt bonds.
Page 56 of 74
<PAGE>
Joseph Markovich serves as a Vice President of the Advisor. He has managed the
Fixed Income Fund since January, 1997. He joined the Advisor in 1985 and has
managed investments for the Advisor for the past 14 years.
Randolph E. Lestyk serves as a Senior Vice President of the Advisor. He has
managed the Pennsylvania Municipal Securities Fund since 1994 and the Mid Cap
Fund since 1997. Prior to joining the Advisor, Mr. Lestyk was involved in equity
and fixed income investing at several financial institutions and senior vice
president and chief investment officer of a major Pennsylvania insurance
company. He has more than 27 years of investment experience.
Gregory S. Huning serves as a Senior Vice President of the Advisor. He has
co-managed the Equity Growth Fund since April, 1999. Prior to joining the
Advisor in 1995, Mr. Huning served as a senior equity portfolio manager for the
Robert Wood Johnson Foundation in 1994.
Glen C. Corbitt serves as a Vice President of the Advisor. He has co-managed the
Equity Growth Fund since April, 1999. Prior to joining the Advisor in 1995, Mr.
Corbitt served as an accountant for Rockefeller Financial Services in 1994.
Fernando Garip serves as a Senior Vice President of the Advisor. He has managed
the Equity Value Fund since January, 1996. He joined the Advisor in 1982 and has
managed investments for the Advisor for the past 17 years.
Richard H. Caro serves as a Vice President of the Advisor. He has managed the
Equity Income Fund since January, 1996. He joined the Advisor in 1983 and has
managed investments for the Advisor for the past 14 years. He has more than 28
years of investment experience.
Edward Kasperavich serves as a Vice President of the Advisor. He has managed the
Balanced Fund since January, 1997. He joined the Advisor in 1985 and has managed
investments for the Advisor for the past 14 years.
PURCHASING, SELLING AND EXCHANGING FUND SHARES
This section tells you how to buy, sell (sometimes called "redeem") and exchange
Class I shares of the Funds.
Class I Shares are for financial institutions investing for their own or
their customers' accounts. For information on how to open an account and set
up procedures for placing transactions, call your Summit investment officer
or authorized institutiion.
HOW TO PURCHASE FUND SHARES
You may purchase shares directly by wire. Contact your Summit Bank
investment officer for details. A Fund cannot accept checks, third-party
checks, credit cards, credit card checks or cash.
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its procedures
which may be different from the procedures for investing directly. Your
institution may charge a fee for its services, in addition to the fees charged
by the
Page 57 of 74
<PAGE>
Fund. You will also generally have to address your correspondence or questions
regarding a Fund to your institution.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange (NYSE)
and, for the Money Market Funds, the Federal Reserve are open for business (a
Business Day).
A Fund may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Fund receives your purchase order.
Each Fund (except the Money Market Funds) calculates its NAV once each Business
Day at the regularly-scheduled close of normal trading on the New York Stock
Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current
Business Day's NAV, a Fund generally must receive your purchase order before
4:00 p.m. Eastern time.
Each Money Market Fund calculates its NAV once each Business Day at 3:00 p.m.
Eastern time. So, for you to be eligible to receive dividends declared on the
day you submit your purchase order, a Fund generally must receive your order
before 3:00 p.m. Eastern time and federal funds (readily available funds) before
3:00 p.m. Eastern time.
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the net
assets in the Fund.
In calculating NAV, a Fund generally values its investment portfolio at market
price (except the Money Market Funds). If market prices are unavailable or a
Fund thinks that they are unreliable, fair value prices may be determined in
good faith using methods approved by the Board of Trustees.
In calculating NAV for the Money Market Funds, we generally value a Fund's
investment portfolio using the amortized cost valuation method, which is
described in detail in our Statement of Additional Information. If this method
is determined to be unreliable during certain market conditions or for other
reasons, a Fund may value its portfolio at market price or fair value prices may
be determined in good faith using methods approved by the Board of Trustees.
The International Equity Fund holds securities that are listed on foreign
exchanges. These securities may trade on weekends or other days when the Fund
does not calculate NAV. As a result, the NAV of the Fund's shares may change on
days when you cannot purchase or sell Fund shares.
Page 58 of 74
<PAGE>
HOW TO SELL YOUR FUND SHARES
Holders of Class I Shares may sell shares by following procedures established
when they opened their account or accounts. If you have questions, call
your Summit Bank investment officer.
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares. Your broker or
institution may charge a fee for its services.
If you would like to sell $10,000 or more of your shares, or you would like your
proceeds sent to a third party or an address other than your own, please notify
the Fund in writing and include a signature guarantee by a bank or other
financial institution (a notarized signature is not sufficient).
The sale price of each share will be the NAV next determined after a Fund
receives your request.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within one Business Day after we
receive your request. Your proceeds can be wired to your bank account (subject
to a $10 fee) or sent to you by check.
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting your Summit
Bank investment officer by mail or telephone.
You may also exchange shares through your financial institution or an investment
professional by mail or telephone. Your broker or institution may charge a fee
for its services.
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after the Fund receives your exchange request.
REDEMPTIONS IN KIND
A Fund generally pays sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Fund's remaining shareholders) the Fund might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were, you might have to pay transaction costs
Page 59 of 74
<PAGE>
to sell the securities distributed to you, as well as taxes on any capital gains
from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Fund may suspend your right to sell your shares if the NYSE restricts trading,
the SEC declares an emergency or for other reasons. More information about this
is in the Statement of Additional Information.
TELEPHONE TRANSACTIONS
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Fund has certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Fund is not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you or
your financial institution transact with the Fund over the telephone, you will
generally bear the risk of any loss.
DISTRIBUTION OF FUND SHARES
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of the Funds.
The SIMT Fund has adopted a shareholder servicing plan for its Class A Shares
under which a shareholder servicing fee of up to 0.25% of average daily net
assets will be paid to the Distributor. The SIF Fund had adopted a
shareholder servicing plan for its Class E Shares under which a shareholder
servicing fee of up to 0.25% on average daily net assets may be paid to the
Distributor.
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes its income as follows:
U.S. TREASURY SECURITIES MONEY MARKET FUND MONTHLY
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
HIGH YIELD BOND FUND
EQUITY GROWTH FUND QUARTERLY
EQUITY VALUE FUND
EQUITY INCOME FUND
EQUITY INDEX FUND
Page 60 of 74
<PAGE>
MID CAP FUND
BALANCED FUND
INTERNATIONAL EQUITY FUND ANNUALLY
Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing at least 15 days prior to the date of the
distribution. Your election will be effective for dividends and distributions
paid after the Fund receives your written notice. To cancel your election,
simply send the Fund written notice.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from a Fund may be taxable whether or not you reinvest them. EACH
SALE OR EXCHANGE IS A TAXABLE EVENT.
The Tax-Exempt Money Market Fund intends to distribute federally tax-exempt
income. The New Jersey Municipal Securities Fund intends to distribute income
that is exempt from both federal taxes and New Jersey state taxes. The
Pennsylvania Municipal Securities Fund intends to distribute income that is
exempt from both federal taxes and Pennsylvania state taxes. The Funds may
invest a portion of their assets in securities that generate taxable income for
federal or state income taxes. Income exempt from federal tax may be subject to
state and local taxes. Any capital gains distributed by these Funds may be
taxable.
The International Equity Fund may be able to pass along a tax credit for foreign
income taxes it pays. The Fund will notify you if it gives you the credit.
The Funds use a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings that have experienced the smallest gain
or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 61 of 74
<PAGE>
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class I Shares
of each Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for a
single Fund share. The total returns in the tables represent the rate that you
would have earned (or lost) on an investment in a Fund, assuming you reinvested
all of your dividends and distributions. This information has been audited by
Arthur Andersen LLP, independent public accountants. Their report, along with
each Fund's financial statements, appears in the annual report that accompanies
our Statement of Additional Information. You can obtain the annual report, which
contains more performance information, at no charge by calling 1-800-932-7782.
Page 62 of 74
<PAGE>
Financial Highlights
For a Share Outstanding throughout the Year
<TABLE>
<CAPTION>
Net Asset Distributions
Value Net from Net Net Asset Net Assets
Beginning Investment Investment Value End End of Total
of Period Income Income of Period Period (000) Return
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund
CLASS I
1998 $1.00 $0.05 $(0.05) $1.00 $802,990 4.70%
1997 1.00 0.04 (0.04) 1.00 487,196 4.55
1996 1.00 0.04 (0.04) 1.00 504,729 4.53
1995 1.00 0.05 (0.05) 1.00 463,531 5.05
1994 1.00 0.03 (0.03) 1.00 465,125 3.44
Prime Obligation Money Market Fund
CLASS I
1998 $1.00 $0.05 $(0.05) $1.00 $599,844 5.02%
1997 1.00 0.05 (0.05) 1.00 400,689 5.02
1996 1.00 0.05 (0.05) 1.00 401,423 4.83
1995 1.00 0.05 (0.05) 1.00 259,667 5.40
1994 1.00 0.04 (0.04) 1.00 157,378 3.67
Tax-Exempt Money Market Fund
CLASS I
1998 $1.00 $0.03 $(0.03) $1.00 $145,891 2.98%
1997 1.00 0.03 (0.03) 1.00 75,097 3.10
1996 1.00 0.03 (0.03) 1.00 67,082 2.94
1995 1.00 0.03 (0.03) 1.00 63,628 3.42
1994 1.00 0.02 (0.02) 1.00 37,745 2.27
<CAPTION>
Ratio of Ratio Ratio of Net
Expenses of Net Investment
Ratio of to Average Investment Income to
Expenses Net Assets Income Average Net
to Average (Excluding to Average Assets (Excluding
Net Assets Waivers) Net Assets Waivers)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund
CLASS I
1998 0.63% 0.63% 4.57% 4.57%
1997 0.65 0.66 4.45 4.44
1996 0.65 0.65 4.44 4.44
1995 0.65 0.65 4.92 4.92
1994 0.62 0.62 3.39 3.39
Prime Obligation Money Market Fund
CLASS I
1998 0.63% 0.63% 4.89% 4.89%
1997 0.65 0.66 4.90 4.89
1996 0.65 0.67 4.73 4.71
1995 0.65 0.66 5.26 5.25
1994 0.62 0.62 3.68 3.68
Tax-Exempt Money Market Fund
CLASS I
1998 0.65% 0.69% 2.92% 2.88%
1997 0.65 0.67 3.05 3.03
1996 0.65 0.68 2.90 2.87
1995 0.65 0.72 3.37 3.30
1994 0.65 0.68 2.27 2.24
</TABLE>
Page 63 of 74
<PAGE>
Financial Highlights
For a Share Outstanding throughout the Year
<TABLE>
<CAPTION>
Realized and
Net Asset Unrealized Distributions Distributions Net Assets
Value Net Gains or from Net from Net Asset End of
Beginning Investment (Losses) on Investment Capital Value End Period
of Period Income Securities Income Gains of Period (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Income Fund
CLASS I
1998 $10.38 $0.58 $0.21 $(0.58) $(0.06) $10.53 $214,456
1997 10.21 0.60 0.17 (0.60) -- 10.38 206,810
1996 10.49 0.57 (0.28) (0.57) -- 10.21 100,129
1995 9.44 0.59 1.05 (0.59) -- 10.49 113,509
1994 10.68 0.59 (1.18) (0.59) (0.06) 9.44 96,558
Intermediate-Term Government Securities Fund
CLASS I
1998 $10.27 $0.56 $0.10 $(0.56) -- $10.37 $31,441
1997 10.16 0.58 0.11 (0.58) -- 10.27 31,739
1996 10.37 0.53 (0.21) (0.53) -- 10.16 24,679
1995 9.51 0.54 0.86 (0.54) -- 10.37 28,877
1994 10.53 0.51 (1.01) (0.51) $(0.01) 9.51 26,277
<CAPTION>
Ratio of Ratio of Net
Expenses Ratio of Investment
to Average Net Income to
Ratio of Net Assets Investment Average Net Assets
Expenses (Excluding Income (Excluding Portfolio
Total to Average Waivers and to Average Waivers and Turnover
Return Net Assets Reimbursements) Net Assets Reimbursements) Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Income Fund
CLASS I
1998 7.80% 0.80% 0.91% 5.54% 5.43% 58.30%
1997 7.78 0.80 0.91 5.90 5.79 80.34
1996 2.94 0.80 0.92 5.60 5.48 40.56
1995 17.76 0.80 0.91 5.83 5.72 35.49
1994 (5.66) 0.80 0.90 5.91 5.81 15.24
Intermediate-Term Government Securities Fund
CLASS I
1998 6.60% 0.80% 0.97% 5.43% 5.26% 43.42%
1997 6.96 0.80 0.94 5.69 5.55 57.82
1996 3.26 0.80 0.87 5.26 5.19 40.60
1995 15.00 0.80 1.05 5.33 5.08 68.29
1994 (4.85) 0.80 0.95 5.13 4.98 40.27
</TABLE>
Page 64 of 74
<PAGE>
Financial Highlights
For a Share Outstanding throughout the Year
<TABLE>
<CAPTION>
Realized and
Net Asset Unrealized Distributions Distributions
Value Net Gains or from Net from Net Asset Net Assets
Beginning Investment (Losses) on Investment Capital Value End End of
of Period Income Securities Income Gains of Period Period (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
New Jersey Municipal Securities Fund
CLASS I
1998 $10.92 $0.48 $0.03 $(0.48) $(0.03) $10.92 $119,816
1997 10.71 0.49 0.21 (0.49) -- 10.92 131,002
1996 10.79 0.44 (0.08) (0.44) -- 10.71 20,689
1995 9.93 0.47 0.86 (0.47) -- 10.79 28,080
1994 10.85 0.48 (0.92) (0.48) -- 9.93 19,977
Pennsylvania Municipal Securities Fund
CLASS I
1998 $10.41 $0.44 $0.05 $(0.44) $(0.20) $10.26 $37,658
1997 10.17 0.45 0.26 (0.45) (0.02) 10.41 42,134
1996 10.23 0.44 (0.06) (0.44) -- 10.17 3,665
1995 9.55 0.40 0.68 (0.40) -- 10.23 3,345
1994 10.17 0.36 (0.62) (0.36) -- 9.55 2,734
High Yield Bond Fund
CLASS I
1998(1) $9.99 $0.15 $0.05 $(0.18) $(0.02) $9.99 $493
<CAPTION>
Ratio of Ratio of Ratio of
Expenses Net Net Investment
Ratio of to Average Investment Income to
Expenses Net Assets Income Average Net Assets Portfolio
to Average (Excluding to Average (Excluding Turnover
Net Assets Waivers) Net Assets Waivers) Rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New Jersey Municipal Securities Fund
CLASS I
1998 4.79% 0.80% 0.92% 4.40% 4.28% 17.55%
1997 6.76 0.80 0.94 4.68 4.54 22.85
1996 3.42 0.67 0.93 4.13 3.87 13.93
1995 13.57 0.41 0.93 4.43 3.91 2.83
1994 (4.12) 0.27 0.93 4.65 3.99 16.81
Pennsylvania Municipal Securities Fund
CLASS I
1998 4.84% 0.80% 0.96% 4.28% 4.12% 56.48%
1997 7.18 0.80 0.96 4.47 4.31 71.89
1996 3.89 0.69 1.49 4.42 3.62 25.88
1995 11.53 0.80 1.27 4.05 3.58 36.92
1994 (2.58) 0.80 1.61 3.67 2.86 38.20
High Yield Bond Fund
CLASS I
1998(1) 1.99% 1.25% 4.79% 7.04% 3.50% 1.47%*
</TABLE>
* The portfolio turnover rate for the master fund, the SEI Institutional
Managed Trust High Yield Bond Portfolio, is 36.36% for the twelve month
period ending December 31, 1998.
(1) Commenced operations on September 22, 1998. Ratios for the period have
been annualized. Total return is for the period indicated and has not
been annualized.
Page 65 of 74
<PAGE>
Financial Highlights
For a Share Outstanding throughout the Year
<TABLE>
<CAPTION>
Realized and
Net Asset Unrealized Distributions Distributions
Value Net Gains or from Net from Net Asset Net Assets
Beginning Investment (Losses) on Investment Capital Value End End of
of Period Income (Loss) Securities Income Gains of Period Period (000)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
27.58%
25.71
21.69 $9.24 -- $2.83 -- $(0.46) $11.61 $199,975
36.71 10.00 $0.01 1.22 $(0.01) (1.98) 9.24 177,801
(5.61)
CLASS I
1998 $12.89 $0.14 $3.37 $(0.12) $(0.37) $15.91 $242,669
1997 13.35 0.18 3.20 (0.18) (3.66) 12.89 242,881
1996 12.81 0.22 2.54 (0.22) (2.00) 13.35 116,715
1995 10.19 0.25 3.46 (0.25) (0.84) 12.81 82,677
1994 11.10 0.21 (0.83) (0.21) (0.08) 10.19 61,407
Equity Income Fund
CLASS I
1998 $13.19 $0.27 $1.19 $(0.28) $(0.39) $13.98 $94,615
1997 13.32 0.32 2.95 (0.32) (3.08) 13.19 131,968
1996 13.07 0.33 2.35 (0.34) (2.09) 13.32 58,035
1995 10.26 0.31 3.29 (0.31) (0.48) 13.07 44,202
1994 11.17 0.32 (0.81) (0.32) (0.10) 10.26 34,514
<CAPTION>
Ratio Ration of
Ratio of of Net Net Investment
Expenses Investment Income (Loss)
Ratio of to Average Income To Average
Expenses Net Assets (Loss) Net Assets Portfolio
Total to Average (Excluding to Average (Excluding Turnover
Return Net Assets Waivers) Net Assets Waivers) Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
27.58%
25.71
21.69 31.81% 0.80% 1.06% (0.15)% (0.41)% 88.28%
36.71 14.17* 0.80 1.07 0.07 (0.20) 114.51
(5.61)
CLASS I
1998 27.58% 0.80% 0.83% 1.07% 0.56% 19.69%
1997 25.71 0.80 1.26 1.06 1.00 80.24
1996 21.69 0.80 1.67 1.08 1.39 85.30
1995 36.71 0.80 2.08 1.07 1.81 61.88
1994 (5.61) 0.80 1.92 1.06 1.66 44.98
Equity Income Fund
CLASS I
1998 11.42% 0.80% 1.11% 2.05% 1.74% 40.30%
1997 25.04 0.80 1.09 2.34 2.05 76.67
1996 21.01 0.80 1.09 2.55 2.26 85.47
1995 35.55 0.80 1.10 2.61 2.31 42.97
1994 (4.42) 0.80 1.08 2.96 2.68 37.76
</TABLE>
* Annualized
(1) Commenced operations on February 3, 1997. Ratio for the period has been
annualized.
Page 66 of 74
<PAGE>
Financial Highlights
For a Share Outstanding throughout the Year
<TABLE>
<CAPTION>
Realized and
Net Asset Unrealized Distributions Distributions Net Assets
Value Net Gains or From Net from Net Asset End of
Beginning Investment (Losses) on Investment Capital Value End Period Total
of Period Income Securities Income Gains of Period (000) Return
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Index Fund
CLASS I
1998(1) $10.00 $0.03 $2.01 $(0.02) $(0.01) $12.01 $699 20.44%
International Equity Fund
CLASS I
1998 $10.34 $(0.01) $0.93 $(0.01) $(0.01) $11.24 $18,912 8.98%
1997 11.23 0.08 (0.04) (0.08) (0.85) 10.34 14,143 0.25
1996 10.74 0.08 1.11 (0.08) (0.62) 11.23 14,822 11.17
1995(2) 10.00 0.03 0.75 (0.02) (0.02) 10.74 9,990 7.81
Mid Cap Fund
CLASS I
1998 $14.80 $0.01 $0.32 -- $(4.43) $10.70 $11,029 7.77%
1997 13.33 0.04 2.65 $(0.04) (1.18) 14.80 46,125 20.49
1996 12.55 0.09 1.59 (0.09) (0.81) 13.33 45,556 13.56
1995 10.83 0.15 1.95 (0.15) (0.23) 12.55 42,375 19.49
1994 12.32 0.12 (1.27) (0.12) (0.22) 10.83 33,448 (9.34)
<CAPTION>
Ratio of Ratio of Net
Expenses Ratio of Investment
to Average Net Income to
Ratio of Net Assets Investment Average Net Assets
Expenses (Excluding Income (Excluding Portfolio
to Average Waivers and to Average Waivers and Turnover
Net Assets Reimbursements) Net Assets Reimbursements) Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Index Fund
CLASS I
1998(1) 0.80% 3.96% (0.70)% (3.86)% 9.35%*
International Equity Fund
CLASS I
1998 1.50% 1.72% 0.41% 0.19% 115.79%
1997 1.50 1.69 0.95 0.76 71.22
1996 1.50 1.73 0.85 0.62 67.03
1995(2) 1.50 2.11 0.79 0.18 14.32
Mid Cap Fund
CLASS I
1998 0.80% 1.21% (0.48)% (0.89)% 32.88%
1997 0.80 1.09 0.30 0.01 59.80
1996 0.80 1.10 0.66 0.36 41.41
1995 0.80 1.10 1.28 0.98 32.96
1994 0.80 1.08 1.06 0.78 13.82
</TABLE>
* The portfolio turnover rate for the master fund, the SEI Index Funds S&P
500 Index Portfolio, is 7.58% for the twelve month period ending December
31, 1998.
(1) Commenced operations on September 3, 1998. Ratios for the period have
been annualized. Total return is for the period indicated and has not
been annualized.
(2) Commenced operations on May 1, 1995. Ratios for this period have been
annualized. Total return is for the period indicated and has not been
annualized.
Page 67 of 74
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DISTRIBUTIONS DISTRIBUTIONS
VALUE NET GAINS OR FROM NET FROM NET ASSET NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE END END OF
OF PERIOD INCOME (LOSS) SECURITIES INCOME GAINS OF PERIOD PERIOD (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED FUND
CLASS I
1998 $12.00 $0.26 $1.95 $(0.25) $(0.05) $13.91 $29,495
1997 11.39 0.32 1.88 (0.32) (1.27) 12.00 24,362
1996 12.05 0.48 1.16 (0.47) (1.83) 11.39 19,243
1995 9.91 0.44 2.27 (0.44) (0.13) 12.05 32,145
1994 10.78 0.37 (0.86) (0.38) -- 9.91 26,921
<CAPTION>
RATIO OF
RATIO OF NET INCOME
EXPENSES RATIO OF (LOSS) TO
RATIO OF TO AVERAGE NET INCOME AVERAGE
EXPENSES NET ASSETS (LOSS) TO NET ASSETS PORTFOLIO
TOTAL TO AVERAGE (EXCLUDING AVERAGE (EXCLUDING TURNOVER
RETURN NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCED FUND
CLASS I
1998 18.65% 0.80% 1.18% 2.06% 1.68% 43.77%
1997 19.68 0.80 1.14 2.67 2.33 93.85
1996 13.77 0.80 1.11 3.68 3.37 43.80
1995 27.76 0.80 1.11 3.89 3.58 41.63
1994 (4.61) 0.80 1.09 3.64 3.35 27.15
</TABLE>
Page 68 of 74
<PAGE>
FINANCIAL HIGHLIGHTS
The table that follows presents performance information about the Class A Shares
of the SIMT High Yield Bond Fund. This information is intended to help you
understand the Fund's financial performance for the past five years, or, if
shorter, the period of the Fund's operations. Some of this information reflects
financial information for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an investment in the
Fund, assuming you reinvested all of your dividends and distributions. This
information has been audited by PricewaterhouseCoopers LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain the annual report, which contains more performance information,
at no charge by calling 1-800-342-5734.
Page 69 of 74
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
NET ASSET AND DIVIDENDS FROM
VALUE, NET UNREALIZED FROM NET REALIZED NET ASSET NET ASSETS
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT CAPITAL VALUE, END END OF
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD PERIOD (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
HIGH YIELD BOND FUND
CLASS A
1998 $11.66 $1.04 $(0.75) $(1.04) $(0.10) $10.81 $314,937
1997 11.14 1.04 0.57 (1.04) (0.05) 11.66 236,457
1996 10.64 0.94 0.62 (1.03) (0.03) 11.14 107,545
1995(1) 10.00 0.67 0.55 (0.58) -- 10.64 23,724
<CAPTION>
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF EXPENSES NET INCOME
RATIO OF TO AVERAGE INVESTMENT TO AVERAGE
EXPENSES NET ASSETS INCOME NET ASSETS PORTFOLIO
TOTAL TO AVERAGE (EXCLUDING TO AVERAGE (EXCLUDING TURNOVER
RETURN NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HIGH YIELD BOND FUND
CLASS A
1998 2.25% 0.85% 0.89% 8.94% 8.90% 56%
1997 15.30 0.86 0.91 9.33 9.28 68
1996 15.46 0.87 0.94 9.01 8.94 55
1995(1) 17.72 0.67 0.86 10.02 9.83 56
</TABLE>
(1) HIGH YIELD BOND SHARES WERE OFFERED BEGINNING JANUARY 11, 1995. ALL
RATIOS INCLUDING TOTAL RETURN FOR THAT PERIOD HAVE BEEN ANNUALIZED.
AMOUNTS DESIGNATED AS "--" ARE ZERO OR HAVE BEEN ROUNDED TO ZERO.
Page 70 of 74
<PAGE>
FINANCIAL HIGHLIGHTS
The table that follows presents performance information about the Class E Shares
of the SIF S&P 500 Index Fund. This information is intended to help you
understand the Fund's financial performance for the past five years, or, if
shorter, the period of the Fund's operations. Some of this information reflects
financial information for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an investment in the
Fund, assuming you reinvested all of your dividends and distributions. This
information has been audited by Arthur Andersen LLP, independent public
accountants. Their report, along with the Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain the annual report, which contains more performance information,
at no charge by calling 1-800-342-5734.
Page 71 of 74
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MARCH 31,
<TABLE>
<CAPTION>
NET REALIZED
AND
NET ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE, NET GAINS OR FROM NET FROM NET ASSET NET ASSETS
BEGINNING INVESTMENT (LOSSES) INVESTMENT CAPITAL VALUE, END END OF
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD PERIOD (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX FUND
CLASS E+
1998 $24.10 $0.45 $10.88 $(0.45) $(0.21) $34.77 $1,300,924
1997 20.88 0.46 3.54 (0.45) (0.33) 24.10 835,889
1996 16.40 0.44 4.72 (0.37) (0.31) 20.88 630,566
1995 15.07 0.42 1.79 (0.42) (0.46) 16.40 458,012
1994 15.80 0.43 (0.22) (0.42) (0.52) 15.07 424,647
1993 14.17 0.40 1.69 (0.40) (0.06) 15.80 675,484
<CAPTION>
RATIO OF
NET
RATIO INVESTMENT
OF EXPENSES RATIO OF NET INCOME
RATIO OF TO AVERAGE INVESTMENT TO AVERAGE
EXPENSES NET ASSETS INCOME NET ASSETS PORTFOLIO AVERAGE
TOTAL TO AVERAGE (EXCLUDING TO AVERAGE (EXCLUDING TURNOVER COMMISSION
RETURN NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE RATE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX FUND
CLASS E+
1998 47.62% 0.25% 0.54% 1.55% 1.26% 4% $.0169
1997 19.46% 0.25% 0.54% 2.03% 1.74% 2% .0197
1996 31.88% 0.25% 0.35% 2.31% 2.21% 3% n/a
1995 15.26% 0.25% 0.35% 2.69% 2.59% 4% n/a
1994 1.19% 0.25% 0.33% 2.57% 2.49% 23% n/a
1993 14.97% 0.25% 0.35% 2.75% 2.65% 1% n/a
</TABLE>
(+) On July 31, 1997 the Board of Trustees approved the renaming of the Class
A shares to Class E shares.
Page 72 of 74
<PAGE>
THE PILLAR FUNDS
INVESTMENT ADVISOR
Summit Bank
210 Main Street
Hackensack, New Jersey 07601
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
More information about The Pillar Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated April 30, 1999, includes detailed information about The Pillar
Funds. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Fund's holdings and contain information from the Funds'
managers about strategies, and recent market conditions and trends and their
impact on Fund performance. The reports also contain detailed financial
information about the Funds.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE: Call 1-800-932-7782
BY MAIL: Write to us
The Pillar Funds
P.O. Box 8523
Boston, MA 02266-8523
BY INTERNET: www.pillarfunds.com
Page 73 of 74
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about The Pillar Funds, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009.
The Pillar Funds' Investment Company Act registration number is 811-6509.
The Pillar Funds, Pillar, the stylized "P" logo, and Your Investment
Foundation are registered service marks of Summit Bank. pillarfunds.com is a
service mark of Summit Bank. Reach Higher, Summit, Summit Financial Services
Group and Summit Bancorp are registered service marks of Summit Bancorp.
Summit Bank is a service mark of Summit Bancorp.
Page 74 of 74
<PAGE>
THE PILLAR FUNDS
Class A and Class B Shares
PROSPECTUS
APRIL 30, 1999
MONEY MARKET FUNDS
U.S. TREASURY SECURITIES MONEY MARKET FUND
PRIME OBLIGATION MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
FIXED INCOME FUNDS
FIXED INCOME FUND
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
NEW JERSEY MUNICIPAL SECURITIES FUND
PENNSYLVANIA MUNICIPAL SECURITIES FUND
HIGH YIELD BOND FUND
EQUITY AND BALANCED FUNDS
EQUITY GROWTH FUND
EQUITY VALUE FUND
EQUITY INCOME FUND
EQUITY INDEX FUND
INTERNATIONAL EQUITY FUND
BALANCED FUND
INVESTMENT ADVISOR
SUMMIT BANK
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1 of 90
<PAGE>
HOW TO READ THIS PROSPECTUS
The Pillar Funds is a mutual fund family that offers different classes of shares
in separate investment portfolios (Funds). The Funds have individual investment
goals and strategies. This prospectus gives you important information about the
Class A and Class B Shares of the Funds that you should know before investing.
Please read this prospectus and keep it for future reference.
Class A and Class B Shares have different expenses and other characteristics,
allowing you to choose the class that best suits your needs. You should
consider the amount you want to invest, how long you plan to have it invested,
and whether you plan to make additional investments.
CLASS A SHARES
- Front-end sales charge (except for the Money Market Funds)
- 12b-1 fees
- $1,000 minimum initial investment
CLASS B SHARES
- Contingent deferred sales charge
- Higher 12b-1 fees and shareholder servicing fees
- $1,000 minimum initial investment
- Automatic conversion to Class A Shares after 8 years
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. IN THE INTRODUCTION SECTION, THERE IS SOME
GENERAL INFORMATION YOU SHOULD KNOW ABOUT THE FUNDS. FOR MORE DETAILED
INFORMATION ABOUT EACH FUND, PLEASE SEE:
<TABLE>
<CAPTION>
PAGE
<S> <C>
U.S. TREASURY SECURITIES MONEY MARKET FUND XXX
PRIME OBLIGATION MONEY MARKET FUND XXX
TAX-EXEMPT MONEY MARKET FUND XXX
FIXED INCOME FUND XXX
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND XXX
NEW JERSEY MUNICIPAL SECURITIES FUND XXX
PENNSYLVANIA MUNICIPAL SECURITIES FUND XXX
HIGH YIELD BOND FUND XXX
EQUITY GROWTH FUND XXX
EQUITY VALUE FUND XXX
EQUITY INCOME FUND XXX
EQUITY INDEX FUND XXX
INTERNATIONAL EQUITY FUND XXX
BALANCED FUND XXX
MORE INFORMATION ABOUT RISK XXX
EACH FUND'S OTHER INVESTMENTS XXX
THE INVESTMENT ADVISOR, SUB-ADVISOR
AND PORTFOLIO MANAGERS XXX
PURCHASING, SELLING AND EXCHANGING FUND SHARES XXX
Page 2 of 90
<PAGE>
DIVIDENDS AND DISTRIBUTIONS XXX
TAXES XXX
FINANCIAL HIGHLIGHTS XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
THE PILLAR FUNDS BACK COVER
</TABLE>
Page 3 of 90
<PAGE>
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
Each Fund has its own investment goal and strategies for reaching that goal.
The investment managers invest Fund assets in a way that they believe will help
each Fund achieve its goal. Still, investing in each Fund involves risk and
there is no guarantee that a Fund will achieve its goal. The investment
managers' judgments about the markets, the economy, or companies may not
anticipate actual market movements, economic conditions or company performance,
and these judgments may affect the return on your investment. In fact, no
matter how good a job an investment manager does, you could lose money on your
investment in a Fund, just as you could with other investments. A FUND SHARE IS
NOT A BANK DEPOSIT AND IT IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY.
The value of your investment in a Fund (other than a Money Market Fund) is based
on the market value of the securities the Fund holds. These prices change daily
due to economic and other events that affect particular companies and other
issuers. These price movements, sometimes called volatility, may be greater or
lesser depending on the types of securities a Fund owns and the markets in which
they trade. The effect on a Fund of a change in the value of a single security
will depend on how widely the Fund diversifies its holdings.
THE U.S. TREASURY SECURITIES MONEY MARKET FUND, PRIME OBLIGATION
MONEY MARKET FUND, AND TAX-EXEMPT MONEY MARKET FUND TRY TO MAINTAIN
A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS NO GUARANTEE
THAT A MONEY MARKET FUND WILL ACHIEVE THIS GOAL.
Page 4 of 90
<PAGE>
U.S. TREASURY SECURITIES MONEY MARKET FUND
FUND SUMMARY
Investment Goal Preserve principal value and maintain
a high degree of liquidity while
providing current income
Investment Focus Money market instruments issued by the
U.S. Treasury
Share Price Volatility Very low
Principal Investment Strategy Investing in short-term U.S. dollar-
denominated obligations of the U.S.
Treasury and repurchase agreements
Investor Profile Conservative investors who want to
receive income through a liquid
investment
INVESTMENT STRATEGY OF THE U.S. TREASURY SECURITIES MONEY MARKET FUND
The Fund invests exclusively in short-term U.S. dollar-denominated money market
instruments issued by the U.S. Treasury and repurchase agreements that are fully
collateralized by U.S. Treasury securities. The Fund will maintain an average
dollar weighted maturity of 60 days or less, and will only acquire securities
that have a remaining maturity of 397 days or less. The Advisor's investment
selection process seeks to increase the Fund's potential for current income
through analysis of the available yields among the Fund's permitted investments
and "positioning on the yield curve" - that is, balancing the desire to earn
attractive rates of interest with the need to maintain an appropriate maturity
level. The Advisor actively manages the maturity of the Fund based on current
market interest rates and its outlook on the various economic factors which
influence the market for short-term fixed income instruments and future interest
rate predictions.
PRINCIPAL RISKS OF INVESTING IN THE U.S. TREASURY SECURITIES MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market fund seeks to keep a
constant price per share of $1.00, you may lose money by investing in the Fund.
Page 5 of 90
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
<TABLE>
<S> <C>
1993 2.21%
1994 3.17%
1995 4.80%
1996 4.27%
1997 4.28%
1998 4.43%
BEST QUARTER WORST QUARTER
1.23% 0.53%
(6/30/95) (6/30/93)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (WWW.PILLARFUNDS.COM) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Securities Money Market Fund 4.43% 4.19% 3.71%*
</TABLE>
* Since 4/1/92
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES
- --------------------------------------------------------------------------------------------------------
<S> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A PERCENTAGE OF OFFERING PRICE) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF NET ASSET VALUE) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS AND OTHER DISTRIBUTIONS (AS None
A PERCENTAGE OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF APPLICABLE) None
EXCHANGE FEE None
</TABLE>
Page 6 of 90
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------------------
<S> <C>
Management Fees .35%
Distribution and Service (12b-1) Fees .25%
Other Expenses .28%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .88%
</TABLE>
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$90 $281 $488 $1,084
</TABLE>
Page 7 of 90
<PAGE>
PRIME OBLIGATION MONEY MARKET FUND
FUND SUMMARY
Investment Goal Preserve principal value and maintain
a high degree of liquidity while
providing current income
Investment Focus Money market instruments
Share Price Volatility Very low
Principal Investment Strategy Investing in a broad range of short-
term high quality U.S. dollar-
denominated debt securities
Investor Profile Conservative investors who want to
receive current income through a
liquid investment
INVESTMENT STRATEGY OF THE PRIME OBLIGATION MONEY MARKET FUND
The Fund invests in a broad range of high quality short-term U.S.
dollar-denominated money market instruments, such as obligations of the U.S.
Treasury; agencies and instrumentalities of the U.S. government; domestic and
foreign banks; domestic and foreign corporations; supranational entities; and
foreign governments. The Fund may also enter into fully collateralized
repurchase agreements. The Fund's portfolio is comprised only of short-term
debt securities that are rated in the two highest categories by nationally
recognized rating organizations or securities that the Advisor determines are
of equal quality. The Fund will maintain an average dollar weighted maturity of
90 days or less, and will only acquire securities that have a remaining maturity
of 397 days or less.
The Advisor's investment selection process seeks to increase the Fund's
potential for current income through (i) security selection; (ii) managing the
Fund's mix of government, corporate and bank obligations; and (iii) "positioning
on the yield curve" - that is, balancing the desire to earn attractive rates of
interest with the need to maintain an appropriate maturity level. Securities
are chosen based on the issuer's financial condition, the financial condition of
any person or company which guarantees the credit of the issuer, liquidity and
competitive yield. The Advisor carefully evaluates and monitors the
creditworthiness of each issuer and any person or company providing credit
support.
PRINCIPAL RISKS OF INVESTING IN THE PRIME OBLIGATION MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market
Page 8 of 90
<PAGE>
fund seeks to keep a constant price per share of $1.00, you may lose money by
investing in the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
<TABLE>
<S> <C>
1993 2.40%
1994 3.40%
1995 5.14%
1996 4.58%
1997 4.75%
1998 4.76%
BEST QUARTER WORST QUARTER
1.29% 0.58%
(6/30/95) (6/30/93)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (WWW.PILLARFUNDS.COM) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime Obligation Money Market Fund 4.76% 4.52% 3.99%*
</TABLE>
* Since 4/1/92
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------
<S> <C> <C>
Prime Obligation Money Market Fund -1.51% -0.64%*
</TABLE>
* Since 12/30/97
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A PERCENTAGE OF OFFERING PRICE) None None
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF NET ASSET VALUE)* None 5.50%
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS AND OTHER DISTRIBUTIONS None None
(AS A PERCENTAGE OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF APPLICABLE) None None
EXCHANGE FEE None None
</TABLE>
Page 9 of 90
<PAGE>
* Class B Shares of the Fund may be obtained only through exchanges. This
sales charge is imposed if you sell Class B Shares within 1 year of your
purchase and decreases over time depending on how long you own your shares.
"Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Management Fees .35% .35%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .28% .28%
Total Annual Fund Operating Expenses .88% 1.63%
</TABLE>
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $90 $281 $488 $1,084
Class B Shares $716 $914 $1,087 $1,732
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $90 $281 $488 $1,084
Class B Shares $166 $514 $887 $1,732
</TABLE>
Page 10 of 90
<PAGE>
TAX-EXEMPT MONEY MARKET FUND
FUND SUMMARY
Investment Goal Preserve principal value and maintain
a high degree of liquidity while
providing current income that is
exempt from federal income tax
Investment Focus Tax-free money market instruments
Share Price Volatility Very low
Principal Investment Strategy Investing substantially all of its
assets in a well diversified portfolio
of short-term municipal securities
which pay interest that is exempt from
federal income taxes
Investor Profile Conservative taxable investors who
want to receive current income exempt
from federal taxes through a liquid
investment
INVESTMENT STRATEGY OF THE TAX-EXEMPT MONEY MARKET FUND
The Fund invests substantially all of its assets in a broad range of high
quality short-term municipal money market instruments that pay interest that is
exempt from federal income taxes. The issuers of these securities may be state
and local governments and agencies located in any of the fifty states, the
District of Columbia, Puerto Rico and other U.S. territories and possessions.
The Fund's portfolio will be well diversified among these issuers, and will be
comprised only of short-term debt securities that are rated in the two highest
categories by nationally recognized rating organizations, or have been
determined by the Advisor to be of equal quality. The Fund will maintain an
average dollar weighted maturity of 90 days or less, and will only acquire
securities that have a remaining maturity of 397 days or less.
The Advisor's investment selection process seeks to increase the Fund's
potential for current income through a strategy that takes advantage of pricing
inefficiencies that often occur in the market for municipal securities. The
Advisor actively manages the maturity of the Fund based on current market
interest rates and its outlook on the various economic factors which influence
the market for short-term municipal instruments and future interest rate
predictions. Securities are chosen based on the issuer's financial condition,
the financial condition of any person or company which guarantees the credit of
the issuer, liquidity and competitive yield. The Fund attempts to avoid
purchasing or holding securities that are subject to a decline in credit quality
of the issue through ongoing monitoring of the credit quality of each issuer and
any person or company providing credit support.
Page 11 of 90
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE TAX-EXEMPT MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market fund seeks to keep a
constant price per share of $1.00, you may lose money by investing in the Fund.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase 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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
<TABLE>
<S> <C>
1993 1.74%
1994 2.02%
1995 3.17%
1996 2.70%
1997 2.84%
1998 2.72%
BEST QUARTER WORST QUARTER
0.85% 0.38%
(6/30/95) (3/31/94)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Exempt Money Market Fund 2.72% 2.69% 2.49%*
</TABLE>
* Since 4/6/92
Page 12 of 90
<PAGE>
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES
- --------------------------------------------------------------------------------------------------------
<S> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A PERCENTAGE OF OFFERING PRICE) None
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF NET ASSET VALUE) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS AND OTHER DISTRIBUTIONS (AS None
A PERCENTAGE OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF APPLICABLE) None
EXCHANGE FEE None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------------------
<S> <C>
Management Fees .35%
Distribution and Service (12b-1) Fees .25%
Other Expenses .34%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .94%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time.
With this fee waiver, the Fund's actual total operating expenses are as follows:
Tax-Exempt Money Market Fund - Class A .90%
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$96 $300 $520 $1,155
</TABLE>
Page 13 of 90
<PAGE>
FIXED INCOME FUND
FUND SUMMARY
Investment Goal High level of total return, through
current income and capital
appreciation, consistent with
preservation of capital
Investment Focus Fixed income securities
Share Price Volatility Low
Principal Investment Strategy Investing in fixed income securities
issued by the U.S. government and U.S.
corporate debt obligations
Investor Profile Investors who seek a high level of
total return consistent with the
preservation of capital
INVESTMENT STRATEGY OF THE FIXED INCOME FUND
The Fund pursues its investment goal by investing primarily in U.S. Treasury and
U.S. government agency obligations, including mortgage-backed securities, and
corporate debt securities that are rated in one of the three highest ratings
categories by a nationally recognized rating organization. The Advisor's
investment selection process begins with a top-down analysis of general economic
conditions to determine how the Fund's investments will be weighted among the
U.S. Treasury, government agency and corporate sectors. The Advisor conducts
credit analysis of the corporate issues to find companies which may be poised
for credit upgrades. In doing so, the Advisor considers not only the yields of
particular issues, but also the potential for price appreciation due to improved
credit standing of a security's issuer. The Advisor diversifies the Fund's
investments in corporate debt among the major industry sectors. The Advisor
continually monitors the sector weighting of the Fund and may sell a security
when there is a fundamental change in a company's or sector's prospects or
better investment opportunities become available. If a security's credit rating
is downgraded, the Advisor will immediately review that security and take
appropriate action, including the possible sale of that security. The Advisor
may purchase securities with any stated remaining maturity, but under normal
circumstances, the Fund will maintain a dollar weighted average maturity of less
than 15 years. The Advisor may vary maturity if it believes interest rates will
change in the future.
PRINCIPAL RISKS OF INVESTING IN THE FIXED INCOME FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers. Generally, the Fund's fixed
income securities will decrease in value if interest rates rise and vice versa,
and the volatility of lower rated securities is even greater than that of higher
rated
Page 14 of 90
<PAGE>
securities. Also, longer-term securities are generally more volatile, so the
average maturity or duration of these securities affects risk.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies
are backed by the U.S. Treasury, while others are backed solely by the ability
of the agency to borrow from the U.S. Treasury or by the agency's own resources.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
The Fund is also subject to the risk that its investment approach, which focuses
on U.S. government and corporate fixed income securities, may perform
differently than other mutual funds which focus on different fixed income market
segments or other asset classes.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1993 10.77%
1994 -5.90%
1995 17.36%
1996 2.68%
1997 7.41%
1998 7.54%
BEST QUARTER WORST QUARTER
5.86% -4.19%
(6/30/95) (3/31/94)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed Income Fund 2.97% 4.64% 6.28%*
Lehman Brothers Intermediate 8.42% 6.59% 7.35%**
Government/Corporate Bond Index
</TABLE>
* Since 4/1/92
** Since 4/30/92
Page 15 of 90
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------
<S> <C> <C>
Fixed Income Fund 1.34% 4.95%*
Lehman Brothers Intermediate 8.42% 9.09%**
Government/Corporate Bond Index
</TABLE>
* Since 5/16/97
** Since 5/31/97
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers Intermediate
Government/Corporate Bond Index is a widely-recognized, market value-weighted
(higher market value bonds have more influence than lower market value bonds)
index of U.S. Treasury securities, U.S. government agency obligations, corporate
debt backed by the U. S. government, fixed-rate nonconvertible corporate debt
securities, Yankee bonds and nonconvertible debt securities issued by or
guaranteed by foreign governments and agencies. All securities in the index are
rated investment grade (BBB) or higher, with maturities of 1 to 10 years.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A PERCENTAGE OF OFFERING PRICE)* 4.25% None
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF NET ASSET VALUE)** None 5.50%
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS AND OTHER DISTRIBUTIONS None None
(AS A PERCENTAGE OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF APPLICABLE) None None
EXCHANGE FEE None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year of
your purchase and decreases over time depending on how long you own your
shares. See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Management Fees .60% .60%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .31% .31%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.16% 1.91%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time.
With this fee waiver, the Fund's actual total operating expenses are as follows:
Page 16 of 90
<PAGE>
Fixed Income Fund -Class A 1.05%
Fixed Income Fund -Class B 1.80%
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $538 $778 $1,036 $1,774
Class B Shares $744 $1,000 $1,232 $2,038
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $538 $778 $1,036 $1,774
Class B Shares $194 $600 $1,032 $2,038
</TABLE>
Page 17 of 90
<PAGE>
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
FUND SUMMARY
Investment Goal Preserve principal value and maintain
a high degree of liquidity while
providing current income
Investment Focus Intermediate-term fixed income
obligations of the U.S. Treasury and
U.S. government agencies
Share Price Volatility Low
Principal Investment Strategy Investing in a portfolio of U.S.
Treasury obligations and U.S.
government agency obligations to
attempt to maximize return while
limiting risk
Investor Profile Conservative investors who want to
receive income through a liquid
investment
INVESTMENT STRATEGY OF THE INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
The Fund attempts to invest fully in fixed income obligations issued by the U.S.
Treasury and U.S. government agencies. In selecting investments for the Fund,
the Advisor analyzes current market conditions and anticipated changes in bond
prices to attempt to obtain the highest possible yield with the least amount of
risk. The Advisor attempts to invest the Fund's assets approximately 66% in
U.S. Treasury obligations and 33% in U.S. government agency obligations. The
Advisor actively manages the maturity of the Fund's portfolio and purchases
securities with competitive yields in relation to other available securities
which will mature in three to ten years. Under normal circumstances, the
Advisor anticipates that the Fund's dollar-weighted average maturity will be
approximately three years; however, the Advisor may vary this average maturity
substantially in anticipation of a change in the interest rate environment, but
in no event will it exceed ten years. The Advisor continually monitors the
securities held by the Fund and may sell a security to adjust the maturity of
the Fund or if better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes. Generally, the Fund's fixed
income securities will decrease in value if interest rates rise and vice versa.
Also, longer-term securities are generally more volatile, so the average
maturity or duration of these securities affects risk.
Page 18 of 90
<PAGE>
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies
are backed by the U.S. Treasury, while others are backed solely by the ability
of the agency to borrow from the U.S. Treasury or by the agency's own resources.
The Fund is also subject to the risk that its investment approach, which focuses
on U.S. government fixed income securities, may perform differently than mutual
funds which focus on different fixed income market segments or other asset
classes.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1993 7.94%
1994 -5.09%
1995 14.71%
1996 3.01%
1997 6.60%
1998 6.47%
BEST QUARTER WORST QUARTER
4.90% -3.20%
(6/30/95) (3/31/94)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Intermediate-Term Government 2.18% 4.09% 5.06%*
Securities Fund
Lehman Brothers Intermediate 8.42% 6.59% 7.35%**
Government/Corporate Bond Index
</TABLE>
* Since 4/1/92
** Since 4/30/92
Page 19 of 90
<PAGE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers Intermediate
Government/Corporate Bond Index is a widely-recognized, market value-weighted
(higher market value bonds have more influence than lower market value bonds)
index of U.S. Treasury securities, U.S. government agency obligations, corporate
debt backed by the U. S. government, fixed-rate nonconvertible corporate debt
securities, Yankee bonds and nonconvertible debt securities issued by or
guaranteed by foreign governments and agencies. All securities in the index are
rated investment grade (BBB) or higher, with maturities of 1 to 10 years.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES
- --------------------------------------------------------------------------------------------------------
<S> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A PERCENTAGE OF OFFERING PRICE)* 4.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF NET ASSET VALUE) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS AND OTHER DISTRIBUTIONS None
(AS A PERCENTAGE OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF APPLICABLE) None
EXCHANGE FEE None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES
- ----------------------------------------------------------------
<S> <C>
Management Fees .60%
Distribution and Service (12b-1) Fees .25%
Other Expenses .37%
- ----------------------------------------------------------------
Total Annual Fund Operating Expenses 1.22%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time.
With this fee waiver, the Fund's actual total operating expenses are as follows:
Intermediate-Term Government Securities Fund - Class A 1.05%
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
Page 20 of 90
<PAGE>
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$519 $772 $1,044 $1,818
</TABLE>
Page 21 of 90
<PAGE>
NEW JERSEY MUNICIPAL SECURITIES FUND
FUND SUMMARY
Investment Goal Current income exempt from both
federal and New Jersey state income
tax, consistent with preservation of
capital
Investment Focus Tax-free New Jersey municipal
securities
Share Price Volatility Medium
Principal Investment Strategy Invests in municipal obligations which
pay interest that is exempt from both
federal and New Jersey state income
tax
Investor Profile Conservative taxable investors who
want to receive current income exempt
from federal and New Jersey state
income tax and are willing to bear the
risk of investing in a portfolio of
securities affected by changes in
economic conditions and governmental
policies within New Jersey
INVESTMENT STRATEGY OF THE NEW JERSEY MUNICIPAL SECURITIES FUND
The Fund pursues its investment goal by investing substantially all of its
assets in municipal securities that generate income exempt from federal and
New Jersey state income taxes. These securities include securities of
municipal issuers located in New Jersey, the District of Columbia, Puerto
Rico and other U.S. territories and possessions. The Fund intends to invest
as much of its assets as possible in securities that are not subject to
federal taxes, but it may invest up to 20% of its total assets in taxable
securities, including those subject to alternative minimum tax. The Fund's
Advisor will purchase municipal securities rated in one of the three highest
ratings categories by a nationally recognized rating organization and attempt
to maintain an average weighted portfolio maturity of less than 15 years. In
selecting securities for the Fund, the Advisor will consider each security's
creditworthiness, yield relative to comparable issuers and maturities,
appreciation potential and liquidity. The Advisor continually monitors the
securities held by the Fund and may sell a security to adjust the maturity of
the Fund or if better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE NEW JERSEY MUNICIPAL SECURITIES FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if
Page 22 of 90
<PAGE>
interest rates rise and vice versa, and the volatility of lower rated securities
is even greater than that of higher rated securities. Also, longer-term
securities are generally more volatile, so the average maturity or duration of
these securities affects risk.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political occurrence affecting one or more of these
issuers, and may experience increased volatility due to its investments in those
securities.
The Fund's concentration of investments in securities of issuers located in New
Jersey subjects the Fund to economic conditions and government policies within
that state. As a result, the Fund will be more susceptible to factors which
adversely affect issuers of New Jersey obligations than a mutual fund which does
not have as great a concentration in New Jersey municipal obligations.
The Fund is also subject to the risk that its market segment, New Jersey
municipal debt securities, may underperform other fixed income market segments
or the fixed income markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1993 10.09%
1994 -4.35%
1995 13.30%
1996 3.08%
1997 6.31%
1998 4.44%
BEST QUARTER WORST QUARTER
5.37% -4.62%
(3/31/95) (3/31/94)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS 5-YEAR GENERAL
OBLIGATION BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
New Jersey Municipal Securities Fund 1.28% 3.76% 5.14%*
Lehman Brothers 5-Year General 5.85% 5.36% 6.22%**
Obligation Bond Index
</TABLE>
Page 23 of 90
<PAGE>
* Since 5/4/92
** Since 5/31/92
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers 5-Year General Obligation Bond
Index is a widely-recognized, market value-weighted index of intermediate
investment grade general obligation bonds with maturities between 4 and 6 years.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES
- --------------------------------------------------------------------------------
<S> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A 3.00%
PERCENTAGE OF OFFERING PRICE)*
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF NET None
ASSET VALUE)
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None
AND OTHER DISTRIBUTIONS (AS A PERCENTAGE OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF None
APPLICABLE)
EXCHANGE FEE None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------
<S> <C>
Management Fees .60%
Distribution and Service (12b-1) Fees .25%
Other Expenses .32%
- --------------------------------------------------------------
Total Annual Fund Operating Expenses 1.17%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time.
With this fee waiver, the Fund's actual total operating expenses are as follows:
New Jersey Municipal Securities Fund - Class A 1.05%
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
Page 24 of 90
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$416 $660 $924 $1,678
</TABLE>
Page 25 of 90
<PAGE>
PENNSYLVANIA MUNICIPAL SECURITIES FUND
FUND SUMMARY
Investment Goal Current income exempt from both federal
and Pennsylvania state income tax,
consistent with preservation of capital
Investment Focus Tax-free Pennsylvania municipal securities
Share Price Volatility Medium
Principal Investment Strategy Invests in municipal obligations which pay
interest that is exempt from both federal
and Pennsylvania state income tax
Investor Profile Conservative taxable investors who want to
receive current income exempt from federal
and Pennsylvania state income tax and are
willing to bear the risk of investing in a
portfolio of securities affected by
changes in economic conditions and
governmental policies within Pennsylvania
INVESTMENT STRATEGY OF THE PENNSYLVANIA MUNICIPAL SECURITIES FUND
The Fund pursues its investment goal by investing substantially all of its
assets in municipal securities that generate income exempt from federal and
Pennsylvania state income taxes. These securities include securities of
municipal issuers located in Pennsylvania, the District of Columbia, Puerto
Rico and other U.S. territories and possessions. The Fund intends to invest
as much of its assets as possible in securities that are not subject to
federal taxes, but it may invest up to 20% of its total assets in taxable
securities, including those subject to alternative minimum tax. The Fund's
Advisor will purchase municipal securities rated in one of the three highest
ratings categories by a nationally recognized rating organization and attempt
to maintain an average weighted portfolio maturity of less than 15 years. In
selecting securities for the Fund, the Advisor will consider each security's
creditworthiness, yield relative to comparable issuers and maturities,
appreciation potential and liquidity. The Advisor continually monitors the
securities held by the Fund and may sell a security to adjust the maturity of
the Fund or if better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE PENNSYLVANIA MUNICIPAL SECURITIES FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than
Page 26 of 90
<PAGE>
that of higher rated securities. Also, longer-term securities are generally
more volatile, so the average maturity or duration of these securities affects
risk.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political occurrence affecting one or more of these
issuers, and may experience increased volatility due to its investments in those
securities.
The Fund's concentration of investments in securities of issuers located in
Pennsylvania subjects the Fund to economic conditions and government policies
within that state. As a result, the Fund will be more susceptible to factors
which adversely affect issuers of Pennsylvania obligations than a mutual fund
which does not have as great a concentration in Pennsylvania municipal
obligations.
The Fund is also subject to the risk that its market segment, Pennsylvania
municipal debt securities, may underperform other fixed income market segments
or the fixed income markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1994 -2.83%
1995 11.15%
1996 3.74%
1997 6.63%
1998 4.58%
BEST QUARTER WORST QUARTER
4.71% -3.37%
(3/31/95) (3/31/94)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS 5-YEAR MUNICIPAL BOND
INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Pennsylvania Municipal Securities Fund 1.46% 3.93% 4.18%*
Page 27 of 90
<PAGE>
Lehman Brothers 5-Year Municipal Bond Index 5.85% 5.22% 5.59%**
</TABLE>
* Since 5/13/93
** Since 5/31/93
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers 5-Year Municipal Bond Index is
a widely-recognized index of intermediate investment grade tax-exempt bonds.
The index includes general obligation bonds, revenue bonds, insured bonds and
prefunded bonds with maturities between 4 and 6 years.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES
- --------------------------------------------------------------------------------
<S> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A
PERCENTAGE OF OFFERING PRICE)* 3.00%
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF
NET ASSET VALUE) None
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED
DIVIDENDS AND OTHER DISTRIBUTIONS (AS A PERCENTAGE OF None
OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF
APPICABLE) None
EXCHANGE FEE None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES
- ------------------------------------------------------------------
<S> <C>
Management Fees .60%
Distribution and Service (12b-1) Fees .25%
Other Expenses .36%
- ------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.21%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time.
With this fee waiver, the Fund's actual total operating expenses are as follows:
Pennsylvania Municipal Securities Fund - Class A 1.05%
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
Page 28 of 90
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$420 $673 $945 $1,722
</TABLE>
Page 29 of 90
<PAGE>
HIGH YIELD BOND FUND
FUND SUMMARY
Investment Goal Maximize total return
Investment Focus High-yield fixed income securities
("junk bonds")
Share Price Volatility High
Principal Investment Strategy Investing the Fund's assets in another
mutual fund with an identical investment
objective
Investor Profile Investors who want the potential for
high total return and who can tolerate
the high risk of share price volatility
INVESTMENT STRATEGY OF THE HIGH YIELD BOND FUND
The Fund pursues its investment objective through what is sometimes called a
"master-feeder" arrangement. The Fund invests substantially all of its assets
in the SEI Institutional Managed Trust (SIMT) High Yield Bond Fund. As a
result, the Fund has an indirect interest in all the securities owned by the
SIMT Fund and the Fund's investment results will be the same as those of the
SIMT Fund, adjusted for the Fund's expenses. The Advisor monitors the
performance of the SIMT Fund and may choose to invest the Fund's assets in
another mutual fund or manage the Fund directly if it determines that doing so
would be in the best interest of the shareholders.
The SIMT Fund invests directly in a portfolio of fixed income securities rated
below investment grade ("junk bonds"), including corporate bonds and debentures,
convertible and preferred securities, and zero coupon obligations. The SIMT
Fund's advisor chooses securities that offer a high current yield as well as
total return potential. The SIMT Fund's securities are diversified as to
issuers and industries. The SIMT Fund's average weighted maturity may vary, and
generally will not exceed ten years, and there is no limit on the maturity or on
the credit quality of any security.
PRINCIPAL RISKS OF INVESTING IN THE HIGH YIELD BOND FUND
The prices of the SIMT Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the SIMT Fund's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is even greater than that of higher rated securities. Also, longer-term
securities are generally more volatile, so the average maturity or duration of
these securities affects risk.
Junk bonds involve greater risks of default or downgrade and are more volatile
than investment grade securities. Junk bonds involve greater risk of price
declines than investment grade
Page 30 of 90
<PAGE>
securities due to actual or perceived changes in an issuer's creditworthiness.
In addition, issuers of junk bonds may be more susceptible than other issuers to
economic downturns. Junk bonds are subject to the risk that the issuer may not
be able to pay interest or dividends and ultimately to repay principal upon
maturity. Discontinuation of these payments could substantially adversely
affect the market value of the security.
The Fund is also subject to the risk that its market segment, junk bonds, may
underperform other fixed income market segments or the fixed income markets as a
whole. In addition, because the Fund invests indirectly in junk bonds through
another mutual fund, the Fund's investment returns depend not only on the
performance of the SIMT Fund, but also may be lower than other mutual funds that
pursue the same investment goal directly due to expenses deducted from Fund
assets at both the master and feeder levels.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1996 14.28%
1997 13.75%
1998 0.25%
BEST QUARTER WORST QUARTER
3.77% -6.97%
(3/31/96) (9/30/98)
</TABLE>
The performance for the periods prior to 9/1/98 represents the performance of
the SIMT Fund adjusted for the expenses of the Fund.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE CS FIRST BOSTON HIGH YIELD INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------
<S> <C> <C>
High Yield Bond Fund -9.42% -2.53%*
CS First Boston High Yield Index 0.58% 10.52%**
</TABLE>
* Since 1/11/95
** Since 1/31/95
Page 31 of 90
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
- -----------------------------------------------------------------------
<S> <C> <C>
High Yield Bond Fund -10.63% -3.89%*
CS First Boston High Yield Index 0.58% 10.52%**
</TABLE>
* Since 1/11/95
** Since 1/31/95
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The CS First Boston High Yield Index is an
unmanaged, trader priced portfolio constructed to mirror the public high yield
debt market. Revisions to the Index are effected weekly. The Index reflects
the reinvestment of dividends.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A 4.25% None
PERCENTAGE OF OFFERING PRICE)*
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF None 5.50%
NET ASSET VALUE)**
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED None None
DIVIDENDS AND OTHER DISTRIBUTIONS (AS A PERCENTAGE OF
OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF None None
APPLICABLE)
EXCHANGE FEE None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year of
your purchase and decreases over time depending on how long you own your
shares. See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -------------------------------------------------------------------------------
<S> <C> <C>
Management Fees 1.09% 1.09%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses 4.34% 4.59%
- -------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 4.59% 6.68%
</TABLE>
* This table and Example include both the fees paid by the Fund and its share
of the fees of the SIMT Fund. The Fund's total actual annual fund operating
expenses for the most recent fiscal year were less than the amount shown above
because the Advisor and other service providers to the Fund are waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Advisor or another service provider may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are as follows:
High Yield Bond Fund - Class A 1.50%
High Yield Bond Fund - Class B 2.25%
Page 32 of 90
<PAGE>
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $990 $2,105 $3,199 $5,846
Class B Shares $1,212 $2,354 $3,403 $6,024
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $990 $2,105 $3,199 $5,846
Class B Shares $662 $1,954 $3,203 $6,024
</TABLE>
Page 33 of 90
<PAGE>
EQUITY GROWTH FUND
FUND SUMMARY
Investment Goal Long-term growth of capital
Investment Focus Large capitalization U.S. common
stocks
Share Price Volatility Medium
Principal Investment Strategy Investing in a diversified portfolio
of common stocks of established U.S.
companies that demonstrate long-term
earnings growth
Investor Profile Investors who seek growth of capital
and are willing to bear the risk of
investing in equity securities
INVESTMENT STRATEGY OF THE EQUITY GROWTH FUND
The Fund pursues its investment goal by investing primarily in common stocks of
established U.S. companies with large market capitalizations (in excess of $5
billion). In selecting investments for the Fund, the Advisor seeks to buy
companies that have consistently grown earnings above the S&P 500 earnings
growth rate and are attractively priced relative to their growth prospects. The
Advisor's investment selection process begins with a top-down analysis of
general economic conditions to determine how the investments will be weighted
among industry sectors. The Fund normally invests in all major industry sectors
represented in the S&P 500. The Advisor then conducts analysis of fundamental
growth characteristics (such as return on equity, earnings growth and
consistency, and price/earnings ratio) of the companies within those sectors to
identify stocks which are likely to appreciate in value. The Advisor
continually monitors the securities held by the Fund and may sell a security
when it achieves a designated price target, there is a fundamental change in a
company's prospects or better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE EQUITY GROWTH FUND
Since it purchases common stocks, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer
a decline in response. These factors contribute to price volatility, which is
the principal risk of investing in the Fund.
The Fund is also subject to the risk that its market segment, large
capitalization growth stocks, may underperform other equity market segments or
the equity markets as a whole.
Page 34 of 90
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1998 30.69%
BEST QUARTER WORST QUARTER
20.65% -11.33%
(12/31/98) (9/30/98)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Equity Growth Fund 23.48% 18.94%*
S&P 500 Index 28.60% 28.38%**
</TABLE>
* Since 2/3/97
** Since 1/31/97
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Equity Growth Fund 24.97% 20.96%*
S&P 500 Index 28.60% 28.40%**
</TABLE>
* Since 5/21/97
** Since 5/31/97
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
Page 35 of 90
<PAGE>
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) SHARES SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A 5.50% None
PERCENTAGE OF OFFERING PRICE)*
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF NET None 5.50%
ASSET VALUE)**
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None None
AND OTHER DISTRIBUTIONS (AS A PERCENTAGE OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF None None
APPLICABLE)
EXCHANGE FEE None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year of
your purchase and decreases over time on how long you own your shares. See
"Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Management Fees .75% .75%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .32% .32%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.32% 2.07%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is
waiving a portion of the fees in order to keep total operating expenses at
a specified level. The Advisor may discontinue all or part of this waiver
at any time. With this fee waiver, the Fund's actual total operating
expenses are as follows:
<TABLE>
<S> <C>
Equity Growth Fund - Class A 1.25%
Equity Growth Fund - Class B 2.00%
</TABLE>
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
Page 36 of 90
<PAGE>
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $677 $945 $1,234 $2,053
Class B Shares $760 $1,049 $1,314 $2,208
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $677 $945 $1,234 $2,053
Class B Shares $210 $649 $1,114 $2,208
</TABLE>
Page 37 of 90
<PAGE>
EQUITY VALUE FUND
FUND SUMMARY
Investment Goal Growth of capital and income
Investment Focus Large capitalization U.S. common
stocks which pay dividends
Share Price Volatility Medium
Principal Investment Strategy Investing in stocks which have an
above-average dividend yield relative
to the Standard & Poor's 500 Index
(S&P 500) and are undervalued by the
market
Investor Profile Investors who want growth of capital
and income who can tolerate some share
price volatility
INVESTMENT STRATEGY OF THE EQUITY VALUE FUND
The Fund pursues its investment goal by investing primarily in dividend-paying
common stocks of established U.S. companies with large market capitalizations
(in excess of $5 billion). In selecting investments for the Fund, the Advisor
seeks to buy companies that are fundamentally sound but have a market price
which the Advisor believes is less than a company's intrinsic value relative to
its growth prospects. The Advisor's investment selection process begins with a
top-down analysis of general economic conditions to determine how the
investments will be weighted among industry sectors. The Fund normally invests
in all major industry sectors represented in the S&P 500. The Advisor then
conducts analysis of fundamental value characteristics (such as price/earnings
ratios that are below a company's long-term earnings growth rate, price to book
value and return on equity) of the companies within those sectors to identify
stocks which represent "bargains" with the potential to appreciate in value in
the near-term. The Advisor continually monitors the securities held by the Fund
and may sell a security when it achieves a designated price target, there is a
fundamental change in a company's prospects or better investment opportunities
become available.
PRINCIPAL RISKS OF INVESTING IN THE EQUITY VALUE FUND
Since it purchases common stocks, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer
a decline in response. These factors contribute to price volatility, which is
the principal risk of investing in the Fund.
Page 38 of 90
<PAGE>
The Fund is also subject to the risk that its market segment, large
capitalization value stocks, may underperform other equity market segments or
the equity markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1993 5.85%
1994 -5.82%
1995 36.35%
1996 21.15%
1997 25.51%
1998 27.18%
BEST QUARTER WORST QUARTER
22.52% -10.46%
(12/31/98) (9/30/98)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund 20.19% 18.59% 15.70%*
S&P 500 Index 28.60% 24.05% 20.50%**
</TABLE>
* Since 4/1/92
** Since 4/30/92
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Equity Value Fund 20.83% 21.11%*
S&P 500 Index 28.60% 28.40%**
</TABLE>
* Since 5/12/97
** Since 5/31/97
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized,
Page 39 of 90
<PAGE>
market value-weighted (higher market value stocks have more influence than lower
market value stocks) index of 500 stocks designed to mimic the overall equity
market's industry weightings.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) SHARES SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A 5.50% None
PERCENTAGE OF OFFERING PRICE)*
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF None 5.50%
NET ASSET VALUE)**
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None None
AND OTHER DISTRIBUTIONS (AS A PERCENTAGE OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF None None
APPLICABLE)
EXCHANGE FEE None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year of
your purchase and decreases over time depending on how long you own your shares.
See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Management Fees .75% .75%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .32% .32%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.32% 2.07%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is
waiving a portion of the fees in order to keep total operating expenses at
a specified level. The Advisor may discontinue all or part of this waiver
at any time. With this fee waiver, the Fund's actual total operating
expenses are as follows:
<TABLE>
<S> <C>
Equity Value Fund - Class A 1.25%
Equity Value Fund - Class B 2.00%
</TABLE>
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
Page 40 of 90
<PAGE>
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $677 $945 $1,234 $2,053
Class B Shares $760 $1,049 $1,314 $2,208
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $677 $945 $1,234 $2,053
Class B Shares $210 $649 $1,114 $2,205
</TABLE>
Page 41 of 90
<PAGE>
EQUITY INCOME FUND
FUND SUMMARY
Growth of capital consistent with an
Investment Goal emphasis on current income
Investment Focus Dividend-paying U.S. stocks
Share Price Volatility Medium
Principal Investment Strategy Investing in stocks which have an
above-average dividend yield relative
to the Standard & Poor's 500 Index
(S&P 500)
Investor Profile Investors who want growth of capital
and income and who can tolerate
moderate share price volatility
INVESTMENT STRATEGY OF THE EQUITY INCOME FUND
The Fund pursues its investment goal by investing primarily in dividend-paying
common stocks and other equity securities of established U.S. companies with
large market capitalizations (in excess of $5 billion). The Fund invests in
companies operating in a broad range of industries based on their ability to
grow both earnings and dividends. The Advisor's investment selection process
begins with a top-down analysis of general economic conditions to determine how
the investments will be weighted among industry sectors. The Fund normally
invests in all major industry sectors represented in the S&P 500. The Advisor
then conducts analysis of individual companies' historical earnings and dividend
trends and chooses those companies that have historical dividend yields which
are normally higher than the dividend yield of the average company in the S&P
500 or have the ability to grow their dividends in future years. The Advisor
continually monitors the securities held by the Fund and may sell a security
when it achieves a designated price target, there is a fundamental change in a
company's prospects or better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE EQUITY INCOME FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer
a decline in response. These factors contribute to price volatility, which is
the principal risk of investing in the Fund.
Page 42 of 90
<PAGE>
The Fund is also subject to the risk that its market segment, large
capitalization income stocks, may underperform other equity market segments or
the equity markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1993 9.94%
1994 -4.56%
1995 35.21%
1996 20.70%
1997 24.68%
1998 11.12%
BEST QUARTER WORST QUARTER
13.84% -11.71%
(12/31/98) (9/30/98)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Income Fund 5.01% 15.32% 14.20%*
S&P 500 Index 28.60% 24.05% 20.50%**
</TABLE>
* Since 4/1/92
** Since 4/30/92
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Equity Income Fund 4.79% 12.74%*
S&P 500 Index 28.60% 28.40%**
</TABLE>
* Since 5/8/97
** Since 5/31/97
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
Page 43 of 90
<PAGE>
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) SHARES SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A 5.50% None
PERCENTAGE OF OFFERING PRICE)*
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF NET None 5.50%
ASSET VALUE)**
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None None
AND OTHER DISTRIBUTIONS (AS A PERCENTAGE OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF None None
APPLICABLE)
EXCHANGE FEE None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year of
your purchase and decreases over time depending on how long you own your shares.
See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Management Fees .75% .75%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .36% .36%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.36% 2.11%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is
waiving a portion of the fees in order to keep total operating expenses at
a specified level. The Advisor may discontinue all or part of these
waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are as follows:
<TABLE>
<S> <C>
Equity Income Fund - Class A 1.25%
Equity Income Fund - Class B 2.00%
</TABLE>
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
Page 44 of 90
<PAGE>
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $681 $957 $1,254 $2,095
Class B Shares $764 $1,061 $1,334 $2,250
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $681 $957 $1,254 $2,095
Class B Shares $214 $661 $1,134 $2,250
</TABLE>
Page 45 of 90
<PAGE>
EQUITY INDEX FUND
FUND SUMMARY
<TABLE>
<CAPTION>
<S> <C>
Investment Goal Investment results that correspond to
the Standard & Poor's 500 Index (S&P
500)
Investment Focus Large capitalization U.S. common
stocks
Share Price Volatility Medium
Principal Investment Strategy Investing the Fund's assets in another
mutual fund with an identical
investment objective
Investor Profile Investors who want growth of capital
and who can tolerate some share price
volatility
</TABLE>
INVESTMENT STRATEGY OF THE EQUITY INDEX FUND
The Fund pursues its investment objective through what is sometimes called a
"master-feeder" arrangement. The Fund invests substantially all of its assets
in the SEI Index Funds (SIF) S&P 500 Index Fund, a separate mutual fund with the
same investment objective. As a result, the Fund has an indirect interest in
all of the securities owned by the SIF Fund and the Fund's investment results
will be the same as those of the SIF Fund, adjusted for the Fund's expenses.
The Advisor monitors the performance of the SIF Fund and may choose to invest
the Fund's assets in another mutual fund or manage the Fund directly if it
determines that doing so would be in the best interest of the shareholders.
The SIF Fund invests exclusively in securities listed in the S&P 500, which
is comprised of 500 selected securities (mostly common stocks). The SIF
Fund's ability to replicate the performance of the S&P 500 will depend to
some extent on the size and timing of cash flows into and out of the Fund, as
well as on the level of the Fund's expenses. The SIF Fund's advisor makes no
attempt to "manage" the Fund in the traditional sense (i.e., by using
economic, financial or market analyses). However, the SIF Fund's advisor may
sell an investment if, in the judgment of the advisor, the merit of the
investment has been substantially impaired by extraordinary events or adverse
financial conditions.
PRINCIPAL RISKS OF INVESTING IN THE EQUITY INDEX FUND
Since it purchases equity securities, the SIF Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically,
the equity markets have moved in cycles, and the value of the SIF Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer
a decline in response. These factors contribute to price volatility, which is
the principal risk of investing in the SIF Fund.
Page 46 of 90
<PAGE>
The Fund is also subject to the risk that its investment approach, which
attempts to duplicate the performance of the S&P 500, may perform differently
than other mutual funds which focus on particular equity market segments or
invest in other asset classes. In addition, because the Fund indirectly
attempts to match the performance of the S&P 500 through investing in another
mutual fund, the Fund's investment returns depend not only on the performance of
the SIF Fund, but also may be lower than other mutual funds that pursue the same
investment goal directly due to expenses deducted from Fund assets at both the
master and feeder levels. The SIF Fund may not be able to match the performance
of the S&P 500.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<CAPTION>
<S> <C>
1989 30.87%
1990 -3.70%
1991 29.20%
1992 6.75%
1993 9.20%
1994 0.40%
1995 36.55%
1996 21.90%
1997 32.29%
1998 21.67%
BEST QUARTER WORST QUARTER
19.38% -13.91%
(12/31/98) (9/30/90)
</TABLE>
The performance for the periods prior to 9/1/98 represents the performance of
the SIF Fund adjusted for the expenses of the Fund.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
SINCE
CLASS A SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Index Fund 14.95% 20.49% 17.04% 13.93%*
S&P 500 Index 28.60% 24.05% 19.19% 18.26%**
</TABLE>
* Since 8/1/85
** Since 7/31/85
Page 47 of 90
<PAGE>
<TABLE>
<CAPTION>
SINCE
CLASS B SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Index Fund 16.26% 21.72% 17.72% 14.69%*
S&P 500 Index 28.60% 24.05% 19.19% 18.26%**
* Since 8/1/85
** Since 7/31/85
</TABLE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR CLASS A CLASS B
INVESTMENT) SHARES SHARES
- --------------------------------------------------------------------------------------------
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES 5.50% None
(AS A PERCENTAGE OF OFFERING PRICE)*
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A None 5.50%
PERCENTAGE OF NET ASSET VALUE)**
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED None None
DIVIDENDS AND OTHER DISTRIBUTIONS (AS A PERCENTAGE
OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, None None
IF APPLICABLE)
EXCHANGE FEE None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year of
your purchase and decreases over time depending on how long you own your
shares. See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
- ----------------------------------------------------------------------
<S> <C> <C>
Management Fees .78% .78%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses 3.72% 3.72%
- ----------------------------------------------------------------------
Total Annual Fund Operating Expenses 4.75% 5.50%
</TABLE>
* This table and Example include both the fees paid by the Fund and its
share of the fees of the SIF Fund. The Fund's total actual annual fund
operating expenses for the most recent fiscal year were less than the
amount shown above because the Advisor and other service providers to the
Fund are waiving a portion of the fees in order to keep total operating
expenses at a specified level. The Advisor or another service provider may
discontinue all or part of these waivers at any time. With these fee
waivers, the Fund's actual total operating expenses are as follows:
Page 48 of 90
<PAGE>
Equity Index Fund - Class A 1.05%
Equity Index Fund - Class B 1.80%
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $999 $1,092 $2,808 $5,095
Class B Shares $1,099 $2,038 $2,916 $5,228
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $999 $1,902 $2,808 $5,095
Class B Shares $549 $1,638 $2,716 $5,228
</TABLE>
Page 49 of 90
<PAGE>
INTERNATIONAL EQUITY FUND
FUND SUMMARY
<TABLE>
<CAPTION>
<S> <C>
Investment Goal Long-term capital appreciation
Investment Focus Common stocks of medium to large sized
companies in Europe and the Pacific
Basin
Share Price Volatility High
Principal Investment Strategy Investing in a diversified portfolio
of common stocks of companies that
have a history of consistent growth
and little or no debt
Investor Profile Investors who want capital
appreciation, who are willing to
accept the risks of international
investing and who want to diversify
their investments by investing
overseas
</TABLE>
INVESTMENT STRATEGY OF THE INTERNATIONAL EQUITY FUND
The Fund pursues its investment goal by investing primarily in common stocks of
medium to large capitalization companies (in excess of $500 million) located in
Europe and the Pacific basin countries, including Japan. The Advisor has
engaged Vontobel USA Inc. as sub-advisor (Sub-Advisor) to manage the Fund on a
day-to-day basis. The Fund focuses on companies that have a history of
consistent growth in cash flow, sales, operating profits, returns on equity and
returns on invested capital, and little or no debt. The Fund intends to be well
diversified among industry sectors and have a low turnover ratio, generally
holding its core positions for at least two years. The Sub-Advisor continually
monitors the securities held by the Fund and may sell a security when it
achieves a designated price target, there is a fundamental change in a company's
or country's prospects or better investment opportunities become available.
PRINCIPAL RISKS OF INVESTING IN THE INTERNATIONAL EQUITY FUND
Since it purchases common stocks, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer
a decline in response. These factors contribute to price volatility, which is
the principal risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily
Page 50 of 90
<PAGE>
affect the U.S. economy or similar issuers located in the United States. In
addition, investments in foreign countries are generally denominated in a
foreign currency. As a result, changes in the value of those currencies
compared to the U.S. dollar may affect (positively or negatively) the value of a
Fund's investments. These currency movements may happen separately from and in
response to events that do not otherwise affect the value of the security in the
issuer's home country. These various risks will be even greater for investments
in emerging market countries since political turmoil and rapid changes in
economic conditions are more likely to occur in these countries.
The medium capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these medium-sized companies may have limited product lines,
markets and financial resources, and may depend upon a relatively small
management group. Therefore, mid cap stocks may be more volatile than those of
larger companies. These securities may be traded over-the-counter or listed on
an exchange and may or may not pay dividends.
The Fund is also subject to the risk that its investment approach, which focuses
on international equity securities, may underperform other mutual funds which
invest in domestic equity market segments or the equity markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<CAPTION>
<S> <C>
1996 10.88%
1997 0.00%
1998 8.69%
BEST QUARTER WORST QUARTER
17.03% -18.76%
(12/31/98) (9/30/98)
</TABLE>
The performance for the periods prior to 9/1/98 represents the performance of
the Fund's previous Sub-Advisor.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE MORGAN STANLEY EAFE INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------
<S> <C> <C>
International Equity Fund 2.73% 5.72%*
Morgan Stanley EAFE Index 20.00% 9.39%**
</TABLE>
Page 51 of 90
<PAGE>
* Since 5/4/95
** Since 5/31/95
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------
<S> <C> <C>
International Equity Fund 2.34% 0.26%*
Morgan Stanley EAFE Index 20.00% 9.75%**
</TABLE>
* Since 5/7/97
** Since 5/31/97
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Morgan Stanley EAFE Index is a
widely-recognized, capitalization-weighted (companies with larger market
capitalizations have more influence than those with smaller market
capitalizations) index of over 1,000 securities listed on the stock exchanges in
Europe, Australia and the Far East.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (AS A PERCENTAGE OF OFFERING 5.50% None
PRICE)*
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A PERCENTAGE OF NET ASSET VALUE)** None 5.50%
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS AND OTHER DISTRIBUTIONS None None
(AS A PERCENTAGE OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, IF APPLICABLE) None None
EXCHANGE FEE None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year of
your purchase and decreases over time depending on how long you own your
shares. See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Management Fees 1.00% 1.00%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .72% .72%
- -----------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.97% 2.72%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor and
Sub-Advisor are waiving a portion of the fees in order to
Page 52 of 90
<PAGE>
keep total operating expenses at a specified level. The Advisor or
Sub-Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
International Equity Fund - Class A 1.75%
International Equity Fund - Class B 2.50%
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $739 $1,134 $1,554 $2,720
Class B Shares $825 $1,244 $1,640 $2,695
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $739 $1,134 $1,554 $2,720
Class B Shares $275 $844 $1,440 $2,871
</TABLE>
Page 53 of 90
<PAGE>
BALANCED FUND
FUND SUMMARY
<TABLE>
<CAPTION>
<S> <C>
Investment Goal Growth of capital consistent with
current income
Investment Focus
Common stocks and fixed income
securities
Share Price Volatility Medium
Principal Investment Strategy Investing in a blended portfolio of
equity and fixed income securities
designed to help maximize the Fund's
total return in both up and down
markets
Investor Profile Investors who want total return, but
who are unwilling to tolerate the
price volatility of a fund that
invests solely in equity securities
</TABLE>
INVESTMENT STRATEGY OF THE BALANCED FUND
The Fund pursues its investment goal by investing primarily in a blended
portfolio of U.S. common stocks and fixed income securities rated in one of the
top three ratings categories by a nationally recognized rating organization. In
selecting investments for the Fund, the Advisor purchases common stocks, as well
as fixed income securities issued by the U.S. government and its agencies and
instrumentalities and by U.S. corporations. The Advisor seeks to buy equity
securities of companies that have consistently grown their earnings per share
above the S&P 500 earnings growth rate and are attractively priced relative to
their growth prospects based on analysis of fundamental growth characteristics
(such as return on equity, earnings growth and consistency, and price/earnings
ratio). For the fixed income portion of the Fund, the Advisor conducts a
top-down analysis of general economic conditions to determine how the Fund's
investments will be weighted among the government and corporate sectors. The
Advisor conducts credit analysis of the corporate issues it buys and diversifies
the Fund's investments in corporate debt among the major industry sectors. The
Advisor attempts to manage the Fund to minimize share price declines during
falling equity markets by reallocating assets from equity investments to fixed
income investments. The Advisor's allocation of investments between equity
securities and fixed income securities is designed to maintain a portfolio which
is not dependent on either the equity market or the fixed income market alone to
produce total return. The Advisor continually monitors the securities held by
the Fund and may sell a security when it achieves a designated price target,
there is a fundamental change in a company's prospects, in an effort to adjust
the weighting of the Fund's investments in equity or fixed income securities, or
better investment opportunities become available.
Page 54 of 90
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE BALANCED FUND
Since it purchases common stocks, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Individual companies may
report poor results or be negatively affected by industry and/or economic trends
and developments. The prices of securities issued by such companies may suffer
a decline in response. These factors contribute to price volatility, which is
the principal risk of investing in the Fund.
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that the Advisor's asset allocation
decisions will not anticipate market trends successfully. For example,
weighting common stocks too heavily during a stock market decline may result in
a failure to preserve capital. Conversely, investing too heavily in fixed
income securities during a period of stock market appreciation may result in
lower total return. In fact, since the Fund will always have a portion of its
assets invested in fixed income securities, it may not perform as well during
periods of stock market appreciation as funds that invest only in stocks.
The Fund is also subject to the risk that its investment approach, which blends
equity and fixed income investments, may perform differently than other mutual
funds which focus on a particular market segment or other asset classes.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<CAPTION>
<S> <C>
1993 7.62%
1994 -4.87%
1995 27.53%
1996 13.39%
1997 19.46%
1998 18.33%
</TABLE>
Page 55 of 90
<PAGE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
16.89% -9.50%
(12/31/98) (9/30/98)
</TABLE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX, THE LEHMAN BROTHERS
INTERMEDIATE GOVERNMENT/CORPORATE INDEX AND A 50/50 BLEND OF THOSE TWO INDICES.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Fund 11.82% 12.94% 11.61%*
S&P 500 Index 28.60% 24.05% 20.50%**
Lehman Brothers Intermediate 8.42% 6.59% 7.35%**
Government/Corporate Index
50/50 Blend 18.85% 15.27% 13.96%**
</TABLE>
* Since 4/1/92
** Since 4/30/92
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------
<S> <C> <C>
Balanced Fund 11.90% 15.75%*
S&P 500 Index 28.60% 28.40%**
Lehman Brothers Intermediate 8.42% 9.09%**
Government/Corporate Index
50/50 Blend 18.85% 18.96%**
</TABLE>
* Since 5/8/97
** Since 5/31/97
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings. The Lehman Brothers Intermediate Government/Corporate Bond
Index is a widely-recognized, market value-weighted (higher market value bonds
have more influence than lower market value bonds) index of U.S. Treasury
securities, U.S. government agency obligations, corporate debt backed by the
U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee
bonds and nonconvertible debt securities issued by or guaranteed by foreign
governments and agencies. All securities in the index are rated investment grade
(BBB) or higher, with maturities of 1 to 10 years.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
Page 56 of 90
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR CLASS A CLASS B
INVESTMENT) SHARES SHARES
- -------------------------------------------------------------------------
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES 5.50% None
(AS A PERCENTAGE OF OFFERING PRICE)*
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A None 5.50%
PERCENTAGE OF NET ASSET VALUE)**
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED None None
DIVIDENDS AND OTHER DISTRIBUTIONS (AS A PERCENTAGE
OF OFFERING PRICE)
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT REDEEMED, None None
IF APPLICABLE)
EXCHANGE FEE None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year of
your purchase and decreases over time depending on how long you own your
shares. See "Selling Fund Shares."
Page 57 of 90
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
- -----------------------------------------------------------------------
<S> <C> <C>
Management Fees 75% .75%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .43% .43%
- -----------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.43% 2.18%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Advisor may discontinue all or part of this waiver at
any time. With this fee waiver, the Fund's actual total operating expenses
are as follows:
Balanced Fund - Class A 1.25%
Balanced Fund - Class B 2.00%
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $688 $978 $1,289 $2,169
Class B Shares $771 $1,082 $1,369 $2,323
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $688 $978 $1,289 $2,169
Class B Shares $221 $682 $1,169 $2,323
</TABLE>
Page 58 of 90
<PAGE>
<TABLE>
<S> <C>
MORE INFORMATION ABOUT RISK
EQUITY RISK - Equity securities include public and Equity Growth Fund
privately issued equity securities, common and preferred Equity Value Fund
stocks, warrants, rights to subscribe to common stock and Equity Income Fund
convertible securities, as well as instruments that Equity Index Fund
attempt to track the price movement of equity indices. International Equity Fund
Investments in equity securities and equity derivatives Balanced Fund
in general are subject to market risks that may cause
their prices to fluctuate over time. The value of
securities convertible into equity securities, such as
warrants or convertible debt, 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 mutual fund invests will
cause a fund's net asset value to fluctuate. An
investment in a portfolio of equity securities may be
more suitable for long-term investors who can bear the
risk of these share price fluctuations.
FIXED INCOME RISK - The market value of fixed income Fixed Income Fund
investments change in response to interest rate changes Intermediate-Term Government Securities Fund
and other factors. During periods of falling interest New Jersey Municipal Securities Fund
rates, the values of outstanding fixed income securities Pennsylvania Municipal Securities Fund
generally rise. Moreover, while securities with longer High Yield Bond Fund
maturities tend to produce higher yields, the prices of Balanced Fund
longer maturity securities are also subject to greater
market fluctuations as a result of changes in interest
rates. In addition to these fundamental risks, different
types of fixed income securities may be subject to the
following additional risks:
CALL RISK - During periods of falling interest Fixed Income Fund
rates, certain debt obligations with high interest Intermediate-Term Government Securities Fund
rates may be prepaid (or "called") by the issuer New Jersey Municipal Securities Fund
prior to maturity. This may cause a Fund's average Pennsylvania Municipal Securities Fund
weighted maturity to fluctuate, and may require a High Yield Bond Fund
Fund to invest the resulting proceeds at lower Balanced Fund
interest rates.
CREDIT RISK - The possibility that an issuer will be Fixed Income Fund
unable to make timely payments of either principal Intermediate-Term Government Securities Fund
or interest. New Jersey Municipal Securities Fund
Pennsylvania Municipal Securities Fund
High Yield Bond Fund
Balanced Fund
</TABLE>
Page 59 of 90
<PAGE>
<TABLE>
<S> <C>
EVENT RISK - Securities may suffer declines in Fixed Income Fund
credit quality and market value due to issuer Intermediate-Term Government Securities Fund
restructurings or other factors. This risk should New Jersey Municipal Securities Fund
be reduced because of a Fund's multiple holdings. Pennsylvania Municipal Securities Fund
High Yield Bond Fund
Balanced Fund
HIGH-YIELD, LOWER RATED SECURITIES (or "junk bonds") High Yield Bond Fund
are subject to additional risks associated with
investing in high-yield securities, including:
- High-yield, lower rated securities involve
greater risk of default or price declines
than investments in investment grade
securities (E.G., securities rated BBB or
higher by S&P or Baa or higher by Moody's)
due to changes in the issuer's
creditworthiness.
- The market for high-yield, lower rated
securities may be thinner and less active,
causing market price volatility and
limited liquidity in the secondary market.
This may limit the ability of a Fund to
sell these securities at their fair market
values either to meet redemption requests,
or in response to changes in the economy
or the financial markets.
- Market prices for high-yield, lower rated
securities may also be affected by
investors' perception of the issuer's
credit quality and the outlook for
economic growth. Thus, prices for high-
yield, lower rated securities may move
independently of interest rates and the
overall bond market.
- The market for high-yield, lower rated
securities may be adversely affected by
legislative and regulatory developments.
MORTGAGE-BACKED SECURITIES - Mortgage-backed Fixed Income Fund only
securities are fixed income securities representing
an interest in a pool of underlying mortgage loans.
They are sensitive to changes in interest rates, but
may respond to these changes differently than other
fixed income securities due to the possibility of
prepayment of the underlying mortgage loans. As a
result, it may not be possible to determine in
advance the actual maturity date or average life of
a mortgage-backed security. Rising interest rates
tend to discourage refinancings, with the result
that the average life and volatility of the security
will increase, exacerbating its decrease in market
price. When interest rates fall, however, mortgage-
backed securities may not gain as much in market
value because of the expectation of additional
mortgage prepayments that must be reinvested at
lower interest rates. Prepayment risk may make it
difficult to calculate the average maturity of a
portfolio of mortgage-backed securities and,
therefore, to assess the volatility risk of that
portfolio.
MUNICIPAL ISSUER RISK - There may be economic or New Jersey Municipal Securities Fund
political changes that impact the ability of municipal Pennsylvania Municipal Securities Fund
issuers to repay principal and to make interest payments
on municipal securities. Changes to the financial
condition or credit rating of municipal issuers may also
adversely affect the value of a Fund's municipal
securities.
</TABLE>
Page 60 of 90
<PAGE>
<TABLE>
<S> <C>
Constitutional or legislative limits on borrowing by
municipal issuers may result in reduced supplies of
municipal securities. Moreover, certain municipal
securities are backed only by a municipal issuer's
ability to levy and collect taxes. In addition, each
Fund's concentration of investments in issuers located
in a single state makes each Fund more susceptible to
adverse political or economic developments affecting
that state. Each Fund also may be riskier than mutual
funds that buy securities of issuers in numerous states.
FOREIGN SECURITY RISKS - Investments in securities of International Equity Fund
foreign companies or governments can be more volatile
than investments in U.S. companies or governments.
Diplomatic, political, or economic developments,
including nationalization or appropriation, could affect
investments in foreign countries. Foreign securities
markets generally have less trading volume and less
liquidity than U.S. markets. In addition, the value of
securities denominated in foreign currencies, and of
dividends from such securities, can change significantly
when foreign currencies strengthen or weaken relative to
the U.S. dollar. Foreign companies or governments
generally are not subject to uniform accounting,
auditing, and financial reporting standards comparable to
those applicable to domestic U.S. companies or
governments. Transaction costs are generally higher than
those in the
</TABLE>
Page 61 of 90
<PAGE>
<TABLE>
<S> <C>
U.S. and expenses for custodial arrangements of foreign
securities may be somewhat greater than typical
expenses for custodial arrangements of similar U.S.
securities. Some foreign governments levy withholding
taxes against dividend and interest income. Although in
some countries a portion of these taxes are
recoverable, the non-recovered portion will reduce the
income received from the securities comprising the
portfolio.
In addition to these risks, certain foreign securities
may be subject to the following additional risk factors:
CURRENCY RISK - Investments in foreign securities International Equity Fund
denominated in foreign currencies involve additional
risks, including:
- The value of a Fund's assets measured in
U.S. dollars may be affected by changes in
currency rates and in exchange control
regulations.
- A Fund may incur substantial costs in
connection with conversions between various
currencies.
- A Fund may be unable to hedge against
possible variations in foreign exchange
rates or to hedge a specific security
transaction or portfolio position.
- Only a limited market currently exists for
hedging transactions relating to currencies
in certain emerging markets.
TRACKING ERROR RISK - Factors such as Fund expenses, Equity Index Fund
imperfect correlation between the Fund's investments and
those of its benchmark, rounding of share prices,
changes to the benchmark, regulatory policies, and
leverage, may affect its ability to achieve perfect
correlation. The magnitude of any tracking error may be
affected by a higher portfolio turnover rate.
</TABLE>
Page 62 of 90
<PAGE>
YEAR 2000 RISK - The Funds depend on the smooth All Funds
functioning of computer systems in almost every aspect
of their business. Like other mutual funds, businesses
and individuals around the world, the Funds could be
adversely affected if the computer systems used by their
service providers do not properly process dates on and
after January 1, 2000, and distinguish between the year
2000 and the year 1900. The Funds have asked their
service providers whether they expect to have their
computer systems adjusted for the year 2000 transition,
and are seeking assurances from each service provider
that they are devoting significant resources to prevent
material adverse consequences to the Funds. While it is
likely that such assurances will be obtained, the Funds
and their 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 Funds do business. Furthermore, many foreign
countries are not as prepared as the U.S. for the year
2000 transition. As a result, computer difficulties in
foreign markets and with foreign institutions as a
result of the year 2000 may add to the possibility of
losses to the International Equity Fund and its
shareholders.
Page 63 of 90
<PAGE>
EACH FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, each Fund may invest up to 100%
of its assets in cash or money market instruments that would not ordinarily be
consistent with the Fund's objectives (other than the Money Market Funds). A
Fund will do so only if the Advisor or Sub-Advisor believes that the risk of
loss outweighs the opportunity for capital gains or higher income. Of course, we
cannot guarantee that any Fund will achieve its investment goal.
INVESTMENT ADVISOR AND SUB-ADVISOR
The Investment Advisor makes investment decisions for each of the Funds, other
than the International Equity Fund, and continuously reviews, supervises and
administers the Funds' respective investment programs. The Advisor oversees the
Sub-Advisor for the International Equity Fund to ensure compliance with that
Fund's investment policies and guidelines, and monitors the Sub-Advisor's
adherence to its investment style. The Advisor pays the Sub-Advisor out of the
investment advisory fees it receives (described below). The Advisor also
monitors the performance of the SIMT Fund and the SIF Fund. The Board of
Trustees of The Pillar Funds supervises the Advisor and Sub-Advisor and
establishes policies that the Advisor and Sub-Advisor must follow in their
management activities.
Summit Bank serves as the Advisor to the Funds. As of December 31, 1998, Summit
Bank had approximately $9.5 billion in assets under management. For the year
ended December 31, 1998, Summit Bank received advisory fees as a percentage of
average daily net assets of:
<TABLE>
<S> <C>
U.S. TREASURY SECURITIES MONEY MARKET FUND 0.35%
PRIME OBLIGATION MONEY MARKET FUND 0.35%
TAX-EXEMPT MONEY MARKET FUND 0.31%
FIXED INCOME FUND 0.49%
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND 0.43%
NEW JERSEY MUNICIPAL SECURITIES FUND 0.48%
PENNSYLVANIA MUNICIPAL SECURITIES FUND 0.44%
HIGH YIELD BOND FUND 0.00%
EQUITY GROWTH FUND 0.49%
EQUITY VALUE FUND 0.48%
EQUITY INCOME FUND 0.44%
EQUITY INDEX FUND 0.00%
INTERNATIONAL EQUITY FUND 0.78%
BALANCED FUND 0.37%
</TABLE>
Page 64 of 90
<PAGE>
Vontobel USA Inc. (Vontobel), 450 Park Avenue, New York, NY 10022, manages the
International Equity Fund on a day-to-day basis. Vontobel selects, buys and
sells securities for the Fund under the supervision of the Advisor and the Board
of Trustees of The Pillar Funds.
Fabrizio Pierallini serves as a Senior Vice President of Vontobel. He has
managed the International Equity Fund since September, 1998. He has more than
10 years of investment experience. Prior to joining Vontobel in 1994, Mr.
Pierallini served as Associate-Director/Portfolio Manager with Swiss Bank
Corporation, New York.
Rajiv Jain serves as Vice President of Vontobel. He has served as associate
portfolio manager for the International Equity Fund since September, 1998. He
has more than 6 years of investment experience. Prior to joining Vontobel, Mr.
Jain served as an analyst for Swiss Bank Corporation, New York.
SEI Investments Management Corporation (SEI), One Freedom Valley Drive, Oaks, PA
19456, is the advisor of the SIMT Fund and has engaged Credit Suisse Asset
Management (Credit Suisse) as sub-advisor to manage the SIMT Fund on a
day-to-day basis. Credit Suisse selects, buys and sells securities for the SIMT
Fund under the supervision of SEI and the SIMT Board of Trustees.
Richard J. Lindquist, C.F.A., serves as portfolio manager of the High Yield Bond
Fund. Mr. Lindquist joined Credit Suisse in 1995 as a result of Credit Suisse's
acquisition of CS First Boston Investment Management, and has had 15 years of
investment management experience, all of which were with high yield bonds.
Prior to joining CS First Boston, Mr. Lindquist was with Prudential Insurance
Company of America where he managed high yield funds totaling approximately $1.3
billion. Prior to joining Prudential, Mr. Lindquist managed high yield funds at
T. Rowe Price.
World Asset Management (World) manages the SIF Fund on a day-to-day basis.
World selects, buys and sells securities for the SIF Fund under the supervision
of the SIF Board of Trustees.
All investment decisions for the SIF Fund are made by a committee of investment
professionals and no persons are primarily responsible for making
recommendations to that committee.
PORTFOLIO MANAGERS
Judith Wolk serves as a Vice President of the Advisor. She has managed the
Prime Obligation Money Market Fund and the U.S. Treasury Securities Money Market
Fund since June, 1996. Ms. Wolk also advises the U.S Treasury Securities Plus
Money Market Fund and Institutional Select Money Market Fund. Prior to joining
the Advisor in 1995, Ms. Wolk managed money market instruments for a large
regional bank for a number of years.
Frances M. Tendall serves as a Senior Vice President of the Advisor. She has
managed the Intermediate-Term Government Securities Fund since April, 1992. She
joined the Advisor in 1982 and has managed investments for the Advisor for the
past 17 years.
Charlene P. Palmer serves as a Vice President of the Advisor. She has managed
the Tax-Exempt Money Market Fund since June, 1996 and the New Jersey Municipal
Securities Fund since May, 1992. She joined the Advisor in 1981 and has managed
investments for the Advisor for the past 18 years, with an emphasis on
tax-exempt bonds.
Page 65 of 90
<PAGE>
Joseph Markovich serves as a Vice President of the Advisor. He has managed the
Fixed Income Fund since January, 1997. He joined the Advisor in 1985 and has
managed investments for the Advisor for the past 14 years.
Randolph E. Lestyk serves as a Senior Vice President of the Advisor. He has
managed the Pennsylvania Municipal Securities Fund since 1994. Mr. Lestyk also
advises the Mid Cap Fund since 1997. Prior to joining the Advisor, Mr. Lestyk
was involved in equity and fixed income investing at several financial
institutions and senior vice president and chief investment officer of a major
Pennsylvania insurance company. He has more than 27 years of investment
experience.
Gregory S. Huning serves as a Senior Vice President of the Advisor. He has
co-managed the Equity Growth Fund since April, 1999. Prior to joining the
Advisor in 1995, Mr. Huning served as a senior equity portfolio manager for the
Robert Wood Johnson Foundation in 1994.
Glen C. Corbitt serves as a Vice President of the Advisor. He has co-managed
the Equity Growth Fund since April, 1999. Prior to joining the Advisor in 1995,
Mr. Corbitt served as an accountant for Rockefeller Financial Services in 1994.
Fernando Garip serves as a Senior Vice President of the Advisor. He has managed
the Equity Value Fund since January, 1996. He joined the Advisor in 1982 and
has managed investments for the Advisor for the past 17 years.
Richard H. Caro serves as a Vice President of the Advisor. He has managed the
Equity Income Fund since January, 1996. He joined the Advisor in 1983 and has
managed investments for the Advisor for the past 14 years. He has more than 28
years of investment experience.
Edward Kasperavich serves as a Vice President of the Advisor. He has managed
the Balanced Fund since January, 1997. He joined the Advisor in 1985 and has
managed investments for the Advisor for the past 14 years.
Page 66 of 90
<PAGE>
PURCHASING, SELLING AND EXCHANGING FUND SHARES
This section tells you how to buy, sell (sometimes called "redeem") and exchange
Class A and Class B Shares of the Funds.
The classes have different expenses and other characteristics.
CLASS A SHARES
- Front-end sales charge (except for the Money Market Funds)
- 12b-1 fees
- $1,000 minimum initial investment
CLASS B SHARES
- Contingent deferred sales charge
- Higher 12b-1 fees and shareholder servicing fees
- $1,000 minimum initial investment
- Automatic conversion to Class A Shares after 8 years
For some investors the minimum initial investment for Class A and Class B Shares
may be lower.
HOW TO PURCHASE FUND SHARES
You may purchase shares directly by:
MAIL:
The Pillar Funds
P.O. Box 8523
Boston, MA 02266-8523
FOR OVERNIGHT DELIVERY:
The Pillar Funds
c/o Boston Financial Data Services
Two Heritage Drive
North Quincy, MA 02171-2144
TELEPHONE: 1-800-932-7782
WIRE:
State Street Bank and Trust Company
ABA #011000028
For Credit To DDA Account #9905-150-0
For Further Credit To Account # (insert your name and account number)
SHAREHOLDERS MUST CALL THE ABOVE NUMBER BEFORE WIRING FUNDS.
Page 67 of 90
<PAGE>
AUTOMATED CLEARING HOUSE (ACH):
Call 1-800-932-7782 to request a form to establish this option.
To purchase shares directly, please call 1-800-932-7782, or complete and send in
the enclosed application. Unless you arrange to pay by wire or through ACH,
write your check, payable in U.S. dollars, to "The Pillar Funds" and include the
name of the appropriate Fund(s) on the check. A Fund cannot accept third-party
checks, credit cards, credit card checks or cash.
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its procedures
which may be different from the procedures for investing directly. Your
institution may charge a fee for its services, in addition to the fees charged
by the Fund. You will also generally have to address your correspondence or
questions regarding a Fund to your institution.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange (NYSE) and,
for the Money Market Funds, the Federal Reserve are open for business (a
Business Day).
A Fund may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Fund receives your purchase order plus, in the
case of Class A Shares, the applicable front-end sales charge.
Each Fund (except the Money Market Funds) calculates its NAV once each Business
Day at the regularly-scheduled close of normal trading on the New York Stock
Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current
Business Day's NAV, a Fund must generally receive your purchase order before
4:00 p.m. Eastern time.
Each Money Market Fund calculates its NAV once each Business Day at 3:00 p.m.
Eastern time. So, for you to be eligible to receive dividends declared on the
day you submit your purchase order, a Fund must generally receive your order
before 3:00 p.m. Eastern time and federal funds (readily available funds) before
3:00 p.m. Eastern time.
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the net
assets in the Fund.
In calculating NAV, a Fund generally values its investment portfolio at market
price (except the Money Market Funds). If market prices are unavailable or a
Fund thinks that they are unreliable, fair value prices may be determined in
good faith using methods approved by the Board of Trustees.
In calculating NAV for the Money Market Funds, we generally value a Fund's
investment portfolio using the amortized cost valuation method, which is
described in detail in our Statement of Additional Information. If this method
is determined to be unreliable during certain market
Page 68 of 90
<PAGE>
conditions or for other reasons, a Fund may value its portfolio at market
price or fair value prices may be determined in good faith using methods
approved by the Board of Trustees.
The International Equity Fund holds securities that are listed on foreign
exchanges. These securities may trade on weekends or other days when the Fund
does not calculate NAV. As a result, the NAV of the Fund's shares may change on
days when you cannot buy or sell Fund shares.
MINIMUM PURCHASES
To purchase Class A or Class B Shares for the first time, you must invest at
least $1,000 in a Fund. Your subsequent investments in any Fund must be made
in amounts of at least $100. A Fund may accept investments of smaller amounts
for either class of shares at our discretion.
SYSTEMATIC INVESTMENT PLAN
If you have a checking or savings account with a bank, you may purchase Class A
or Class B Shares automatically through regular deductions from your account in
amounts of at least $50 per month.
FRONT-END SALES CHARGES - CLASS A SHARES
The offering price of Class A Shares is the NAV next calculated after a Fund
receives your request, plus the front-end sales load (except the Money Market
Funds).
The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:
<TABLE>
<CAPTION>
If Your Investment is: YOUR SALES CHARGE AS A PERCENTAGE OF YOUR SALES CHARGE AS A PERCENTAGE OF
OFFERING PRICE YOUR NET INVESTMENT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed Income Fund $0-99,999 4.25% 4.44%
High Yield Bond Fund $100,000-249,000 3.75% 3.90%
$250,000-499,999 2.75% 2.83%
$500,000-999,999 2.00% 2.04%
$1,000,000 and above* 0.00% 0.00%
If Your Investment is: YOUR SALES CHARGE AS A PERCENTAGE OF YOUR SALES CHARGE AS A PERCENTAGE OF
OFFERING PRICE YOUR NET INVESTMENT
-----------------------------------------------------------------------------------------------------
Intermediate-Term $0-99,999 4.00% 4.17%
Government Securities Fund $100,000-249,000 3.00% 3.09%
$250,000-499,999 2.00% 2.04%
$500,000-999,999 1.00% 1.01%
$1,000,000 and above* 0.00% 0.00%
If Your Investment is: YOUR SALES CHARGE AS A PERCENTAGE OF YOUR SALES CHARGE AS A PERCENTAGE OF
OFFERING PRICE YOUR NET INVESTMENT
-----------------------------------------------------------------------------------------------------
New Jersey Municipal $0-249,999 3.00% 3.10%
Securities Fund $250,000-499,999 2.00% 2.05%
Pennsylvania Municipal $500,000-999,999 1.00% 1.01%
Page 69 of 90
<PAGE>
Securities Fund $1,000,000 and above* 0.00% 0.00%
If Your Investment is: YOUR SALES CHARGE AS A PERCENTAGE OF YOUR SALES CHARGE AS A PERCENTAGE OF
OFFERING PRICE YOUR NET INVESTMENT
-----------------------------------------------------------------------------------------------------
Equity and Balanced Funds $0-49,999 5.50% 5.82%
$50,000-99,999 4.75% 4.99%
$100,000-249,000 3.75% 3.90%
$250,000-499,999 2.75% 2.83%
$500,000-999,999 2.00% 2.04%
$1,000,000 and above* 0.00% 0.00%
</TABLE>
*Purchases of $1,000,000 or more do not have a sales charge. However, the
Distributor will charge you a 1.00% contingent deferred sales charge if you
redeem your shares within 12 months from the date you bought them.
Page 70 of 90
<PAGE>
WAIVER OF FRONT-END SALES CHARGE --CLASS A SHARES
The front-end sales charge will be waived on Class A Shares:
- - issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which The Pillar Funds is a party;
- - sold to dealers or brokers that have a sales arrangement with the
Distributor, for their own account or for retirement plans for their
employees;
- - 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;
- - sold to present or retired employees of Summit Bancorp, or one of its
affiliates and/or the spouses of such employees;
- - sold to present employees of service providers to The Pillar Funds;
- - sold to any qualified customer who has entered into an agreement with
Summit Bank, its affiliates or correspondent banks;
- - sold to present or retired Trustees of The Pillar Funds and their immediate
families;
- - sold to present or retired Directors of Summit Bancorp or its affiliates,
and their immediate families;
- - sold to beneficial owners of Class I Shares whose interests are converted
into Class A Shares;
- - purchased within 90 days of a redemption of Class A Shares of a non-money
market fund (only to the amount of the redemption); or
- - sold to 401(k) plans that have entered into service arrangements with
Summit Bank, its affiliates or correspondent banks.
REPURCHASE OF CLASS A SHARES
You may repurchase any amount of Class A Shares of any Fund at NAV (without the
normal front-end sales charge), up to the limit of the value of any amount of
Class A Shares (other than those which were purchased with reinvested dividends
and distributions) that you redeemed within the past 90 days. In effect, this
allows you to reacquire shares that you may have had to redeem, without
re-paying the front-end sales charge. You may only exercise this privilege
once. To exercise this privilege, the Fund must receive your purchase order
within 90 days of your redemption. IN ADDITION, YOU MUST NOTIFY THE FUND WHEN
YOU SEND IN YOUR PURCHASE ORDER THAT YOU ARE REPURCHASING SHARES.
REDUCED SALES CHARGES --CLASS A SHARES
RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this
right allows you to add the value of the Class A Shares you already own to the
amount that you are currently purchasing. The Fund will combine the value of
your current purchases with the current value of any Class A Shares you
purchased previously for (i) your account, (ii) your spouse's account, (iii) a
joint account with your spouse, or (iv) your minor children's trust or custodial
accounts. A fiduciary purchasing shares for the same fiduciary account, trust
or estate may also use this right of accumulation. The Fund will only consider
the value of Class A Shares purchased previously that were sold subject to a
sales charge. TO BE ENTITLED TO A REDUCED SALES CHARGE BASED ON SHARES ALREADY
OWNED, YOU MUST ASK US FOR THE REDUCTION AT THE TIME OF PURCHASE. You must
provide the Fund with your account number(s) and, if applicable, the account
numbers for your spouse and/or
Page 71 of 90
<PAGE>
children (and provide the children's ages). The Fund may amend or terminate
this right of accumulation at any time.
LETTER OF INTENT. You may purchase Class A Shares at the sales charge rate
applicable to the total amount of the purchases you intend to make over a
13-month period. In other words, a Letter of Intent allows you to purchase
Class A Shares of a Fund over a 13-month period and receive the same sales
charge as if you had purchased all the shares at the same time. The Fund will
only consider the value of Class A Shares sold subject to a sales charge. As a
result, Class A Shares purchased with dividends or distributions will not be
included in the calculation. To be entitled to a reduced sales charge based on
shares you intend to purchase over the 13-month period, you must send the Fund a
Letter of Intent. In calculating the total amount of purchases, you may include
in your letter purchases made up to 90 days before the date of the Letter. The
13-month period begins on the date of the first purchase, including those
purchases made in the 90-day period before the date of the Letter. Please note
that the purchase price of these prior purchases will not be adjusted.
You are not legally bound by the terms of your Letter of Intent to purchase the
amount of your shares stated in the Letter. The Letter does, however, authorize
the Fund to hold in escrow 5% of the total amount you intend to purchase. If
you do not complete the total intended purchase at the end of the 13-month
period, the Fund's transfer agent will redeem the necessary portion of the
escrowed shares to make up the difference between the reduced rate sales charge
(based on the amount you intended to purchase) and the sales charge that would
normally apply (based on the actual amount you purchased).
COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate
sales charge rate, the Fund will combine same day purchases of Class A Shares
(that are subject to a sales charge) made by you, your spouse and your minor
children (under age 21). This combination also applies to Class A Shares you
purchase with a Letter of Intent.
CONTINGENT DEFERRED SALES CHARGES - CLASS B SHARES
You do not pay a sales charge when you purchase Class B Shares. The offering
price of Class B Shares is simply the next calculated NAV. But if you sell your
shares within 7 years after your purchase, you will pay a contingent deferred
sales charge as described in the table below for either (1) the NAV of the
shares at the time of purchase, or (2) NAV of the shares next calculated after
the Fund receives your sale request, whichever is less. The sales charge does
not apply to shares you purchase through reinvestment of dividends or
distributions. So, you never pay a deferred sales charge on any increase in
your investment above the initial offering price. This sales charge does not
apply to exchanges of Class B Shares of one Fund for Class B Shares of another
Fund.
Page 72 of 90
<PAGE>
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
Year Since AS A PERCENTAGE OF
Purchase DOLLAR AMOUNT SUBJECT TO CHARGE
---------------------------------------------
<S> <C>
First 5.50%
Second 5.00%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh 0.00%
Eighth 0.00%
</TABLE>
The contingent deferred sales charge will be waived if you sell your Class B
Shares for the following reasons:
- - to make certain required withdrawals from a retirement plan (including
IRAs);
- - because of death or disability;
- - by investors who purchase shares with redemption proceeds (but only to the
extent of such redemption proceeds) from another investment company within
30 days of such redemption, provided that, the investors paid either a
front-end or contingent deferred sales charge on the original shares
redeemed (certain documentation may be required);
- - on the redemption of shares originally purchased through a bank trust
department, a registered investment advisor, or retirement plans who have
made certain arrangements with the Distributor or any other financial
institution, to the extent that no payments were advanced for purchases
made through those institutions; or
- - shareholders who automatically reinvest their dividends and distributions
may redeem up to 10% of the value of their shares each year.
GENERAL INFORMATION ABOUT SALES CHARGES
Your securities dealer is paid a commission when you buy your shares and is paid
a servicing fee as long as you hold your shares. Your securities dealer or
servicing agent may receive different levels of compensation depending on which
Class of shares you buy.
From time to time, some financial institutions, including brokerage firms
affiliated with the Advisor, may be reallowed up to the entire sales charge.
Firms that receive a reallowance of the entire sales charge may be considered
underwriters for the purpose of federal securities law.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of the Funds.
Page 73 of 90
<PAGE>
HOW TO SELL YOUR FUND SHARES
If you own your shares directly, you may sell your shares on any Business Day by
contacting a Fund directly by mail or telephone at 1-800-932-7782.
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares. Your broker or
institution may charge a fee for its services.
If you would like to sell $10,000 or more of your shares, or you would like your
proceeds sent to a third party or an address other than your own, please notify
the Fund in writing and include a signature guarantee by a bank or other
financial institution (a notarized signature is not sufficient).
The sale price of each share will be the NAV next determined after a Fund
receives your request, less any applicable deferred sales charge.
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $2,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $50 from any Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have a checking or
savings account with a bank, electronically transferred to your account.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within one Business Day after we
receive your request. Your proceeds can be wired to your bank account (subject
to a $10 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY
CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK
HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE).
INVOLUNTARY SALES OF YOUR SHARES
If your account balance drops below $1,000 because of redemptions, you may be
required to sell your shares. But, we will always give you at least 60 days'
written notice to give you time to add to your account and avoid the sale of
your shares.
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting us directly by
mail or telephone.
You may also exchange shares through your financial institution or an investment
professional by mail or telephone. Your broker or institution may charge a fee
for its services.
Page 74 of 90
<PAGE>
IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE ABLE TO
EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS
FROM YOUR DATE OF PURCHASE).
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after the Fund receives your exchange request.
CLASS A SHARES
You may exchange Class A Shares of any Fund for Class A Shares of any other
Fund. If you exchange shares that you purchased without a sales charge or with
a lower sales charge into a Fund with a sales charge or with a higher sales
charge, the exchange is subject to an incremental sales charge (e.g., the
difference between the lower and higher applicable sales charges). If you
exchange shares into a Fund with the same, lower or no sales charge there is no
incremental sales charge for the exchange.
CLASS B SHARES
You may exchange Class B Shares of any Fund for Class B Shares of any other
Fund. No contingent deferred sales charge is imposed on redemptions of Class
B Shares you acquire in an exchange, including shares of the Prime Obligation
Money Market Fund, provided you hold your shares for at least 7 years from
the date of your initial purchase.
REDEMPTIONS IN KIND
A Fund generally pays sale (redemption) proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the Fund's remaining shareholders) the Fund might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). It is highly unlikely that your shares
would ever be redeemed in kind, but if they were, you might have to pay
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Fund may suspend your right to sell your shares if the NYSE restricts trading,
the SEC declares an emergency or for other reasons. More information about this
is in the Statement of Additional Information.
TELEPHONE TRANSACTIONS
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Fund has certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Fund is not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you or
your
Page 75 of 90
<PAGE>
financial institution transact with the Fund over the telephone, you will
generally bear the risk of any loss.
DISTRIBUTION OF FUND SHARES
Each Fund has adopted a distribution plan under Rule 12b-1 that allows the Fund
to pay distribution and service fees for the sale and distribution of its
shares, and for services provided to shareholders. Because these fees are paid
out of a Fund's assets continuously, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges.
Distribution fees, as a percentage of average daily net assets are as follows:
CLASS A SHARES 0.25%
CLASS B SHARES 1.00%
The SIMT Fund has adopted a shareholder servicing plan under which its Class
A shares may pay a shareholder servicing fee of up to 0.25% of average daily
net assets. The SIF Fund has adopted a shareholder servicing plan under
which its Class E shares may pay a shareholder servicing fee of up to 0.25%
of average daily net assets. To the extent that a shareholder servicing fee
is charged to either the SIMT Fund or the SIF Fund, the Distributor will
waive a corresponding amount for the High Yield Bond Fund or the Equity Index
Fund to limit the distribution and shareholder service fees to a total of
1.00%.
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes its income as follows:
U.S. TREASURY SECURITIES MONEY MARKET FUND MONTHLY
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
HIGH YIELD BOND FUND
EQUITY GROWTH FUND QUARTERLY
EQUITY VALUE FUND
EQUITY INCOME FUND
EQUITY INDEX FUND
BALANCED FUND
INTERNATIONAL EQUITY FUND ANNUALLY
Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution.
Page 76 of 90
<PAGE>
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing at least 15 days prior to the date of the
distribution. Your election will be effective for dividends and distributions
paid after the Fund receives your written notice. To cancel your election,
simply send the Fund written notice.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax
issues that affect the Funds and their shareholders. This summary is based on
current tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from a Fund may be taxable whether or not you reinvest them. EACH SALE
OR EXCHANGE IS A TAXABLE EVENT.
The Tax-Exempt Money Market Fund intends to distribute federally tax-exempt
income. The New Jersey Municipal Securities Fund intends to distribute income
that is exempt from both federal taxes and New Jersey state taxes. The
Pennsylvania Municipal Securities Fund intends to distribute income that is
exempt from both federal taxes and Pennsylvania state taxes. The Funds may
invest a portion of their assets in securities that generate taxable income for
federal or state income taxes. Income exempt from federal tax may be subject to
state and local taxes. Any capital gains distributed by these Funds may be
taxable.
The International Equity Fund may be able to pass along a tax credit for foreign
income taxes it pays. The Fund will notify you if it gives you the credit.
The Funds use a tax management technique known as "highest in, first out."
Using this technique, the portfolio holdings that have experienced the
smallest gain or largest loss are sold first in an effort to minimize capital
gains and enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 77 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Class A and
Class B Shares of each Fund. This information is intended to help you
understand each Fund's financial performance for the past five years, or, if
shorter, the period of the Fund's operations. Some of this information reflects
financial information for a single Fund share. The total returns in the tables
represent the rate that you would have earned (or lost) on an investment in a
Fund, assuming you reinvested all of your dividends and distributions. This
information has been audited by Arthur Andersen LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain the annual report, which contains more performance information,
at no charge by calling 1-800-932-7782.
Page 78 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
NET ASSET DISTRIBUTIONS
VALUE NET FROM NET NET ASSET
BEGINNING INVESTMENT INVESTMENT VALUE END NET ASSETS TOTAL
OF PERIOD INCOME INCOME OF PERIOD END OF RETURN
PERIOD (000)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. TREASURY SECURITIES MONEY MARKET FUND
CLASS A
1998 $1.00 $0.04 $(0.04) $1.00 $68,327 4.43%
1997 1.00 0.04 (0.04) 1.00 12,492 4.28
1996 1.00 0.04 (0.04) 1.00 3,503 4.27
1995 1.00 0.05 (0.05) 1.00 3,532 4.80
1994 1.00 0.03 (0.03) 1.00 633 3.17
PRIME OBLIGATION MONEY MARKET FUND
CLASS A
1998 $1.00 $0.05 $(0.05) $1.00 $4,166 4.76%
1997 1.00 0.05 (0.05) 1.00 17,514 4.75
1996 1.00 0.04 (0.04) 1.00 11,347 4.58
1995 1.00 0.05 (0.05) 1.00 6,925 5.14
1994 1.00 0.03 (0.03) 1.00 3,281 3.40
CLASS B
1998 $1.00 $0.04 $(0.04) $1.00 $146 3.99%
1997(1) 1.00 -- -- 1.00 10 5.48*
TAX-EXEMPT MONEY MARKET FUND
CLASS A
1998 $1.00 $0.03 $(0.03) $1.00 $16,346 2.72%
1997 1.00 0.03 (0.03) 1.00 8,509 2.84
1996 1.00 0.03 (0.03) 1.00 3,852 2.70
1995 1.00 0.03 (0.03) 1.00 5,238 3.17
1994 1.00 0.02 (0.02) 1.00 2,790 2.02
<CAPTION>
RATIO OF RATIO RATIO OF NET
EXPENSES OF NET INVESTMENT
RATIO OF TO AVERAGE INVESTMENT INCOME TO
EXPENSES NET ASSETS INCOME AVERAGE NET
TO AVERAGE (EXCLUDING TO AVERAGE ASSETS (EXCLUDING
NET ASSETS WAIVERS) NET ASSETS WAIVERS)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES MONEY MARKET FUND
CLASS A
1998 0.88% 0.88% 4.28% 4.28%
1997 0.90 0.90 4.22 4.22
1996 0.90 0.90 4.19 4.19
1995 0.90 0.90 4.66 4.66
1994 0.87 0.87 3.07 3.07
PRIME OBLIGATION MONEY MARKET FUND
CLASS A
1998 0.88% 0.88% 4.70% 4.70%
1997 0.90 0.91 4.67 4.66
1996 0.90 0.92 4.48 4.46
1995 0.90 0.91 5.01 5.00
1994 0.87 0.87 3.89 3.89
CLASS B
1998 1.63% 1.63% 3.84% 3.84%
1997(1) 1.65 3.01 8.53 7.17
TAX-EXEMPT MONEY MARKET FUND
CLASS A
1998 0.90% 0.94% 2.69% 2.65%
1997 0.90 0.92 2.82 2.80
1996 0.90 0.93 2.65 2.62
1995 0.90 0.96 3.14 3.08
1994 0.90 0.92 1.97 1.95
</TABLE>
* Annualized
(1) Commenced Operations on December 30, 1997. Ratios for this Period Have Been
Annualized.
Page 79 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DISTRIBUTION DISTRIBUTIONS NET ASSETS
VALUE NET GAINS OR FROM NET FROM NET ASSET END OF
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE END PERIOD TOTAL
OF PERIOD INCOME SECURITIES INCOME GAINS OF PERIOD (000) RETURN(+)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED INCOME FUND
CLASS A
1998 $10.36 $0.55 $ 0.21 $(0.55) $(0.06) $10.51 $4,292 7.54%
1997 10.20 0.57 0.16 (0.57) -- 10.36 4,526 7.41
1996 10.48 0.55 (0.28) (0.55) -- 10.20 4,830 2.68
1995 9.44 0.56 1.04 (0.56) -- 10.48 5,844 17.36
1994 10.68 0.56 (1.18) (0.56) (0.06) 9.44 5,525 (5.90)
CLASS B
1998 $10.39 $0.48 $ 0.22 $(0.48) $(0.06) $10.55 $6,835 6.84%
1997(1) 10.11 0.31 0.28 (0.31) -- 10.39 1,268 9.41
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
CLASS A
1998 $10.26 $0.54 $ 0.11 $(0.54) -- $10.37 $1,253 6.47%
1997 10.16 0.55 0.10 (0.55) -- 10.26 1,397 6.60
1996 10.37 0.52 (0.22) (0.51) -- 10.16 2,578 3.01
1995 9.51 0.51 0.86 (0.51) -- 10.37 3,665 14.71
1994 10.53 0.49 (1.01) (0.49) $(0.01) 9.51 2,372 (5.09)
<CAPTION>
RATIO OF RATIO OF NET
EXPENSES RATIO OF INVESTMENT
TO AVERAGE NET INCOME TO
RATIO OF NET ASSETS INVESTMENT AVERAGE NET ASSETS
EXPENSES (EXCLUDING INCOME (EXCLUDING PORTFOLIO
TO AVERAGE WAIVERS AND TO AVERAGE WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) NET ASSETS REIMBURSEMENTS) RATE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIXED INCOME FUND
CLASS A
1998 1.05% 1.16% 5.31% 5.20% 58.30%
1997 1.05 1.16 5.60 5.49 80.34
1996 1.05 1.17 5.35 5.23 40.56
1995 1.05 1.16 5.58 5.47 35.49
1994 1.05 1.15 5.65 5.55 15.24
CLASS B
1998 1.80% 1.91% 4.44% 4.33% 58.30%
1997(1) 1.80 1.86 5.02 4.96 80.34
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
CLASS A
1998 1.05% 1.22% 5.19% 5.02% 43.42%
1997 1.05 1.19 5.40 5.26 57.82
1996 1.05 1.12 5.01 4.94 40.60
1995 1.05 1.30 5.08 4.83 68.29
1994 1.05 1.20 4.83 4.68 40.27
</TABLE>
(+) Total Return Does Not Reflect Sales Loads on Class A and Class B Shares.
(1) Commenced Operations on May 16, 1997. Ratios for this Period Have Been
Annualized.
Page 80 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DISTRIBUTION DISTRIBUTIONS
VALUE NET GAINS OR FROM NET FROM NET ASSET NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE END END OF TOTAL
OF PERIOD INCOME SECURITIES INCOME GAINS OF PERIOD PERIOD (000) RETURN(+)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NEW JERSEY MUNICIPAL SECURITIES FUND
CLASS A
1998 $10.89 $0.44 $ 0.03 $(0.45) $(0.03) $10.88 $16,706 4.44%
1997 10.70 0.49 0.17 (0.47) -- 10.89 18,651 6.31
1996 10.79 0.41 (0.09) (0.41) -- 10.70 20,247 3.08
1995 9.93 0.44 0.86 (0.44) -- 10.79 25,954 13.30
1994 10.85 0.45 (0.92) (0.45) -- 9.93 21,195 (4.35)
PENNSYLVANIA MUNICIPAL SECURITIES FUND
CLASS A
1998 $10.38 $0.42 $ 0.05 $(0.42) $(0.20) $10.23 $433 4.58%
1997 10.17 0.43 0.23 (0.43) (0.02) 10.38 404 6.63
1996 10.22 0.42 (0.05) (0.42) -- 10.17 344 3.74
1995 9.55 0.38 0.67 (0.38) -- 10.22 269 11.15
1994 10.17 0.33 (0.62) (0.33) -- 9.55 336 (2.83)
HIGH YIELD BOND FUND
CLASS A
1998(1) $10.00 $0.17 $ 0.01 $(0.18) $(0.02) $9.98 $103 1.79%
CLASS B
1998(1) $10.00 $0.16 -- $(0.16) $(0.02) $9.98 $2,285 1.63%
<CAPTION>
RATIO OF RATIO OF RATIO OF
EXPENSES NET NET INVESTMENT
RATIO OF TO AVERAGE INVESTMENT INCOME TO
EXPENSES NET ASSETS INCOME AVERAGE NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING TO AVERAGE (EXCLUDING TURNOVER
NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NEW JERSEY MUNICIPAL SECURITIES FUND
CLASS A
1998 1.05% 1.17% 4.15% 4.03% 17.55%
1997 1.05 1.19 4.35 4.21 22.85
1996 0.92 1.18 3.88 3.62 13.93
1995 0.66 1.18 4.18 3.66 2.83
1994 0.52 1.18 4.40 3.74 16.81
PENNSYLVANIA MUNICIPAL SECURITIES FUND
CLASS A
1998 1.05% 1.21% 4.03% 3.87% 56.48%
1997 1.05 1.21 4.18 4.02 71.89
1996 0.94 1.74 4.19 3.39 25.88
1995 1.05 1.55 3.80 3.30 36.92
1994 1.05 1.92 3.42 2.55 38.20
HIGH YIELD BOND FUND
CLASS A
1998(1) 1.50% 5.04% 7.00% 3.46% 1.47%*
CLASS B
1998(1) 2.25% 5.79% 6.88% 3.34% 1.47%*
</TABLE>
* The Portfolio Turnover Rate for the Master Fund, the SEI Institutional
Managed Trust High Yield Bond Portfolio, Is 36.36% for the Twelve Month
Period Ending December 31, 1998.
(+) Total Return Does Not Reflect Sales Loads on Class A and Class B Shares
(1) Commenced Operations on September 11, 1998. Ratios for this Period Have
Been Annualized. Total Return Is for the Period Indicated and Has Not Been
Annualized.
Page 81 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DISTRIBUTION DISTRIBUTIONS
VALUE NET GAINS OR FROM NET FROM NET ASSET NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE END END OF TOTAL
OF PERIOD INCOME (LOSS) SECURITIES INCOME GAINS OF PERIOD PERIOD (000) RETURN(+)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY GROWTH FUND
CLASS A
1998 $9.25 -- $2.73 $-- $(0.46) $11.52 $3,634 30.69%
1997(1) 10.00 (0.01) 1.24 -- $(1.98) 9.25 432 14.13*
CLASS B
1998 $9.18 $(0.03) $ 2.72 $-- $(0.46) $11.41 $6,061 30.47%
1997(2) 10.41 (0.02) 0.77 -- (1.98) 9.18 357 13.01*
EQUITY VALUE FUND
CLASS A
1998 $12.90 $ 0.11 $ 3.36 $(0.09) $(0.37) $15.91 $18,546 27.18%
1997 13.35 0.15 3.20 (0.14) (3.66) 12.90 13,923 25.51
1996 12.83 0.19 2.51 (0.18) (2.00) 13.35 10,000 21.15
1995 10.21 0.21 3.47 (0.22) (0.84) 12.83 7,644 36.35
1994 11.12 0.18 (0.83) (0.18) (0.08) 10.21 3,031 (5.83)
CLASS B
1998 $12.87 $ 0.03 $3.33 $(0.01) $(0.37) $15.85 $19,577 26.33%
1997(3) 14.81 0.04 1.73 (0.05) (3.66) 12.87 5,072 19.17*
<CAPTION>
RATIO RATIO OF
RATIO OF OF NET NET INVESTMENT
EXPENSES INVESTMENT INCOME (LOSS)
RATIO OF TO AVERAGE INCOME TO AVERAGE
EXPENSES NET ASSETS (LOSS) NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING TO AVERAGE (EXCLUDING TURNOVER
NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQUITY GROWTH FUND
CLASS A
1998 1.05% 1.32% (0.41)% (0.68)% 88.28%
1997(1) 1.05 1.32 (0.28) (0.55) 114.51
CLASS B
1998 1.80% 2.08% (1.16)% (1.44)% 88.28%
1997(2) 1.80 2.09 (1.08) (1.37) 114.51
EQUITY VALUE FUND
CLASS A
1998 1.05% 1.32% 0.58% 0.31% 19.69%
1997 1.05 1.31 0.98 0.72 80.24
1996 1.05 1.33 1.42 1.14 85.3
1995 1.05 1.32 1.83 1.56 61.88
1994 1.05 1.31 1.67 1.41 44.98
CLASS B
1998 1.80% 2.07% (0.18)% (0.45)% 19.69%
1997(3) 1.80 2.07 0.09 (0.18) 80.24
</TABLE>
* Annualized
(+) Total Return Does Not Reflect Sales Loads on Class A and Class B Shares.
(1) Commenced Operations on February 3, 1997. Ratios for this Period Have Been
Annualized.
(2) Commenced Operations on May 21, 1997. Ratios for this Period Have Been
Annualized.
(3) Commenced Operations May 12, 1997. Ratios for this Period Have Been
Annualized.
Page 82 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DISTRIBUTION DISTRIBUTIONS
VALUE NET GAINS OR FROM NET FROM NET ASSET NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE END END OF TOTAL
OF PERIOD INCOME (LOSS) SECURITIES INCOME GAINS OF PERIOD PERIOD (000) RETURN(+)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY INCOME FUND
CLASS A
1998 $13.22 $0.24 $1.19 $(0.25) $(0.39) $14.01 11.12% $18,159
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
CLASS B
1998 $13.17 $0.17 $1.15 $(0.16) $(0.39) $13.94 10.29% $18,907
1997(1) 14.34 0.15 1.94 (0.18) (3.08) 13.17 22.87* 7,862
EQUITY INDEX FUND
CLASS A
1998(2) $9.92 $0.02 $2.02 $(0.02) $(0.01) $11.93 20.59% $482
CLASS B
1998(3) $9.96 $0.02 $1.99 $(0.02) $(0.01) $11.94 20.19% $5,207
INTERNATIONAL EQUITY FUND
CLASS A
1998 $10.33 $0.01 $0.88 $(0.01) $(0.01) $11.20 8.69% $576
1997 11.22 0.05 (0.04) (0.05) (0.85) 10.33 0.00 665
1996 10.73 0.09 1.06 (0.04) (0.62) 11.22 10.88 788
1995(4) 10.00 0.01 0.75 (0.01) (0.02) 10.73 7.64 621
CLASS B
1998 $10.30 $(0.06) $0.86 $(0.01) $(0.01) $11.08 $312 7.84%
1997(5) 11.45 (0.03) (0.23) (0.04) (0.85) 10.30 118 (2.39)
<CAPTION>
RATIO OF
RATIO OF NET INCOME
EXPENSES RATIO OF (LOSS) TO
RATIO OF TO AVERAGE NET INCOME AVERAGE
EXPENSES NET ASSETS (LOSS) TO NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING AVERAGE (EXCLUDING TURNOVER
NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQUITY INCOME FUND
CLASS A
1998 1.05% 1.36% 1.80% 1.49% 40.30%
1997 1.05 1.34 2.05 1.76 76.67
1996 1.05 1.34 2.30 2.01 85.47
1995 1.05 1.35 2.36 2.06 42.97
1994 1.05 1.33 2.71 2.43 37.76
CLASS B
1998 1.80% 2.11% 1.07% 0.76% 40.30%
1997(1) 1.80 2.13 1.27 0.94 76.67
EQUITY INDEX FUND
CLASS A
1998(2) 1.05% (1.63)% 4.21% (4.79)% 9.35%**
CLASS B
1998(3) 1.80% (1.51)% 4.96% (4.67)% 9.35%**
INTERNATIONAL EQUITY FUND
CLASS A
1998 1.75% 1.97% 0.29% 0.07% 115.79%
1997 1.75 1.95 0.70 0.50 71.22
1996 1.75 1.98 0.70 0.47 67.03
1995(4) 1.75 2.38 0.45 (0.18) 14.32
CLASS B
1998 2.50% 2.70% (0.62)% (0.82)% 115.79%
1997(5) 2.50 2.70 (0.60)% (0.80)%* 71.22
</TABLE>
* Annualized
** The Portfolio Turnover Rate for the Master Fund, the SEI Index Funds
S&P 500 Index Portfolio, Is 7.58% for the Twelve Month Period Ending
December 31, 1998.
(+) Total Return Does Not Reflect Sales Loads on Class A and Class B Shares.
(1) Commenced Operations on May 8, 1997. Ratios for this Period Have Been
Annualized.
(2) Commenced Operations on September 10, 1998. Ratios for the Period Have Been
Annualized. Total Return Is for the Period Indicated and Has Not Been
Annualized.
(3) Commenced Operations on September 8, 1998. Ratios for the Period Have Been
Annualized. Total Return Is for the Period Indicated and Has Not Been
Annualized.
(4) Commenced Operations on May 4, 1995. Ratios for this Period Have Been
Annualized. Total Return Is for the Period Indicated and Has Not Been
Annualized.
(5) Commenced Operations on May 7, 1997. Ratios for this Period Have Been
Annualized. Total Return Is for the Period Indicated and Has Not Been
Annualized.
Page 83 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET UNREALIZED DISTRIBUTION DISTRIBUTIONS
VALUE NET GAINS OR FROM NET FROM NET ASSET NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE END END OF TOTAL
OF PERIOD INCOME (LOSS) SECURITIES INCOME GAINS OF PERIOD PERIOD (000) RETURN(+)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCED FUND
CLASS A
1998 $12.02 $0.23 $1.95 $(0.22) $(0.05) $13.93 18.33% $11,352
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
CLASS B
1998 $11.97 $0.15 $1.92 $(0.15) $(0.05) $13.84 17.40% $22,811
1997(1) 11.93 0.15 1.34 (0.18) (1.27) 11.97 19.45* 4,447
<CAPTION>
RATIO OF
RATIO OF NET INCOME
EXPENSES RATIO OF (LOSS) TO
RATIO OF TO AVERAGE NET INCOME AVERAGE
EXPENSES NET ASSETS (LOSS) TO NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING AVERAGE (EXCLUDING TURNOVER
NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCED FUND
CLASS A
1998 1.05% 1.43% 1.81% 1.43% 43.77%
1997 1.05 1.39 2.44 2.10 93.85
1996 1.05 1.36 3.43 3.12 43.80
1995 1.05 1.36 3.64 3.33 41.63
1994 1.05 1.34 3.39 3.10 27.15
CLASS B
1998 1.80% 2.18% 1.02% 0.64% 43.77%
1997(1) 1.80 2.28 1.23 0.75 93.85
</TABLE>
* Annualized
(+) Total Return Does Not Reflect Sales Loads on Class A and Class B Shares.
(1) Commenced Operations on May 8, 1997. Ratios for this Period Have Been
Annualized.
Page 84 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
The table that follows presents performance information about the Class A Shares
of the SIMT High Yield Bond Fund. This information is intended to help you
understand the Fund's financial performance for the past five years, or, if
shorter, the period of the Fund's operations. Some of this information reflects
financial information for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an investment in the
Fund, assuming you reinvested all of your dividends and distributions. This
information has been audited by PricewaterhouseCoopers LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain the annual report, which contains more performance information,
at no charge by calling 1-800-342-5734.
Page 85 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
NET REALIZED
NET ASSET AND UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE, NET GAINS OR FROM NET FROM REALIZED NET ASSET NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END END OF TOTAL
OF PERIOD INCOME SECURITIES INCOME GAINS OF PERIOD PERIOD (000) RETURN
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HIGH YIELD BOND FUND
CLASS A
1998 $11.66 $1.04 $(0.75) $(1.04) $(0.10) $10.81 $314,937 2.25%
1997 11.14 1.04 0.57 (1.04) (0.05) 11.66 236,457 15.30
1996 10.64 0.94 0.62 (1.03) (0.03) 11.14 107,545 15.46
1995(1) 10.00 0.67 0.55 (0.58) -- 10.64 23,724 17.72
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES RATIO OF NET INCOME TO
RATIO OF TO AVERAGE INVESTMENT AVERAGE
EXPENSES NET ASSETS INCOME TO NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING AVERAGE (EXCLUDING TURNOVER
NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HIGH YIELD BOND FUND
CLASS A
1998 0.85% 0.89% 8.94% 8.90% 56%
1997 0.86 0.91 9.33 9.28 68
1996 0.87 0.94 9.01 8.94 55
1995(1) 0.67 0.86 10.02 9.83 56
</TABLE>
(1) High Yield Bond Shares Were Offered Beginning January 11, 1995. All
Ratios Including Total Return for That Period Have Been Annualized. Amounts
Designated as "--" Are Zero or Have Been Rounded to Zero.
Page 86 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
The table that follows presents performance information about the Class E Shares
of the SIF S&P 500 Index Fund. This information is intended to help you
understand the Fund's financial performance for the past five years, or, if
shorter, the period of the Fund's operations. Some of this information reflects
financial information for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an investment in the
Fund, assuming you reinvested all of your dividends and distributions. This
information has been audited by Arthur Andersen LLP, independent public
accountants. Their report, along with the Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain the annual report, which contains more performance information,
at no charge by calling 1-800-342-5734.
Page 87 of 90
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD FOR THE PERIOD ENDED MARCH 31,
<TABLE>
<CAPTION>
NET REALIZED
NET ASSET AND UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE, NET GAINS OR FROM NET FROM NET ASSET NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT CAPITAL VALUE, END END OF TOTAL
OF PERIOD INCOME SECURITIES INCOME GAINS OF PERIOD PERIOD (000) RETURN
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX FUND
Class E+
1998 $24.10 $0.45 $10.88 $(0.45) $(0.21) $34.77 $1,300,924 47.62%
1997 20.88 0.46 3.54 (0.45) (0.33) 24.10 835,889 19.46%
1996 16.40 0.44 4.72 (0.37) (0.31) 20.88 630,566 31.88%
1995 15.07 0.42 1.79 (0.42) (0.46) 16.40 458,012 15.26%
1994 15.80 0.43 (0.22) (0.42) (0.52) 15.07 424,647 1.19%
1993 14.17 0.40 1.69 (0.40) (0.06) 15.80 675,484 14.97%
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES RATIO OF NET INCOME TO
RATIO OF TO AVERAGE INVESTMENT AVERAGE
EXPENSES NET ASSETS INCOME TO NET ASSETS PORTFOLIO AVERAGE
TO AVERAGE (EXCLUDING AVERAGE (EXCLUDING TURNOVER COMMISSION
NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE RATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX FUND
CLASS E+
1998 0.25% 0.54% 1.55% 1.26% 4% $.0169
1997 0.25% 0.54% 2.03% 1.74% 2% .0197
1996 0.25% 0.35% 2.31% 2.21% 3% n/a
1995 0.25% 0.35% 2.69% 2.59% 4% n/a
1994 0.25% 0.33% 2.57% 2.49% 23% n/a
1993 0.25% 0.35% 2.75% 2.65% 1% n/a
</TABLE>
(+) On July 31, 1997 the Board of Trustees approved the renaming of the Class A
shares to Class E shares.
Page 88 of 90
<PAGE>
THE PILLAR FUNDS
INVESTMENT ADVISOR
Summit Bank
210 Main Street
Hackensack, New Jersey 07601
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
More information about The Pillar Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated April 30, 1999, includes detailed information about The Pillar
Funds. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of
this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Fund's holdings and contain information from the
Funds' managers about strategies, and recent market conditions and trends and
their impact on Fund performance. The reports also contain detailed
financial information about the Funds.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE: Call 1-800-932-7782
BY MAIL: Write to us
The Pillar Funds
P.O. Box 8523
Boston, MA 02266-8523
BY INTERNET: www.pillarfunds.com
Page 89 of 90
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual
reports, as well as other information about The Pillar Funds, from the SEC's
website ("http://www.sec.gov"). You may review and copy documents at the SEC
Public Reference Room in Washington, DC (for information call
1-800-SEC-0330). You may request documents by mail from the SEC, upon
payment of a duplicating fee, by writing to: Securities and Exchange
Commission, Public Reference Section, Washington, DC 20549-6009. The Pillar
Fund Investment Company Act registration number is 811-6509.
The Pillar Funds, Pillar, the stylized "P" logo and Your Investment Foundation
are registered service marks of Summit Bank. pillarfunds.com is a service
mark of Summit Bank. Reach Higher, Summit, Summit Financial Services Group
and Summit Bancorp are registered service marks of Summit Bancorp. Summit
Bank is a service mark of Summit Bancorp.
Page 90 of 90
<PAGE>
THE PILLAR FUNDS
COMMERCIAL CASH MANAGEMENT ACCOUNT
PROSPECTUS
April 30, 1999
INSTITUTIONAL SELECT MONEY MARKET FUND
U.S. TREASURY SECURITIES MONEY MARKET FUND (CLASS I SHARES)
PRIME OBLIGATION MONEY MARKET FUND (CLASS I SHARES)
INVESTMENT ADVISOR
SUMMIT BANK
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
Page 1 of 22
<PAGE>
HOW TO READ THIS PROSPECTUS
The Pillar Funds is a mutual fund family that offers different classes of shares
in separate investment portfolios (Funds). The Funds have individual investment
goals and strategies. This prospectus gives you important information about the
Funds that are available through Summit Bank's commercial cash management
account that you should know before investing. Please read this prospectus and
keep it for future reference.
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT THE FUNDS. FOR MORE DETAILED INFORMATION
ABOUT EACH FUND, PLEASE SEE:
<TABLE>
<CAPTION>
PAGE
<S> <C>
INSTITUTIONAL SELECT MONEY MARKET FUND XXX
U.S. TREASURY SECURITIES MONEY MARKET FUND XXX
PRIME OBLIGATION MONEY MARKET FUND XXX
MORE INFORMATION ABOUT RISK XXX
EACH FUND'S OTHER INVESTMENTS XXX
THE INVESTMENT ADVISOR AND PORTFOLIO MANAGERS XXX
PURCHASING AND SELLING FUND SHARES XXX
DIVIDENDS AND DISTRIBUTIONS XXX
FINANCIAL HIGHLIGHTS XXX
TAXES XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
THE PILLAR FUNDS BACK COVER
</TABLE>
Page 2 of 22
<PAGE>
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
Each Fund has its own investment goal and strategies for reaching that goal.
The investment managers invest Fund assets in a way that they believe will help
each Fund achieve its goal. Still, investing in each Fund involves risk and
there is no guarantee that a Fund will achieve its goal. The investment
managers' judgments about the markets, the economy, or companies may not
anticipate actual market movements, economic conditions or company performance,
and these judgments may affect the return on your investment. In fact, no
matter how good a job an investment manager does, you could lose money on your
investment in a Fund, just as you could with other investments. A Fund share is
not a bank deposit and it is not insured or guaranteed by the FDIC or any
government agency.
THE FUNDS TRY TO MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS NO
GUARANTEE THAT A FUND WILL ACHIEVE THIS GOAL.
Page 3 of 22
<PAGE>
INSTITUTIONAL SELECT MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal Preserve principal value and maintain
a high degree of liquidity while
providing current income
Investment Focus Money market instruments
Share Price Volatility Very low
Principal Investment Strategy Investing in a broad range of short-
term high quality U.S. dollar-
denominated debt securities
Investor Profile Conservative investors who want to
receive current income through a
liquid investment
</TABLE>
INVESTMENT STRATEGY OF THE INSTITUTIONAL SELECT MONEY MARKET FUND
The Fund invests in a broad range of high quality short-term U.S.
dollar-denominated money market instruments, such as obligations of the U.S.
Treasury; agencies and instrumentalities of the U.S. government; domestic and
foreign banks; domestic and foreign corporations; supranational entities; and
foreign governments. The Fund may also enter into fully collateralized
repurchase agreements. The Fund's portfolio is comprised only of short-term
debt securities that are rated in the two highest categories by nationally
recognized rating organizations or securities that the Advisor determines are
of equal quality. The Fund will maintain an average dollar weighted maturity of
90 days or less, and will only acquire securities that have a remaining maturity
of 397 days or less.
The Advisor's investment selection process seeks to increase the Fund's
potential for current income through (i) security selection; (ii) managing the
Fund's mix of government, corporate and bank obligations; and (iii) "positioning
on the yield curve" - that is, balancing the desire to earn attractive rates of
interest with the need to maintain an appropriate maturity level. Securities
are chosen based on the issuer's financial condition, the financial condition of
any person or company which guarantees the credit of the issuer, liquidity and
competitive yield. The Advisor carefully evaluates and monitors the
creditworthiness of each issuer and any person or company providing credit
support.
PRINCIPAL RISKS OF INVESTING IN THE INSTITUTIONAL SELECT MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market
Page 4 of 22
<PAGE>
fund seeks to keep a constant price per share of $1.00, you may lose money by
investing in the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund from year to year.
<TABLE>
<S> <C>
1998 5.35%
BEST QUARTER WORST QUARTER
1.34% 1.27%
(9/30/98) (12/31/98)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
Institutional Select Money Market Fund 5.35% 5.38%*
</TABLE>
* Since 7/1/97
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
SHARES
- -----------------------------------------------------------------
<S> <C>
Management Fees .10%
Other Expenses .22%
- -----------------------------------------------------------------
Total Annual Fund Operating Expenses .32%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time.
With this fee waiver, the Fund's actual total operating expenses are as follows:
Institutional Select Money Market Fund .30%
For more information about these fees, see "Investment Advisor."
Page 5 of 22
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$33 $103 $180 $406
</TABLE>
Page 6 of 22
<PAGE>
U.S. TREASURY SECURITIES MONEY MARKET FUND
FUND SUMMARY
Investment Goal Preserve principal value and maintain a high
degree of liquidity while providing current
income
Investment Focus Money market instruments issued by the U.S.
Treasury
Share Price Volatility Very low
Principal Investment Strategy Investing in short-term U.S.
dollar-denominated obligations of the U.S.
Treasury and repurchase agreements
Investor Profile Conservative investors who want to receive
income through a liquid investment
INVESTMENT STRATEGY OF THE U.S. TREASURY SECURITIES MONEY MARKET FUND
The Fund invests exclusively in short-term U.S. dollar-denominated money market
instruments issued by the U.S. Treasury and repurchase agreements that are fully
collateralized by U.S. Treasury securities. The Fund will maintain an average
dollar weighted maturity of 60 days or less, and will only acquire securities
that have a remaining maturity of 397 days or less. The Advisor's investment
selection process seeks to increase the Fund's potential for current income
through analysis of the available yields among the Fund's permitted investments
and "positioning on the yield curve" - that is, balancing the desire to earn
attractive rates of interest with the need to maintain an appropriate maturity
level. The Advisor actively manages the maturity of the Fund based on current
market interest rates and its outlook on the various economic factors which
influence the market for short-term fixed income instruments and future interest
rate predictions.
PRINCIPAL RISKS OF INVESTING IN THE U.S. TREASURY SECURITIES MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market fund seeks to keep a
constant price per share of $1.00, you may lose money by investing in the Fund.
PERFORMANCE INFORMATION
Page 7 of 22
<PAGE>
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 2.46%
1994 3.44%
1995 5.05%
1996 4.53%
1997 4.55%
1998 4.70%
BEST QUARTER WORST QUARTER
1.29% 0.59%
(6/30/95) (6/30/93)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Securities Money Market Fund 4.70% 4.45% 3.97%*
</TABLE>
* Since 4/1/92
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Management Fees .35%
Other Expenses .28%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .63%
</TABLE>
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
Page 8 of 22
<PAGE>
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$64 $202 $351 $786
</TABLE>
Page 9 of 22
<PAGE>
PRIME OBLIGATION MONEY MARKET FUND
FUND SUMMARY
Investment Goal Preserve principal value and maintain a high
degree of liquidity while providing current
income
Investment Focus Money market instruments
Share Price Volatility Very low
Principal Investment Strategy Investing in a broad range of short-term high
quality U.S. dollar-denominated debt
securities
Investor Profile Conservative investors who want to receive
current income through a liquid investment
INVESTMENT STRATEGY OF THE PRIME OBLIGATION MONEY MARKET FUND
The Fund invests in a broad range of high quality short-term U.S.
dollar-denominated money market instruments, such as obligations of the U.S.
Treasury; agencies and instrumentalities of the U.S. government; domestic and
foreign banks; domestic and foreign corporations; supranational entities; and
foreign governments. The Fund may also enter into fully collateralized
repurchase agreements. The Fund's portfolio is comprised only of short-term
debt securities that are rated in the two highest categories by nationally
recognized rating organizations or securities that the Advisor determines are
of equal quality. The Fund will maintain an average dollar weighted maturity of
90 days or less, and will only acquire securities that have a remaining maturity
of 397 days or less.
The Advisor's investment selection process seeks to increase the Fund's
potential for current income through (i) security selection; (ii) managing the
Fund's mix of government, corporate and bank obligations; and (iii) "positioning
on the yield curve" - that is, balancing the desire to earn attractive rates of
interest with the need to maintain an appropriate maturity level. Securities
are chosen based on the issuer's financial condition, the financial condition of
any person or company which guarantees the credit of the issuer, liquidity and
competitive yield. The Advisor carefully evaluates and monitors the
creditworthiness of each issuer and any person or company providing credit
support.
PRINCIPAL RISKS OF INVESTING IN THE PRIME OBLIGATION MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market
Page 10 of 22
<PAGE>
fund seeks to keep a constant price per share of $1.00, you may lose money by
investing in the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1993 2.65%
1994 3.67%
1995 5.40%
1996 4.83%
1997 5.02%
1998 5.02%
BEST QUARTER WORST QUARTER
1.35% 0.64%
(6/30/95) (6/30/93)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime Obligation Money Market Fund 5.02% 4.79% 4.25%*
</TABLE>
* Since 4/1/92
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------------
<S> <C>
Management Fees .35%
Other Expenses .28%
- -------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .63%
</TABLE>
For more information about these fees, see "Investment Advisor."
Page 11 of 22
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$64 $202 $351 $786
</TABLE>
Page 12 of 22
<PAGE>
MORE INFORMATION ABOUT RISK
All Funds
YEAR 2000 RISK - The Funds depend on the smooth
functioning of computer systems in almost every
aspect of their business. Like other mutual
funds, businesses and individuals around the
world, the Funds could be adversely affected if
the computer systems used by their service
providers do not properly process dates on and
after January 1, 2000, and distinguish between
the year 2000 and the year 1900. The Funds
have asked their service providers whether they
expect to have their computer systems adjusted
for the year 2000 transition, and are seeking
assurances from each service provider that they
are devoting significant resources to prevent
material adverse consequences to the Funds.
While it is likely that such assurances will be
obtained, the Funds and their 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 Funds do business.
EACH FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, we cannot guarantee that any Fund will
achieve its investment goal.
Page 13 of 22
<PAGE>
INVESTMENT ADVISOR
The Investment Advisor makes investment decisions for each of the Funds, and
continuously reviews, supervises and administers the Funds' respective
investment programs. The Board of Trustees of The Pillar Funds supervises the
Advisor and establishes policies that the Advisor must follow in its management
activities.
Summit Bank serves as the Advisor to the Funds. As of December 31, 1998, Summit
Bank had approximately $9.5 billion in assets under management. For the year
ended December 31, 1998, Summit Bank received advisory fees as a percentage of
average daily net assets of:
<TABLE>
<S> <C>
INSTITUTIONAL SELECT MONEY MARKET FUND 0.08%
U.S. TREASURY SECURITIES MONEY MARKET FUND 0.35%
PRIME OBLIGATION MONEY MARKET FUND 0.35%
</TABLE>
PORTFOLIO MANAGER
Judith Wolk serves as a Vice President of the Advisor. She has managed the
Prime Obligation Money Market Fund and the U.S. Treasury Securities Money
Market Fund since June, 1996, and the Institutional Select Money Market Fund
since its inception. Ms. Wolk also advises the U.S. Treasury Securities Plus
Money Market Fund. Prior to joining the Advisor in 1995, Ms. Wolk managed
money market instruments for a large regional bank for a number of years.
Page 14 of 22
<PAGE>
PURCHASING AND SELLING FUND SHARES
This section tells you how to buy and sell (sometimes called "redeem") and
exchange shares of the Funds.
HOW TO PURCHASE FUND SHARES
Shares of the Funds are for financial institutions investing for their own or
their customers' accounts and cash management account customers of Summit Bank.
Cash management account shareholders should consult their cash management
account agreement or call 1-888-8SUMMIT for more information on purchasing
shares. A Fund generally will not accept checks, third-party checks, credit
cards, credit card checks or cash.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange (NYSE) and
the Federal Reserve are open for business (a Business Day).
A Fund may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Fund receives your purchase order.
Each Fund calculates its NAV once each Business Day at 3:00 p.m. Eastern time.
So, for you to be eligible to receive dividends declared on the day you submit
your purchase order, a Fund must generally receive your order before 3:00 p.m.
Eastern time and federal funds (readily available funds) before 3:00 p.m.
Eastern time.
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the net
assets in the Fund.
In calculating NAV, we generally value a Fund's investment portfolio using the
amortized cost valuation method, which is described in detail in our Statement
of Additional Information. If this method is determined to be unreliable during
certain market conditions or for other reasons, a Fund may value its portfolio
at market price or fair value prices may be determined in good faith using
methods approved by the Board of Trustees.
Page 15 of 22
<PAGE>
MINIMUM PURCHASES
Summit Bank may require cash management account customers to maintain minimum
banking account levels in order to participate in the cash management account
program. The minimum levels are subject to the terms of your cash management
account agreement with Summit Bank. In general, however, if your banking
account falls below the minimum amount, your shares in a Fund may be redeemed or
you may be charged additional fees.
For the Institutional Select Money Market Fund, the minimum initial investment
and minimum account sizes are $5,000,000.
HOW TO SELL YOUR FUND SHARES
Cash management account shareholders may sell shares by following procedures
established when they opened their account or accounts. If you have questions,
call 1-888-8SUMMIT.
The sale price of each share will be the NAV next determined after a Fund
receives your request.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within one Business Day after we
receive your request. Your proceeds will be wired to your bank account.
AUTOMATIC EXCHANGE OF YOUR SHARES
If your account balance for the Institutional Select Money Market Fund drops
below $5,000,000 because of redemptions, your shares may be automatically
exchanged for Class I Shares of the Prime Obligation Money Market Fund. But, we
will always give you at least 30 days' written notice to give you time to add to
your account and avoid the automatic exchange of your shares.
Page 16 of 22
<PAGE>
INVOLUNTARY SALES OF YOUR SHARES
If your account balance drops below the minimum level required in your cash
management account agreement with Summit Bank because of redemptions, you may be
required to sell your shares. But, we will always give you at least 60 days'
written notice to give you time to add to your account and avoid the sale of
your shares.
REDEMPTIONS IN KIND
A Fund generally pays sale (redemption) proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the Fund's remaining shareholders), the Fund might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). It is highly unlikely that your shares
would ever be redeemed in kind, but if they were, you might have to pay
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Fund may suspend your right to sell your shares if the NYSE restricts trading,
the SEC declares an emergency or for other reasons. More information about this
is in the Statement of Additional Information.
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although the Fund has certain safeguards and procedures
to confirm the identity of callers and the authenticity of instructions, the
Fund is not responsible for any losses or costs incurred by following telephone
instructions we reasonably believe to be genuine. If you or your financial
institution transact with the Fund over the telephone, you will generally bear
the risk of any loss.
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares dividends daily and distributes its income monthly and makes
distributions of capital gains, if any, at least annually. If you own Fund
shares on a Fund's record date, you will be entitled to receive the
distribution.
Cash management account shareholders automatically receive dividends and
distributions in cash. Other shareholders will receive dividends and
distributions in the form of additional Fund shares unless you elect to receive
payment in cash. To elect cash payment, you must notify the Fund in writing at
least 15 days prior to the date of the distribution. Your election will be
effective for dividends and distributions paid after the Fund receives your
written notice. To cancel your election, simply send the Fund written notice.
Page 17 of 22
<PAGE>
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax
issues that affect the Funds and their shareholders. This summary is based on
current tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains,
if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation.
Distributions you receive from a Fund may be taxable whether or not you
reinvest them. Each sale or exchange is a taxable event.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 18 of 22
<PAGE>
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about each Fund. This
information is intended to help you understand each Fund's financial performance
for the past five years, or, if shorter, the period of the Fund's operations.
Some of this information reflects financial information for a single Fund share.
The total returns in the tables represent the rate that you would have earned
(or lost) on an investment in a Fund, assuming you reinvested all of your
dividends and distributions. This information has been audited by Arthur
Andersen LLP, independent public accountants. Their report, along with each
Fund's financial statements, appears in the annual report that accompanies our
Statement of Additional Information. You can obtain the annual report, which
contains more performance information, at no charge by calling 1-800-932-7782.
Page 19 of 22
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
REALIZED
AND
NET ASSET UNREALIZED DISTRIBUTIONS NET ASSETS
VALUE NET GAINS OR FROM NET NET ASSET END OF
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT VALUE END PERIOD
OF PERIOD INCOME SECURITIES INCOME OF PERIOD (000)
- -----------------------------------------------------------------------------------------
INSTITUTIONAL SELECT MONEY MARKET FUND
<S> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.05 --- $(0.05) $ 1.00 $130,091
1997(1) 1.00 0.03 --- (0.03) 1.00 61,522
U.S. TREASURY SECURITIES MONEY MARKET FUND
CLASS I
1998 $1.00 $0.05 --- $(0.05) $1.00 $802,990
1997 1.00 0.04 --- (0.04) 1.00 487,196
1996 1.00 0.04 --- (0.04) 1.00 504,729
1995 1.00 0.05 --- (0.05) 1.00 463,531
1994 1.00 0.03 --- (0.03) 1.00 465,125
PRIME OBLIGATION MONEY MARKET FUND
CLASS I
1998 $1.00 $0.05 --- $(0.05) $1.00 $599,844
1997 1.00 0.05 --- (0.05) 1.00 400,689
1996 1.00 0.05 --- (0.05) 1.00 401,423
1995 1.00 0.05 --- (0.05) 1.00 259,667
1994 1.00 0.04 --- (0.04) 1.00 157,378
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF EXPENSES RATIO OF INCOME TO
EXPENSES TO AVERAGE NET AVERAGE NET
TO NET ASSETS INVESTMENT ASSETS
AVERAGE (EXCLUDING INCOME (EXCLUDING
TOTAL NET WAIVERS AND TO AVERAGE WAIVERS AND
RETURN ASSETS REIMBURSEMENT NET ASSETS REIMBURSEMENTS)
- -----------------------------------------------------------------------------------------
INSTITUTIONAL SELECT MONEY MARKET FUND
<S> <C> <C> <C> <C> <C>
1998 5.35% 0.30% 0.32% 5.22% 5.20%
1997(1) 5.38 0.30 0.35 5.32 5.27
U.S. TREASURY SECURITIES MONEY MARKET FUND
CLASS I
1998 4.70% 0.63% 0.63% 4.57% 4.57%
1997 4.55 0.65 0.66 4.45 4.44
1996 4.53 0.65 0.65 4.44 4.44
1995 5.05 0.65 0.65 4.92 4.92
1994(2) 3.44 0.62 0.62 3.39 3.39
PRIME OBLIGATION MONEY MARKET FUND
CLASS I
1998 5.02% 0.63% 0.63% 4.89% 4.89%
1997 5.02 0.65 0.66 4.90 4.89
1996 4.83 0.65 0.67 4.73 4.71
1995 5.40 0.65 0.66 5.26 5.25
1994 3.67 0.62 0.62 3.68 3.68
</TABLE>
(1) Commenced operations on July 1, 1997. Ratios for this period have been
annualized.
Page 20 of 22
<PAGE>
THE PILLAR FUNDS
INVESTMENT ADVISOR
Summit Bank
210 Main Street
Hackensack, New Jersey 07601
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
More information about The Pillar Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated April 30, 1999, includes detailed information about The Pillar
Funds. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Fund's holdings and contain information from the Funds'
managers about strategies, and recent market conditions and trends. The reports
also contain detailed financial information about the Funds.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE: Call 1-800-932-7782
BY MAIL: Write to us
The Pillar Funds
P.O. Box 8523
Boston, MA 02266-8523
BY INTERNET: www.pillarfunds.com
Page 21 of 22
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual
reports, as well as other information about The Pillar Funds, from the SEC's
website ("http://www.sec.gov"). You may review and copy documents at the SEC
Public Reference Room in Washington, DC (for information call 1-800-SEC-0330).
You may request documents by mail from the SEC, upon payment of a duplicating
fee, by writing to: Securities and Exchange Commission, Public Reference
Section, Washington, DC 20549-6009.
The Pillar Funds' Investment Company Act registration number is 811-6509.
The Pillar Funds, Pillar, the stylized "P" logo and Your Investment
Foundation are registered service marks of Summit Bank. pillarfunds.com is a
service mark of Summit Bank. Reach Higher, Summit, Summit Financial Services
Group and Summit Bancorp are registered service marks of Summit Bancorp.
Summit Bank is a service mark of Summit Bancorp.
Page 22 of 22
<PAGE>
THE PILLAR FUNDS
RETAIL CASH MANAGEMENT ACCOUNT
PROSPECTUS
APRIL 30, 1999
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)
INVESTMENT ADVISOR
SUMMIT BANK
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1 of 21
<PAGE>
HOW TO READ THIS PROSPECTUS
The Pillar Funds is a mutual fund family that offers different classes of shares
in separate investment portfolios (Funds). The Funds have individual investment
goals and strategies. This prospectus gives you important information about the
Funds that are available through Summit Bank's retail cash management account
that you should know before investing. Please read this prospectus and keep it
for future reference.
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT
EACH FUND, PLEASE SEE:
<TABLE>
<CAPTION>
PAGE
<S> <C>
U.S. TREASURY SECURITIES MONEY MARKET FUND XXX
PRIME OBLIGATION MONEY MARKET FUND XXX
TAX-EXEMPT MONEY MARKET FUND XXX
MORE INFORMATION ABOUT RISK XXX
EACH FUND'S OTHER INVESTMENTS XXX
THE INVESTMENT ADVISOR AND PORTFOLIO MANAGERS XXX
PURCHASING AND SELLING FUND SHARES XXX
DIVIDENDS AND DISTRIBUTIONS XXX
FINANCIAL HIGHLIGHTS XXX
TAXES XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
PILLAR FUNDS Inside Back Cover
</TABLE>
Page 2 of 21
<PAGE>
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
Each Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help each
Fund achieve its goal. Still, investing in each Fund involves risk and there is
no guarantee that a Fund will achieve its goal. The investment managers'
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in a
Fund, just as you could with other investments. A Fund share is not a bank
deposit and it is not insured or guaranteed by the FDIC or any government
agency.
THE FUNDS TRY TO MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00,
BUT THERE IS NO GUARANTEE THAT A FUND WILL ACHIEVE THIS GOAL.
Page 3 of 21
<PAGE>
U.S. TREASURY SECURITIES MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<CAPTION>
<S><C>
Investment Goal Preserve principal value and maintain a high degree
of liquidity while providing current income
Investment Focus Money market instruments issued by the U.S. Treasury
Share Price Volatility Very low
Principal Investment Strategy Investing in short-term U.S. dollar-denominated
obligations of the U.S. Treasury and repurchase
agreements
Investor Profile Conservative investors who want to receive income
through a liquid investment
</TABLE>
INVESTMENT STRATEGY OF THE U.S. TREASURY SECURITIES MONEY MARKET FUND
The Fund invests exclusively in short-term U.S. dollar-denominated money market
instruments issued by the U.S. Treasury and repurchase agreements that are fully
collateralized by U.S. Treasury securities. The Fund will maintain an average
dollar weighted maturity of 60 days or less, and will only acquire securities
that have a remaining maturity of 397 days or less. The Advisor's investment
selection process seeks to increase the Fund's potential for current income
through analysis of the available yields among the Fund's permitted investments
and "positioning on the yield curve" - that is, balancing the desire to earn
attractive rates of interest with the need to maintain an appropriate maturity
level. The Advisor actively manages the maturity of the Fund based on current
market interest rates and its outlook on the various economic factors which
influence the market for short-term fixed income instruments and future interest
rate predictions.
PRINCIPAL RISKS OF INVESTING IN THE U.S. TREASURY SECURITIES MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market fund seeks to keep a
constant price per share of $1.00, you may lose money by investing in the Fund.
Page 4 of 21
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
<TABLE>
<S> <C>
1993 2.21%
1994 3.17%
1995 4.80%
1996 4.27%
1997 4.28%
1998 4.43%
BEST QUARTER WORST QUARTER
1.23% 0.53%
(6/30/95) (6/30/93)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Securities Money Market Fund 4.43% 4.19% 3.71%*
</TABLE>
* Since 4/1/92
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------- ----------------------
<S> <C>
Management Fees .35%
Distribution and Service (12b-1) Fees .25%
Other Expenses .28%
----
Total Annual Fund Operating Expenses .88%
</TABLE>
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
Page 5 of 21
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ---------- ----------
<S> <C> <C> <C>
$ 90 $ 281 $ 488 $ 1,084
</TABLE>
Page 6 of 21
<PAGE>
PRIME OBLIGATION MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S><C>
Investment Goal Preserve principal value and maintain a high degree
of liquidity while providing current income
Investment Focus Money market instruments
Share Price Volatility Very low
Principal Investment Strategy Investing in a broad range of short-term high
quality U.S. dollar-denominated debt securities
Investor Profile Conservative investors who want to receive current
income through a liquid investment
</TABLE>
INVESTMENT STRATEGY OF THE PRIME OBLIGATION MONEY MARKET FUND
The Fund invests in a broad range of high quality short-term U.S.
dollar-denominated money market instruments, such as obligations of the U.S.
Treasury; agencies and instrumentalities of the U.S. government; domestic and
foreign banks; domestic and foreign corporations; supranational entities; and
foreign governments. The Fund may also enter into fully collateralized
repurchase agreements. The Fund's portfolio is comprised only of short-term debt
securities that are rated in the two highest categories by nationally recognized
rating organizations or securities that the Advisor determines are of equal
quality. The Fund will maintain an average dollar weighted maturity of 90 days
or less, and will only acquire securities that have a remaining maturity of 397
days or less.
The Advisor's investment selection process seeks to increase the Fund's
potential for current income through (i) security selection; (ii) managing the
Fund's mix of government, corporate and bank obligations; and (iii) "positioning
on the yield curve" - that is, balancing the desire to earn attractive rates of
interest with the need to maintain an appropriate maturity level. Securities are
chosen based on the issuer's financial condition, the financial condition of any
person or company which guarantees the credit of the issuer, liquidity and
competitive yield. The Advisor carefully evaluates and monitors the
creditworthiness of each issuer and any person or company providing credit
support.
PRINCIPAL RISKS OF INVESTING IN THE PRIME OBLIGATION MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market
Page 7 of 21
<PAGE>
fund seeks to keep a constant price per share of $1.00, you may lose money by
investing in the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class S Shares
from year to year.
<TABLE>
<S> <C>
1998 4.66%
BEST QUARTER WORST QUARTER
1.17% 1.10%
(9/30/98) (12/31/98)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS S SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Prime Obligation Money Market Fund 4.66% 4.68%*
</TABLE>
* Since 8/18/97
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS S SHARES
- ---------------------------------------------------------------------------------------
<S> <C>
Management Fees .35%
Distribution and Service (12b-1) Fees .60%
Other Expenses .28%
----
Total Annual Fund Operating Expenses 1.23%
</TABLE>
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
Page 8 of 21
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ---------- ----------
<S> <C> <C> <C>
$ 125 $ 390 $ 676 $ 1,489
</TABLE>
Page 9 of 21
<PAGE>
TAX-EXEMPT MONEY MARKET FUND
FUND SUMMARY
Investment Goal Preserve principal value and maintain a high
degree of liquidity while providing current
income that is exempt from federal income tax
Investment Focus Tax-free money market instruments
Share Price Volatility Very low
Principal Investment Strategy Investing substantially all of its assets in
a well diversified portfolio of short-term
municipal securities which pay interest that
is exempt from federal income taxes
Investor Profile Conservative taxable investors who want to
receive current income exempt from federal
taxes through a liquid investment
INVESTMENT STRATEGY OF THE TAX-EXEMPT MONEY MARKET FUND
The Fund invests substantially all of its assets in a broad range of high
quality short-term municipal money market instruments that pay interest that is
exempt from federal income taxes. The issuers of these securities may be state
and local governments and agencies located in any of the fifty states, the
District of Columbia, Puerto Rico and other U.S. territories and possessions.
The Fund's portfolio will be well diversified among these issuers, and will be
comprised only of short-term debt securities that are rated in the two highest
categories by nationally recognized rating organizations, or have been
determined by the Advisor to be of equal quality. The Fund will maintain an
average dollar weighted maturity of 90 days or less, and will only acquire
securities that have a remaining maturity of 397 days or less.
The Advisor's investment selection process seeks to increase the Fund's
potential for current income through a strategy that takes advantage of pricing
inefficiencies that often occur in the market for municipal securities. The
Advisor actively manages the maturity of the Fund based on current market
interest rates and its outlook on the various economic factors which influence
the market for short-term municipal instruments and future interest rate
predictions. Securities are chosen based on the issuer's financial condition,
the financial condition of any person or company which guarantees the credit of
the issuer, liquidity and competitive yield. The Fund attempts to avoid
purchasing or holding securities that are subject to a decline in credit quality
of the issue through ongoing monitoring of the credit quality of each issuer
and any person or company providing credit support.
Page 10 of 21
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE TAX-EXEMPT MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market fund seeks to keep a
constant price per share of $1.00, you may lose money by investing in the Fund.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase 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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
<TABLE>
<S> <C>
1993 1.74%
1994 2.02%
1995 3.17%
1996 2.70%
1997 2.84%
1998 2.72%
BEST QUARTER WORST QUARTER
0.85% 0.38%
(6/30/95) (3/31/94)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Exempt Money Market Fund 2.72% 2.69% 2.49%*
</TABLE>
* Since 4/6/92
Page 11 of 21
<PAGE>
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------------------------
<S> <C>
Management Fees .35%
Distribution and Service (12b-1) Fees .25%
Other Expenses .34%
- --------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .94%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
Tax-Exempt Money Fund - Class A Shares .90%
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ---------- ----------
<S> <C> <C> <C>
$ 96 $ 300 $ 520 $ 1,155
</TABLE>
Page 12 of 21
<PAGE>
MORE INFORMATION ABOUT RISK
YEAR 2000 RISK - The Funds depend on the smooth functioning of All Funds
computer systems in almost every aspect of their business. Like
other mutual funds, businesses and individuals around the world,
the Funds could be adversely affected if the computer systems used
by their service providers do not properly process dates on and
after January 1, 2000, and distinguish between the year 2000 and
the year 1900. The Funds have asked their service providers
whether they expect to have their computer systems adjusted for
the year 2000 transition, and is seeking assurances from each
service provider that they are devoting significant resources to
prevent material adverse consequences to the Funds. While it is
likely that such assurances will be obtained, the Funds and their
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
Funds do business.
EACH FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus,
each Fund also may invest in other securities, use other strategies and
engage in other investment practices. These investments and strategies, as
well as those described in this prospectus, are described in detail in our
Statement of Additional Information. Of course, we cannot guarantee that any
Fund will achieve its investment goal.
INVESTMENT ADVISOR
The Investment Advisor makes investment decisions for each of the Funds, and
continuously reviews, supervises and administers the Funds' respective
investment programs. The Board of Trustees of The Pillar Funds supervises the
Advisor and establishes policies that the Advisor must follow in its management
activities.
Summit Bank serves as the Advisor to the Funds. As of December 31, 1998, Summit
Bank had approximately $9.5 billion in assets under management. For the year
ended December 31, 1998, Summit Bank received advisory fees as a percentage of
average daily net assets of:
<TABLE>
<S> <C>
U.S. TREASURY SECURITIES MONEY MARKET FUND 0.35%
PRIME OBLIGATION MONEY MARKET FUND 0.35%
TAX-EXEMPT MONEY MARKET FUND 0.31%
</TABLE>
Page 13 of 21
<PAGE>
PORTFOLIO MANAGERS
Judith Wolk serves as a Vice President of the Advisor. She has managed the Prime
Obligation Money Market Fund and the U.S. Treasury Securities Money Market Fund
since June, 1996. Ms. Wolk also advises the U.S. Treasury Securities Plus Money
Market Fund and Institutional Select Money Market Fund. Prior to joining the
Advisor in 1995, Ms. Wolk managed money market instruments for a large
regional bank for a number of years.
Charlene P. Palmer serves as a Vice President of the Advisor. She has managed
the Tax-Exempt Money Market Fund since June, 1996. She joined the Advisor in
1981 and has managed investments for the Advisor for the past 18 years, with an
emphasis on tax-exempt bonds.
PURCHASING AND SELLING FUND SHARES
This section tells you how to buy and sell (sometimes called "redeem") shares of
the Funds.
HOW TO PURCHASE FUND SHARES
Shares of the Funds are for cash management account customers of Summit Bank.
Cash management account shareholders should consult their cash management
account agreement or call 1-888-8SUMMIT for more information on purchasing
shares. A Fund generally will not accept checks, third-party checks, credit
cards, credit card checks or cash.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange (NYSE) and
the Federal Reserve are open for business (a Business Day).
A Fund may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Fund receives your purchase order.
Each Fund calculates its NAV once each Business Day at 3:00 p.m. Eastern
time. So, for you to be eligible to receive dividends declared on the day you
submit your purchase order, a Fund must generally receive your order before
3:00 p.m. Eastern time and federal funds (readily available funds) before
3:00 p.m. Eastern time.
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the net
assets in the Fund.
Page 14 of 21
<PAGE>
In calculating NAV, we generally value a Fund's investment portfolio using the
amortized cost valuation method, which is described in detail in our Statement
of Additional Information. If this method is determined to be unreliable during
certain market conditions or for other reasons, a Fund may value its portfolio
at market price or fair value prices may be determined in good faith using
methods approved by the Board of Trustees.
MINIMUM PURCHASES
Summit Bank may require cash management account customers to maintain minimum
banking account levels in order to participate in the cash management account
program. The minimum levels are subject to the terms of your cash management
account agreement with Summit Bank. In general, however, if your banking account
falls below the minimum amount, your shares in a Fund may be redeemed or you may
be charged additional fees.
HOW TO SELL YOUR FUND SHARES
Cash management account shareholders may sell shares by following procedures
established when they opened their account or accounts. If you have questions,
call 1-888-8SUMMIT.
If you own your shares directly, you may sell your shares on any Business Day by
contacting a Fund directly by mail or telephone at 1-800-932-7782.
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares. Your broker or
institution may charge a fee for its services.
The sale price of each share will be the NAV next determined after a Fund
receives your request.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within one Business Day after we
receive your request. Your proceeds will be wired to your bank account.
INVOLUNTARY SALES OF YOUR SHARES
If your account balance drops below the minimum level required in your cash
management account agreement with Summit Bank because of redemptions, you may be
required to sell your shares. But, we will always give you at least 60 days'
written notice to give you time to add to your account and avoid the sale of
your shares.
Page 15 of 21
<PAGE>
REDEMPTIONS IN KIND
A Fund generally pays sale (redemption) proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the
protection of the Fund's remaining shareholders), the Fund might pay all or
part of your redemption proceeds in liquid securities with a market value
equal to the redemption price (redemption in kind). It is highly unlikely
that your shares would ever be redeemed in kind, but if they were, you might
have to pay transaction costs to sell the securities distributed to you, as
well as taxes on any capital gains from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Fund may suspend your right to sell your shares if the NYSE restricts trading,
the SEC declares an emergency or for other reasons. More information about this
is in the Statement of Additional Information.
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although the Fund has certain safeguards and procedures to
confirm the identity of callers and the authenticity of instructions, the Fund
is not responsible for any losses or costs incurred by following telephone
instructions we reasonably believe to be genuine. If you or your financial
institution transact with the Fund over the telephone, you will generally bear
the risk of any loss.
DISTRIBUTION OF FUND SHARES
Each Fund has adopted a distribution plan under Rule 12b-1 that allows the Fund
to pay distribution and service fees for the sale and distribution of its
shares, and for services provided to shareholders. Because these fees are paid
out of a Fund's assets continuously, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges.
Distribution fees, as a percentage of average daily net assets, are as follows:
<TABLE>
<CAPTION>
CLASS A SHARES
<S> <C>
U.S. Treasury Securities Money Market Fund 0.25%
Tax-Exempt Money Market Fund 0.25%
<CAPTION>
CLASS S SHARES
<S> <C>
Prime Obligation Money Market Fund 0.60%
</TABLE>
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor. Under any such
Page 16 of 21
<PAGE>
program, the Distributor may provide incentives, in the form of cash or other
compensation, including merchandise, airline vouchers, trips and vacation
packages, to dealers selling shares of the Funds.
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares dividends daily and distributes its income monthly and makes
distributions of capital gains, if any, at least annually. If you own Fund
shares on a Fund's record date, you will be entitled to receive the
distribution.
Cash management account shareholders automatically receive dividends and
distributions in cash. Other shareholders will receive dividends and
distributions in the form of additional Fund shares unless you elect to receive
payment in cash. To elect cash payment, you must notify the Fund in writing at
least 15 days prior to the date of the distribution. Your election will be
effective for dividends and distributions paid after the Fund receives your
written notice. To cancel your election, simply send the Fund written notice.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains,
if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation.
Distributions you receive from a Fund may be taxable whether or not you
reinvest them. Each sale or exchange is a taxable event.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 17 of 21
<PAGE>
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about each Fund. This
information is intended to help you understand each Fund's financial performance
for the past five years, or, if shorter, the period of the Fund's operations.
Some of this information reflects financial information for a single Fund share.
The total returns in the tables represent the rate that you would have earned
(or lost) on an investment in a Fund, assuming you reinvested all of your
dividends and distributions. This information has been audited by Arthur
Andersen LLP, independent public accountants. Their report, along with each
Fund's financial statements, appears in the annual report that accompanies our
Statement of Additional Information. You can obtain the annual report, which
contains more performance information, at no charge by calling 1-800-932-7782.
Page 18 of 21
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
REALIZED AND
UNREALIZED
NET ASSET GAINS OR DISTRIBUTIONS
VALUE NET (LOSSES) FROM NET NET ASSET NET ASSETS
BEGINNING INVESTMENT ON INVESTMENT VALUE END END OF
OF PERIOD INCOME SECURITIES INCOME OF PERIOD PERIOD (000)
- ---------------------------------------------------------------------------------------------------------------------
U.S. TREASURY
SECURITIES MONEY
MARKET FUND
CLASS A
<S> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.04 --- $(0.04) $1.00 $68,327
1997 1.00 0.04 --- (0.04) 1.00 12,492
1996 1.00 0.04 --- (0.04) 1.00 3,503
1995 1.00 0.05 --- (0.05) 1.00 3,532
1994(2) 1.00 0.03 --- (0.03) 1.00 633
PRIME OBLIGATION
MONEY MARKET FUND
CLASS S
1998 $1.00 $0.05 --- $(0.05) $1.00 $99,978
1997(1) 1.00 0.02 --- (0.02) 1.00 30,520
TAX-EXEMPT MONEY
MARKET FUND
CLASS A
1998 $1.00 $0.03 --- $(0.03) $1.00 $16,346
1997 1.00 0.03 --- (0.03) 1.00 8,509
1996 1.00 0.03 --- (0.03) 1.00 3,852
1995 1.00 0.03 --- (0.03) 1.00 5,238
1994(2) 1.00 0.02 --- (0.02) 1.00 2,790
<CAPTION>
RATIO OF RATIO RATIO OF NET
EXPENSES OF NET INVESTMENT
RATIO OF TO AVERAGE INVESTMENT INCOME TO
EXPENSES NET ASSETS INCOME AVERAGE NET
TOTAL TO AVERAGE (EXCLUDING TO AVERAGE ASSETS (EXCLUDING
RETURN NET ASSETS WAIVERS) NET ASSETS WAIVERS)
------------------------------------------------------------------------------
U.S. TREASURY
SECURITIES MONEY
MARKET FUND
CLASS A
<S> <C> <C> <C> <C> <C>
1998 4.43% 0.88% 0.88% 4.28% 4.28%
1997 4.28 0.90 0.90 4.22 4.22
1996 4.27 0.90 0.90 4.19 4.19
1995 4.80 0.90 0.90 4.66 4.66
1994(2) 3.17 0.87 0.87 3.07 3.07
PRIME OBLIGATION
MONEY MARKET FUND
CLASS S
1998 4.66% 0.98% 1.23% 4.52% 4.27%
1997(1) 4.69* 1.00 1.02 4.67 4.65
TAX-EXEMPT MONEY
MARKET FUND
CLASS A
1998 2.72% 0.90% 0.94% 2.69% 2.65%
1997 2.84 0.90 0.92 2.82 2.80
1996 2.70 0.90 0.93 2.65 2.62
1995 3.17 0.90 0.96 3.14 3.08
1994(2) 2.02 0.90 0.92 1.97 1.95
</TABLE>
* Annualized
(1) Commenced operations on August 18, 1997. Ratios for this period have been
annualized.
(2) Commenced operations on April 1, 1992. Ratios for this period have been
annualized.
Page 19 of 21
<PAGE>
THE PILLAR FUNDS
INVESTMENT ADVISOR
Summit Bank
210 Main Street
Hackensack, New Jersey 07601
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
More information about The Pillar Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated April 30, 1999, includes detailed information about The Pillar
Funds. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Fund's holdings and contain information from the Funds'
managers about strategies, and recent market conditions and trends. The reports
also contain detailed financial information about the Funds.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE: Call 1-800-932-7782
BY MAIL: Write to us
The Pillar Funds
P.O. Box 8523
Boston, MA 02266-8523
BY INTERNET: www.pillarfunds.com
-------------------
Page 20 of 21
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about The Pillar Funds, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009.
The Pillar Funds' Investment Company Act registration number is 811-6509.
The Pillar Funds, Pillar, the stylized "P" logo and Your Investment
Foundation are registered service marks of Summit Bank. pillarfunds.com is a
service mark of Summit Bank. Reach Higher, Summit, Summit Financial Services
Group and Summit Bancorp are registered service marks of Summit Bancorp.
Summit Bank is a service mark of Summit Bancorp.
Page 21 of 21
<PAGE>
THE PILLAR FUNDS
PROSPECTUS
APRIL 30, 1999
INSTITUTIONAL SELECT MONEY MARKET FUND
INVESTMENT ADVISOR
SUMMIT BANK
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1 of 16
<PAGE>
HOW TO READ THIS PROSPECTUS
The Pillar Funds is a mutual fund family that offers different classes of shares
in separate investment portfolios (Funds). The Funds have individual investment
goals and strategies. This prospectus gives you important information about the
shares of the Institutional Select Money Market Fund that you should know before
investing. Please read this prospectus and keep it for future reference.
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN
EASILY REVIEW THIS IMPORTANT INFORMATION. FOR MORE DETAILED INFORMATION ABOUT
THE FUND, PLEASE SEE:
<TABLE>
<CAPTION>
PAGE
<S> <C>
PRINCIPAL INVESTMENT STRATEGIES AND RISKS,
PERFORMANCE INFORMATION AND EXPENSES XXX
MORE INFORMATION ABOUT RISK XXX
THE FUND'S OTHER INVESTMENTS XXX
THE INVESTMENT ADVISOR AND PORTFOLIO MANAGER XXX
PURCHASING AND SELLING FUND SHARES XXX
DIVIDENDS AND DISTRIBUTIONS XXX
TAXES XXX
FINANCIAL HIGHLIGHTS XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
THE PILLAR FUNDS Back Cover
</TABLE>
Page 2 of 16
<PAGE>
<PAGE>
INSTITUTIONAL SELECT MONEY MARKET FUND
FUND SUMMARY
Investment Goal Preserve principal value and maintain a high
degree of liquidity while providing current
income
Investment Focus Money market instruments
Share Price Volatility Very low
Principal Investment Strategy Investing in a broad range of short-term high
quality U.S. dollar-denominated debt
securities
Investor Profile Conservative investors who want to receive
current income through a liquid investment
INVESTMENT STRATEGY OF THE INSTITUTIONAL SELECT MONEY MARKET FUND
The Fund invests in a broad range of high quality short-term U.S.
dollar-denominated money market instruments, such as obligations of the U.S.
Treasury; agencies and instrumentalities of the U.S. government; domestic and
foreign banks; domestic and foreign corporations; supranational entities; and
foreign governments. The Fund may also enter into fully collateralized
repurchase agreements. The Fund's portfolio is comprised only of short-term debt
securities that are rated in the two highest categories by nationally recognized
rating organizations or securities that the Advisor determines are of equal
quality. The Fund will maintain an average dollar weighted maturity of 90 days
or less, and will only acquire securities that have a remaining maturity of 397
days or less.
The Advisor's investment selection process seeks to increase the Fund's
potential for current income through (i) security selection; (ii) managing the
Fund's mix of government, corporate and bank obligations; and (iii) "positioning
on the yield curve" - that is, balancing the desire to earn attractive rates of
interest with the need to maintain an appropriate maturity level. Securities are
chosen based on the issuer's financial condition, the financial condition of any
person or company which guarantees the credit of the issuer, liquidity and
competitive yield. The Advisor carefully evaluates and monitors the
creditworthiness of each issuer and any person or company providing credit
support.
PRINCIPAL RISKS OF INVESTING IN THE INSTITUTIONAL SELECT MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market
Page 3 of 16
<PAGE>
fund seeks to keep a constant price per share of $1.00, you may lose money by
investing in the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund from year to year.
<TABLE>
<CAPTION>
1998 5.35%
<S> <C>
BEST QUARTER WORST QUARTER
1.34% 1.27%
(12/31/98) (9/30/98)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------
<S> <C> <C>
Institutional Select Money Market Fund 5.35% 5.38%*
</TABLE>
* Since 7/1/97
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
- ------------------------------------------------------------------------------
<S> <C>
Management Fees .10%
Other Expenses .22%
- ------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .32%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
Institutional Select Money Market Fund .30%
For more information about these fees, see "Investment Advisor."
Page 4 of 16
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- ------- -------
<S> <C> <C> <C>
$ 33 $ 103 $ 180 $ 406
</TABLE>
Page 5 of 16
<PAGE>
MORE INFORMATION ABOUT RISK
The Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
The Fund has an investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help
the Fund achieve its goal. Still, investing in the Fund involves risk and
there is no guarantee that the Fund will achieve its goal. The investment
managers' judgments about the markets, the economy, or companies may not
anticipate actual market movements, economic conditions or company
performance, and these judgments may affect the return on your investment. In
fact, no matter how good a job an investment manager does, you could lose
money on your investment in the Fund, just as you could with other
investments. THE INSTITUTIONAL SELECT MONEY MARKET FUND TRIES TO MAINTAIN A
CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS NO GUARANTEE THAT THE FUND
WILL ACHIEVE THIS GOAL. A Fund share is not a bank deposit and it is not
insured or guaranteed by the FDIC or any government agency.
YEAR 2000 RISK - The Fund depends on the smooth functioning of computer systems
in almost every aspect of its business. Like other mutual funds, businesses and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000, and distinguish between the year 2000 and the year
1900. The Fund has asked its service providers whether they expect to have its
computer systems adjusted for the year 2000 transition, and is seeking
assurances from each service provider that they are devoting significant
resources to prevent material adverse consequences to the Fund. While it is
likely that such assurances will be obtained, the Fund and its shareholders may
experience losses if these assurances prove to be incorrect or as a result of
year 2000 computer difficulties experienced by issuers of portfolio securities
or third parties, such as custodians, banks, broker-dealers or others with which
the Fund does business.
Page 6 of 16
<PAGE>
THE FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus,
the Fund also may invest in other securities, use other strategies and engage
in other investment practices. These investments and strategies, as well as
those described in this prospectus, are described in detail in our Statement
of Additional Information. Of course, we cannot guarantee that the Fund will
achieve its investment goal.
INVESTMENT ADVISOR
The Investment Advisor makes investment decisions for the Fund and continuously
reviews, supervises and administers the Fund's investment program. The Board of
Trustees of The Pillar Funds supervises the Advisor and establishes policies
that the Advisor must follow in its management activities.
Summit Bank serves as the Advisor to the Fund. As of December 31, 1998, Summit
Bank had approximately $9.5 billion in assets under management. For the year
ended December 31, 1998, Summit Bank received advisory fees as a percentage of
average daily net assets of:
INSTITUTIONAL SELECT MONEY MARKET FUND 0.08%
Page 7 of 16
<PAGE>
PORTFOLIO MANAGER
Judith Wolk serves as a Vice President of the Advisor. She has managed the
Institutional Select Money Market Fund since its inception. Ms. Wolk also
advises the Prime Obligation Money Market Fund, the U.S. Treasury Securities
Money Market Fund and the U.S. Treasury Securities Plus Money Market Fund.
Prior to joining the Advisor in 1995, Ms. Wolk managed money market
instruments for a large regional bank for a number of years.
PURCHASING AND SELLING FUND SHARES
This section tells you how to buy and sell (sometimes called "redeem") shares of
the Fund.
HOW TO PURCHASE FUND SHARES
Shares of the Fund are for financial institutions investing for their own or
their customers' accounts or cash management account customers of Summit
Bank. Cash management account shareholders should consult their cash
management account agreement or call 1-888-8SUMMIT for more information on
purchasing shares.
Page 8 of 16
<PAGE>
The Fund cannot accept checks, third-party checks, credit cards, credit card
checks or cash.
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its procedures
which may be different from the procedures for investing directly. Your
institution may charge a fee for its services, in addition to the fees charged
by the Fund. You will also generally have to address your correspondence or
questions regarding the Fund to your institution.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange (NYSE) and
the Federal Reserve are open for business (a Business Day)
The Fund may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Fund receives your purchase order.
The Fund calculates its NAV once each Business Day at 3:00 p.m. Eastern time.
So, for you to be eligible to receive dividends declared on the day you submit
your purchase order, the Fund generally must receive your order before 3:00 p.m.
Eastern time and federal funds (readily available funds) before 3:00 p.m.
Eastern time.
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the net
assets in the Fund.
In calculating NAV for the Fund, we generally value the Fund's investment
portfolio using the amortized cost valuation method, which is described in
detail in our Statement of Additional Information. If this method is determined
to be unreliable during certain market conditions or for other reasons, the Fund
may value its portfolio at market price or fair value prices may be determined
in good faith using methods approved by the Board of Trustees.
MINIMUM PURCHASES
To purchase shares for the first time, you must invest at least $5,000,000 in
the Fund. There is no minimum for subsequent purchases. The Fund may accept
investments of smaller amounts at its discretion.
HOW TO SELL YOUR FUND SHARES
Cash management account shareholders may sell shares by following procedures
established when they opened their account or accounts. If you have questions,
call 1-888-8SUMMIT.
Page 9 of 16
<PAGE>
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares. Your broker or
institution may charge a fee for its services.
The sale price of each share will be the NAV next determined after the Fund
receives your request.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within one Business Day after we
receive your request. Your proceeds will be wired to your bank account and
may be subject to a wire fee.
Page 10 of 16
<PAGE>
AUTOMATIC EXCHANGES OF YOUR SHARES
If your account balance for the Institutional Select Money Market Fund drops
below $5,000,000 because of redemptions, your shares may be automatically
exchanged for Class I shares of the Prime Obligation Money Market Fund. But, we
will always give you at least 30 days' written notice to give you time to add to
your account and avoid the automatic exchange of your shares. You 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 may modify or terminate the
automatic exchange feature of the Fund at any time upon 60 days' notice to
shareholders.
INVOLUNTARY SALES OF YOUR SHARES
If your account balance drops below the minumum level required in your cash
management account agreement with Summit Bank because of redemptions, you may
be required to sell your shares or you may be charged additional fees. But, we
will always give you at least 60 days written notice to give you time to add
to your account and avoid the sale of your shares.
REDEMPTIONS IN KIND
The Fund generally pays sale (redemption) proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the Fund's remaining shareholders) the Fund might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). It is highly unlikely that your shares
would ever be redeemed in kind, but if they were, you might have to pay
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Fund may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the Statement of Additional Information.
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although the Fund has certain safeguards and procedures to
confirm the identity of callers and the authenticity of instructions, the Fund
is not responsible for any losses or costs incurred by following telephone
instructions we reasonably believe to be genuine. If you or your financial
institution transact with the Fund over the telephone, you will generally bear
the risk of any loss.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes its income monthly and makes distributions of capital
gains, if any, at least annually. If you own Fund shares on a Fund's record
date, you will be entitled to receive the distribution.
Cash management account shareholders automatically receive dividends and
distributions in cash. Other shareholders will receive dividends and
distributions in the form of additional Fund shares unless you elect to receive
payment in cash. To elect cash payment, you must notify the Fund in writing at
least 15 days prior to the date of the distribution. Your election will be
effective for dividends and distributions paid after the Fund receives your
written notice. To cancel your election, simply send the Fund written notice.
Page 11 of 16
<PAGE>
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Fund and its shareholders. This summary is based on current tax
laws, which may change.
The Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from the Fund may be taxable whether or not you reinvest them. Each
sale or exchange is a taxable event.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 12 of 16
<PAGE>
FINANCIAL HIGHLIGHTS
The table that follows presents performance information about the Fund. This
information is intended to help you understand the Fund's financial performance
for the past five years, or, if shorter, the period of the Fund's operations.
Some of this information reflects financial information for a single Fund share.
The total returns in the table represent the rate that you would have earned (or
lost) on an investment in the Fund, assuming you reinvested all of your
dividends and distributions. This information has been audited by Arthur
Andersen LLP, independent public accountants. Their report, along with the
Fund's financial statements, appears in the annual report that accompanies our
Statement of Additional Information. You can obtain the annual report, which
contains more performance information, at no charge by calling 1-800-932-7782.
Page 13 of 16
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
REALIZED AND
UNREALIZED
NET ASSET GAINS OR DISTRIBUTIONS NET ASSETS
VALUE NET (LOSSES) FROM NET NET ASSET END OF
BEGINNING INVESTMENT ON INVESTMENT VALUE END PERIOD
OF PERIOD INCOME SECURITIES INCOME OF PERIOD (000)
- ----------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SELECT MONEY MARKET FUND
<S> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.05 --- $(0.05) $1.00 $130,091
1997(1) 1.00 0.03 --- (0.03) 1.00 61,522
<CAPTION>
RATIO OF RATIO OF NET
EXPENSES RATIO OF INVESTMENT
TO AVERAGE NET INCOME TO
RATIO OF NET ASSETS INVESTMENT AVERAGE NET ASSETS
EXPENSES (EXCLUDING INCOME (EXCLUDING
TOTAL TO AVERAGE WAIVERS AND TO AVERAGE WAIVERS AND
RETURN NET ASSETS REIMBURSEMENTS) NET ASSETS REIMBURSEMENTS)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 5.35% 0.30% 0.32% 5.22% 5.20%
1997(1) 5.38 0.30 0.35 5.32 5.27
</TABLE>
(1) Commenced operations on July 1, 1997. Ratios for this period have been
annualized.
Page 14 of 16
<PAGE>
THE PILLAR FUNDS
INVESTMENT ADVISOR
Summit Bank
210 Main Street
Hackensack, New Jersey 07601
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
More information about The Pillar Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated April 30, 1999, includes detailed information about The Pillar
Funds. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list the Fund's holdings and contain information from the Fund's
managers about strategies, and recent market conditions and trends. The reports
also contain detailed financial information about the Fund.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE: Call 1-800-932-7782
BY MAIL: Write to us
The Pillar Funds
P.O. Box 8523
Boston, MA 02266-8523
BY INTERNET: www.pillarfunds.com
Page 15 of 16
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about The Pillar Funds, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009.
The Pillar Funds' Investment Company Act registration number is 811-6509.
The Pillar Funds, Pillar, the stylized "P" logo and Your Investment
Foundation are registered service marks of Summit Bank. pillarfunds.com is a
service mark of Summit Bank. Reach Higher, Summit, Summit Financial Services
Group and Summit Bancorp are registered service marks of Summit Bancorp.
Summit Bank is a service mark of Summit Bancorp.
Page 16 of 16
<PAGE>
THE PILLAR FUNDS
PROSPECTUS
APRIL 30, 1999
U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND
INVESTMENT ADVISOR
SUMMIT BANK
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1 of 14
<PAGE>
HOW TO READ THIS PROSPECTUS
The Pillar Funds is a mutual fund family that offers different classes of shares
in separate investment portfolios (Funds). The Funds have individual investment
goals and strategies. This prospectus gives you important information about the
shares of the U.S. Treasury Securities Plus Money Market Fund that you should
know before investing. Please read this prospectus and keep it for future
reference.
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN
EASILY REVIEW THIS IMPORTANT INFORMATION. FOR MORE DETAILED INFORMATION ABOUT
THE FUND, PLEASE SEE:
PAGE
PRINCIPAL INVESTMENT STRATEGIES AND RISKS,
PERFORMANCE INFORMATION AND EXPENSES XXX
MORE INFORMATION ABOUT RISK XXX
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS XXX
THE INVESTMENT ADVISOR AND PORTFOLIO MANAGER XXX
PURCHASING AND SELLING FUND SHARES XXX
DIVIDENDS AND DISTRIBUTIONS XXX
FINANCIAL HIGHLIGHTS XXX
TAXES XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
THE PILLAR FUNDS Back Cover
Page 2 of 14
<PAGE>
<PAGE>
U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND
FUND SUMMARY
Investment Goal Preserve principal value and maintain a high
degree of liquidity while providing current
income
Investment Focus Money market instruments issued by the
U.S. Treasury
Share Price Volatility Very low
Principal Investment Strategy Investing in short-term U.S.
dollar-denominated obligations of the U.S.
Treasury and repurchase agreements
Investor Profile Conservative investors who want to receive
income through a liquid investment
INVESTMENT STRATEGY OF THE U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND
The Fund invests exclusively in short-term U.S. dollar-denominated money market
instruments issued by the U.S. Treasury and repurchase agreements that are fully
collateralized by U.S. Treasury securities. The Fund will maintain an average
dollar weighted maturity of 60 days or less, and will only acquire securities
that have a remaining maturity of 397 days or less. The Advisor's investment
selection process seeks to increase the Fund's potential for current income
through analysis of the available yields among the Fund's permitted investments
and "positioning on the yield curve" - that is, balancing the desire to earn
attractive rates of interest with the need to maintain an appropriate maturity
level. The Advisor actively manages the maturity of the Fund based on current
market interest rates and its outlook on the various economic factors which
influence the market for short-term fixed income instruments and future interest
rate predictions.
PRINCIPAL RISKS OF INVESTING IN THE U.S. TREASURY SECURITIES PLUS
MONEY MARKET FUND
An investment in the Fund is subject to income risk, which is the possibility
that the Fund's yield will decline due to falling interest rates. A FUND SHARE
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY. In addition, although a money market fund seeks to keep a
constant price per share of $1.00, you may lose money by investing in the Fund.
Page 3 of 14
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund from year to year.
<TABLE>
<S> <C>
1994 3.60%
1995 5.40%
1996 4.82%
1997 4.89%
1998 4.79%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
1.36% 0.68%
(6/30/95) (3/31/94)
</TABLE>
Call 1-800-932-7782 or visit the Fund's website (www.pillarfunds.com) for the
Fund's most current 7-day yield.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Securities Plus Money Market Fund 4.79% 4.70% 4.45%*
</TABLE>
* Since 5/3/93
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------
Management Fees .15%
Distribution and Service (12b-1) Fees .03%
Other Expenses .52%
----
Total Annual Fund Operating Expenses .70%
</TABLE>
* The Fund's total actual annual fund operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Advisor may discontinue all or part of this waiver at any time. With
this fee waiver, the Fund's actual total operating expenses are as follows:
U.S. Treasury Securities Plus Money Market Fund .55%
For more information about these fees, see "Investment Advisor" and
"Distribution of Fund Shares."
Page 4 of 14
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$72 $224 $390 $871
</TABLE>
Page 5 of 14
<PAGE>
MORE INFORMATION ABOUT RISK
The Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
The Fund has an investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help
the Fund achieve its goal. Still, investing in the Fund involves risk and
there is no guarantee that the Fund will achieve its goal. The investment
managers' judgments about the markets, the economy, or companies may not
anticipate actual market movements, economic conditions or company
performance, and these judgments may affect the return on your investment. In
fact, no matter how good a job an investment manager does, you could lose
money on your investment in the Fund, just as you could with other
investments. THE U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND TRIES TO
MAINTAIN A CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS NO GUARANTEE THAT
THE FUND WILL ACHIEVE THIS GOAL. A Fund share is not a bank deposit and it
is not insured or guaranteed by the FDIC or any government agency.
YEAR 2000 RISK - The Fund depends on the smooth functioning of computer systems
in almost every aspect of its business. Like other mutual funds, businesses and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000, and distinguish between the year 2000 and the year
1900. The Fund has asked its service providers whether they expect to have their
computer systems adjusted for the year 2000 transition, and is seeking
assurances from each service provider that they are devoting significant
resources to prevent material adverse consequences to the Fund. While it is
likely that such assurances will be obtained, the Fund and its shareholders may
experience losses if these assurances prove to be incorrect or as a result of
year 2000 computer difficulties experienced by issuers of portfolio securities
or third parties, such as custodians, banks, broker-dealers or others with which
the Fund does business.
Page 6 of 14
<PAGE>
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
The Fund's investments and strategies are described in more detail in our
Statement of Additional Information. Of course, we cannot guarantee that the
Fund will achieve its investment goal.
INVESTMENT ADVISOR
The Investment Advisor makes investment decisions for the Fund and continuously
reviews, supervises and administers the Fund's investment program. The Board of
Trustees of The Pillar Funds supervises the Advisor and establishes policies
that the Advisor must follow in its management activities.
Summit Bank serves as the Advisor to the Fund. As of December 31, 1998, Summit
Bank had approximately $9.5 billion in assets under management. For the year
ended December 31, 1998, Summit Bank waived the entire amount of its advisory
fees.
PORTFOLIO MANAGER
Judith Wolk serves as a Vice President of the Advisor. She has managed the
U.S. Treasury Securities Plus Money Market Fund since June, 1996. Ms. Wolk
also advises the Prime Obligation Money Market Fund, the U.S. Treasury
Securities Money Market Fund and the Institutional Select Money Market Fund.
Prior to joining the Advisor in 1995, Ms. Wolk managed money market
instruments for a large regional bank for a number of years.
PURCHASING AND SELLING FUND SHARES
This section tells you how to buy and sell (sometimes called "redeem") shares of
the Fund. Shares of the Fund are available only to customers of Summit Bank's
Money Desk.
HOW TO PURCHASE FUND SHARES
To purchase shares directly, please call 1-800-243-8550. The Fund cannot accept
checks, third-party checks, credit cards, credit card checks or cash.
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its procedures
which may be different from the procedures for investing directly. Your
institution may charge a fee for its services, in addition to the fees charged
by the Fund. You will also generally have to address your correspondence or
questions regarding the Fund to your institution.
Page 7 of 14
<PAGE>
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange (NYSE)
and the Federal Reserve are open for business (a Business Day).
The Fund may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Fund receives your purchase order.
The Fund calculates its NAV once each Business Day at 3:00 p.m. Eastern time.
So, for you to be eligible to receive dividends declared on the day you submit
your purchase order, the Fund generally must receive your order before 3:00 p.m.
Eastern time and federal funds (readily available funds) before 3:00 p.m.
Eastern time.
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the net
assets in the Fund.
In calculating NAV for the Fund, we generally value the Fund's investment
portfolio using the amortized cost valuation method, which is described in
detail in our Statement of Additional Information. If this method is determined
to be unreliable during certain market conditions or for other reasons, the Fund
may value its portfolio at market price or fair value prices may be determined
in good faith using methods approved by the Board of Trustees.
MINIMUM PURCHASES
To purchase shares for the first time, you must invest at least $100,000 in
the Fund. There is no minimum for subsequent purchases. The Fund may accept
investments of smaller amounts at its discretion.
HOW TO SELL YOUR FUND SHARES
If you own your shares directly, you may sell your shares on any Business Day by
contacting the Money Desk by telephone at 1-800-243-8550.
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares. Your broker or
institution may charge a fee for its services.
The sale price of each share will be the NAV next determined after the Fund
receives your request.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within one Business Day after we
receive your request. Your proceeds will be credited to your account.
Page 8 of 14
<PAGE>
REDEMPTIONS IN KIND
The Fund generally pays sale (redemption) proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the Fund's remaining shareholders), the Fund might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). It is highly unlikely that your shares
would ever be redeemed in kind, but if they were, you might have to pay
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Fund may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the Statement of Additional Information.
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although the Fund has certain safeguards and procedures to
confirm the identity of callers and the authenticity of instructions, the Fund
is not responsible for any losses or costs incurred by following telephone
instructions we reasonably believe to be genuine. If you or your financial
institution transact with the Fund over the telephone, you will generally bear
the risk of any loss.
DISTRIBUTION OF FUND SHARES
The Fund has adopted a distribution plan under Rule 12b-1 that allows the Fund
to pay distribution and service fees for the sale and distribution of its
shares, and for services provided to shareholders. Because these fees are paid
out of the Fund's assets continuously, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges.
Distribution fees, as a percentage of average daily net assets, are 0.03% for
the Fund.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor. Under any such program, the Distributor may provide incentives, in
the form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of the Fund.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes its income monthly and makes distributions of capital
gains, if any, at least annually. If you own Fund shares on a Fund's record
date, you will be entitled to receive the distribution.
Page 9 of 14
<PAGE>
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Money Desk by telephone.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Fund and its shareholders. This summary is based on current tax
laws, which may change.
The Fund will distribute substantially all of its income and capital gains,
if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation.
Distributions you receive from the Fund may be taxable whether or not you
reinvest them. Each sale or exchange is a taxable event.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 10 of 14
<PAGE>
FINANCIAL HIGHLIGHTS
The table that follows presents performance information about the Fund. This
information is intended to help you understand the Fund's financial performance
for the past five years, or, if shorter, the period of the Fund's operations.
Some of this information reflects financial information for a single Fund share.
The total returns in the table represent the rate that you would have earned (or
lost) on an investment in the Fund, assuming you reinvested all of your
dividends and distributions. This information has been audited by Arthur
Andersen LLP, independent public accountants. Their report, along with the
Fund's financial statements, appears in the annual report that accompanies our
Statement of Additional Information. You can obtain the annual report, which
contains more performance information, at no charge by calling 1-800-932-7782.
Page 11 of 14
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
REALIZED
AND
NET ASSET UNREALIZED DISTRIBUTIONS NET ASSETS
VALUE NET GAINS OR FROM NET NET ASSET END OF
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT VALUE END PERIOD
OF PERIOD INCOME SECURITIES INCOME OF PERIOD (000)
- -------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND
<S> <C> <C> <C> <C> <C> <C>
1998 $1.00 $0.05 --- $(0.05) $1.00 $63,222
1997 1.00 0.05 --- (0.05) 1.00 68,658
1996 1.00 0.05 --- (0.05) 1.00 65,173
1995 1.00 0.05 --- (0.05) 1.00 64,697
1994 1.00 0.04 --- (0.04) 1.00 46,301
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES RATIO OF INCOME TO
TO AVERAGE NET AVERAGE NET
RATIO OF NET ASSETS INVESTMENT ASSETS
EXPENSES (EXCLUDING INCOME (EXCLUDING
TOTAL TO AVERAGE WAIVERS AND TO AVERAGE WAIVERS AND
RETURN NET ASSETS REIMBURSEMENTS) NET ASSETS REIMBURSEMENTS)
- -------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND
<S> <C> <C> <C> <C> <C>
1998 4.78% 0.55% 0.70% 4.69% 4.54%
1997 4.89 0.55 0.65 4.78 4.68
1996 4.82 0.55 0.65 4.72 4.62
1995 5.40 0.55 0.62 5.26 5.19
1994 3.60 0.55 0.63 3.42 3.34
</TABLE>
Page 12 of 14
<PAGE>
THE PILLAR FUNDS
INVESTMENT ADVISOR
Summit Bank
210 Main Street
Hackensack, New Jersey 07601
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
More information about The Pillar Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated April 30, 1999, includes detailed information about The Pillar
Funds. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list the Fund's holdings and contain information from the Fund's
managers about strategies, and recent market conditions and trends. The reports
also contain detailed financial information about the Fund.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE: Call 1-800-243-8550
BY MAIL: Write to us
Summit Bank
214 Main Street, Third Floor
Hackensack, New Jersey 07601
Attention: Bank Investments
BY INTERNET: www.pillarfunds.com
Page 13 of 14
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about The Pillar Funds, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009.
The Pillar Funds' Investment Company Act registration number is 811-6509.
The Pillar Funds, Pillar, the stylized "P" logo and Your Investment
Foundation are registered service marks of Summit Bank. pillarfunds.com is a
service mark of Summit Bank. Reach Higher, Summit, Summit Financial Services
Group and Summit Bancorp are registered service marks of Summit Bancorp.
Summit Bank is a service mark of Summit Bancorp.
Page 14 of 14
<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 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, High Yield Bond, Balanced, Equity Growth,
Equity Value, Equity Income, Equity Index, Mid Cap, and International Equity
Funds dated April 30, 1999, as may be amended or supplemented from time to time.
Capitalized terms used in this Statement of Additional Information have the same
meaning as defined in the prospectus. Prospectuses may be obtained through the
Distributor, SEI Investments Distribution Co., Oaks, PA 19456, or by calling
1-800-932-7782.
<TABLE>
TABLE OF CONTENTS
<S> <C>
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
The Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . S-
Additional Information About the Funds and their Investment
Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . S-
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . S-
Description of Permitted Investments. . . . . . . . . . . . . . . S-
Investment Limitations. . . . . . . . . . . . . . . . . . . . . .
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . S-
SIMT High Yield Bond Portfolio . . . . . . . . . . . . . . . S-
SIF S&P 500 Index Portfolio. . . . . . . . . . . . . . . . . S-
Management of the Trust. . . . . . . . . . . . . . . . . . . . . . . . S-
Trustees and Officers of the Trust. . . . . . . . . . . . . . . . S-
Trustees and Officers of SIMT and SIF . . . . . . . . . . . . . . S-
The Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
The Sub-Advisor . . . . . . . . . . . . . . . . . . . . . . . . . S-
SIMT High Yield Bond Portfolio. . . . . . . . . . . . . . . . . . S-
SIF S&P 500 Index Portfolio . . . . . . . . . . . . . . . . . . . S-
The Administrator . . . . . . . . . . . . . . . . . . . . . . . . S-
The Transfer Agent and Shareholder Servicing Agent. . . . . . . . S-
The Portfolios' Administrator and Transfer Agent. . . . . . . . . S-
Custodians. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Fund Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Trading Practices and Brokerage . . . . . . . . . . . . . . . . .
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . S-
SIMT . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
SIF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
The Distributor and the Distribution Plans of the Trust. . . . . . . . S-
Portfolio Distribution . . . . . . . . . . . . . . . . . . . . . . . . S-
SIMT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
SIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Computation of Yield. . . . . . . . . . . . . . . . . . . . . . . S-
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Calculation of Total Return . . . . . . . . . . . . . . . . . . . S-
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . . S-
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . S-
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . S-
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
SIMT and SIF. . . . . . . . . . . . . . . . . . . . . . . . . . . S-
General Information and History. . . . . . . . . . . . . . . . . . . . S-
Description of Shares . . . . . . . . . . . . . . . . . . . . . . S-
Shareholder Liability . . . . . . . . . . . . . . . . . . . . . . S-
Limitation of Trustees' Liability . . . . . . . . . . . . . . . . S-
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Federal Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . S-
State Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . S-
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Description of Ratings . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
April 30, 1999
PIL-F-027-05
The Pillar Funds, Pillar, the stylized "P" logo and Your Investment
Foundation are registered service marks of Summit Bank. Pillarfunds.com is a
service mark of Summit Bank. Reach Higher, Summit, Summit Financial Services
Group and Summit Bancorp are registered service marks of Summit Bancorp.
Summit Bank is a service mark of Summit Bancorp.
Neither the Equity Index Fund nor the SEI Index Funds ("SIF") S&P 500 Index
Portfolio is sponsored, endorsed, sold or promoted by Standard & Poor's Ratings
Group ("S&P"). S&P makes no representation or warranty, implied or expressed,
to the purchasers of the Fund, Portfolio or any member of the public regarding
the advisability of investing in index funds or the Fund or Portfolio or the
ability of the S&P 500 Index to track general stock market performance. S&P has
no obligation to take the needs of the owners of the Fund or Portfolio into
consideration in determining, composing or calculating the S&P 500 Index. S&P
is not responsible for and has not participated in the determination of, the
timing of, pricing at, or quantities of the Fund or Portfolio to be issued or in
the determination or calculation of the equation by which the Fund or Portfolio
is to be converted into cash. S&P has no obligation or liability in connection
with the administration, marketing or trading of the Fund or Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY
DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY THE FUND, PORTFOLIO, OWNERS OF THE FUND, OWNERS OF THE
PORTFOLIO, OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESSED OR IMPLIED
WARRANTIES, AND HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED
THEREIN.
<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 CLASS(ES)
------------------------------------------------------------------------------
<S> <C>
U.S. Treasury Securities Plus Money Market Fund Not Applicable
Institutional Select Money Market Fund Not Applicable
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
Equity Index Fund I/A/B
Fixed Income Fund I/A/B
Equity Growth Fund I/A/B
Equity Value Fund I/A/B
Equity Income Fund I/A/B
High Yield Bond Fund I/A/B
International Equity 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 Funds. See "Description of Shares."
Under the "master-feeder" structure, the High Yield Bond Fund will invest up to
100% of its assets in the SEI Institutional Managed Trust High Yield Bond Fund
(the "SIMT Fund"). The Equity Index Fund will invest up to 100% of its assets
in the SEI Index Funds S&P 500 Index Portfolio (the "SIF Fund").
The investment policies of the High Yield Bond Fund and the Equity Index Fund
will be substantially similar to those of the SIMT Fund and the SIF Fund,
respectively, should the Funds withdraw from the master-feeder structure and the
Advisor manage their assets directly.
<PAGE>
Unless otherwise indicated, policies with respect to "a Fund," "all Funds" or
"Fixed Income Funds" includes the SIMT Fund, and policies with respect to "a
Fund," "all Funds" or "Equity Funds" includes the SIF Fund. Unless otherwise
indicated, the term "Advisor", as used in this Statement of Additional
Information, includes the Advisor, the Sub-Advisor and any Advisor, Sub-Advisor
or Money Manager of either the SIMT Fund or the SIF Fund.
ADDITIONAL INFORMATION ABOUT THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
THE MONEY MARKET FUNDS
U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND
U.S. TREASURY SECURITIES MONEY MARKET FUND
PRIME OBLIGATION MONEY MARKET FUND
INSTITUTIONAL SELECT MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
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 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. In addition, under
these regulations, each Money Market Fund 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.
U.S. TREASURY SECURITIES PLUS MONEY MARKET FUND
U.S. TREASURY SECURITIES MONEY MARKET FUND
Each Fund invests 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. Each Fund may also engage in securities
lending.
PRIME OBLIGATION MONEY MARKET FUND
INSTITUTIONAL SELECT MONEY MARKET FUND
Each 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.
<PAGE>
savings and loan institutions and U.S. and London branches of foreign banks,
provided such institutions have total assets of $500 million or more shown on
their last published financial statements at the time of investment and are
insured by the FDIC (each 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.
TAX-EXEMPT MONEY MARKET FUND
The 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 credit quality of these institutions
could cause losses to the Fund and affect its share price.
The 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.
<PAGE>
THE FIXED INCOME FUNDS
FIXED INCOME FUND
The Fund seeks 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 by 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 ("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 Fund may purchase mortgage-backed securities that are backed
or collateralized by fixed, adjustable or floating rate
<PAGE>
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 Fund seeks to preserve principal value and maintain a high degree of
liquidity while providing current income.
The Fund expects to be fully invested in U.S. Treasury Obligations and U.S.
Government Agencies and in no event will it invest less than 65% of its total
assets in these securities.
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 three years; however, the
Advisor may vary this average maturity substantially in anticipation of a change
in the interest rate environment.
NEW JERSEY MUNICIPAL SECURITIES FUND
The Fund seeks to provide current income exempt from both Federal and New Jersey
income taxes, consistent with preservation of capital.
The 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 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
<PAGE>
fully invested as possible in securities exempt from Federal income tax and not
subject to the Federal alternative minimum tax.
The Fund is a non-diversified investment company.
PENNSYLVANIA MUNICIPAL SECURITIES FUND
The Fund seeks 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 Fund 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 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 Fund is a non-diversified investment company.
HIGH YIELD BOND FUND
The Fund seeks to maximize total return. It currently pursues this objective by
investing up to 100% of its assets in the SIMT Fund, which as an identical
investment objective.
Under normal market conditions, the SIMT Fund will invest at least 65% of its
total assets in
<PAGE>
fixed income securities that are rated below investment grade, I.E., rated below
the top four rating categories by an NRSRO at the time of purchase or, if not
rated, determined to be of comparable quality by the money manager or managers
chosen by SIMC (the "Money Managers"). Securities rated in the lowest rating
categories may have predominantly speculative characteristics or may be in
default. The achievement of the SIMT Fund's investment objective may be more
dependent on a Money Manager's own credit analysis than would be the case if the
SIMT Fund invested in higher rated securities. There is no bottom limit on the
ratings of high yield securities that may be purchased or held by the SIMT Fund.
The SIMT Fund may invest in all types of fixed income securities issued by
domestic or foreign issuers, including (i) mortgage-backed securities, (ii)
asset-backed securities, (iii) zero coupon, pay-in-kind or deferred payment
securities, and (iv) variable and floating rate instruments.
Any assets of the SIMT Fund not invested in the fixed income securities
described above may be invested in (i) convertible securities; (ii) preferred
stocks; (iii) equity securities; (iv) investment grade fixed income securities;
(v) money market securities; (vi) securities issued on a when-issued or
delayed-delivery basis, including TBA mortgage-backed securities; (vii) forward
foreign currency contracts; and (vii) Yankee obligations. In addition, the SIMT
Fund may purchase or write options, futures and options on futures.
The Money Managers may vary the average maturity of the securities in the SIMT
Fund without limit, and there is no restriction on the maturity of any
individual security.
GENERAL INVESTMENT POLICIES - FIXED INCOME FUNDS
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
<PAGE>
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 this 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
<PAGE>
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 this Statement of Additional Information.
THE EQUITY AND BALANCED FUNDS
EQUITY GROWTH FUND
The Fund seeks long-term growth of capital.
The Fund will normally be as fully invested as practicable and in no event will
it invest less than 65% of its total assets in equity securities consisting of
common stocks, warrants to purchase common stocks, debt securities and preferred
stocks that are convertible into common stocks and American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs"), Continental Depositary Receipts
("CDRs") and Global Depositary Receipts ("GDRs"). The Advisor will invest in
companies that it expects will demonstrate greater long-term earnings growth
than the average company included in the S&P 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:
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.
EQUITY VALUE FUND
<PAGE>
The Fund seeks growth of both capital and income.
The Fund will normally be as fully invested as practicable and in no event will
it invest less than 65% of its total assets 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.
EQUITY INCOME FUND
The Fund seeks growth of capital consistent with an emphasis on current income.
The Fund will normally be as fully invested as practicable and in no event will
it invest less than 65% of its total assets in equity securities consisting of
common stocks, warrants to purchase common stocks, debt securities and preferred
stocks convertible into common stocks and ADRs.
MID CAP FUND
The Fund seeks 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. 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 risks associated with investments in smaller capitalization companies
which may be subject to greater volatility than investments in companies with
larger capitalizations.
EQUITY INDEX FUND
The Fund seeks investment results that correspond to the S&P 500. It currently
pursues this objective by investing up to 100% of its assets in the SIF Fund,
which has an identical investment objective.
The SIF Fund's ability to duplicate the performance of the S&P 500 will depend
to some extent on the size and timing of cash flows into and out of the SIF
Fund, as well as on the level of the SIF Fund's expenses.
Adjustments made to accommodate cash flows will track the S&P 500 to the maximum
extent practicable, and may result in brokerage expenses for the SIF Fund. Over
time, the correlation
<PAGE>
between the performance of the SIF Fund and the S&P 500 is expected to be over
0.95. A correlation of 1.00 would indicate perfect correlation, which would be
achieved when the net asset value of the SIF Fund, including the value of its
dividends and capital gains distributions, increased or decreased in exact
proportion to changes in the S&P 500.
The SIF Fund will normally invest in all of the stocks which comprise the S&P
500, except when changes are made to the S&P 500 itself. The SIF Fund's policy
is to fully invest in common stocks, and it is expected that cash reserves or
other non-Index securities would normally be less than 10% of net assets.
Accordingly, an investment in shares of the SIF Fund involves risks similar to
those of investing in a fund consisting of the common stocks of some or all of
the companies included in the S&P 500.
The weightings of stocks in the S&P 500 are based on each stock's relative total
market value, I.E., market price per share times the number of shares
outstanding. Because of this weighting, approximately 50% of the S&P 500 is
currently composed of stocks of the 50 largest companies in the S&P 500, and the
S&P 500 currently represents over 65% of the market value of all U.S. common
stocks listed on the New York Stock Exchange.
The Advisor makes no attempt to "manage" the SIF Fund in the traditional sense
(I.E., by using economic, financial or market analyses). The adverse financial
situation of a company usually will not result in the elimination of a stock
from the SIF Fund. However, an investment may be removed from the SIF Fund if,
in the judgement of the Advisor, the merit of the investment has been
substantially impaired by extraordinary events or adverse financial conditions.
Furthermore, administrative adjustments may be made in the SIF Fund from time to
time because of mergers, changes in the composition of the S&P 500 and similar
reasons. In certain circumstances, the Advisor may exercise discretion in
determining whether to exercise warrants and rights issued in respect to
portfolio securities or whether to tender portfolio securities pursuant to a
tender or exchange offer.
The SIF Fund may enter into stock index futures contracts to maintain adequate
liquidity to meet its redemption demands while maximizing the level of the SIF
Fund's assets which are tracking the performance of the S&P 500, provided that
the value of these contracts does not exceed 20% of the SIF Fund's total assets.
The SIF Fund may only purchase those stock index futures contracts--such as
futures contracts on the S&P 500--that are likely to closely duplicate the
performance of the S&P 500. The SIF Fund also can sell such futures contracts
in order to close out a previously established position. The SIF Fund will not
enter into any stock index futures contract for the purpose of speculation, and
will only enter into contracts traded on national securities exchange with
standardized maturity dates.
The SIF Fund may invest cash reserves in securities issued by the U.S.
Government, its agencies or instrumentalities, bankers' acceptances, commercial
paper rated at least A-1 by S&P and/or Prime-1 by Moody's, certificates of
deposit or repurchase agreements involving such obligations. Such investments
will not be used for defensive purposes.
<PAGE>
The equity securities in which the SIF Fund invests are common stocks, preferred
stocks, securities convertible into common stock and ADRs.
The SIF Fund may lend up to 20% of its assets to qualified institutions for the
purpose of realizing additional income, however the SIF Fund has no present
intention to lend its securities. The SIF Fund may invest in illiquid
securities. The SIF Fund may enter into forward commitments, or purchase
securities on a when-issued or delayed delivery basis.
In order to maintain liquidity during times of unusual market conditions, the
Fund may also invest temporarily in cash and cash items.
INTERNATIONAL EQUITY FUND
The investment objective of the Fund is to seek capital appreciation. The Fund
will attempt to achieve its objective by investing a carefully selected and
continuously managed diversified portfolio consisting primarily of equity
securities (including such equity-related securities as warrants, convertible
bonds, debentures or convertible preferred stock) of companies located in
European and Pacific Basin countries.
Using a bottom-up investment approach, the Sub-Advisor invests in large- and
medium-capitalization companies that have a long record of successful operations
in their core business. Typically, such companies occupy a leading position in
their industry, have consistently generated free cash flow, and achieved
earnings growth through increasing market share and unit sales volumes. The
Sub-Advisor's goal is to construct a portfolio of the best companies in the
developed markets of Europe and the Pacific Basin without making any country
bets. With approximately 80-100 names, the Fund also seeks to be well
diversified in terms of industry exposure.
From a country allocation standpoint, the Sub-Advisor's main objective is to
control portfolio risk by normalizing the distribution of country/regional
weights relative to those of the Fund's benchmark. The Sub-Advisor analyzes
approximately 35 international equity markets, including those comprised in
Morgan Stanley Capital International's EAFE (Europe, Australia and Far East) and
Emerging Markets Free Indexes. The Sub-Advisor establishes a risk-variance
matrix by fixing minimum/maximum ranges for each market based on its historical
volatility over the last 10 years. Generally, investments in emerging markets
will constitute less than 5% of the Fund's assets. The Sub-Advisor also gives
consideration to such factors as market liquidity, accessibility to foreign
investors, regulatory protection of shareholders, accounting and disclosure
standards, transferability of funds and foreign exchange controls, if any.
The Sub-Advisor's stock selection process begins with rigorous research into
historical fundamentals, with a focus on companies that have a proven record of
at least 7 to 10 years of predictable earnings. The Sub-Advisor screens a
universe of approximately 3000 stocks in a market capitalization range from
approximately $500 million to approximately $100 billion. The
<PAGE>
Sub-Advisor's screens are designed to be representative of each market/industry
and generally cover a broad cross-section of companies which together account
for about 90% of total market capitalization. The Sub-Advisor's data series
focus on companies that have achieved consistent growth in cash flow, sales,
operating profits, returns on equity and returns on invested capital, and that
have little or no debt. The Sub-Advisor defines cash flow as recurrent net
profit plus depreciation. Furthermore, the Sub-Advisor analyzes the share
price in relation to earnings before interest, taxes, depreciation and
amortization, and looks at the underlying trend of cash and retained earnings.
The Sub-Advisor supplements the quantitative screening process by an analysis of
qualitative criteria, one of the most important of which is to identify strong,
stable and reliable management that maintains a company's market position
through consistent unit volume growth and gains in market share.
The screening process eliminates highly leveraged companies, cyclical companies
and companies with erratic sales growth, negative cash flow, weak operating
profits, volatile retained earnings, and low returns on equity and returns on
invested capital. As a result of the screening process, the original universe
of 3000 companies is distilled to an "investable universe" of approximately
250-300 stocks of analyzable companies with a proven historical record that the
Sub-Advisor deems to be within its circle of competence. For each company in
its investable universe, the Sub-Advisor estimates cash flow available to the
company's shareholders over the next 10 years, discounting that 10-year cash
flow growth by the 10-year bond of the respective country/region to calculate an
intrinsic value to its market price. If the company's stock is trading lower
than or close to the Sub-Advisor's determination of the company's intrinsic
value, the Sub-Advisor considers it a candidate for purchase.
Position size at purchase ranges from 1% to 3% of total portfolio assets.
Within this range position size varies in proportion to the market
capitalization of the company within a given country's stock market. The
Sub-Advisor normally allows positions to reach a maximum of approximately 5% of
total assets.
Normally, the Fund will tend to be fully invested. Stock are sold if a
country's maximum weight based on the risk-variance matrix has been exceeded.
The Sub-Advisor may trim or sell positions if a company's fundamentals have
deteriorated, or if it is selling significantly above the Sub-Advisor's
estimation of its intrinsic value. Within each country, no conscious sector
allocation decision is made. Sector allocation is the result of the stock
selection within each country. The holding periods of the Fund's core positions
generally exceed two years.
For active currency risk management, the Sub-Advisor employs a systematic
currency hedging approach based on a technical-trend-following model.
Portfolio turnover is expected not to exceed an annual rate of 100% under normal
circumstances.
<PAGE>
Such a turnover rate may reflect substantial short-term trading and
corresponding brokerage costs which the Fund must pay.
Under normal circumstances the Fund will have at least 65% of its assets
invested in European and Pacific Basin equity securities. The Fund intends to
diversify investments broadly among countries and normally to have represented
in the portfolio business activities of not fewer than three different
countries. The securities the Fund purchases may not always be purchased on the
principal market. For example, ADRs may be purchased if trading conditions make
them more attractive than the underlying security.
The Fund may (i) enter into forward contracts to purchase or sell foreign
currencies ("forward currency contracts"); (ii) purchase and write covered call
options on foreign currencies ("currency options"); (iii) enter into contracts
for the purchase or sale for future delivery of foreign currencies ("currency
futures"); or (iv) purchase and write covered call options on currency futures.
THE BALANCED FUND
The Fund seeks 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 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 money
market securities.
GENERAL INVESTMENT POLICIES - BALANCED AND EQUITY FUNDS
For temporary defensive purposes during periods when the Advisor determines that
market
<PAGE>
conditions warrant, each Balanced and Equity Fund may invest up to 100% of its
assets in the money market securities and may hold cash for liquidity purposes.
To the extent a Balanced or Equity Fund is engage 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 believe 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 Balanced and Equity 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 Balanced and Equity Fund reserves the right to engage in
securities lending. The Balanced and Equity 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 - BALANCED AND EQUITY FUNDS
The value of the shares of the Balanced and Equity 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 Balanced and Equity Growth Funds' fixed income
securities will fluctuate in response to interest rate changes and other
factors. See "Risk Factors - Fixed Income Funds" for a discussion of the risks
associated with fixed income investments.
Each Balanced and Equity 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 a Balanced or
Equity Fund's foreign securities may be subject to foreign witholding 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.
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The Equity Growth Fund may invest in junk bonds. The Fund may also 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; (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 portion 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 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.
RISK FACTORS -MASTER-FEEDER STRUCTURE
Unlike other mutual funds which directly acquire and manage their own portfolio
securities, both the High Yield Bond Fund and the Equity Index Fund (each, a
"Feeder Fund") seek to achieve its investment objective by investing up to 100%
of its assets in the SIMT Fund and the SIF Fund (each, a "Master Fund"),
respectively, each of which is a separate registered investment company with
identical investment objectives. The investment objective of a Feeder Fund or a
Master Fund may not be changed without shareholder approval. In addition to
selling beneficial interests to the Feeder Funds, each Master Fund may sell
beneficial interests to other mutual funds or institutional investors. Such
investors will invest in a Master Fund on the same terms and conditions and will
pay a proportionate share of that Master Fund's expenses. However, other
investors investing in a Master Fund are not required to buy their shares at the
same public offering prices as the corresponding Feeder Fund. Investors in a
Feeder Fund should be aware that because of these differences, other investors
in the other funds that invest in the corresponding Master Fund may obtain
different returns. Such differences in returns are also present in other mutual
fund structures.
Certain changes in a Master Fund's investment objective, policies or
restrictions may require the
<PAGE>
corresponding Feeder Fund to redeem its investment. Any such withdrawal could
result in a distribution-in-kind of portfolio securities (as opposed to a cash
distribution from the Master Fund). The Feeder Fund could incur brokerage fees
or other transaction costs in converting such securities into cash. The
distribution-in-kind may also result in a less diversified portfolio of
investments or adversely affect the liquidity of the Feeder Fund. In addition,
the investment of a Feeder Fund may be withdrawn from the corresponding Master
Fund at any time if the Trustees of the Trust determine that it is in the best
interest of the Feeder Fund to do so.
Upon any such withdrawal, the Trustees of the Trust would consider what action
might be taken, including the investment of all of the assets of such Feeder
Fund in another pooled investment entity having the same investment objective as
the Feeder Fund or retaining an investment advisor to manage the Feeder Fund's
assets in accordance with its investment objective and policies. The
performance of a Feeder Fund might be adversely affected under such
circumstances and such Feeder Fund may not be able to achieve its investment
objective.
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 distribution
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 EURO
On January 1, 1999, the European Monetary Union (EMU) implemented a new currency
unit, the Euro, to help reshape financial markets, banking systems and monetary
policies in Europe and other parts of the world. The countries converting or
tying their currencies to the Euro include Austria, Belgium, France, Germany,
Luxembourg, the Netherlands, Ireland, Finland, Italy, Portugal and Spain.
Financial transactions and market information, including share quotations and
company accounts, in participating countries are denominated in Euros.
Approximately 46% of the stock exchange capitalization of the total European
market may now be reflected in Euros, and participating governments will now
issue their bonds in Euros. Monetary policy for participating countries will
now be uniformly managed by a new central bank, the European Central Bank (ECB).
Although it is not possible to predict the impact of the Euro implementation
plan on the Funds, particularly the International Equity Fund, the transition to
the Euro may change the economic environment and behavior of investors,
particularly in European markets. For example, investors may begin to view
those countries participating in the EMU as a single entity, and the Advisor
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may need to adapt its investment strategy accordingly. The process of
implementing the Euro also may adversely affect financial markets world-wide and
may result in changes in the relative strength and value of the U.S. dollar or
other major currencies, as well as possible adverse tax consequences. The
transition from current currencies to the Euro may be considered a taxable
event. The transition to the Euro is likely to have a significant impact on
fiscal and monetary policy in the participating countries and may produce
unpredictable effects on trade and commerce generally. These resulting
uncertainties could create increased volatility in financial markets world-wide.
DESCRIPTION OF PERMITTED INVESTMENTS
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 include 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
<PAGE>
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 instrumentalities. The Advisor
intends to limit purchases of non-mortgage asset-backed securities to securities
that are readily marketable at the time of purchase.
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,
<PAGE>
the credit quality of the issuer and any call provisions.
CURRENCY TRANSACTIONS. Currency transactions may be used in order to hedge the
value of portfolio holdings denominated in particular currencies against
fluctuations in relative value. Currency transactions include forward currency
contracts, exchange listed currency futures and options thereon, exchange listed
and OTC options on currencies, and currency swaps. A forward currency contract
involves a privately negotiated obligation to purchase or sell (with delivery
generally required) a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are traded in the
interbank market conducted directly between currency traders (usually large,
commercial banks) and their customers. A forward foreign currency contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A currency swap is an agreement to exchange cash flows based
on the notional difference among two or more currencies and operates similarly
to an interest rate swap, which is described below. A Fund may enter into
currency transactions with counterparties which have received (or the guarantors
of the obligations of which have received) a credit rating of A-1 or P-1 by S&P
or Moody's, respectively, or that have an equivalent rating from an NRSRO or
(except for OTC currency options) are determined to be of equivalent credit
quality by the Advisor.
A Fund's dealings in forward currency contracts and other currency transactions
such as futures, options on futures, options on currencies and swaps will be
limited to hedging involving either specific transactions ("Transaction
Hedging") or portfolio positions ("Position Hedging"). Transaction Hedging is
entering into a currency transaction with respect to specific assets or
liabilities of a Fund, which will generally arise in connection with the
purchase or sale of its portfolio securities or the receipt of income therefrom.
A Fund may enter into Transaction Hedging out of a desire to preserve the U.S.
dollar price of a security when it enters into a contract for the purchase or
sale of a security denominated in a foreign currency. A Fund will be able to
protect itself against possible losses resulting from changes in the
relationship between the U.S. dollar and foreign currencies during the period
between the date the security is purchased or sold and the date on which payment
is made or received by entering into a forward contract for the purchase or
sale, for a fixed amount of dollars, of the amount of the foreign currency
involved in the underlying security transactions.
Position Hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.
A Fund may use Position Hedging when the Advisor, believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar. A Fund may enter into a forward foreign currency contract to sell, for
a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of its portfolio securities denominated in such foreign
currency. The precise matching of the forward foreign currency contract amount
and the value of the portfolio securities involved may not have a perfect
correlation since the future value of the securities hedged will change as a
consequence of market between the date the forward contract is entered into and
the date its matures. The projection of short-term currency market movement is
<PAGE>
difficult, and the successful execution of this short-term hedging strategy is
uncertain.
A Fund will not enter into a transaction to hedge currency exposure to an extent
greater, after netting all transactions intended wholly or partially to offset
other transactions, than the aggregate market value (at the time of entering
into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging as described below.
A Fund may also cross-hedge currencies by entering into transactions to purchase
or sell one or more currencies that are expected to decline in value relative to
other currencies to which that Fund has or in which that Fund expects to have
portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, a Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which a Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar.
Proxy hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, and to buy U.S. dollars. The amount of the contract
would not exceed the value of the Fund's securities denominated in linked
currencies. For example, if the Advisor considers that the Swedish krone is
linked to the Euro, the Fund holds securities dominated in krone and the Advisor
believes that the value of the krone will decline against the U.S. dollar, the
Advisor may enter into a contract to sell Euros and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to a Fund
if the currency being hedged fluctuates in value to a degree in a direction that
is not anticipated. Furthermore, there is risk that the perceived linkage
between various currencies may not by present or may not be present during the
particular time that a Fund is engaging in proxy hedging. If a Fund enters into
a currency hedging transaction, the Fund will comply with the asset segregation
requirements described below.
RISK OF CURRENCY TRANSACTIONS. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchase and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to a Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors
<PAGE>
extrinsic to that country's economy. Although forward foreign currency
contracts and currency futures 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.
DELAYED DELIVERY SECURITIES. 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.
One form of a delayed-delivery security that a Fund may purchase is a "to be
announced" ("TBA") mortgage-backed security. A TBA mortgage-backed security
transaction arises when a mortgage-backed security, such as a GNMA pass-through
security, is purchased or sold with specific pools that will constitute that
GNMA pass-through security to be announced on a future settlement date.
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 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 Limitations" 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
<PAGE>
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.
FOREIGN SECURITIES. Securities of foreign issuers 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, 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.
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 the by the contract at
a specified price during a specified future month. The value of the contract
usually will vary in direct proportion to the total face value. 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
<PAGE>
purchase such contracts in order to offset increases in the cost of common
stocks that it intends to purchase. Market value of a stock index futures
position is defined as the closing value of the index multiplied by 500 times
the number of contracts held. 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.
A Fund's ability to effectively utilize futures contracts depends on several
factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying securities,
financial instruments or indices. In addition, the purchase of a futures
contract involves the risk that a Fund could lose more than the original margin
deposit required to initiate a futures transaction.
In considering the proposed use of futures contracts, particular note should be
taken that futures contracts relate to the anticipated levels at some point in
the future, not to the current level of the underlying instruments; thus, for
example, trading of stock index futures may not reflect the trading of the
securities which are used to formulate an index or even actual fluctuations in
the relevant index itself. There is, in addition, a risk that movements in the
price of futures contracts will not correlate with the movement in prices of the
stock index being tracked. There may be several reasons unrelated to the value
of the underlying securities which causes this situation to occur. First, all
participants in the futures market are subject to initial and variation margin
requirements. This amount is maintained in a segregated account at the
custodian bank. If, to avoid meeting additional margin deposit requirements or
for other reasons, investors choose to close a significant number of futures
contracts through offsetting transactions, distortions in the normal price
relationship between the securities markets and futures markets may occur.
Second, because the deposit requirements in the futures market are less onerous
than margin requirements in the securities market, there may be increased
participation by speculators in the futures market which may also cause
temporary price distortions.
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. Positions in futures contracts may be closed only on
an exchange or board of trade providing a secondary market for such futures
contracts. 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
<PAGE>
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.
No price is paid upon entering into futures contracts. Instead, a Fund is
required to deposit an amount of cash or U.S. Treasury securities known as
"initial margin." Subsequent payments, called "variation margin," to and from
the broker, would be made on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The margin is in the nature of
a performance bond or good-faith deposit on a futures contract.
The SIMT Fund has undertaken to restrict its futures contract trading as
follows: First, the SIMT Fund will not engage in transactions in futures
contracts for speculative purposes. Second, the SIMT Fund will not market
itself to the public as a commodity pool or otherwise as a vehicle for trading
in the commodities futures or commodity options markets. Third, the SIMT Fund
will disclose to all prospective shareholders the purpose and limitations on its
commodity futures trading. Fourth, the SIMT Fund will submit to the Commodity
Futures Trading Commission ("CFTC") special calls for information. Accordingly,
registration as a commodities pool operator with the CFTC is not expected to be
required.
The SIF Fund has undertaken to restrict its futures contract trading as follows:
First, the SIF Fund will not engage in transactions in futures contracts for
speculative purposes. Second, the SIF Fund will not market itself to the public
as a commodity pool or otherwise as a vehicle for trading in the commodities
futures or commodity options markets. Third, the SIF Fund will disclose to all
prospective shareholders the purpose and limitations on its commodity futures
trading. Fourth, the SIF Fund will submit to the Commodity Futures Trading
Commission ("CFTC") special calls for information. Accordingly, registration as
a commodities pool operator with the CFTC is not expected to be required.
ILLIQUID SECURITIES. 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.
INVESTMENT COMPANIES. Most Funds may invest up to 10% of its total assets in
shares of other investment companies. The High Yield Bond Fund and Equity Index
Fund invest 100% of their assets in other investment companies under
master-feeder arrangements, as discussed in the appropriate prospectus. 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
<PAGE>
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.
The SIMT Fund will primarily 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 or "BB" or lower by 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.
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK SECURITIES. The
descriptions below are intended to supplement the discussion of risks contained
in the appropriate Prospectus.
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.
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
<PAGE>
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 accretes in a taxable year is treated as earned by a Fund and
therefore is subject to the distribution requirements of 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.
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 include those issued or
guaranteed by U.S. Government agencies or instrumentalities such as the
Government National Mortgage Association ("GNMA"), Fannie Mae and the Federal
Home Loan Mortgage Corporation ("FHLMC") and 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
<PAGE>
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. 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.
Since prepayment rates vary widely, it is not possible to predict accurately the
average maturity of a particular mortgage-backed security. 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.
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 by an
NRSRO. While they are generally structured with
<PAGE>
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. The Funds may also invest in mortgage-backed securities issued by
non-governmental entities. The mortgage-backed securities the Funds may
purchase are CMOs and 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 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 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.
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.
<PAGE>
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.
MUNICIPAL SECURITIES. Municipal securities include:
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 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
<PAGE>
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. 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.
New Jersey is the ninth largest state in population and the fifth smallest in
land area. With an average of 1,077 persons per square mile, it is the most
densely populated of all the states. New Jersey is located at the center of the
megalopolis which extends from Boston to Washington, and which includes over
one-fifth of the country's population. This central location in the
northeastern corridor, the transportation and port facilities and proximity to
New York City make the State an attractive location for corporate headquarters
and international business offices. A number of Fortune Magazine's top 500
companies maintain headquarters or major facilities in New Jersey.
The State's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural areas
with selective commercial agriculture. New Jersey has the Atlantic seashore on
the east and lakes and mountains in the north and northwest, which provide
recreation for residents as well as for out-of-state visitors. Since 1976,
casino gambling in Atlantic city has been an important State tourist attraction.
Between 1980 and 1990, New Jersey's annual population growth was 0.51 percent
and between 1990 and 1997, it accelerated slightly to .53 percent. While this
rate of growth is less than that for the United States, it compares favorably
with other Middle Atlantic States. New York has shown a 0.11 percent annual
rate of increase since 1990 and Pennsylvania's population has increased 0.16
percent per year. Historically, New Jersey's average per capita income has been
<PAGE>
well above the national average. In 1997 the State ranked second among all the
states in per capita personal income at $32,654, compared to a national average
of $25,598.
The onset of the national recession (which officially began in July 1990
according to the National Bureau of Economic Research) caused an acceleration of
New Jersey's job losses in construction and manufacturing. In addition, the
national recession caused an employment downturn in such previously growing
sectors as wholesale trade, retail trade, finance, utilities, trucking and
warehousing. Reflecting the downturn, the rate of unemployment in the State
rose from a low of 4.1% for 1989 to 8.5% in 1992, which was greater than the
national average of 7.5% for that year. Improvement has been slow but steady.
New Jersey's unemployment rate dropped to 5.0% in June 1998 versus the national
average of 4.5% at that time.
In its seventh year of expansion, the State has benefited and will continue to
benefit from national growth. While the latest national indicators show that
economic growth strongly accelerated during the first quarter of 1998, the
inflation rate remained low. After a robust economic growth of 5.5% in the
first quarter of 1998, inflation-adjusted gross domestic product slowed to 1.4%
in the second quarter. This second quarter pace is slower, but is positive and
more sustainable.
Business investment expenditures and consumer spending have increased
substantially in the nation as well as in the State. Capital and consumer
spending may continue to rise due to the sustained character of economic growth
and the interest-sensitive homebuilding industry may continue to provide
stimulus both nationally and in New Jersey. It is expected that the employment
and income growth that has and is taking place will lead to further growth in
State consumer outlays.
Looking further ahead, prospects for New Jersey are favorable. While growth is
likely to be slower than in the nation, the locational advantages that have
served New Jersey well for many years will still be there. Structural changes
that have been going on for years can be expected to continue, with job creation
concentrated most heavily in the service industries.
The primary method for State financing of capital projects is through the sale
of the general obligation bonds of the State. These bonds are backed by the
full faith and credit of the State tax revenues and certain other fees are
pledged to meet the principal and interest payments and if provided, redemption
premium payments, if any, required to repay the bonds. General obligation debt
must be approved by voter referendum and is used primarily to finance various
environmental, transportation, correctional and institutional projects. As of
June 30, 1998, the state's outstanding general obligation debt totaled $3.6
billion. The debt service obligation for such outstanding indebtedness was $484
million for fiscal year 1998.
The State operates on a fiscal year beginning July 1 and ending June 30. On
June 30, 1998, Governor Whitman signed the New Jersey Legislature's $18.1
billion budget for fiscal year 1999. As part of the fiscal year 1999 budget,
the State enacted additional tax cuts. The State
<PAGE>
closed recent fiscal years with surpluses in the general fund (the fund into
which all State revenues not otherwise restricted by statute are deposited and
from which appropriations are made) of $569.2 million in 1995, $442 million in
1996, $280.5 million in 1997, and $143.9 million in 1998. It is estimated that
fiscal year 1999 will end with a surplus of $199 million.
All outstanding general obligation bonds of New Jersey are rated "AA+" by S&P,
"Aa1" by Moody's and "AA+" by Fitch. The ratings reflect only the views of the
rating agencies.
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.
The Commonwealth of Pennsylvania is one of the most populous states, ranking
fifth behind California, New York, Texas and Florida. Pennsylvania is an
established yet growing state with a diversified economy, and is the
headquarters for many major corporations. Pennsylvania had been historically
identified as a heavy industry state. That reputation has changed over the last
thirty years as the coal, steel and railroad industries declined and the
Commonwealth's business environment readjusted to reflect a more diversified
industrial base. This economic readjustment was a direct result of a long-term
shift in jobs, investment and workers away from the northeast part of the
nation. Currently, the major sources of growth in Pennsylvania are in the
service sector, including trade, medical and health services, education, and
financial institutions. Pennsylvania's workforce is estimated at 5.9 million
people, ranking as the sixth largest labor pool in the nation. The high level
of education embodied in the Commonwealth's work force fosters a wide variety of
employment capabilities with the State's basic and higher education statistics
comparing favorably with other states in the nation.
The Commonwealth is highly urbanized. Of the Commonwealth's 1990 census
population, 79 percent resided in the 15 Metropolitan Statistical Areas ("MSAs")
of the Commonwealth. The largest MSAs in the Commonwealth are those which
include the cities of Philadelphia and Pittsburgh, which together contain almost
44 percent of the State's total population. The population of Pennsylvania,
12.02 million people in 1997, according to the U.S. Bureau of the Census,
represents a slight increase from the 1988 population of 11.85 million. A high
proportion of Pennsylvania's population is comprised of persons 65 and over.
Non-agricultural employment in Pennsylvania over the ten years ending in 1997
increased at an annual rate of 0.76 percent, compared to a 0.17 percent rate for
the Middle Atlantic region and 1.69 percent for the U.S. during the period 1988
through 1997. For the five years ending with
<PAGE>
1997, employment in the Commonwealth has increased 5.4 percent, which is higher
than the 4.8 percent growth in the Middle Atlantic region during this period.
Non-manufacturing employment in Pennsylvania has increased in recent years to
82.7 percent of total employment in 1997. Consequently, manufacturing
employment constitutes a diminished share of total employment within the
Commonwealth.
In 1994 and 1995, Pennsylvania's annual average unemployment rate was below the
Middle Atlantic Region's average, but slightly higher than that of the United
States. As of October 1998, the most recent month for which data is available,
the seasonally adjusted unemployment rate for the Commonwealth was 4.7 percent,
compared to 4.6 percent for the United States.
Personal income in the Commonwealth for 1997 is $308.6 billion, an increase of
4.5 percent over the previous year. During the same period, national personal
income increased at a rate of 5.7 percent. Based on the 1997 personal income
estimates, per capita income for 1997 is at $25,678 in the Commonwealth compared
to per capita income in the United States of $25,298.
Commonwealth revenues (prior to tax refunds) during the 1998 fiscal year totaled
$18,123.2 million, $676.1 million (3.9 percent) above the estimate made at the
time the budget was enacted. Tax revenue received in fiscal 1998 grew 4.8
percent over tax revenues received during fiscal 1997. This rate of increase
includes the effect of legislated tax reductions that affected receipts during
both fiscal years and therefore understates the actual underlying rate of growth
of tax revenue during fiscal 1998. Expenditures from all fiscal 1998
appropriations of Commonwealth revenues totaled $17,229.8 million (excluding
pooled financing expenditures and net of current year lapses). This amount
represents an increase of 4.5 percent over fiscal 1997 appropriation
expenditures.
The unappropriated balance of Commonwealth revenues increased during the 1998
fiscal year by $86.4 million to $488.7 million at June 30, 1998 (prior to
reserves for transfer to the Tax Stabilization Reserve Fund). Higher than
estimated revenues, offset in part by increased reserves for tax refunds, and
slightly lower expenditures than budgeted were responsible for the increase.
Transfers to the Tax Stabilization Reserve Fund for fiscal 1998 operations will
total $223.3 million, consisting of $73.3 million representing the required
transfer of fifteen percent of the ending unappropriated surplus balance, plus
an additional $150 million authorized by the General Assembly when it enacted
the fiscal 1999 budget. With these transfers, the balance in the Tax
Stabilization Reserve Fund will exceed $664 million and represent 3.7 percent of
fiscal 1998 revenues.
By law, the Governor must submit a balanced operating budget and while the
General Assembly may change items, the Governor retains a line-item veto power.
Total appropriations cannot exceed estimated revenues, also taking into account
any deficit or surplus remaining from the previous year. When adjusted to
include the estimated effect of enacted tax changes, fiscal 1999 Commonwealth
revenues are projected to increase by 1.66 percent over actual Commonwealth
revenues for fiscal 1998. Tax reductions included in the enacted 1999 fiscal
year budget totaled
<PAGE>
an estimated $241.0 million for fiscal 1999 and reserves for tax refunds for
fiscal 1999 total $603.9 million. Appropriations enacted for fiscal 1999 are
4.1 percent ($705.1 million) above the appropriations enacted for fiscal 1998
(including supplemental appropriations). The enacted fiscal 1999 budget assumes
the draw down of the $265.4 million beginning budgetary balance by $143.9
million to an estimated closing balance, prior to transfer of the required
portion to the Tax Stabilization Reserve Fund, of $124.3 million. For the
fiscal year through October 1998, Commonwealth revenues are $69.2 million, or
1.3 percent above estimate for the period.
All outstanding general obligation bonds of the Commonwealth are rated AA by
S&P, Aa3 by Moody's and AA by Fitch. The ratings reflect only the views of the
rating agencies.
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 purchase 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 decrease
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 nonperformance by the
dealer. OTC options are available for a greater variety of securities and
<PAGE>
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 with an equal amount of the underlying
security or foreign currency or other liquid assets and/or cash. 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.
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.
PAY-IN-KIND SECURITIES. Pay-in-kind securities pay interest in either cash
or additional securities, at the issuer's option, for a specified period.
Pay-in-kind bonds are designed to give an issuer flexibility in managing cash
flow. Pay-in-kind bonds are expected to reflect the market value of the
underlying debt plus an amount representing accreted interest since the last
payment. Pay-in-kind securities are securities that have interest payable by
delivery of additional securities. Upon maturity, the holder is entitled to
receive the aggregate par value of the securities.
RECEIPTS. Interests in separately traded interest and principal component parts
of U.S. Government obligations that are issued by banks or brokerage firms and
are created by depositing U.S. Government obligations into a special account at
a custodian bank. The custodian holds the interest and principal payments for
the benefit of the registered owners of the
<PAGE>
certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include "Treasury Receipts" ("TRs"), "Treasury Investment Growth
Receipts" ("TIGRs"), and "Certificates of Accrual on Treasury Securities"
("CATS"). TIGRs and CATS are interests in private proprietary accounts while
TRs and STRIPS are interests in accounts sponsored by the U.S. Treasury.
Receipts are sold as zero coupon securities; for more information, see "Zero
Coupon Securities."
REPURCHASE AGREEMENTS. Repurchase agreements are agreements by which a person
(E.G., a portfolio) obtains a security and simultaneously commits to return the
security to the seller (a financial institution deemed to present minimal risk
of bankruptcy during the term of the agreement based on guidelines established
by the Trustees of the Trust) at an agreed upon price (including principal and
interest) on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves
the obligation of the seller to pay the agreed upon price, which obligation is
in effect secured by the value of the underlying security.
Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by the Funds
will provide that the underlying security at all times shall have a value at
least equal to 102% of the resale price stated in the agreement (the Advisor
monitors compliance with this requirement). Under all repurchase agreements
entered into by the Funds, a Fund takes actual or constructive possession of the
underlying collateral. However, if the seller defaults, a Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
sale including accrued interest are less than the resale price provided in the
agreement including interest. In addition, even though the United States
Bankruptcy Code provides protection for most repurchase agreements, if the
seller should be involved in bankruptcy or insolvency proceedings, a Fund may
incur delay and costs in selling the underlying security or may suffer a loss of
principal and interest if a Fund is treated as an unsecured creditor and
required to return the underlying security to the seller's estate.
<PAGE>
RESTRICTED SECURITIES. Each of the Funds may invest in restricted securities.
Restricted securities are securities that may not be sold freely to the public
absent registration under the Securities Act of 1933, as amended (the "1933
Act"), or an exemption from registration. Section 4(2) commercial paper is
issued in reliance on an exemption from registration under Section 4(2) of the
1933 Act, and is generally sold to institutional investors who purchase for
investment. Any resale of such commercial paper must be an exempt transaction,
usually to an institutional investor through the issuer or investment dealers
who make a market on such commercial paper. Rule 144A securities are securities
re-sold in reliance on an exemption from registration provided by Rule 144A
under the 1933 Act.
SECURITIES LENDING. Each Fund may lend securities pursuant to agreements
requiring that the loans be continuously secured by cash, U.S. Government
securities, or any combination of cash and such securities, as collateral equal
at all times to at least 100% of the market value of the securities lent. Such
loans will not be made if, as a result, the aggregate amount of all outstanding
securities loans for the Fund exceed one-third of the value of a Fund's total
assets taken at fair market value. A Fund will continue to receive interest or
dividends on the securities lent while simultaneously earning interest on the
investment of the cash collateral in U.S. Government securities. However, a
Fund will normally pay lending fees to such broker-dealers and related expenses
from the interest earned on invested collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
if the borrowers fail financially. However, loans are made only to borrowers
deemed by the Advisor to be of good standing and when, in the judgment of the
Advisor, the consideration which can be earned currently from such securities
loans justifies the attendant risk. Any loan may be terminated by either party
upon reasonable notice to the other party. The Funds may use SEI Investments
Distribution Co. ("SEI Investments" or the "Distributor") or a broker/dealer
affiliate of the Advisor as a broker in these transactions.
STANDBY COMMITMENTS AND PUTS. The Funds may purchase securities at a price
which would result in a yield to maturity lower than that generally offered by
the seller at the time of purchase when they can simultaneously acquire the
right to sell the securities back to the seller, the issuer, or a third party
(the "writer") at an agreed-upon price at any time during a stated period or on
a certain date. Such a right is generally denoted as a "standby commitment" or
a "put." The purpose of engaging in transactions involving standby commitments
or puts is to maintain flexibility and liquidity to permit the Funds to meet
redemptions and remain as fully invested as possible in municipal securities.
The right to put the securities depends on the writer's ability to
<PAGE>
pay for the securities at the time the put is exercised. The Funds will limit
their put transactions to institutions which the Advisor believes present
minimum credit risks, and the Advisor will use its best efforts to initially
determine and continue to monitor the financial strength of the sellers of the
options by evaluating their financial statements and such other information as
is available in the marketplace. It may, however, be difficult to monitor the
financial strength of the writers because adequate current financial information
may not be available. In the event that any writer is unable to honor a put for
financial reasons, the Fund would be a general creditor (i.e., on a parity with
all other unsecured creditors) of the writer. Furthermore, particular
provisions of the contract between the Fund and the writer may excuse the writer
from repurchasing the securities; for example, a change in the published rating
of the underlying municipal securities or any similar event that has an adverse
effect on the issuer's credit or a provision in the contract that the put will
not be exercised except in certain special cases, for example, to maintain
portfolio liquidity. A Fund could, however, at any time sell the underlying
portfolio security in the open market or wait until the portfolio security
matures, at which time it should realize the full par value of the security.
Municipal Securities purchased subject to a put may be sold to third persons at
any time, even though the put is outstanding, but the put itself, unless it is
an integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Fund.
The sale of the securities to a third party or the lapse of a certain period of
time with the put unexercised may terminate the right to put the securities.
Prior to the expiration of any put option, the Fund could seek to negotiate
terms for the extension of such an option. If such a renewal cannot be
negotiated on terms satisfactory to the Fund, the Fund could, of course, sell
the portfolio security. The maturity of the underlying security will generally
be different from that of the put. There will be no limit to the percentage of
portfolio securities that a Fund may purchase subject to a standby commitment or
put, but the amount paid directly or indirectly for all standby commitments and
puts, which are not integral parts of the security as originally issued, held in
the Fund will not exceed 1/2 of 1% of the value of the total assets of such Fund
calculated immediately after any such put is acquired.
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 financial 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
<PAGE>
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.
VARIABLE AMOUNT MASTER DEMAND NOTES. These notes permit the investment of
fluctuating amounts at varying market rates of interest pursuant to direct
arrangements between the Trust, as lender, and the borrower. Such notes provide
that the interest rate on the amount outstanding varies on a daily, weekly or
monthly basis depending upon a stated short-term interest rate index. Both the
lender and the borrower have the right to reduce the amount of outstanding
indebtedness at any time. There is no secondary market for the notes. It is
not generally contemplated that such instruments will be traded. Variable
amount master demand notes may or may not be backed by bank letters of credit.
WARRANTS. Warrants are instruments giving holders the right, but not the
obligation, to buy equity or fixed income securities of a company at a given
price during a specified period.
WHEN-ISSUED SECURITIES. The Funds may acquire fixed income and equity
securities on a
<PAGE>
when-issued basis, in which case delivery and payment normally take place within
45 days after the date of commitment to purchase. The Funds will only make
commitments to purchase obligations on a when-issued basis with the intention of
actually acquiring the securities, but may sell them before the settlement date.
The when-issued securities may be subject to market fluctuation, and no interest
accrues to the purchaser on a fixed income security to the purchaser during this
period. The payment obligation and the interest rate that will be received on
the fixed income securities are each fixed at the time the purchaser enters into
the commitment. Purchasing obligations on a when-issued basis is a form of
leveraging and can involve a risk that the yields available in the market when
the delivery takes place may actually be higher than those obtained in the
transaction itself. In that case there could be an unrealized loss at the time
of delivery.
Segregated accounts will be established with the Funds' custodian and the Funds
will maintain liquid assets and/or cash in an amount at least equal in value to
the Funds' commitments to purchase when-issued securities. If the value of
these assets declines, the Funds will place additional liquid assets in the
account on a daily basis so that the value of the assets in the account is at
all times equal to the amount of such commitments.
YANKEE OBLIGATIONS. Yankee obligations are U.S. dollar-denominated instruments
of foreign issuers who either register with the Securities and Exchange
Commission or issue under Rule 144A under the Securities Act of 1933. These
obligations consist of debt securities (including preferred or preference stock
of non-governmental issuers), certificates of deposit, fixed time deposits and
bankers' acceptances issued by foreign banks, and debt obligations of foreign
governments or their subdivisions, agencies and instrumentalities, international
agencies and supranational entities. Some securities issued by foreign
governments or their subdivisions, agencies and instrumentalities may not be
backed by full faith and credit of the foreign government.
ZERO COUPON SECURITIES. The Funds may invest in zero coupon securities. STRIPS
and receipts (TRs, TIGRs and CATS) are sold as zero coupons securities, that is,
fixed income securities that have been stripped of their unmatured interest
coupons. Zero coupon securities are sold at a (usually substantial) discount
and redeemed at face value at their maturity date without interim cash payments
of interest or principal. The amount of this discount is accreted over the life
of the security, and the accretion constitutes the income earned on the security
for both accounting and tax purposes. Because of these features, the market
prices of zero coupon securities are generally more volatile than the market
prices of securities that have similar maturity but that pay interest
periodically. Zero coupon securities are likely to respond to a greater degree
to interest rate changes than are non-zero coupon securities with similar
maturity and credit qualities.
Corporate zero coupon securities are: (i) notes or debentures which do not pay
current interest and are issued at substantial discounts from par value, or (ii)
notes or debentures that pay no current interest until a stated date one or more
years into the future, after which the issuer is obligated to pay interest until
maturity, usually at a higher rate than if interest were payable from
<PAGE>
the date of issuance and may also make interest payments in kind (e.g., with
identical zero coupon securities). Such corporate zero coupon securities, in
addition to the risks identified above, are subject to the risk of the issuer's
failure to pay interest and repay principal in accordance with the terms of the
obligation. A Fund must accrete the discount or interest on high-yield bonds
structured as zero coupon securities as income even though it does not receive a
corresponding cash interest payment until the security's maturity or payment
date. A Fund may have to dispose of its securities under disadvantageous
circumstances to generate cash, or may have to leverage itself by borrowing cash
to satisfy distribution requirements. A Fund accretes income with respect to
the securities prior to the receipt of cash payments.
INVESTMENT LIMITATIONS
I. INVESTMENT LIMITATIONS OF THE TRUST
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. The
Equity Growth Fund, Equity Value Fund, Equity Income Fund, Mid Cap Fund,
Balanced Fund, International Equity Fund and Fixed Income Fund may not,
with respect to 75% of the Fund's assets, acquire more than 10% of any
class of the outstanding voting securities of any one issuer (other than
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities). This restriction does not apply to the New Jersey
Municipal Securities Fund and Pennsylvania Municipal Securities Fund.
2. Invest in companies for the purpose of exercising control; provided, that
this limitation does not apply to the Equity Growth Fund, Equity Value
Fund, Equity Income Fund, Mid Cap Fund, Balanced Fund, International Equity
Fund, Fixed Income Fund, New Jersey Municipal Securities Fund, Pennsylvania
Municipal Securities Fund, High Yield Bond Fund or Equity Index 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, except that the
Equity Growth Fund, Equity Value Fund, Equity Income Fund, Mid Cap Fund,
Balanced Fund, Fixed Income Fund, New Jersey Municipal Securities Fund and
<PAGE>
Pennsylvania Municipal Securities Fund may borrow an amount not exceeding
33 1/3% 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 ("SEC") may prescribe by rules and regulations, reduce
the amount of its borrowings to such an extent that the asset coverage of
such borrowings shall be at least 300%. This borrowing provision is
included 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, Equity Value Fund,
Equity Income Fund, Equity Index Fund, Mid Cap Fund, Balanced Fund, Fixed
Income Fund, New Jersey Municipal Securities Fund, Pennsylvania Municipal
Securities Fund, High Yield Bond Fund and International Equity 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 1940 Act, as amended, and the rules and regulations thereunder. Under
these rules and regulations, as currently in effect, a Fund is generally
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. The 1940 Act and the rules and
regulations thereunder permit feeder funds to invest up to 100% of their
assets in corresponding master funds.
<PAGE>
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 SEC.
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
securities together own more than 5% of such shares or securities; provided
that limitation does not apply to the Equity Growth Fund, Equity Value
Fund, Equity Income Fund, Mid Cap Fund, International Equity Fund, Balanced
Fund, Fixed Income Fund, New Jersey Municipal Securities Fund, Pennsylvania
Municipal Securities Fund, High Yield Bond Fund and Equity Index Fund.
11. 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.
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 Fund and
Pennsylvania Municipal Securities Fund.
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 Funds and Balanced Fund, only, supranational agencies will be
deemed to be issuers conducting their principal business activities in the
same industry; and (iv) with respect to the Balanced Fund and Equity Funds
only, governmental issuers within a particular country will be deemed to be
conducting their principal business activities in the same industry.
<PAGE>
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.
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.
The foregoing percentage limitations apply at the time of the purchase of a
security.
Notwithstanding the foregoing, each of the High Yield Bond Fund and Equity Index
Fund may invest up to 100% of its assets in another investment company, or
series thereof, with substantially similar investment objectives, policies and
limitations.
The investment objectives are fundamental policies of each Fund. In addition,
it is a fundamental policy of the New Jersey Municipal Securities Fund and
Pennsylvania Municipal Securities Fund to invest at least 80% of their
respective total assets in municipal securities. 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.
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 High Yield Bond Fund, Equity Index Fund, Equity Growth Fund
and International Equity Fund, Equity Value Fund, Equity Income Fund, Mid
Cap Fund and Balanced Fund, write or purchase puts, calls, options,
warrants, or combinations thereof;
<PAGE>
except that (i) the Tax-Exempt Money Market Fund, New Jersey Municipal
Securities Fund and Pennsylvania Municipal Securities Fund may purchase
securities subject to a put and (ii) the Equity Value Fund, Equity Income
Fund, Mid Cap Fund and Balanced Fund may purchase warrants. However, the
Equity Value Fund, Equity Income Fund, Mid Cap Fund and Balanced Fund 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, Equity Value Fund, Equity Income Fund, Mid Cap Fund,
International Equity Fund, Balanced Fund, Fixed Income Fund, New Jersey
Municipal Securities Fund, Pennsylvania Municipal Securities Fund, High Yield
Bond Fund and Equity Index Fund.
The Funds 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.
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"). 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.
II. INVESTMENTS LIMITATIONS OF THE SIMT FUND
The following investment limitations are fundamental policies of the SIMT Fund
(or the "Fund") which cannot be changed without the consent of the holders of a
majority of the SIMT Fund's outstanding shares. The term "majority of the
outstanding shares" means the vote of (i) 67% or more of the SIMT Fund's shares
present at a meeting, if more than 50% of the outstanding shares of the SIMT
Fund are present or represented by proxy, or (ii) more than 50% of the SIMT
Fund's outstanding shares, whichever is less.
The SIMT Fund may not:
1. With respect to 75% of its assets, (i) purchase the securities of any
issuer (except securities issued or guaranteed by the United States Government,
its agencies or
<PAGE>
instrumentalities) if, as a result, more than 5% of its total assets would
be invested in the securities of such issuer; or (ii) acquire more than 10%
of the outstanding voting securities of any one issuer.
2. 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 obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities.
3. Borrow money in an amount exceeding 33 1/3% of the value its total assets,
provided that, for purposes of this limitation, investment strategies which
either obligate the Fund to purchase securities or require the Fund to
segregate assets are not considered to be borrowings. To the extent that
its borrowings exceed 5% of its assets, (i) all borrowings will be repaid
before making additional investments and any interest paid on such
borrowings will reduce income; and (ii) asset coverage of at least 300% is
required.
4. Make loans if, as a result, more than 33 1/3% of its total assets would be
loaned to other parties, except that the Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) lend its securities.
5. Purchase or sell real estate, physical commodities, or commodities
contracts, except that the Fund may purchase (i) marketable securities
issued by companies which own or invest in real estate (including real
estate investment trusts), commodities, or commodities contracts; and (ii)
commodities contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.
6. Issue senior securities (as defined in the 1940 Act) except as permitted by
rule, regulation or order of the SEC.
7. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
8. Invest in interests in oil, gas, or other mineral exploration or
development programs and oil, gas or mineral leases.
The foregoing percentages will apply at the time of the purchase of a security
and shall not be considered violated unless an excess or deficiency occurs
immediately after or as a result of a purchase of such security. These
investment limitations and the investment limitations in SIMT's prospectus are
fundamental policies of SIMT and may not be changed without shareholder
approval.
<PAGE>
NON-FUNDAMENTAL POLICIES. The following investment policies are non-fundamental
policies that may be changed by SIMT's Board of Trustees without shareholder
approval.
The SIMT Fund may not:
1. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by the Portfolio's fundamental limitation on borrowing.
2. Invest in companies for the purpose of exercising control.
3. Purchase securities on margin or effect short sales, except that the Fund
may (i) obtain short term credits as necessary for the clearance of
security transactions; (ii) provide initial and variation margin payments
in connection with transactions involving futures contracts and options on
such contracts; and (iii) make short sales "against the box" or in
compliance with the SEC's position regarding the asset segregation
requirements imposed by Section 18 of the 1940 Act.
4. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act or an order of exemption therefrom.
5. Purchase or hold illiquid securities, I.E., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 15% of its net assets
would be invested in illiquid securities.
6. Purchase securities which are not readily marketable, if, in the aggregate,
more than 15% of its total assets would be invested in such securities.
Under rules and regulations established by the SEC, an investment company is
typically prohibited from acquiring the securities of other investment companies
if, as a result of such acquisition, the investment company 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 total investment company's assets; or
securities (other than treasury stock) issued by all investment companies
represent more than 10% of the total assets of the investment company. However,
certain investment companies may rely upon SEC exemptive orders which permit the
investment company to invest in other investment companies beyond these
percentage limitations. An investment company's purchase of such securities
results in the bearing of expenses such that shareholders would indirectly bear
a proportionate share of the operating expenses of such investment companies,
including advisory fees.
Each of the foregoing percentage limitations (except with respect to the
limitation on investing in illiquid securities) apply at the time of purchase.
<PAGE>
III. INVESTMENT LIMITATIONS OF THE SIF FUND
The following investment limitations are fundamental policies of the SIF Fund
(or the "Fund") which cannot be changed without the consent of the holders of a
majority of the SIF Fund's outstanding shares. The term "majority of the
outstanding shares" means the vote of (i) 67% or more of the SIF Fund's shares
present at a meeting, if more than 50% of the outstanding shares of the SIF Fund
are present or represented by proxy, or (ii) more than 50% of the SIF Fund's
outstanding shares, whichever is less.
The SIF Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed
by the United States Government, its agencies or instrumentalities) if, as
a result, more than 5% of the Fund's total assets would be invested in the
securities of such issuer. This restriction applies to 75% of the Fund's
total assets.
2. Purchase any securities which would cause more than 25% of the Fund's total
assets to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that
this limitation does not apply to investments in obligations issued or
guaranteed by the United States Government or its agencies or
instrumentalities.
3. Borrow money, except for temporary or emergency purposes and then only in
an amount not exceeding 10% of the value of the total assets of the Fund.
This borrowing provision is included solely to facilitate the orderly sale
of portfolio securities to accommodate substantial redemption requests if
they should occur, and is not for investment purposes. All borrowings will
be repaid before making additional investments for the Fund and any
interest paid on such borrowings will reduce the Fund's income.
4. Make loans, except that the Fund, (i) may enter into repurchase agreements,
provided that repurchase agreements and time deposits maturing in more than
seven days, and other illiquid securities, including securities which are
not readily marketable or are restricted, are not to exceed, in the
aggregate, 10% of the Fund's total assets, (ii) may engage in securities
lending as described in SIF's prospectus, and (iii) may purchase or hold
debt instruments in accordance with its investment objectives and policies.
5. Pledge, mortgage or hypothecate assets, except to secure temporary
borrowings as described in the SIF Fund prospectus in aggregate amounts not
to exceed 10% of the net assets of the Portfolio taken at current value at
the time of the incurrence of such loan and in connection with stock index
futures trading as provided in SIF's prospectus and Statement of Additional
Information.
6. Invest in companies for the purpose of exercising control.
<PAGE>
7. Purchase or sell real estate, real estate limited partnership interests,
physical commodities or commodities contracts. However, subject to its
permitted investments, the Fund may purchase (i) obligations issued by
companies which invest in real estate, commodities or commodities
contracts, and (ii) commodities contracts related to financial instruments,
such as financial futures contracts.
8. Make short sales of securities, maintain a short position or purchase
securities on margin, except that SIF may obtain short-term credits as
necessary for the clearance of security transactions.
9. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
10. Purchase securities of other investment companies except as permitted by
the 1940 Act and the rules and regulations thereunder and may only purchase
securities of money market funds.
11. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described in the SIF S&P 500 Index Portfolio
prospectus and SIF's Statement of Additional Information or as permitted by
rule, regulation or order of the SEC.
12. Purchase or retain securities of an issuer if, to the knowledge of SIF, an
officer, trustee, partner or director of SIF or any investment advisor of
SIF 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.
13. Purchase securities of any company which has (with predecessors) a record
of less than three years continuing operations if, as a result, more than
5% of the total assets (taken at current value) would be invested in such
securities.
14. Purchase warrants, puts, calls, straddles, spreads or combinations thereof.
15. Invest in interests in oil, gas or other mineral exploration or development
programs.
16. Purchase restricted securities (securities which must be registered under
the Securities Act of 1933 before they may be offered or sold to the
public) or other illiquid securities except as described in SIF's
prospectus and Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a security
and shall not be considered violated unless an excess or deficiency occurs or
exists immediately after and as a result of a purchase of such security. These
investment limitations and the investment limitations
<PAGE>
in SIF's Prospectus are fundamental policies of SIF and may not be changed
without shareholder approval.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS OF THE TRUST
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, Alpha Select Funds, The Arbor Fund, ARK Funds, Armada Funds, Bishop
Street Funds, Boston 1784 Funds-Registered Trademark-, CNI Charter Funds,
CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds, Inc.,
First American Investment Funds, Inc., First American Strategy Funds, Inc.,
HighMark Funds, Huntington Funds, The Nevis Fund, Oak Associates Funds, The
Parkstone Group of Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds,
SEI Institutional Investments Trust, SEI Institutional International Trust,
SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt
Trust, STI Classic Funds, STI Classic Variable Trust and TIP Funds, each of
which is an open-end management investment company managed by SEI Investments
Mutual Funds Services or its affiliates and 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); Office 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).
<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-Registered Trademark-, The Expedition Funds, Oak Associates Funds,
SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
International Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.
MARK E. NAGLE - President and Chief Executive Officer - Date of Birth: 10/20/59.
Vice President of Fund Accounting and Administration for SEI Investments Mutual
Funds Services 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.
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.
RICHARD W. GRANT - Secretary - Date of Birth: 10/25/45 - 1701 Market Street,
Philadelphia, PA 19103-2921, Partner of Morgan, Lewis & Bockius LLP (law firm),
counsel to the Trust, Administrator and Distributor.
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).
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
<PAGE>
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 Andersen LLP prior to 1987.
JAMES R. FOGGO (DOB 06/30/64) - Vice President and Assistant Secretary- Date of
Birth: 06/30/64 - Vice President and Assistant Secretary of the Administrator
and the Distributor since 1998. Associate, Paul Weiss, Rifkind, Wharton &
Garrison (law firm), 1998. Associate, Baker & McKenzie (law firm), 1995-1998.
Associate, Battle Fowler L.L.P. (law firm), 1993-1995. Operations Manager, The
Shareholder Services Group, Inc., 1986-1990.
CHRISTOPHER F. SALFI - Controller and Chief Financial Officer- Date of Birth:
11/28/63 - Director, Fund Accounting, SEI Investments since January 1998; prior
to his current position, served most recently as Fund Accounting Manager of SEI
Investments from 1994 to 1997; Investment Accounting Manager, PFPC from 1993 to
1994; FPS Services, Inc. from 1986 to 1993.
- --------------------
* "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, 1998, the
Trust paid approximately $51,000.00 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
- ------------------------ -------------------- -------------------- ------------------- --------------------------
Name of Person, Position Aggregate Pension or Estimated Annual Total Compensation
Compensation From Retirement Benefits Benefits Upon From Registrant and
Registrant(1) Accrued As Part of Retirement Fund Complex Paid to
Fund Expenses Trustees for the
Fiscal Year Ended
December 31, 1998(2)
<S> <C> <C> <C> <C>
- ------------------------ -------------------- -------------------- ------------------- --------------------------
Arthur L. Berman, $12,000.00 N/A N/A $12,000 for service
Trustee on 1 board
- ------------------------ -------------------- -------------------- ------------------- --------------------------
Ray Konrad, Trustee $12,000.00 N/A N/A $12,000 for service
on 1 board
- ------------------------ -------------------- -------------------- ------------------- --------------------------
James B. Grecco, $12,000.00 N/A N/A $12,000 for service
Trustee on 1 board
- ------------------------ -------------------- -------------------- ------------------- --------------------------
Christine H. Yackman, $12,000.00 N/A N/A $12,000 for service
Trustee on 1 board
- ------------------------ -------------------- -------------------- ------------------- --------------------------
Thomas D. Sayles, Jr., $12,000.00 N/A N/A $12,000 for service
Trustee(3) on 1 board
- ------------------------ -------------------- -------------------- ------------------- --------------------------
<PAGE>
- ------------------------ -------------------- -------------------- ------------------- --------------------------
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.
II. TRUSTEES AND OFFICERS OF SIMT AND SIF
The following individuals currently serve as the Trustees and Officers of SIMT
and SIF. For those executive officers who are also officers of the Trust, only
the name and office of the Trustee or officer is set forth below.
ROBERT A. NESHER - Chairman of the Board of Trustees.*
GEORGE J. SULLIVAN, JR. - Trustee - Date of Birth: 11/13/42 - General Partner,
Teton Partners, L.P., since 1991; Chief Financial Officer, Noble Partners, L.P.,
since 1991; Treasurer and Clerk, Peak Asset Management, Inc. since 1991;
Trustee, Navigator Securities Lending Trust since 1995. Trustee of SEI Asset
Allocation Trust, SEI Liquid Asset Trust, SEI Daily Income Trust, SEI Tax Exempt
Trust, SEI Index Funds and SEI Institutional Investments Trust.
WILLIAM M. DORAN - Trustee* - Date of Birth: 05/06/40 - 1701 Market Street,
Philadelphia, PA 19103-2921. Partner, Morgan, Lewis & Bockius LLP (law firm),
counsel to the Trust, Manager and Distributor, Director and Secretary of SEI
Investments and Secretary of the Advisor, Manager and Distributor. Trustee of
The Arbor Fund, The Advisors' Inner Circle Fund, The Expedition Funds, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Liquid Asset
Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI
International Trust, and SEI Tax Exempt Trust.
F. WENDELL GOOCH - Trustee** - Date of Birth: 12/03/32 - P.O. Box 190, Paoli, IN
47454. President, Orange County Publishing Co., Inc., since October 1981.
Publisher of the Paoli News and the Paoli Republican and Editor of the Paoli
Republican since January 1981, President, H & W Distribution, Inc. since July
1984. Trustee of STI Classic Funds.
FRANK E. MORRIS*** - Trustee**- Date of Birth: 12/30/23 - 105 Walpole Street,
Dover, MA 02030. Retired since 1990. Peter Drucker Professor of Management,
Boston College, 1989-1990. President, Federal Reserve Bank of Boston, 1968-1988.
Trustee of The Arbor Fund, The Advisors' Inner Circle Fund, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Liquid Asset Trust, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
International Trust, and SEI Tax Exempt Trust.
JAMES M. STOREY - Trustee**- Date of Birth: 04/12/31 - Retired; Partner, Dechert
Price & Rhoads, from September 1987-December 1993; Trustee of The Arbor Fund,
The Advisors' Inner Circle Fund, The Expedition Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI
<PAGE>
Index Funds, SEI Liquid Asset Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, and SEI Tax Exempt
Trust.
EDWARD D. LOUGHLIN - President and Chief Executive Officer - Date of Birth:
03/07/51- Executive Vice President and President - Asset Management Division of
SEI Investments since 1994. Senior Vice President, SEI Investments, 1986-1991;
Vice President, SEI Investments, 1981-1986.
CYNTHIA M. PARRISH - Vice President and Assistant Secretary - Date of Birth:
10/23/59 - Vice President and Assistant Secretary of the SEI Investments and the
Distributor since August 1997. Branch Chief, Division of Enforcement, U.S.
Securities and Exchange Commission, January 1995 - August 1997. Senior Counsel -
Division of Enforcement, U.S. Securities and Exchange Commission, September 1992
- - January 1995.
MARK E. NAGLE - Controller and Chief Financial Officer.
RICHARD W. GRANT - Secretary.
KEVIN P. ROBINS - Vice President, Assistant Secretary.
TODD CIPPERMAN - Vice President, Assistant Secretary.
JOSEPH M. O'DONNELL - Vice President, Assistant Secretary.
LYDIA A. GAVALIS - Vice President, Assistant Secretary.
LYNDA J. STRIEGEL - Vice President, Assistant Secretary.
KATHY HEILIG - Vice President, Assistant Secretary.
JAMES R. FOGGO (DOB 06/30/64) - Vice President and Assistant Secretary.
- -----------------
* Messrs. Nesher and Doran are Trustees who may be deemed to be
"interested persons" of SIMT as the term is defined in the 1940 Act.
** Messrs. Gooch, Storey and Sullivan serve as members of the Audit
Committee of the Trust.
*** Mr. Morris retired from the Board on December 30, 1998.
For the fiscal year ended September 30, 1998, SIMT paid the following amounts to
the Trustees:
<TABLE>
<CAPTION>
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
Aggregate Pension or Retirement Estimated Total Compensation from
Compensation Benefits Accrued as Annual Registrant and Fund Complex
From SIMT for Part of Fund Expenses Benefits Upon Paid to Directors for Fiscal
Name of Person and Fiscal Year End Retirement Year End September 30, 1998
Position September 30,
1998
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
<PAGE>
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
<S> <C> <C> <C> <C>
Robert A. Nesher, Trustee $0 $0 $0 $0
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
George J. Sullivan, Jr. $26,715.00 $0 $0 $102,000 for services on 8
Trustee boards
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
William M. Doran, Trustee $0 $0 $0 $0
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
F. Wendell Gooch, Trustee $26,715.00 $0 $0 $102,000 for services on 8
boards
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
Frank E. Morris, Trustee* $26,715.00 $0 $0 $102,000 for services on 8
boards
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
James M. Storey, Trustee $26,715.00 $0 $0 $102,000 for services on 8
boards
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
- --------------------------------------------------------
</TABLE>
* Mr. Morris retired from the Board effective December 30, 1998.
Mr. Edward W. Binshadler serves as a consultant to the Audit Committee
and receives as compensation $5,000 per Audit Committee meeting
attended.
For the fiscal year ended March 31, 1998, SIF paid the following amounts to the
Trustees:
<TABLE>
<CAPTION>
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
Aggregate Pension or Retirement Estimated Total Compensation from
Compensation Benefits Accrued as Annual Registrant and Fund Complex
From SIF for Part of Fund Expenses Benefits Upon Paid to Directors for Fiscal
Name of Person and Fiscal Year End Retirement Year End March 31, 1998
Position March 31, 1998
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
<S> <C> <C> <C> <C>
Robert A. Nesher, Trustee $0 $0 $0 $0
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
George J. Sullivan, Jr. $4,870.00 $0 $0 $100,000 for services on 8
Trustee boards
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
William M. Doran, Trustee $0 $0 $0 $0
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
F. Wendell Gooch, Trustee $4,870.00 $0 $0 $100,000 for services on 8
boards
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
Frank E. Morris, Trustee* $4,870.00 $0 $0 $100,000 for services on 8
boards
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
James M. Storey, Trustee $4,870.00 $0 $0 $100,000 for services on 8
boards
- --------------------------- ------------------ ------------------------ --------------- --------------------------------
</TABLE>
- --------------------------------------------------------
* Mr. Morris retired from the Board effective December 30, 1998.
Mr. Edward W. Binshadler serves as a consultant to the Audit Committee
and receives as compensation $5,000 per Audit Committee meeting
attended.
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") for the Funds. 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, 1998, total assets under management were approximately $9.5
billion.
<PAGE>
Summit Bank is a wholly-owned subsidiary of Summit Bancorp, an interstate bank
holding company with approximately $33 billion in assets and 440 banking
offices, predominantly in New Jersey, eastern Pennsylvania and southern
Connecticut, as of December 31, 1998.
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 Advisor, in addition to providing investment advice to the Trust, provides
investment advice to other clients. Some of these clients' funds are managed
under an asset allocation program 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 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 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 program.
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.
For the fiscal years ended December 31, 1996, 1997 and 1998, the Funds paid the
following advisory fees:
<TABLE>
<CAPTION>
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Fund Fees Paid (000) Fees Waived (000)
--------------- ------------------ ------------ -------------- --------------- -----------
1996 1997 1998 1996 1997 1998
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market $1,483,256 $1,647,200 $2,184,892 $13,685 $74,551 $0
Fund
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Prime Obligation Money Market Fund $1,249,323 $1,494,179 $1,909,572 $59,285 $58,224 $0
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Tax-Exempt Money Market Fund $235,721 $249,145 $281,854 $19,962 $13,948 $39,766
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Institutional Select Money Market Fund * $9,681 $88,040 * $9,249 $26,549
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
U.S. Treasury Securities Plus Money $35,739 $36,157 $2,562 $65,612 $78,082 $97,115
Market Fund
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Fixed Income Fund $548,757 $1,152,778 $1,067,263 $132,719 $275,261 $236,813
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
New Jersey Municipal Securities Fund $169,521 $629,451 $698,355 $117,210 $193,912 $171,106
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Pennsylvania Municipal Securities Fund $0 $173,734 $176,873 $23,653 $55,630 $64,111
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
<PAGE>
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Intermediate-Term Government $164,062 $159,825 $147,370 $20,823 $49,402 $58,742
Securities Fund
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Equity Growth Fund * $809,370 $903,953 * $460,947 $493,857
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Equity Value Fund $503,319 $1,149,769 $1,184,685 $300,124 $610,793 $666,888
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Equity Income Fund $282,807 $587,414 $578,730 $181,061 $365,524 $398,029
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Mid Cap Fund $228,182 $241,395 $70,640 $149,082 $151,223 $89,547
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Balanced Fund $161,262 $133,549 $190,140 $110,920 $117,387 $191,965
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
International Equity Fund $103,626 $129,179 $158,465 $30,671 $31,555 $35,303
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
High Yield Bond Fund * * $0 * * $2,664
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
Equity Index Fund * * $0 * * $4,998
- ---------------------------------------- ----------------------------------------------- ------------------------------------------
</TABLE>
* An asterisk indicates that the Fund had not commenced operations as of the
period indicated.
THE SUB-ADVISOR
The Advisor and Vontobel USA Inc., which acts as investment sub-advisor to the
International Equity Fund (the "Sub-Advisor"), have entered into a sub-advisory
agreement (the "Sub-Advisory Agreement"). The Sub-Advisor is a wholly owned and
controlled subsidiary of Vontobel Holding Ltd., a Swiss bank holding company,
having its registered offices in Zurich, Switzerland. As of December 31, 1998,
the Sub-Advisor managed in excess of $1.9 billion. The Sub-Advisor also acts as
the advisor or Sub-Advisor to other mutual funds and to three series of a
Luxembourg fund organized by an affiliate of the Sub-Advisor. That fund does not
accept investments from the U.S.
The address of the Sub-Advisor is 450 Park Avenue, New York, N.Y. 10022.
Mr. Fabrizio Pierallini, who is a Senior Vice President of the Sub-Advisor, is
the portfolio manager of the International Equity Fund since September, 1998 and
has been a portfolio manager at the Sub-Advisor since April 1994. He is
currently in charge of portfolio management and research for the Sub-Advisor's
international and emerging markets equity portfolios. From 1991 to 1994, Mr.
Pierallini was an Associate-Director/Portfolio Manager with Swiss Bank
Corporation, New York. From 1988 to 1991, he was a Vice President/Portfolio
Manager with SBC Portfolio Management, Zurich. Mr. Rajiv Jain, who is a Vice
President of the Sub-Advisor, is the associate portfolio manager of the Fund.
Mr. Jain joined the Sub-Advisor in November 1994 and serves as an assistant
portfolio manager for the Sub-Advisor's international and emerging markets
equity portfolios since September, 1998. From 1993 to 1994, Mr. Jain worked as
an analyst with Swiss Bank Corporation, New York.
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 the Funds' shares. The
Sub-Advisor reserves the
<PAGE>
right to terminate any such fee waiver at any time in its sole discretion.
For the fiscal period from January 1, 1998 and ended August 31, 1998, the
Advisor paid Wellington Management Company, LLP, the Fund's prior sub-advisor, a
sub-advisory fee of .60% of the average daily net assets of the Fund. For the
fiscal period from September 1, 1998 and ended December 31, 1998, the Advisor
paid the Sub-Advisor a sub-advisory fee of .60% of the average daily net assets
of the Fund.
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 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 Sub-Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Fund by a majority of the outstanding shares of 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, 1996, 1997 and the fiscal period from
January 1, 1998 and ended August 31, 1998, Wellington Management Company, LLP,
the Fund's prior sub-advisor, received the following fees from the Advisor:
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------ -----------------------------------------------------
Fees Paid Fees Waived
Fund
--------------- ------------- ------------ ---------------- --------------------- --------------
1996 1997 1998 1996 1997 1998
- ----------------------------- --------------- ------------- ------------ ---------------- --------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
International Equity Fund* $81,600 $96,000 $60,300 $0 $0 $0
- ----------------------------- --------------- ------------- ------------ ---------------- --------------------- --------------
</TABLE>
* Vontobel USA Inc. was appointed the Fund's sub-advisor on June 22,
1998 and began managing the Fund on September 1, 1998.
For the fiscal period from September 1, 1998 and ended December 31, 1998,
Vontobel USA Inc. received $34,800 from the Advisor.
SIMT FUND
SEI Investments Management Corporation ("SIMC") serves as investment advisor to
the SIMT Fund. SIMC is a wholly-owned subsidiary of SEI Investments Company
("SEI Investments"), a financial services company. The principal business
address of SIMC is Oaks, Pennsylvania 19456. SEI Investments was founded in 1968
and is a leading provider of investment solutions to banks, institutional
investors, investment advisers and insurance companies. Affiliates of
<PAGE>
SIMC have provided consulting advice to institutional investors for more than 21
years, including advice regarding the selection and evaluation of investment
advisors. SIMC currently serves as manager or administrator to more than 46
investment companies, including more than 387 funds, which investment companies
have more than $128 billion in assets as of October 31, 1998.
The advisory agreement and the sub-advisory agreement with respect to the SIMT
Fund provide that SIMC and each Money Manager shall not be protected against any
liability to SIMT 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.
SIMC acts as the investment advisor to the SIMT Fund and operates as a "manager
of managers." As investment advisor, SIMC oversees the investment advisory
services provided to the SIMT Fund and manages the cash portion of the SIMT
Fund's assets. Pursuant to separate sub-advisory agreements with SIMC, and under
the supervision of SIMC and the Board of Trustees, the Money Managers are
responsible for the day-to-day investment management of all or a discrete
portion of the assets of the SIMT Fund. The Money Managers are selected based
primarily upon the research and recommendations of SIMC, which evaluates
quantitatively and qualitatively each of the sub-investment advisor's styles and
strategies. Subject to the SIMT Board's review, SIMC allocates and, when
appropriate, reallocates the SIMT Fund's assets among Money Managers, monitors
and evaluates Money Manager performance, and oversees Money Manager compliance
with the SIMT Fund's investment objective, policies and restrictions. SIMC HAS
THE ULTIMATE RESPONSIBILITY FOR THE INVESTMENT PERFORMANCE OF THE SIMT FUND DUE
TO ITS RESPONSIBILITY TO OVERSEE MONEY MANAGERS AND RECOMMEND THEIR HIRING,
TERMINATION AND REPLACEMENT.
For these advisory services, SIMC is entitled to a fee; which is calculated
daily and paid monthly, at an annual rate of .4875% of the SIMT Fund's average
daily net assets. SIMC pays the Money Managers out of its investment advisory
fee.
For the fiscal years ended September 30, 1998, SIMC received an advisory fee of
.4875% of the SIMT Fund's average daily net assets.
The continuance of the Advisory and Sub-Advisory Agreement must be specifically
approved at least annually (i) by the vote of a majority of the outstanding
shares of the SIMT Fund or by the SIMT Trustees, and (ii) by the vote of a
majority of the Trustees who are not parties to such Agreement or "interested
persons" of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. Each Advisory or Sub-Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the SIMT Trust or, with respect to the
SIMT Fund, by a majority of the outstanding shares of the SIMT Fund, on not less
than 30 days' nor more than 60 days' written notice to the SIMT Fund Advisor (or
Sub-Advisor) or by the SIMT Fund Advisor (or Sub-Advisor) on 90 days' written
notice to the SIMT Trust.
<PAGE>
SIMC has obtained an exemptive order from the SEC that permits SIMC, with the
approval of the SIMT's Board of Trustees, to retain unaffiliated sub-advisors
for the SIMT Fund without submitting the sub-advisory agreement to a vote of the
SIMT Fund's shareholders. The exemptive relief permits the non-disclosure of
amounts payable by SIMC under such sub-advisory agreement. The SIMT Trust will
notify shareholders in the event of any change in the identity of the
sub-advisor for the SIMT Fund.
For the fiscal year ended September 30, 1996, 1997 and 1998, the SIMT Fund paid
the following fees to SIMC:
<TABLE>
<CAPTION>
- -------------- -------------------------------------------- ---------------------------------------------
Advisory Fees Paid (000) Advisory Fees Waived (000)
------------- ------------- ---------------- -------------- ------------- ----------------
1996 1997 1998 1996 1997 1998
- -------------- -------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIMT Fund $282 $812 $1,309 $0 $0 $0
- -------------- -------------------------------------------- ---------------------------------------------
</TABLE>
Credit Suisse Asset Management ("Credit Suisse" or the "Money Manager")
currently serves as investment sub-advisor to the SIMT Fund. Credit Suisse is a
general partnership organized under the laws of the State of New York which,
together with its predecessor firms, have been engaged in the investment
advisory business for over 50 years.
For the fiscal years ended September 30, 1996, 1997 and 1998, SIMC paid the
following fees to Money Managers:
<TABLE>
<CAPTION>
- -------------- -------------------------------------------- ---------------------------------------------
Sub-Advisory Fees Paid (000) Sub-Advisory Fees Waived (000)
-------------- --------------- ------------- ----------------- ------------ --------------
1996 1997 1998 1996 1997 1998
- -------------- -------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIMT Fund $195 $585 $893 $0 $0 $0
- -------------- -------------------------------------------- ---------------------------------------------
</TABLE>
SIF FUND
World Asset Management ("World") serves as investment advisor to the SIF S&P 500
Index Portfolio.
World is a general partnership organized by Munder Capital Management ("MCM"), a
general partnership formed in December 1994, which engages in investment
management and advisory services. As of December 31, 1997, total assets under
management of World were $11.0 billion and assets under management of MCM were
$37.0 billion. The principal address for World is 255 Brown Street Centre, 2nd
Floor, Birmingham, Michigan 48009.
World provides certain record keeping and management services in connection with
the SIF Fund, including monitoring the indexing systems and determining which
securities to purchase and sell in order to keep the SIF Fund in balance with
its index.
The advisory agreement for the SIF Fund ("SIF Advisory Agreement") provides that
the
<PAGE>
investment advisor, World Asset Management ("World" or the "SIF Advisor"),
shall not be protected against any liability to SIF 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 SIF 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 SIF Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of SIF or, with respect
to the SIF Fund by a majority of the outstanding shares of the SIF Fund, on not
less than 30 days', nor more than 60 days', written notice to World, or by World
on 90 days' written notice to SIF.
World is a general partnership organized by Munder Capital Management, a general
partnership formed in December, 1994, which engages in investment management and
advisory services.
World is entitled to a fee for its investment advisory services, which is
calculated daily and paid monthly, at an annual rate of 0.03% of the average
daily net assets of the SIF Fund. No monthly payment to World shall exceed the
payment actually made to SIMC pursuant to the management agreement between SIMC
and SIF.
For the fiscal years ended March 31, 1996, 1997 and 1998, the SIF Fund paid the
following advisory fees:
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------------- -------------------------------------------
Advisory Fees Paid Advisory Fees Waived
--------------- -------------- ------------ --------------- ------------ --------------
1996 1997 1998 1996 1997 1998
- ----------------------------- --------------- -------------- ------------ --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
SIF Fund $161,179 $234,127 $398,677 $0 $0 $0
- ----------------------------- ------------------------------------------- -------------------------------------------
</TABLE>
THE ADMINISTRATOR
The Trust and SEI Investments Mutual Fund Services (the "Administrator") are
parties to an Administration Agreement. SEI Investments Mutual Funds Services
(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,
except for the (i) U.S. Treasury Securities Plus Money Market Fund, for which it
receives 35% of the average daily net assets, and (ii) Institutional Select
Money Market Fund, for which it receives .10% of the average daily net assets.
The Administrator has agreed to waive its fees for the High Yield Bond Fund and
Equity Index Fund to the extent necessary to maintain the total operating
expenses stated in the Fund Fees and Expenses section in the Prospectus.
<PAGE>
The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
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. 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, Alpha Select Funds, The Arbor Fund,
ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds-Registered
Trademark-, CNI Charter Funds, CrestFunds, Inc., CUFUND, The Expedition
Funds, First American Funds, Inc., First American Investment Funds, Inc.,
First American Strategy Funds, Inc., HighMark Funds, Huntington Funds, The
Nevis Fund, Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series
Fund, Inc., SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional Investments Trust, SEI Institutional Managed Trust,
SEI Institutional International Trust, SEI Liquid Asset Trust, SEI Tax Exempt
Trust, STI Classic Funds, STI Classic Variable Trust, TIP Funds and UAM
Funds, Inc. II.
For the fiscal years ended December 31, 1996, 1997 and 1998, the Funds paid the
following administrative fees:
<TABLE>
<CAPTION>
- ----------------------------------------------- ------------------------------------------------ ---------------------------------
Fund Fees Paid Fees Waived
------------------------------------------------ ---------------------------------
1996 1997 1998 1996 1997 1998
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund $855,185 $984,420 $1,247,080 $0 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Prime Obligation Money Market Fund $747,383 $887,094 $1,091,198 $0 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Tax-Exempt Money Market Fund $146,103 $150,340 $183,785 $0 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
U.S. Treasury Securities Plus Money Market $235,806 $266,568 $232,579 $0 $0 $0
Fund
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Institutional Select Money Market Fund * $19,094 $114,589 * $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Fixed Income Fund $227,160 $476,002 $434,695 $0 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
New Jersey Municipal Securities Fund $86,863 $274,456 $289,822 $8,714 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
<PAGE>
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Pennsylvania Municipal Securities Fund $0 $76,478 $80,328 $7,884 $6,505 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Intermediate-Term Government Securities Fund $61,629 $69,742 $68,704 $0 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Equity Growth Fund * $338,754 $372,753 * $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Equity Value Fund $214,253 $469,484 $493,758 $0 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Equity Income Fund $123,705 $254,120 $260,472 $0 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Mid Cap Fund $100,599 $104,699 $42,717 $0 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Balanced Fund $72,586 $66,885 $101,896 $0 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
International Equity Fund $26,860 $32,086 $31,693 $0 $0 $0
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
High Yield Bond Fund * * $0 * * $875
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
Equity Index Fund * * $0 * * $1,350
- ----------------------------------------------- ------------- ------------------ --------------- ------------ ------------- ------
</TABLE>
* An asterisk indicates that the Fund had not commenced operations as of the
period indicated.
THE TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company (the "Transfer Agent"), 225 Franklin Street,
Boston, Massachusetts 02110 is the Trust's Transfer Agent.
Boston Financial Data Services, Two Heritage Drive, North Quincy, Massachusetts
02171 is the Trust's dividend disbursing agent and shareholder servicing agent.
THE SIMT FUND AND SIF FUND'S ADMINISTRATOR AND TRANSFER AGENT
SIMT and SIF each has entered into a "management agreement" ("Management
Agreement") with SEI Investments Fund Management ("SEI Management") to provide
administrative services. Each Management Agreement provides that SEI Management
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by SIMT or SIF, respectively, in connection with the matters to which
such Management Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of SEI Management in the
performance of its duties or from reckless disregard of its duties and
obligations thereunder.
The continuance of each Management Agreement must be specifically approved at
least annually (i) by the vote of a majority of the SIMT or SIF Trustees or by
the vote of a majority of the outstanding voting securities of the appropriate
Fund, and (ii) by the vote of a majority of the Trustees of SIMT or SIF who are
not parties to the Management Agreement or an "interested person" (as that term
is defined in the 1940 Act) of any party thereto, cast in person at a meeting
called for the purpose of voting on such approval. Each Management Agreement is
terminable at any time, as to the Fund, without penalty by the Trustees of SIMT
or SIF by a vote of a majority of the outstanding shares of a Fund or by SEI
Management on not less than 30 days' nor more than 60 days' written notice.
For the fiscal years indicated, the SIMT Fund paid the following fees to SEI
Management:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Management Fees Paid (000) Management Fees Waived (000)
-------------------------------------------------------------------------------------------------
1996 1997 1998 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIMT Fund $160 $501 $940 $42 $82 $105
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
For the fiscal years indicated, the SIF Fund paid the following fees to SEI
Management:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Management Fees Paid Management Fees Waived
(000) (000)
-------------------------------------------------------------------------------------------------
1996 1997 1998 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIF Fund $658 $1,271 $2,404 $524 $446 $520
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
CUSTODIANS
Summit Bank has 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 the each
Fund except the International Equity Fund, and .17% of the International Equity
Fund's average daily net assets. In addition, with respect to the International
Equity 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
I. THE TRUST
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 is responsible for placing the orders
to execute transactions for the Fund. In placing orders, it is the policy of the
Trust to seek to obtain the best net results taking into account such factors as
price (including the applicable dealer spread), the size, type and difficulty of
the transaction involved, the firm's general execution and operational
facilities, and the firm's risk in positioning the securities involved. While
the 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
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.
<PAGE>
The 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 determination of what are reasonably competitive
rates is based upon the professional knowledge of the 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 may allocate, out of all commission business generated by all of the
funds and accounts under management by the 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 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 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.
<PAGE>
For the fiscal year ended December 31, 1998, 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 Research Total Dollar Amount of Transactions Involving Directed
Services Brokerage Commissions for Research Services
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
$230,000 $550,000,000
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The 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 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 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 Financial Services Group, a separate non-bank
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 SEC. Under these provisions, the
Distributor or Summit Financial Services Group 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 Financial Services Group 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.
For the fiscal years ended December 31, 1996, 1997 and 1998, the Funds paid the
following brokerage commissions:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Total Brokerage Commissions Amount Paid to SEI Investments(1)
--------------------------------------------------------------------------------
1996 1997 1998 1996 1997 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund N/A N/A N/A N/A $2,134 N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Prime Obligation Money Market Fund N/A N/A N/A $53,399 $47,306 N/A
- ----------------------------------------------------------------------------------------------------------------------------------
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 $16,774 $17,304 N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Institutional Select Money Market Fund * N/A N/A * $2,625 N/A
- ----------------------------------------------------------------------------------------------------------------------------------
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 $5,987 N/A 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 $471,889 * N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Value Fund $289,752 $359,684 $103,821 $6,360 N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $194,728 $269,004 $137,889 $1,000 N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund $129,497 $127,629 $121,969 N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $50,970 $57,835 $67,206 $1,008 N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund $60,818 $61,452 $75,402 N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund * * N/A * * N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Index Fund * * 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 Total $ Amount of Brokerage Brokerage Brokerage
Fund Commissions Paid Commissions Paid to Affiliated Commissions Paid Transactions
Brokers to the Effected Through
Affiliated Affiliated
Brokers Brokers
---------------------------------------------------------------------------------------------------
1996 1997 1998 1996 1997 1998 1998 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<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 N/A N/A N/A N/A N/A N/A N/A N/A
Fund
- -----------------------------------------------------------------------------------------------------------------------------------
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 N/A N/A N/A 16,774 N/A N/A N/A N/A
Money Market Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Select Money
Market Fund
---------------------------------------------------------------------------------------------------
* N/A N/A * N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $0 $0 $0 $0 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities $0 $0 $0 $0 $0 $0 $0 $0
Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal $0 $5,987 $0 $0 $0 $0 $0 $0
Securities Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate-Term Government $0 $0 $0 $0 $0 $0 $0 $0
Securities Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund * $392,850 $471,889 * $0 $900 .19% .26%
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value Fund $289,752 $359,684 $103,821 $6,360 $0 $216 .2% .02%
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $194,728 $269,004 $137,889 $1,000 $0 $646 .47% .44%
- -----------------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund $129,497 $127,629 $121,969 $0 $0 $4,972 4.08% .40%
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $50,970 $57,835 $67,206 $1,008 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund $60,818 $61,452 $75,402 $0 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund * * N/A * * N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Index Fund * * N/A * * N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</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,
1998 the _______________ held securities of the Trust's "regular brokers or
dealers" as follows:
II. SEI INSTITUTIONAL MANAGED TRUST
SIMT 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 SIMT's Trustees, the advisors are responsible for placing orders
to execute portfolio transactions. In placing orders, it is the SIMT Fund's
policy to seek to obtain the best net results taking into account such factors
as price (including the applicable dealer spread), size, type and difficulty of
the transaction involved, the firm's general execution and operational
facilities, and the firm's risk in positioning the securities involved. While
the advisors generally seek reasonably competitive spreads or commissions, the
SIMT Fund will not necessarily be paying the lowest spread or commission
available. The SIMT Fund will not purchase portfolio securities from any
affiliated person acting as principal except in conformity with the regulations
of the SEC.
It is expected that the SIMT Fund may execute brokerage or other agency
transactions through the Distributor, a registered broker-dealer, for a
commission in conformity with the 1940 Act, the Securities Exchange Act of 1934,
as amended, and rules and regulations of the SEC. Under these provisions, the
Distributor is permitted to receive and retain compensation for effecting
portfolio transactions for the SIMT Fund on an exchange if a written contract is
in effect between the Distributor and the Trust expressly permitting the
Distributor to receive and retain such compensation. These provisions 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." In addition, the SIMT
Fund may direct commission business to one or more designated broker-dealers,
including the Distributor, in connection with such broker-dealer's payment of
certain of the SIMT Fund's
<PAGE>
expenses. 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 for evaluating the
reasonableness of commissions paid to the Distributor and will review these
procedures periodically.
In connection with transactions effected for SIMT Fund operating within the
"Manager of Managers" structure, SIMC and the various firms that serve as
sub-advisor to the SIMT Fund of the Trust, in the exercise of joint investment
discretion over the assets of the SIMT Fund, may direct a substantial portion of
the SIMT Fund's brokerage to the Distributor. All such transactions directed to
the Distributor must be accomplished in a manner that is consistent with the
Trust's policy to achieve best net results, and must comply with the Trust's
procedures regarding the execution of transactions through affiliated brokers.
For the fiscal years indicated, the SIMT Fund paid the following brokerage fees:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
% of Total Brokerage % of Total Total $ Amount
Total $ Amount of Brokerage Commissions Paid to Brokerage of Brokerage
Fund Total $ Amount of Brokerage Commissions Paid to Affiliated the Affiliated Brokers Transactions Commissions Paid
Commissions Paid Brokers Effected Through for Research
Affiliated Brokers
------------------------------------------------------------------------------------------------------------------------
1996 1997 1998 1996 1997 1998 1998 1998 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SIMT Fund $0 $0 $0 $0 $0 $0 0% 0% $0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The portfolio turnover rate for the SIMT Fund for the fiscal years indicated
were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Portfolio Turnover Rate
Fund
----------------------------------------------------------
1996 1997 1998
- ------------------------------------------------------------------------
<S> <C> <C> <C>
SIMT Fund 55% 68% 56%
- ------------------------------------------------------------------------
</TABLE>
III. SEI INDEX FUNDS
SIF 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 SIF Advisor is responsible for placing orders
to execute portfolio transactions. In placing orders, it is SIF's policy to seek
to obtain the best net results taking into account such factors as price
(including the applicable dealer spread), size, type and difficulty of the
transaction involved, the firm's general execution and operational facilities,
and the firm's risk in positioning the securities
<PAGE>
involved. While the SIF Advisor generally seeks reasonably competitive spreads
or commissions, SIF will not necessarily be paying the lowest spread or
commission available. SIF's policy of investing in securities with short
maturities will result in high portfolio turnover. SIF will not purchase
portfolio securities from any affiliated person acting as principal except in
conformity with the regulations of the SEC.
SIF does not expect to use one particular dealer, but, subject to SIF's policy
of seeking the best net results, dealers who provide supplemental investment
research to the SIF Advisor may receive orders to transactions by SIF.
Information so received will be in addition to and not in lieu of the services
required to be performed by the SIF Advisor under its Advisory Agreement, and
the expenses of the SIF Advisor will not necessarily be reduced as a result of
the receipt of such supplemental information.
The money market securities in which the SIF Fund invests are traded primarily
in the over-the-counter market generally do not involve either brokerage
commissions or transfer taxes. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the SIF
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. The
cost of executing portfolio securities transactions of the SIF Fund will
primarily consist of dealer spreads and underwriting commissions.
The SIF Fund may execute brokerage or other agency transactions through the
Distributor, a registered broker-dealer, for a commission, in conformity with
the 1940 Act, the Securities Exchange Act of 1934 and the rules and regulations
thereunder. Under these provisions, the Distributor is permitted to receive and
retain compensation for effecting portfolio transactions for the SIF Fund on an
exchange if a written contract is in effect between the Distributor and SIF
expressly permitting the Distributor to receive and retain such compensation.
These provisions further require that commissions paid to the Distributor by SIF
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 commissions, fee or other
remuneration 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 SIF, have adopted procedures for
evaluating the reasonableness of commissions paid to the Distributor and will
review these procedures periodically.
Since SIF does not market its shares through intermediary brokers or dealers, it
is not SIF's practice to allocate brokerage or principal business on the basis
of sales of its shares which may be made through such firms. However, the SIF
Advisor may place portfolio orders with qualified broker-dealers who recommend
SIF to clients, and may, when a number of brokers and dealers can provide best
price and execution on a particular transaction, consider such recommendations
by a broker or dealer in selecting among broker-dealers.
<PAGE>
It is expected that the portfolio turnover rate will normally not exceed 100%
for the SIF Fund. The portfolio turnover rate would exceed 100% if all of its
securities, exclusive of U.S. Government securities and other securities whose
maturities at the time of acquisition are one year or less, are replaced in the
period of one year. Turnover rates may vary from year to year and may be
affected by cash requirements for redemptions and by requirements which enable
the Portfolio to receive favorable tax treatment.
For the fiscal years indicated, the SIF Fund paid the following brokerage
commissions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
% of Total % of Total Total $ Amount of
Total $ Amount of Brokerage Brokerage Brokerage Brokerage
Fund Total $ Amount of Brokerage Commissions Commissions Paid to Commissions Transactions Commissions Paid
Paid Affiliated Brokers Paid to the Effected for Research
Affiliated Through
Brokers Affiliated
Brokers
------------------------------------------------------------------------------------------------------------------------
1996 1997 1998 1996 1997 1998 1998 1998 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SIF Fund $36,384 $99,663 $89,956 $0 $0 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The portfolio turnover rate for the SIF Fund for the fiscal years indicated were
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Portfolio Turnover Rate
Fund
----------------------------------------------------------
1996 1997 1998
- --------------------------------------------------------------------
<S> <C> <C> <C>
SIF Fund 3% 2% 4%
- --------------------------------------------------------------------
</TABLE>
THE DISTRIBUTOR AND THE DISTRIBUTION PLANS OF THE TRUST
SEI Investments Distribution Co., (the "Distributor"), a wholly owned subsidiary
of SEI Investments, and the Trust are parties to: a distribution agreement (the
"Distribution Agreement") 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.
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.
<PAGE>
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 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
<PAGE>
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, 1996, 1997 and
1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Fund Dollar Amount of Loads Dollar Amount of Loads
Retained by SEI Investments
---------------------------------------------------------------------------------
1996 1997 1998 1996 1997 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Income Fund $45,951 $5,218 $6,252 $729
- --------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities $26,191 $17,033 $3,531 $1,995
Fund
- --------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal $648 $1,877 $72 $221
Securities Fund
- --------------------------------------------------------------------------------------------------------------------
Intermediate-Term Government $19,783 $0 $2,774 $0
Securities Fund
- --------------------------------------------------------------------------------------------------------------------
Equity Growth Fund * $1,275 * $122
- --------------------------------------------------------------------------------------------------------------------
Equity Value Fund $57,084 $81,148 $8,140 $9,933
- --------------------------------------------------------------------------------------------------------------------
Equity Income Fund $99,330 $75,235 $13,726 $8,933
- --------------------------------------------------------------------------------------------------------------------
Mid Cap Fund $18,446 $1,495 $2,605 $215
- --------------------------------------------------------------------------------------------------------------------
Balanced Fund $38,379 $27,532 $5,421 $3,510
- --------------------------------------------------------------------------------------------------------------------
International Equity Fund $13,212 $830 $1,868 $91
- --------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund * * * *
- --------------------------------------------------------------------------------------------------------------------
Equity Index Fund * * * *
- --------------------------------------------------------------------------------------------------------------------
</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
<PAGE>
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 contingent deferred sales charge ("CDSC") upon
their Class B shares in the amounts shown for the fiscal years ended December
31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Fund Dollar Amount of Loads Dollar Amount of Loads
Retained by SEI Investments
----------------------------------------------------------------------------------
1996 1997 1998 1996 1997 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prime Obligation Money Market * $0 * * $
Fund
- --------------------------------------------------------------------------------------------------------------------
Fixed Income Fund * $4,845 * * $
- --------------------------------------------------------------------------------------------------------------------
Equity Value Fund * $4,796 * * $
- --------------------------------------------------------------------------------------------------------------------
Equity Income Fund * $2,783 * * $
- --------------------------------------------------------------------------------------------------------------------
Balanced Fund * $1,250 * * $
- --------------------------------------------------------------------------------------------------------------------
Equity Growth Fund * $49 * * $
- --------------------------------------------------------------------------------------------------------------------
International Equity Fund * $0 * * $
- --------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund * * * * $
- --------------------------------------------------------------------------------------------------------------------
Equity Index Fund * * * * $
- --------------------------------------------------------------------------------------------------------------------
</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, 1998, the Class A Shares of the Funds
incurred the following distribution expenses:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Total Distribution Total
Expenses Distribution Sales Expenses Printing Other Costs
Expenses (as a Costs
% of net assets)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market Fund $93,655 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Prime Obligation Money Market Fund $43,865 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $22,284 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $11,392 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities Fund $44,887 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Securities Fund $1,117 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate-Term Government Securities Fund $3,436 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund $6,079 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value Fund $41,193 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $44,426 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund $7,577 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $26,021 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund $1,606 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund $43 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Index Fund $81 .25% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*An asterisk indicates that the Class A Shares of the Fund had not commenced
operations as of the period indicated.
For the fiscal year ended December 31, 1998, the Class B Shares of the Funds
incurred the following distribution expenses:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distribution Total
Expenses Distribution Sales Expenses Printing Other Costs
Fund Expenses (as a Costs
% of net assets)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime Obligation Money Market Fund $462 1.00% N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $19,244 1.00% N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Value Fund $95,430 1.00% N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund $115,366 1.00% N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $89,516 1.00% N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Growth Fund $17,495 1.00% N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund $1,558 1.00% N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund $2,905 1.00% N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Index Fund $4,270 1.00% N/A * N/A
- ----------------------------------------------------------------------------------------------------------------------------------
</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, 1998, the Class S Shares of the Prime
Obligation Money Market Fund incurred the following distribution expenses:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Total Total
Distribution Distribution Sales Expenses Printing Other Costs
Expenses Expenses (as a Costs
% of net assets)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime Obligation Money Market $201,591 .35% N/A N/A N/A
Fund
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Class I Shares do not have distribution expenses.
For the fiscal year ended December 31, 1998, the U.S. Treasury Securities Plus
Money Market Fund incurred the following distribution expenses:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Total Total
Distribution Distribution Sales Expenses Printing Other Costs
Expenses Expenses (as a Costs
% of net assets)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities Plus $19,935 .03% N/A N/A N/A
Money Market Fund
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DISTRIBUTION OF THE SIMT FUND AND SIF FUND
I. SIMT FUND
SEI Investments Distribution Co. also serves as the distributor for the Class A
Shares of the SIMT Fund pursuant to a distribution agreement with SIMT.
Under the Class A Distribution Agreement, the Distributor has agreed to
perform all distribution services and functions of the SIF Fund to the extent
such services and functions are not provided to the SIMT Fund pursuant to
another agreement. The Distribution Agreement provide that the shares of the
SIMT Fund are distributed through the Distributor. The Distributor receives
no compensation for distribution of Class A Shares.
The Distribution Agreement provides that it will continue in effect for a
period of more than one year from the date of their execution only so
long as such continuance is specifically approved at least annually by
the vote of a majority of the Board members of SIMT and by the vote of the
majority of those board members of SIMT who are not interested persons of
SIMT.
The Portfolio has also adopted a shareholder servicing plan for their Class A
Shares (the "Service Plan"). Under the Service Plan, the Distributor may
perform, or may compensate other service providers for performing, the following
shareholder services: maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services provided on investments;
assisting clients in changing dividend options, account designations and
addresses; sub-accounting; providing information on share positions to clients;
forwarding shareholder communications to clients; processing purchase, exchange
and redemption orders; and processing dividend payments. Under the Service Plan,
the SIMT Fund may pay the Distributor a negotiated fee at a rate of up to .025%
annually of the average daily net assets of the SIMT Fund attributable to Class
A Shares subject to the arrangement for provision of shareholder and
administrative services. The Distributor may retain as a profit any difference
between the fee it receives and the amount it pays to third parties.
II. SIF FUND
SEI Investments Distribution Co. also serves as the distributor for the Class E
Shares of the SIF Fund pursuant to a distribution agreement with SIF.
Under the Class E Distribution Agreement, the Distributor has agreed to perform
all distribution services and functions of the SIF Fund to the extent such
services and functions are not provided to the SIF Fund pursuant to another
agreement. The Distribution Agreement provide that the shares of the SIF Fund
are distributed through the Distributor. The Distributor receives no
compensation for distribution of Class E shares.
The Distribution Agreement provides that it will continue in effect for a period
of more than one year from the date of their execution only so long as such
continuance is specifically approved at least annually by the vote of a majority
of the Board members of SIF and by the vote of the majority of those board
members of SIF who are not interested persons of SIF.
The Portfolio has also adopted a shareholder servicing plan for their Class E
Shares (the "Service Plan"). Under the Service Plan, the Distributor may
perform, or may compensate other service providers for performing the
following shareholder services: maintaining client accounts; arranging for
bank wires; responding to client inquiries concerning services provided on
investments; assisting clients in changing dividend options, account
designations and addresses; sub-accounting; providing information on share
positions to clients; forwarding shareholder communications to clients;
processing purchase, exchange and redemption orders; and processing dividend
payments. Under the Service Plan, the SIF Fund may pay the Distributor a
negotiated fee at a rate of up to .025% annually of the average daily net
assets of the SIF Fund attributable to Class E Shares subject to the
arrangement for provision of shareholder and administrative services. The
Distributor may retain as a profit any difference between the fee it receives
and the amount it pays to third parties.
<PAGE>
PERFORMANCE
COMPUTATION OF YIELD
MONEY MARKET FUNDS. From time to time the 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 + 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
<PAGE>
under "Other Yields" below.
For the 7-day period ended December 31, 1998, 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 4.10 4.19 N/A
------------------------------------------------------------
A 3.85 3.93 N/A
- ------------------------------------------------------------------------------------------------------------------
Prime Obligation Money Market Fund I 4.60 4.71 N/A
------------------------------------------------------------
A 4.35 4.45 N/A
------------------------------------------------------------
B 3.61 3.67 N/A
------------------------------------------------------------
S 4.25 4.34 N/A
- ------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund I 3.11 3.16 4.58
------------------------------------------------------------
A 2.86 2.90 4.20
- ------------------------------------------------------------------------------------------------------------------
U.S. Treasury Securities Plus Money Market Fund N/A 4.26 4.35 N/A
- ------------------------------------------------------------------------------------------------------------------
Institutional Select Money Market Fund N/A 4.98 5.10 N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
OTHER YIELDS. The 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}TO THE POWER OF 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 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, 1998 the yields on the Fixed Income
Funds were as follows:
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FUND Class Current Tax Equivalent
Yield Yield
(%) (%)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed Income Fund I 4.92 N/A
-------------------------------------------------------------------------------------
A 4.46 N/A
-------------------------------------------------------------------------------------
B 4.04 N/A
- --------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund I 6.24 N/A
-------------------------------------------------------------------------------------
A 6.52 N/A
-------------------------------------------------------------------------------------
B 7.43 N/A
- --------------------------------------------------------------------------------------------------------------------
New Jersey Municipal I 3.61 5.78
Securities Fund
-------------------------------------------------------------------------------------
A 3.32 5.31
- --------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal I 4.21 6.36
Securities Fund
-------------------------------------------------------------------------------------
A 3.83 5.79
- --------------------------------------------------------------------------------------------------------------------
Intermediate-Term Government I 4.39 N/A
Securities Fund
-------------------------------------------------------------------------------------
A 3.95 N/A
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not in operation as of the period indicated.
CALCULATION OF TOTAL RETURN
From time to time, the 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)TO THE POWER OF 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 $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.
<PAGE>
Based on the foregoing, the average total returns for the Funds from inception
through December 31, 1998 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 7.80 5.85 N/A 7.25
-----------------------------------------------------------------------
A (no load) 7.54 5.55 N/A 6.96
-----------------------------------------------------------------------
A (load) 2.97 4.64 N/A 6.28
-----------------------------------------------------------------------
B (no load) 6.84 N/A N/A 7.90
-----------------------------------------------------------------------
B (load) 1.34 N/A N/A 4.95
- --------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Securities Fund I 4.79 4.73 N/A 6.00
-----------------------------------------------------------------------
A (no load) 4.44 4.40 N/A 5.62
-----------------------------------------------------------------------
A (load) 1.28 3.76 N/A 5.14
- --------------------------------------------------------------------------------------------------------------------
I 4.84 4.87 N/A 5.01
Pennsylvania Municipal Securities Fund
-----------------------------------------------------------------------
A (no load) 4.58 4.55 N/A 4.75
-----------------------------------------------------------------------
A (load) 1.46 3.93 N/A 4.18
- --------------------------------------------------------------------------------------------------------------------
I 6.60 5.20 N/A 5.96
Intermediate-Term Government Securities
Fund
-----------------------------------------------------------------------
A (no load) 6.47 4.94 N/A 5.71
-----------------------------------------------------------------------
A (load) 2.18 4.09 N/A 5.06
- --------------------------------------------------------------------------------------------------------------------
I 31.81 N/A N/A 23.06
Equity Growth Fund
-----------------------------------------------------------------------
A (no load) 30.69 N/A N/A 22.50
-----------------------------------------------------------------------
A (load) 23.48 N/A N/A 18.94
-----------------------------------------------------------------------
B (no load) 30.47 N/A N/A 23.69
-----------------------------------------------------------------------
B (load) 24.97 N/A N/A 20.96
- --------------------------------------------------------------------------------------------------------------------
I 27.58 20.29 N/A 16.98
Equity Value Fund
-----------------------------------------------------------------------
A (no load) 27.18 19.95 N/A 16.69
-----------------------------------------------------------------------
A (load) 20.19 18.59 N/A 15.70
-----------------------------------------------------------------------
B (no load) 26.33 N/A N/A 23.79
-----------------------------------------------------------------------
B (load) 20.83 N/A N/A 21.11
- --------------------------------------------------------------------------------------------------------------------
I 11.42 16.92 N/A 15.45
Equity Income Fund
-----------------------------------------------------------------------
A (no load) 11.12 16.63 N/A 15.16
-----------------------------------------------------------------------
A (load) 5.01 15.32 N/A 14.20
-----------------------------------------------------------------------
B (no load) 10.29 N/A N/A 15.45
- --------------------------------------------------------------------------------------------------------------------
B (load) 4.79 N/A N/A 12.74
- --------------------------------------------------------------------------------------------------------------------
Balanced Fund I 18.65 14.51 N/A 12.84
-----------------------------------------------------------------------
A (no load) 18.33 14.23 N/A 12.54
-----------------------------------------------------------------------
A (load) 11.82 12.94 N/A 11.61
-----------------------------------------------------------------------
B (no load) 17.40 N/A N/A 18.48
-----------------------------------------------------------------------
B (load) 11.90 N/A N/A 15.75
- --------------------------------------------------------------------------------------------------------------------
International Equity Fund I 8.98 N/A N/A 7.63
-----------------------------------------------------------------------
A (no load) 8.69 N/A N/A 7.35
-----------------------------------------------------------------------
<PAGE>
-----------------------------------------------------------------------
A (load) 2.73 N/A N/A 5.72
-----------------------------------------------------------------------
B (no load) 7.84 N/A N/A 3.16
-----------------------------------------------------------------------
B (load) 2.34 N/A N/A 0.26
- --------------------------------------------------------------------------------------------------------------------
Mid Cap Fund I 7.77 9.82 N/A 10.83
- --------------------------------------------------------------------------------------------------------------------
</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 Equity 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 Equity Fund, May 7, 1997.
** Not in operation during period.
Each Feeder Fund may advertise the performance of its corresponding Master Fund
adjusted to reflect applicable sales loads and operating expenses, other than
Rule 12b-1 fees. The data for the SIMT Fund and the SIF Fund set forth below is
adjusted to reflect feeder level operating expenses of [.40%] and [.55%],
respectively. In the absence or reduction of current fee waivers or
reimbursements, total return would be reduced.
The following table shows total returns for the Class A Shares of the SIMT Fund
for inception through September 30, 1998 and the Class E Shares of the SIF Fund
for inception through March 31, 1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
CLASS/
FUND WITH/WITHOUT LOAD
---------------- --------------- =====================
ONE YEAR FIVE SINCE
YEARS INCEPTION
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SIMT Fund (commenced operations on January 11, 1995) Class A 2.25 * 12.13
Without Load
- ---------------------------------------------------------------------------------------------------------------------------------
SIF Fund (commenced operations on August l, 1985) Class E 47.62 22.09% 17.80
Without Load
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not in operation during period.
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
<PAGE>
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. Additionally, the
Trust reserves the right to suspend sales of shares of a Feeder Fund for any
period during which the corresponding Master Fund is 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. 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
<PAGE>
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 management account 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
I. THE TRUST
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 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
<PAGE>
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 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 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
<PAGE>
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.
II. SIMT AND SIF
The purchase and redemption price of shares is the net asset value of each
share. A Portfolio's securities are valued by SIMC pursuant to valuations
provided by an independent pricing service (generally the last quoted sale
price). Portfolio securities listed on a securities exchange for which market
quotations are available are valued at the last quoted sale price on each day on
which the New York Stock Exchange is open for business or, if there is no such
reported sale, at the most recently quoted bid price. Unlisted securities for
which market quotations are readily available are valued at the most recently
quoted bid price. The pricing service may also use a matrix system to determine
valuations. This system considers such factors as security prices, yields,
maturities, call features, ratings and developments relating to specific
securities in arriving at valuations. The procedures of the pricing service and
its valuations are reviewed by the officers of SIMT and SIF under the general
supervision of the Trustees.
GENERAL INFORMATION AND HISTORY
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. The
Trust currently consists of the U.S. Treasury Securities Plus Money Market Fund,
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, High Yield Bond
Fund, Equity Growth Fund, Mid Cap Fund, Equity Income Fund, Equity Value Fund,
International Equity Fund, Equity Index 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
<PAGE>
received by the Trust for shares of any portfolio and all assets of such
portfolio belong to that portfolio and are 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.
SIMT and SIF are organized as Massachusetts business trusts. The Trustees
believe that neither the High Yield Bond Fund nor the Equity Index Fund will be
adversely affected by reason of investing in the SIMT Fund and the SIF Fund,
respectively.
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
<PAGE>
shareholders requesting the meeting.
In the case of the High Yield Bond and Equity Index Funds, whenever a vote is
required on matters pertaining to the SIMT Fund or SIF Fund, respectively, the
Trust will either (a) seek instructions from the appropriate Fund's shareholders
with regard to the voting of the proxies and vote such proxies only in
accordance with such instructions; or (b) vote the shares held by it in the same
proportion as the vote of all the other shareholders of the particular Feeder
Fund. In either instance, other investors in the SIMT Fund or SIF Fund could
control the results of voting at the master level.
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
Shareholders automatically receive all income dividends and capital gain
distributions in additional 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. 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.
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
<PAGE>
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 16, 1999 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:
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS PERCENT OF
BENEFICIAL OWNERSHIP
<S> <C> <C>
Institutional Select Money Summit Bank 78.22%
Market Fund: Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0821
Acct #1181
Summit Asset Management 21.78%
c/o Laurie Minervini
P.O. Box 821
Hackensack, NJ 07602-0821
Acct #2283
U.S. Treasury Securities Summit Bank 82.69%
Money Market Fund: Attn: Patricia Kyritz
P.O. Box 821
Hackensack, NJ 07602-0821
Acct #1181
Summit Asset Management 11.77%
c/o Laurie Minervini
P.O. Box 821
Hackensack, NJ 07602-0821
Acct #2283
Summit Asset Management 5.96%
c/o Laurie Minervini
P.O. Box 821
Hackensack, NJ 07602-0821
Acct #2283
U.S. Treasury Securities Integrated Packaging Corporation 7.20%
Plus Money Market Fund: c/o Dannie Warren
122 Quentin Road
New Brunswick, NJ 08901-3263
Laguna Corporation 6.24%
96 Hobart Street
Hackensack, NJ 07601-3911
Prime Obligation Summit Bank 57.67%
Money Market Fund: Attn: Patricia Kyritz
P.O. Box 821
Hackensack, NJ 07602-0821
Acct # 1181
<PAGE>
Summit Asset Management 16.63%
c/o Laurie Minervini
P.O. Box 821
Hackensack, NJ 07602-0821
Acct #2283
Summit Financial Services Group 13.88%
Attn: Richard Jennings
1457 MacArthur Road
Whitehall, PA 18052-5787
Acct # 2016795
Summit Asset Management 11.76%
c/o Laurie Minervini
P.O. Box 821
Hackensack, NJ 07602-0821
Acct #2283
Tax-Exempt Money Market Fund: Summit Bank 74.90%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181
Summit Asset Management 16.41%
c/o Laurie Minervini
P.O. Box 821
Hackensack, NJ 07602-0821
Acct #2283
Summit Financial Services Group 8.68%
Attn: Richard Jennings
P.O. Box 22227
Lehigh Valley, PA 18002-2227
Acct # 2016795
Equity Growth Fund: Summit Bank 80.62%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
Summit Bank 18.78%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
<PAGE>
Fixed Income Fund: Summit Bank 39.80%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
Summit Bank 29.29%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181
Summit Bank 28.44%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
New Jersey Municipal Summit Bank 48.82%
Securities Fund: Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
Summit Bank 35.94%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181
Summit Bank 12.49%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
Equity Value Fund: Summit Bank 50.89%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
Summit Bank 47.86%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
<PAGE>
Equity Income Fund: Summit Bank 72.66%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
Summit Bank 23.24%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
Mid Cap Fund: Summit Bank 56.71%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
Summit Bank 36.50%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
Balanced Fund: Summit Bank 76.05%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
Summit Bank 13.49%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
Summit Bank 10.43%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181
Pennsylvania Municipal Summit Bank 68.70%
Securities Fund: Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181
<PAGE>
Summit Bank 30.27%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
International Equity Fund: Summit Bank 49.72%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
Summit Bank 32.07%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181
Summit Bank 17.67%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
Intermediate-Term Government Summit Bank 41.95%
Securities Fund: Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
Summit Bank 38.99%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
Summit Bank 18.02%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1181
High Yield Bond Fund: Summit Bank 77.56%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
<PAGE>
Summit Bank 8.62%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
Equity Index Fund: Summit Bank 45.21%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 1182
Summit Bank 39.08%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 118
Summit Bank (401K) 15.71%
Attn: Patricia Kyritz
P.O. Box 547
Hackensack, NJ 07602-0547
Acct # 2070055
</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.
<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 Federal income 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.
The following general discussion of certain Federal income tax consequences is
based on the Code, and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. New legislation, as well as
administrative charges or court decisions, may significantly change the
conclusions expressed herein, and may have a retroactive effect with respect to
the transaction contemplated herein.
Each Fund is generally treated as a separate corporation for Federal income tax
purposes, and thus the provisions of the Code generally will be applied to each
Fund separately.
<PAGE>
FEDERAL INCOME TAX
QUALIFICATION AS A RIC. Each Fund intends to qualify and elect to be treated for
each taxable year as a "regulated investment company" ("RIC") under Subchapter M
of the Code. Accordingly, 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 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. If a Fund meets all of the
RIC requirements, it will not be subject to Federal income tax on any of its net
investment income or capital gains that it distributes to shareholders.
Although each Fund intends to distribute substantially all of its net investment
income and may distribute its capital gains for any taxable year, a Fund will be
subject to Federal income taxation to the extent any such income or gains are
not distributed.
FUND DISTRIBUTIONS. Distributions of investment company taxable income will be
taxable to shareholders as ordinary income, regardless of whether such
distributions are paid in cash or are reinvested in additional Shares, to the
extent of a Fund's earnings and profits. Each Fund anticipates that it will
distribute substantially all of its investment company taxable income for each
taxable year.
Each Fund may either retain or distribute to shareholders its excess of net
long-term capital gains over net short-term capital losses ("net capital
gains"). If such gains are distributed as a capital gains distribution, they are
taxable to shareholders who are individuals at a maximum rate of 20%, regardless
of the length of time the shareholder has held shares.
In the case of corporate shareholders, distributions (other than capital gains
distributions) from a RIC generally qualify for the dividends-received deduction
only to the extent of the gross amount of qualifying dividends received by a
Fund for the year. Generally, and subject to certain limitations, a dividend
will be treated as a qualifying dividend if it has been received from a domestic
corporation. Accordingly, except for the Equity Growth Fund, Equity Value Fund,
<PAGE>
Equity Income Fund and Mid Cap Fund, distributions from the Funds generally will
not be eligible for the corporate dividends-received deduction.
Each Fund will provide a statement annually to shareholders as to the Federal
tax status of distributions paid (or deemed to be paid) by a Fund during the
year, including the amount of dividends eligible for the corporate
dividends-received deduction.
SALE OR EXCHANGE OF FUND SHARES. Generally, gain or loss on the sale or exchange
of a share will be capital gain or loss that will be long-term if the share has
been held for more than twelve months and otherwise will be short-term. For
individuals, long-term capital gains are currently taxed at a maximum rate of
20% and short-term capital gains are currently taxed at ordinary income tax
rates. However, if a shareholder realizes a loss on the sale, exchange or
redemption of a share held for six months or less and has previously received a
capital gains distribution with respect to the share (or any undistributed net
capital gains of a Fund with respect to such share are included in determining
the shareholder's long-term capital gains), the shareholder must treat the loss
as a long-term capital loss to the extent of the amount of the prior capital
gains distribution (or any undistributed net capital gains of a Fund that have
been included in determining such shareholder's long-term capital gains). In
addition, any loss realized on a sale or other disposition of shares will be
disallowed to the extent an investor repurchases (or enters into a contract or
option to repurchase) shares within a period of 61 days (beginning 30 days
before and ending 30 days after the disposition of the shares). This loss
disallowance rule will apply to shares received through the reinvestment of
dividends during the 61-day period.
FEDERAL EXCISE TAX. If a Fund fails to distribute in a calendar year at least
98% of its ordinary income for the year and 98% of its capital gain net income
(the excess of short and long term capital gains over short and long term
capital losses) for the one-year period ending October 31 of that year (and any
retained amount from the prior calendar year), such Fund will be subject to a
nondeductible 4% Federal excise tax on the undistributed amounts. Each Fund
intends to make sufficient distributions to avoid imposition of this tax, or to
retain, at most its net capital gains and pay tax thereon.
If a Fund fails to qualify for any taxable year as a RIC, all of its taxable
income will be subject to tax at regular corporate income tax rate (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 EQUITY, 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
<PAGE>
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.
The Fixed Income Funds may make investments in securities (such as STRIPS) that
bear "original issue discount" or "acquisition discount" (collectively, "OID
Securities"). The holder of such securities is deemed to have received interest
income even though no cash payments have been received. Accordingly, OID
Securities may not produce sufficient current cash receipts to match the amount
of distributable net investment income a Fund must distribute to satisfy the
Distribution Requirement. In some cases, a Fund may have to borrow money or
dispose of other investments in order to make sufficient cash distributions to
satisfy the Distribution Requirement.
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. 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 Alternative Minimum Tax may be imposed in two
circumstances. First, exempt-interest dividends derived from certain "private
activity bonds" issued after August 7, 1986, will generally be an item of tax
preference (and therefore potentially subject to the Alternative Minimum Tax)
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.
<PAGE>
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
met 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.
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. Shareholders are urged to consult their tax advisor as to the
consequences of these and other U.S., state and local tax rules regarding an
investment in a Fund.
LEGAL MATTERS
Morgan, Lewis & Bockius LLP serves as legal counsel to the Trust.
<PAGE>
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.
The financial statements of SIMT (with respect to the SIMT High Yield Bond
Portfolio only), incorporated by reference into this Statement of Additional
Information have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of SIF (with respect to the SIF S&P 500 Index Portfolio
only), 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 16, 1999 for the fiscal year
ended December 31, 1998, relating to the financial statements and financial
highlights of the Trust are incorporated by reference herein. A copy of the
Trust's 1998 Annual Report to Shareholders must accompany delivery of this
Statement of Additional Information.
SIMT's audited financial statements and the notes thereto and the Report of the
Independent Accountants dated November 20, 1998 for the fiscal year ended
September 30, 1998, relating to the financial statements and financial
highlights of SIMT (each with respect to the SIMT High Yield Bond Portfolio
only) and unaudited financial statements for the period ended March 31, 1999 and
notes thereto are incorporated by reference herein. A copy of SIMT's 1998 Annual
Report to Shareholders must accompany delivery of this Statement of Additional
Information.
SIF's audited financial statements and the notes thereto and the Report of the
Independent Public Accountants dated May 8,1998 for the fiscal year ended March
31, 1998, relating to the financial statements and financial highlights of SIF
(each with respect to the SIF S&P 500 Index Portfolio only) are incorporated by
reference herein. A copy of SIF's 1998 Annual Report to Shareholders must
accompany delivery of this Statement of Additional Information.
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
The following descriptions are summaries of published ratings.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1 +,1 and 2, to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 have satisfactory capacity to meet its financial commitments.
Commercial paper issues rated Prime-1 by Moody's are judged by Moody's to be of
the "highest" quality on the basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch Investors Services, Inc. ("Fitch"). Paper rated Fitch-1 is regarded as
having the strongest degree of assurance for timely payment. The rating Fitch-2
(Very Good Grade) is the second highest commercial paper rating assigned by
Fitch which reflects an assurance of timely payment only slightly less in degree
than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff and
Phelps, Inc. ("Duff"). Paper rated Duff-1 is regarded as having very high
certainty of timely payment with excellent liquidity factors which are supported
by ample asset protection. Risk factors are minor. Paper rated Duff-2 is
regarded as having good certainty of timely payment, good access to capital
markets and sound liquidity factors and company fundamentals.
Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
The rating TBW-1 by Thomson indicates a very high likelihood that principal and
interest will be paid on a timely basis.
DESCRIPTION OF CORPORATE BOND RATINGS
Bonds which are rated Aaa by Moody's 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 an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are
<PAGE>
most unlikely to impair the fundamentally strong position of such issues. Bonds
rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
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 sometime in the future.
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. 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.
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.
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.
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.
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 bond ratings, where specified, are applied to senior bank obligations
and insurance company senior policyholder and claims obligations with an
original maturity in excess of one year. Obligations relying upon support
mechanisms such as letters-of-credit and bonds of indemnity are excluded unless
explicitly rated.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's sovereign rating. Such branch obligations are
rated at the lower of the bank's rating or Moody's sovereign rating for the bank
deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by the actions of the government controlling
<PAGE>
the currency of denomination. In addition, risk associated with bilateral
conflicts between an investor's home country and either the issuer's home
country or the country where an issuer branch is located are not incorporated
into Moody's ratings.
Moody's makes no representation that rated bank obligations or insurance company
obligations are exempt from registration under the U.S. Securities Act of 1933
or issued in conformity with any other applicable law or regulation. Nor does
Moody's represent that any specific bank or insurance company obligation is
legally enforceable or is a valid senior obligation of a rated issuer.
Moody's ratings are opinions, not recommendations to buy or sell, and their
accuracy is not guaranteed. A rating should be weighed solely as one factor in
an investment decision and you should make your own study and evaluation of any
issuer whose securities or debt obligations you consider buying or selling.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
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 in small degree. Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt in higher rated categories. Debt rated BBB is regarded as having an
adequate capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having significant speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Debt rated BB is less vulnerable to nonpayment
than other speculative grade debt. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions that could
lead to the obligor's inadequate capacity to meet its financial commitment on
the obligation. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB- rating. Debt rated B has
greater vulnerability to default but presently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions would likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation. The B rating category also is used for
debt subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
Debt rated CCC has a currently identifiable vulnerability to nonpayment, and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial
<PAGE>
commitment on the obligation. In the event of adverse business, financial or
economic conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation. An obligation rated CC is currently
highly vulnerable to nonpayment. 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.
An obligation 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 or the taking of a similar action if payments on an
obligation are jeopardized.
Bonds rated AAA by Fitch are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated F-1+.
Bonds rated A are considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
Bonds rated BBB are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have an adverse impact on these bonds and,
therefore, impair timely payment. The likelihood that the ratings of these bonds
will fall below investment grade is higher than for bonds with higher ratings.
Bonds rated BB are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified, which could
assist the obligor in satisfying its debt service requirements. Bonds rated B
are considered highly speculative. While bonds in this class are currently
meeting debt service requirements, the probability of continued timely payment
of principal and interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity throughout the life of
the issue.
Bonds rated CCC have certain identifiable characteristics that, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment. Bonds rated CC are minimally protected.
Default in payment of interest and/or principal seems probable over time. Bonds
rated C are in imminent default in payment of interest or principal.
<PAGE>
Bonds rated DDD, DD and D are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
Bonds rated AAA by Duff are considered of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA+ , AA and AA- are considered to be of high credit
quality. Protection factors are strong. Risk is modest but may vary slightly
from time to time because of economic conditions. Bonds rated A+, A and A- have
protection factors that are average but adequate. However, risk factors are more
variable and greater in periods of economic stress.
Bonds rated BBB+, BBB and BBB- are considered to have below average protection
factors but are still considered sufficient for prudent investment. There is
considerable variability in risk during economic cycles. Bonds rated BB+, BB and
BB- are below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category. Bonds rated B+, B and B- are below investment
grade and possess risk that obligations will not be met when due. Financial
protection factors will fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating grade.
Bonds rated CCC are well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable company
developments.
Bonds rated DD are defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Bonds rated AAA by IBCA are obligations for which there is the lowest
expectation of investment risk. Capacity for timely repayment of principal and
interest is substantial, such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk substantially.
Bonds rated AA are obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk, albeit not very significantly. Bonds rated A are
obligations for which there is low expectation of investment risk. Capacity for
timely repayment of principal and interest is strong although adverse changes in
business, economic or financial conditions may lead to increased investment
risk.
Bonds rated BBB are obligations for which there is currently a low expectation
of investment
<PAGE>
risk. Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in other
categories. Bonds rated BB are obligations for which there is a possibility of
investment risk developing. Capacity for timely repayment of principal and
interest exists, but is susceptible over time to adverse changes in business,
economic or financial conditions. Bonds rated B are obligations for which
investment risk exists. Timely repayment of principal and interest is not
sufficiently protected against adverse changes in business, economic or
financial conditions.
Bonds rated CCC are obligations for which there is a current perceived
possibility of default. Timely repayment of principal and interest is dependent
on favorable business, economic or financial conditions. Bonds rated CC are
obligations which are highly speculative or which have a high risk of default.
Bonds rated C are obligations which are currently in default.
Bonds rated AAA by Thomson indicate that the ability to repay principal and
interest on a timely basis is very high. Bonds rated AA indicate a superior
ability to repay principal and interest on a timely basis, with limited
incremental risk compared to issues rated in the highest category. Bonds rated A
indicate the ability to repay principal and interest is strong. Issues rated A
could be more vulnerable to adverse developments (both internal and external)
than obligations with higher ratings.
Bonds rated BBB indicate an acceptable capacity to repay principal and interest.
Issues rated BBB are, however, more vulnerable to adverse developments (both
internal and external) than obligations with higher ratings. Bonds rated BBB are
the lowest investment grade category.
While not investment grade, the BB rating suggests that the likelihood of
default is considerably less than for lower-rated issues. However, there are
significant uncertainties that could affect the ability to adequately service
debt obligations. Issues rated B show a higher degree of uncertainty and
therefore greater likelihood of default than higher-rated issues. Adverse
developments could well negatively affect the payment of interest and principal
on a timely basis.
Issues rated CCC clearly have a high likelihood of default, with little capacity
to address further adverse changes in financial circumstances. CC is applied to
issues that are subordinate to other obligations rated CCC and are afforded less
protection in the event of bankruptcy or reorganization. Issues rated D are in
default.
<PAGE>
PART C: OTHER INFORMATION
POST-EFFECTIVE AMENDMENT NO. 20
Item 23. Exhibits:
(a) Registrant's Declaration of Trust dated September 9, 1991 originally
filed with Registrant's Registration Statement on Form N-1A (File No.
33-44712), filed with the Securities and Exchange Commission on
December 23, 1991.*
(b) Registrant's By-laws originally filed with Registrant's Registration
Statement on Form N-1A (File No. 33-44712), with the Securities and
Exchange Commission on December 23, 1991.*
(c) Not Applicable.
(d)(1) Investment Advisory Agreement between Registrant and United Jersey
Bank Investment Management Division dated April 28, 1996.**
(d)(2) Investment Advisory Agreement dated April 28, 1996 between Registrant
and United Jersey Bank Investment Management Division (the "Advisor")
with respect to the International Growth Portfolio.**
(d)(3) Investment Sub-Advisory Agreement dated April 28, 1996 between the
Advisor and Wellington Management Company, LLP.**
(d)(4) Amended and Restated Schedule to the Investment Advisory Agreement
dated April 28, 1996.*******
(d)(5) Investment Sub-Advisory Agreement dated August 31, 1998 between the
Advisor and Vontobel USA Inc.******
(e)(1) Distribution Agreement between Registrant and SEI Financial Services
Company dated February 28, 1992, as amended May 25, 1993, originally
filed with Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (File No. 33-44712) with the
Securities and Exchange Commission on September 24, 1992.*
(e)(2) Distribution and Agreement-Class B Shares between Registrant and SEI
Financial Services Company dated February 20, 1997.***
(f) Not Applicable.
(g)(1) Custodian Agreement dated February 28, 1992 between Registrant and
United Jersey Bank originally filed with Post-Effective Amendment No.
1 to Registrant's Registration Statement on Form N-1A (File No.
33-44712), with the Securities and Exchange Commission on September
24, 1992.*
(g)(2) Custodian Agreement dated April 22, 1992 between United Jersey Bank
and The Bank of California, National Association originally filed
with Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (File No. 33-44712), with the Securities and
Exchange Commission on February 10, 1995.*
(h)(1) Administration Agreement between Registrant and SEI Financial
Management Corporation dated February 28, 1992 as amended May 25,
1996 and December 1, 1996.**
(h)(2) Amended and Restated Schedule to the Administration Agreement dated
February 28, 1992.*******
(h)(3) Registrant's Consent to Assignment and Assumption dated June 1, 1996
of the Administration Contract dated February 28, 1992, as amended
May 25, 1993.**
(h)(4) Transfer Agent Agreement originally filed with Post-Effective
Amendment No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 33-44712) with the Securities and Exchange Commission on
September 24, 1992.*
C-2
<PAGE>
(h)(5) Transfer Agent Agreement between Registrant and State Street Bank and
Trust Company.*******
(i)(1) Opinion and Consent of Counsel is filed herewith.
(j)(1) Consent of Arthur Andersen LLP is filed herewith.
(j)(2) Consent of Arthur Andersen LLP with respect to SIF is filed herewith.
(j)(3) Consent of PricewaterhouseCoopers LLP with respect to SIMT is filed
herewith.
(k) Not Applicable.
(l) Not Applicable.
(m)(1) Distribution Plan-Class A (formerly Class B).**
(m)(2) Distribution Plan-U.S. Treasury Securities Plus Money Market Fund
originally filed with Post-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A (File No. 33-44712), filed with
the Securities and Exchange Commission on March 1, 1993.**
(m)(3) Distribution Plan-Class B Shares dated February 20, 1997.***
(n) Financial Data Schedules are filed herewith.
(o) Amended and Restated Rule 18f-3 Multiple Class Plan dated August 11,
1998.******
(p) Powers of Attorney for Robert A. Nesher, Ray Konrad, Arthur L.
Berman, Christine H. Yackman, James B. Grecco, Thomas D. Sayles, Jr.
and Mark E. Nagle.****
- ------------------------------------------
* Incorporated by reference to Post-Effective Amendment No. 9, as filed
on November 13, 1996.
** Incorporated by reference to Post-Effective Amendment No. 10, as
filed on February 28, 1997.
*** Incorporated by reference to Post-Effective Amendment No. 11, as
filed on April 30, 1997.
**** Incorporated by reference to Post-Effective Amendment No. 15, as
filed on January 30, 1998.
***** Incorporated by reference to Post-Effective Amendment No. 16, as
filed on April 30, 1998.
****** Incorporated by reference to Post-Effective Amendment No. 18, as
filed on September 1, 1998.
******* Incorporated by reference to Post-Effective Amendment No. 19, as
filed on March 1, 1999.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
See the Statement of Additional Information regarding the Trust's
control relationships. The Administrator is a subsidiary of SEI Corporation
which also controls the distributor of the Registrant, SEI Investments
Distribution Co., and other corporations engaged in providing various financial
and record keeping services, primarily to bank trust departments, pension plan
sponsors, and investment managers.
Item 25. INDEMNIFICATION:
Article VIII of the Declaration of Trust filed as Exhibit 1 to the
Registration Statement is incorporated by reference. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to
trustees, directors, officers and controlling persons of the Registrant by the
Registrant pursuant to the Declaration of Trust or otherwise, the Registrant is
aware that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and, therefore,
is unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by trustees, directors, officers or controlling persons of the Registrant
in connection with the successful defense of any act, suit or proceeding) is
asserted by such trustees, directors, officers or controlling persons in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been
C-3
<PAGE>
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act will be governed by the final adjudication of such issues.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR:
Other business, profession, vocation, or employment of a substantial
nature in which each director or principal officer of the Advisor is or has
been, at any time during the last two fiscal years, engaged for his own account
or in the capacity of a director, officer, employee, partner or trustee are as
follows:
<TABLE>
<CAPTION>
NAME AND POSITION NAME OF CONNECTION WITH
WITH INVESTMENT ADVISOR OTHER COMPANY OTHER COMPANY
<S> <C> <C>
DIRECTORS:
T. Joseph Semrod, Chairman, Chief
Executive Officer & Director Summit Bancorp Chairman & CEO
Robert G. Cox, President & Director Summit Bancorp President
John G. Collins, Vice Chairman & Director Summit Bancorp Vice Chairman
Bjorn Ahlstrom, Director Volvo North America, --
Corporation, Retired
Robert L. Boyle, Director William H. Hintelmann Firm Representative
James C. Brady, Jr., Director Mill House Associates, L.P. Partner
Barry D. Brown, Director Princeton Insurance Co. Chairman
T.J. Dermot Dunphy, Director Sealed Air Corporation Chairman & CEO
Anne Evans Estabrook, Director Elberon Development Co. Owner
Elinor J. Ferdon, Director Girl Scouts of the USA National President
Samuel Gerstein, Esq., Director Gerstein & Grayson Partner
Richard H. Goldberger, Director Linda's Diversified Holdings Inc. Chairman
Robert S. Hekemian, Director Hekemian & Co., Inc. Chairman & CEO
Thomas C. Jamieson, Jr., Esq., Jamieson, Moore, Peskin & Chairman & President
Director Spicer, PA
Vincent P. Langone, Director Formica Corporation Chairman & CEO
Francis J. Mertz, Director Fairleigh Dickinson University President
George L. Miles, Jr., Director WQED Pittsburgh President & CEO
Bertram B. Miller, Director B.B. Miller & Company President
Raymond Silverstein, Director Alloy, Silverstein, Shapiro, Consultant
Adams, Mulford & Co.
Orin R. Smith, Director Engelhard Corp. Chairman & CEO
Sylvester L. Sullivan, Director Car Rentals, Inc. President
Joseph M. Tabak, Director Jersey Paper Company Chairman & CEO
Robert A. Woodruff, Director Woodruff Oil Company President
</TABLE>
Vontobel USA Inc. ("Vontobel") is the investment sub-advisor for the
International Equity Fund. The principal address of Vontobel is 450 Park Avenue,
New York, NY 10022.
The list required by this Item 26 of officers and directors of the
Adviser, together with information as to any other business, profession,
vocation or employment of substantial nature engaged in by such
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<PAGE>
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by the Adviser pursuant to the Advisers
Act (SEC File No. 801-15908).
Item 27. PRINCIPAL UNDERWRITERS:
(a) Furnish the name of each investment company (other than the
Registrant) for which each principal underwriter currently
distributing the securities of the Registrant also acts as a
principal underwriter, distributor or investment adviser.
Registrant's distributor, SEI Investments Distribution Co. (the
"Distributor"), acts as distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds[Registered Trademark] June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These
services include portfolio evaluation, performance
C-5
<PAGE>
measurement and consulting services ("Funds Evaluation") and automated
execution, clearing and settlement of securities transactions
("MarketLink").
(b) Furnish the Information required by the following table with respect
to each director, officer or partner of each principal underwriter
named in the answer to Item 21 of Part B. Unless otherwise noted, the
business address of each director or officer is Oaks, PA 19456.
<TABLE>
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board of Directors --
Henry H. Greer Director --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President & General Counsel Vice President &
Assistant Secretary
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President &
Assistant Secretary
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
C-6
<PAGE>
Jeff Drennen Vice President --
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary Vice President &
Assistant Secretary
Greg Gettinger Vice President & Assistant Secretary --
Kathy Heilig Vice President Vice President &
Assistant Secretary
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Mark Nagle Vice President President
Joanne Nelson Vice President --
Joseph M. O'Donnell Vice President & Assistant Secretary Vice President &
Assistant Secretary
Cynthia M. Parrish Vice President & Assistant Secretary --
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Lynda J. Striegel Vice President & Assistant Secretary Vice President &
Assistant Secretary
Lori L. White Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
</TABLE>
Item 28. LOCATION OF ACCOUNTS AND RECORDS:
C-7
<PAGE>
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b);
(3); (6); (8); (12); and 31a-1(d), the required books and records are
maintained at the offices of Registrant's Custodian:
Summit Bank
210 Main Street
Hackensack, NJ 07601
Union Bank of California Global Custody
475 Sansome Street
11th Floor
San Francisco, CA 94111
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1), (4); (2)(C)
and (D); (4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required
books and records are maintained at the offices of Registrant's
Administrator:
SEI Investments Mutual Funds Services
Oaks, PA 19456
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and
31a-1(f), the required books and records are maintained at the principal
offices of the Registrant's Advisor or Sub-Advisor:
C-8
<PAGE>
Summit Bank Investment Management Division,
a division of Summit Bank
210 Main Street
Hackensack, NJ 07601
Vontobel USA Inc.
450 Park Avenue
New York, NY 10022
Item 29. MANAGEMENT SERVICES: None.
Item 30. UNDERTAKINGS:
Registrant hereby undertakes that whenever shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940, as amended
(the "1940 Act"), inform the Board of Trustees of their desire to communicate
with shareholders of the Trust, the Trustees will inform such shareholders as to
the approximate number of shareholders of record and the approximate costs of
mailing or afford said shareholders access to a list of shareholders.
Registrant undertakes to call a meeting of shareholders for the purpose
of voting upon the question of removal of a Trustee(s) when requested in writing
to do so by the holders of at least 10% of Registrant's outstanding shares and
in connection with such meetings to comply with the provisions of Section 16(c)
of the 1940 Act relating to shareholder communications.
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest Annual Report to
Shareholders, upon request and without charge.
C-9
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust for The Pillar Funds is
on file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this Registration Statement has been executed on
behalf of the Trust by an officer of the Trust as an officer and by its Trustees
as trustees and not individually and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees, officers, or
shareholders individually but are binding only upon the assets and property of
the Trust.
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
No. 20 to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Oaks, Commonwealth of
Pennsylvania on the 29th day of April, 1999.
THE PILLAR FUNDS
By:/s/Mark E. Nagle
------------------------
Mark E. Nagle
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacity and on the dates indicated.
* Trustee April 29, 1999
- ------------------------------------
Arthur L. Berman
* Trustee April 29, 1999
- ------------------------------------
Ray Konrad
* Trustee April 29, 1999
- ------------------------------------
Robert A. Nesher
* Trustee April 29, 1999
- ------------------------------------
Christine H. Yackman
* Trustee April 29, 1999
- ------------------------------------
James B. Grecco
* Trustee April 29, 1999
- ------------------------------------
Thomas D. Sayles, Jr.
/s/Mark E. Nagle President April 29, 1999
- ------------------------------------
Mark E. Nagle
/s/Christopher F. Salfi Controller & April 29, 1999
- ------------------------------------ Chief Financial
Christopher F. Salfi Officer
*By: /s/Mark E. Nagle
--------------------------------
Mark E. Nagle
Attorney-in-Fact
C-11
<PAGE>
EXHIBIT INDEX
Exhibit Name
EX-99.A Registrant's Declaration of Trust dated September 9, 1991
originally filed with Registrant's Registration Statement
on Form N-1A (File No. 33-44712), filed with the Securities
and Exchange Commission on December 23, 1991.*
EX-99.B Registrant's By-laws originally filed with Registrant's
Registration Statement on Form N-1A (File No. 33-44712),
with the Securities and Exchange Commission on December 23,
1991.*
EX-99.D1 Investment Advisory Agreement between Registrant and United
Jersey Bank Investment Management Division dated April 28,
1996.**
EX-99.D2 Investment Advisory Agreement dated April 28, 1996 between
Registrant and United Jersey Bank Investment Management
Division (the "Advisor") with respect to the International
Growth Portfolio.**
EX-99.D3 Investment Sub-Advisory Agreement between the Advisor and
Wellington Management Company, LLP.**
EX-99.D4 Amended and Restated Schedule to the Investment Advisory
Agreement dated April 28, 1996.*******
EX-99.D5 Investment Sub-Advisory Agreement dated August 31, 1998
between the Advisor and Vontobel USA Inc.******
EX-99.E1 Distribution Agreement between Registrant and SEI Financial
Services Company dated February 28, 1992, as amended May
25, 1993, originally filed with Post-Effective Amendment
No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 33-44712) with the Securities and Exchange
Commission on September 24, 1992.*
EX-99.E2 Distribution Agreement-Class B Shares between Registrant
and SEI Financial Services Company dated February 20,
1997.***
EX-99.G1 Custodian Agreement dated February 28, 1992 between
Registrant and United Jersey Bank originally filed with
Post-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A (File No. 33-44712), with the
Securities and Exchange Commission on September 24, 1992.*
EX-99.G2 Custodian Agreement dated April 22, 1992 between United
Jersey Bank and The Bank of California, National
Association originally filed with Post-Effective Amendment
No. 5 to Registrant's Registration Statement on Form N-1A
(File No. 33-44712), with the Securities and Exchange
Commission on February 10, 1995.*
EX-99.H1 Administration Agreement between Registrant and SEI
Financial Management Corporation dated February 28, 1992,
as amended May 25, 1996 and December 1, 1996.**
EX-99.H2 Amended and Restated Schedule to the Administration
Agreement dated February 28, 1992.*******
<PAGE>
EX-99.H3 Registrant's Consent to Assignment and Assumption dated
June 1, 1996 of the Administration Contract dated February
28, 1992, as amended May 25, 1993.**
EX-99.H4 Transfer Agent Agreement originally filed with
Post-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A (File No. 33-44712) with the
Securities and Exchange Commission on September 24, 1992.**
EX-99.H5 Transfer Agent Agreement between Registrant and State
Street Bank and Trust Company.*******
EX-99.I Opinion and Consent of Counsel is filed herwith
EX-99.J1 Consent of Arthur Andersen LLP is filed herewith.
EX-99.J2 Consent of Arthur Andersen LLP with respect to SIF is filed
herewith.
EX-99.J3 Consent of PricewaterhouseCoopers L.L.P. with respect to
SIMT is filed herewith.
EX-99.M1 Distribution Plan-Class A (formerly Class B).**
EX-99.M2 Distribution Plan-U.S. Treasury Securities Plus Money
Market Fund originally filed with Post-Effective Amendment
No. 2 to Registrant's Registration Statement on Form N-1A
(File No. 33-44712), filed with the Securities and Exchange
Commission on March 1, 1993.**
EX-99.M3 Distribution Plan-Class B Shares dated February 20,
1997.***
EX-27.N Financial Data Schedules are filed herewith.
EX-99.O Amended and Restated Rule 18f-3 Multiple Class Plan dated
August 11, 1998.******
EX-99.P Powers of Attorney for Robert A. Nesher, Ray Konrad, Arthur
L. Berman, Christine H. Yackman, James B. Grecco, Thomas D.
Sayles, Jr. and Mark E. Nagle.****
- ---------------------------------------
<TABLE>
<S> <C>
* Incorporated by reference to Post-Effective Amendment No. 9, as filed on November 13, 1996.
** Incorporated by reference to Post-Effective Amendment No. 10, as filed on February 28, 1997.
*** Incorporated by reference to Post-Effective Amendment No. 11, as filed on April 30, 1997.
**** Incorporated by reference to Post-Effective Amendment No. 15, as filed on January 30, 1998.
***** Incorporated by reference to Post-Effective Amendment No. 16, as filed on April 30, 1998.
****** Incorporated by reference to Post-Effective Amendment No. 18, as filed on September 1, 1998.
******* Incorporated by reference to Post-Effective Amendment No. 19, as filed on March 1, 1999.
</TABLE>
<PAGE>
1701 Market Street Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103 Counselors at Law
215-963-5000
215-963-5299
April 29, 1999
The Pillar Funds
c/o SEI Investments
Oaks, PA 19456
Re: Opinion of Counsel regarding Post-Effective Amendment No. 20 to the
Registration Statement filed on Form N-1A under the Securities Act of 1933
(File No. 33-44712)
--------------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to The Pillar Funds, a Massachusetts business trust
(the "Fund"), in connection with the above-referenced Registration Statement
which relates to the Fund's shares of common stock, par value $.001 per share
(collectively, the "Shares"). This opinion is being delivered to you in
connection with the Fund's filing of Post-Effective Amendment No. 20 to the
Registration Statement (the "Amendment") to be filed with the Securities and
Exchange Commission pursuant to Rule 485(b) under the Securities Act of 1933
(the "1933 Act"). With your permission, all assumptions and statements of
reliance herein have been made without any independent investigation or
verification on our part, except to the extent otherwise expressly stated, and
we express no opinion with respect to the subject matter or accuracy of such
assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things, executed
copies of the following documents:
(a) a certificate of the Commonwealth of Massachusetts to the existence
and good standing of the Fund dated April 22, 1999;
(b) the Articles of Incorporation of the Fund and all amendments and
supplements thereto (the "Articles of Incorporation");
(c) a certificate executed by Richard W. Grant, the Secretary of the Fund,
certifying as to the Fund's Articles of Incorporation and Amended and
Restated By-Laws (the "By-Laws"), and certain resolutions adopted by
the Board of Directors of the Fund authorizing the issuance of the
Shares; and
<PAGE>
The Pillar Funds
April 29, 1999
Page 2
(d) a printer's proof of the Amendment.
In our capacity as counsel to the Fund, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Fund. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Articles of
Incorporation and By-Laws, and for the consideration described in the
Registration Statement, will be legally issued, fully paid and nonassessable
under the laws of the Commonwealth of Massachusetts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not concede that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ Morgan, Lewis & Bockius
Morgan, Lewis and Bockius LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 12,
1999, on the December 31, 1998 financial statements of The Pillar Funds,
included in the previously filed Form N-30D dated February 26, 1999, and to
all references to our firm included in or made part of this Post-Effective
Amendment No. 20 to the Registration Statement File No. 33-44712.
/s/ Arthur Andersen LLP
Philadelphia, Pennsylvania
April 29, 1999
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 12,
1999, on the December 31, 1998 financial statements of The Pillar Funds,
included in the previously filed Form N-30D dated February 26, 1999, and to
all references to our firm included in or made part of this Post-Effective
Amendment No. 20 to the Registration Statement File No. 33-44712.
/s/ Arthur Andersen LLP
Philadelphia, Pennsylvania
April 29, 1999
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 20 to the Registration Statement (File No. 33-44712) and Amendment No. 22
to the Registration Statement (File No. 811-6509) of the Pillar Funds on Form
N-1A under the Securities Act of 1933 and the Investment Company Act of 1940
respectively, or our report dated November 20, 1998 on our audit of the
financial statements and financial highlights of the SEI Institutional
Managed Trust, which report is included in the Annual Report to Shareholders
for the year ended September 30, 1998, which is incorporated by reference in
the Post-Effective Amendment to the Registration Statement. We also consent
to the reference to our Firm under the caption "Financial Highlights" in the
Prospectus and under the captions "Independent Accountants" and "Experts" and
"Financial Statements" in the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 29, 1999
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<NAME> PILLAR FUNDS
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<NAME> EQUITY INCOME RETAIL B
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<NAME> PILLAR FUNDS
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<NAME> BALANCED GROWTH RETAIL B
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<NAME> PILLAR FUNDS
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<CIK> 0000882303
<NAME> PILLAR FUNDS
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<NAME> PENNSYLVANIA MUNICIPAL SECURITIES INSTITUTIONAL CLASS
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<CIK> 0000882303
<NAME> PILLAR FUNDS
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<NAME> PENNSYLVANIA MUNICIPAL SECURITIES RETAIL A
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<CIK> 0000882303
<NAME> PILLAR FUNDS
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<NAME> U.S. TREASURY SECURITIES PLUS MONEY MARKET INSTITUTIONAL
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<CIK> 0000882303
<NAME> PILLAR FUNDS
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<NAME> EQUITY GROWTH INSTITUTIONAL CLASS
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<PAGE>
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<CIK> 0000882303
<NAME> PILLAR FUNDS
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<NAME> EQUITY GROWTH RETAIL A
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<NAME> PILLAR FUNDS
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<NAME> EQUITY GROWTH RETAIL B
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<NAME> INSTITUTIONAL SELECT MONEY MARKET INSTITUTIONAL CLASS
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<OVERDISTRIBUTION-GAINS> (4)
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<NUMBER-OF-SHARES-SOLD> 422961
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<PER-SHARE-NAV-BEGIN> 1.00
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000882303
<NAME> PILLAR FUNDS
<SERIES>
<NUMBER> 280
<NAME> EQUITY INDEX INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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<OTHER-ITEMS-ASSETS> 26
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<ACCUMULATED-NET-GAINS> 24
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 410
<NET-ASSETS> 6388
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<EXPENSES-NET> (11)
<NET-INVESTMENT-INCOME> (9)
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<APPREC-INCREASE-CURRENT> 410
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<NET-CHANGE-IN-ASSETS> 699
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 16
<AVERAGE-NET-ASSETS> 2121
<PER-SHARE-NAV-BEGIN> 10.00
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<PER-SHARE-DIVIDEND> (.02)
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000882303
<NAME> PILLAR FUNDS
<SERIES>
<NUMBER> 281
<NAME> EQUITY INDEX RETAIL A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 5413
<INVESTMENTS-AT-VALUE> 5823
<RECEIVABLES> 605
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26
<TOTAL-ASSETS> 6454
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 66
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5956
<SHARES-COMMON-STOCK> 40
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (2)
<ACCUMULATED-NET-GAINS> 24
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 410
<NET-ASSETS> 6388
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2
<OTHER-INCOME> 0
<EXPENSES-NET> (11)
<NET-INVESTMENT-INCOME> (9)
<REALIZED-GAINS-CURRENT> 35
<APPREC-INCREASE-CURRENT> 410
<NET-CHANGE-FROM-OPS> 436
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 457
<NUMBER-OF-SHARES-REDEEMED> (1)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 482
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5
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<GROSS-EXPENSE> 16
<AVERAGE-NET-ASSETS> 2121
<PER-SHARE-NAV-BEGIN> 9.92
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 2.02
<PER-SHARE-DIVIDEND> (.02)
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<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000882303
<NAME> PILLAR FUNDS
<SERIES>
<NUMBER> 282
<NAME> EQUITY INDEX RETAIL B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 5413
<INVESTMENTS-AT-VALUE> 5823
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<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26
<TOTAL-ASSETS> 6454
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 66
<TOTAL-LIABILITIES> 66
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5956
<SHARES-COMMON-STOCK> 436
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (2)
<ACCUMULATED-NET-GAINS> 24
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 410
<NET-ASSETS> 6388
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2
<OTHER-INCOME> 0
<EXPENSES-NET> (11)
<NET-INVESTMENT-INCOME> (9)
<REALIZED-GAINS-CURRENT> 35
<APPREC-INCREASE-CURRENT> 410
<NET-CHANGE-FROM-OPS> 436
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1)
<DISTRIBUTIONS-OF-GAINS> (2)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4956
<NUMBER-OF-SHARES-REDEEMED> (115)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 5207
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 16
<AVERAGE-NET-ASSETS> 2121
<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 1.99
<PER-SHARE-DIVIDEND> (.02)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.94
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000882303
<NAME> PILLAR FUNDS
<SERIES>
<NUMBER> 290
<NAME> HIGH YIELD BOND INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 2735
<INVESTMENTS-AT-VALUE> 2732
<RECEIVABLES> 19
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 179
<TOTAL-ASSETS> 2930
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49
<TOTAL-LIABILITIES> 49
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2879
<SHARES-COMMON-STOCK> 49
<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-NII> (1)
<ACCUMULATED-NET-GAINS> 6
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3)
<NET-ASSETS> 2881
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 40
<OTHER-INCOME> 0
<EXPENSES-NET> (9)
<NET-INVESTMENT-INCOME> 31
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> (3)
<NET-CHANGE-FROM-OPS> 38
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 493
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 493
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12
<AVERAGE-NET-ASSETS> 1485
<PER-SHARE-NAV-BEGIN> 9.99
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> .05
<PER-SHARE-DIVIDEND> (.18)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.99
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000882303
<NAME> PILLAR FUNDS
<SERIES>
<NUMBER> 291
<NAME> HIGH YIELD BOND RETAIL A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 2735
<INVESTMENTS-AT-VALUE> 2732
<RECEIVABLES> 19
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<OTHER-ITEMS-ASSETS> 179
<TOTAL-ASSETS> 2930
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49
<TOTAL-LIABILITIES> 49
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2879
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1)
<ACCUMULATED-NET-GAINS> 6
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3)
<NET-ASSETS> 2881
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 40
<OTHER-INCOME> 0
<EXPENSES-NET> (9)
<NET-INVESTMENT-INCOME> 31
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> (3)
<NET-CHANGE-FROM-OPS> 38
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 102
<NUMBER-OF-SHARES-REDEEMED> (1)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 103
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3
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<GROSS-EXPENSE> 12
<AVERAGE-NET-ASSETS> 1485
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> (.18)
<PER-SHARE-DISTRIBUTIONS> (.02)
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<PER-SHARE-NAV-END> 9.98
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000882303
<NAME> PILLAR FUNDS
<SERIES>
<NUMBER> 292
<NAME> HIGH YIELD BOND RETAIL B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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<TOTAL-LIABILITIES> 49
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2879
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<OVERDISTRIBUTION-NII> (1)
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3)
<NET-ASSETS> 2881
<DIVIDEND-INCOME> 0
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<EXPENSES-NET> (9)
<NET-INVESTMENT-INCOME> 31
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> (3)
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<DISTRIBUTIONS-OF-INCOME> (25)
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<PER-SHARE-NAV-BEGIN> 10.00
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000882303
<NAME> SEI INDEX FUNDS
<SERIES>
<NUMBER> 011
<NAME> S & P 500 INDEX CLASS E
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
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<NET-CHANGE-IN-ASSETS> (542)
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<GROSS-EXPENSE> 4500
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<EXPENSE-RATIO> .25
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000882303
<NAME> SEI INSTITUTIONAL MANAGED TRUST
<SERIES>
<NUMBER> 121
<NAME> HIGH YIELD BOND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
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<ACCUM-APPREC-OR-DEPREC> (11887)
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<NUMBER-OF-SHARES-REDEEMED> (117547)
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<GROSS-EXPENSE> 2389
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<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> 1.04
<PER-SHARE-GAIN-APPREC> (.75)
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<PER-SHARE-DISTRIBUTIONS> (.10)
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<PER-SHARE-NAV-END> 10.81
<EXPENSE-RATIO> .85
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</TABLE>
