<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
One South Street, Baltimore, Maryland 21202
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(800) 442-8299
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Prospectus--March 2, 1998
INVESTMENT OBJECTIVES
The Glenmede Fund, Inc., a Maryland corporation ("Glenmede Fund"), and The
Glenmede Portfolios, a Massachusetts business trust ("Glenmede Portfolios" and
collectively with Glenmede Fund, the "Funds"), are no-load, open-end management
investment companies. The Funds currently offer twelve series of shares, each
of which has different investment objectives and policies. The securities
offered hereby are five of these series of shares (known as "Portfolios") of
the Funds listed below.
Government Cash Portfolio. The objective of the Government Cash Portfolio is to
provide maximum current interest income consistent with the preservation of
capital and liquidity. The Government Cash Portfolio seeks to achieve its
objective by investing primarily in short-term money market instruments issued
by the U.S. Treasury, U.S. Government agencies, or other agencies, enterprises
or instrumentalities sponsored by the U.S. Government and by entering into
repurchase agreements secured thereby. It is anticipated that the Portfolio
will maintain a constant net asset value or price of $1.00 per share, and an
average weighted maturity of 90 days or less.
Tax-Exempt Cash Portfolio. The objective of the Tax-Exempt Cash Portfolio is to
provide maximum current interest income exempt from Federal income taxes
consistent with the preservation of capital and liquidity. The Tax-Exempt Cash
Portfolio seeks to achieve its objective by investing primarily in short-term,
high quality municipal securities ("Municipal Obligations"). It is anticipated
that the Portfolio will maintain a constant net asset value or price of $1.00
per share, and an average weighted maturity of 90 days or less.
Core Fixed Income Portfolio. The objective of the Core Fixed Income Portfolio
is to provide maximum, long-term total return consistent with reasonable risk
to principal. The Core Fixed Income Portfolio seeks to achieve its objective by
investing primarily in mortgage-backed securities and fixed income securities
issued by the U.S. Treasury, U.S. Government agencies, or other agencies,
enterprises or instrumentalities sponsored by the U.S. Government. The
Portfolio may also invest up to 35% of its total assets during normal
circumstances in other securities, including debt obligations of domestic and
foreign companies. The net asset value of this Portfolio will fluctuate.
Muni Intermediate Portfolio. The objective of the Muni Intermediate Portfolio
is to seek as high a level of current income exempt from Federal income tax as
is consistent with preservation of capital. The Muni Intermediate Portfolio
seeks to achieve its objective by investing primarily in Municipal Obligations.
The net asset value of this Portfolio will fluctuate.
New Jersey Muni Portfolio. The objective of the New Jersey Muni Portfolio is to
seek as high a level of current income exempt from Federal income tax as is
consistent with preservation of capital. The New Jersey Muni Portfolio seeks to
achieve its objective by investing primarily in Municipal Obligations. The net
asset value of this Portfolio will fluctuate.
Total return consists of income (dividend and/or interest income from
portfolio securities) and capital gains and losses, both realized and
unrealized, from portfolio securities.
Shares of the Portfolios are subject to investment risks, including
possible loss of principal, are not bank deposits and are not endorsed by,
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, The Glenmede Corporation or any of its affiliates or any other
governmental agency or bank. There can be no assurance that the Government Cash
or Tax-Exempt Cash Portfolios will be able to maintain a stable net asset value
of $1.00 per share.
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ABOUT THIS PROSPECTUS
This Prospectus, which should be retained for future reference, sets forth
certain information that you should know before you invest. A Statement of
Additional Information ("SAI") containing additional information about the
Funds has been filed with the Securities and Exchange Commission. Such SAI
dated March 2, 1998, as amended or supplemented from time to time, is
incorporated by reference into this Prospectus. The 1997 Annual Report to
Shareholders contains additional investment and performance information about
the Portfolios. A copy of the SAI and the 1997 Annual Report may be obtained,
without charge, by writing to the Funds at the address shown above or by
calling the Funds at the telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSES OF THE PORTFOLIOS
The following table illustrates the expenses and fees incurred by each
Portfolio for the fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
Tax- New
Government Exempt Core Fixed Muni Jersey
Cash Cash Income** Intermediate Muni
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ----------- --------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses* ......... None None None None None
Maximum Annual Client Fee+ ................ 1.00% 1.00% 1.00% 1.00% 1.00%
Annual Portfolio Operating Expenses
(as a percentage of net assets)
Investment Advisory Fees ............... 0% 0% 0% 0% 0%
Administration Fees .................... .04% .04% .04% .04% .04%
Other Expenses ......................... .09% .10% .19%*** .30% .27%
----- ----- ------ ----- -----
Total Annual Portfolio Expenses ........... .13% .14% .13%*** .34% .31%
===== ===== ====== ===== =====
</TABLE>
- ------------
+ The Portfolios described in this prospectus do not pay any advisory fees to
The Glenmede Trust Company, the investment advisor of the Funds (the
"Advisor"), or its affiliates ("Affiliates"). However, investors in these
Portfolios must be clients of the Advisor or Affiliates. The "Maximum
Annual Client Fee" in the above table is the current maximum fee that the
Advisor or an Affiliate would charge its clients directly for fiduciary,
trust and/or advisory services (e.g., personal trust, estate, advisory,
tax and custodian services). The actual annual fees charged by the Advisor
and its Affiliates directly to their clients for such services vary
depending on a number of factors, including the particular services
provided to the client, but are generally under 1% of the client's assets
under management. Investors may also have to pay various fees to others to
become clients of the Advisor or an Affiliate. See "Investment Advisor."
* A transaction charge may be imposed by broker-dealers or others that make
shares of the Portfolio available. There is no transaction charge for
shares purchased directly from the Portfolios.
** The Intermediate Government Portfolio was renamed the Core Fixed Income
Portfolio effective September 25, 1997.
*** "Other Expenses" does not include interest expenses of the Core Fixed
Income Portfolio. If such interest expenses are included, "Other Expenses"
would be 0.30% and "Total Operating Expenses" would be 0.43% for the Core
Fixed Income Portfolio.
The purpose of the above table is to assist an investor in understanding
the various estimated costs and expenses that an investor in a Portfolio will
bear directly or indirectly. Actual expenses may be greater or lesser than such
estimates. For further information concerning the Funds' expenses see
"Investment Advisor" and "Administrative, Transfer Agency and Dividend Paying
Services."
The following example illustrates the estimated Annual Portfolio Operating
Expenses that an investor would pay on a $1,000 investment over various time
periods assuming (i) a 5% annual rate of return and (ii) redemption at the end
of each time period. The example does not include fees for fiduciary and
investment services which investors pay the Advisor or Affiliates as clients.
See "Investment Advisor." As noted in the above table the Funds charge no
shareholder transaction expenses of any kind.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Government Cash Portfolio ............ $1 $ 4 $ 7 $17
Tax-Exempt Cash Portfolio ............ $1 $ 5 $ 8 $18
Core Fixed Income Portfolio .......... $1 $ 4 $ 7 $17
Muni Intermediate Portfolio .......... $3 $11 $19 $43
New Jersey Muni Portfolio ............ $3 $10 $17 $39
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide financial highlights of each Portfolio for
the respective periods presented and includes data derived from Funds'
Financial Statements included in Fund's 1997 Annual Report to Shareholders,
which Financial Statements and report thereon of Coopers & Lybrand L.L.P., the
Fund's independent accountants, are incorporated by reference in the SAI. The
following information should be read in conjunction with such Financial
Statements. Glenmede Fund's Financial Statements for the periods ended October
31, 1991, 1990 and 1989 were examined by the Fund's previous independent
accountants, Price Waterhouse L.L.P.
<TABLE>
<CAPTION>
Government Cash Portfolio
----------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1997 1996 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Net investment income .......... 0.054 0.053 0.059 0.038
Distributions from net
investment income ............. $ (0.054) $ (0.053) $ (0.059) $ (0.038)
-------- -------- -------- --------
Net asset value, end of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total return++ ................. 5.53% 5.46% 5.87% 3.78%
======== ======== ======== ========
Ratios to average net assets/
Supplemental data:
Net assets, end of year (in
000's) ....................... $451,038 $452,395 $408,605 $353,405
Ratio of operating
expenses to average net
assets ....................... 0.13% 0.16% 0.15% 0.11%
Ratio of net investment
income to average net
assets ....................... 5.39% 5.32% 5.71% 3.82%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Government Cash Portfolio
------------------------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1993 1992 1991 1990 1989+
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Net investment income .......... 0.031 0.041 0.064 0.081 0.089
Distributions from net
investment income ............. $ (0.031) $ (0.041) $ (0.064) $ (0.081) $ (0.089)
-------- -------- -------- -------- --------
Net asset value, end of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return++ ................. 3.18% 4.19% 6.59% 8.41% 9.27%
======== ======== ======== ======== ========
Ratios to average net assets/
Supplemental data:
Net assets, end of year (in
000's) ....................... $247,816 $203,882 $253,260 $217,398 $229,555
Ratio of operating
expenses to average net
assets ....................... 0.11% 0.13% 0.13% 0.15% 0.14%*
Ratio of net investment
income to average net
assets ....................... 3.14% 4.18% 6.45% 8.08% 9.00%*
</TABLE>
- --------------------
+ The Portfolio commenced operations on November 7, 1988.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-Exempt Cash Portfolio
----------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1997 1996 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Net investment income .......... 0.034 0.034 0.038 0.025
Distributions from net
investment income ............. $(0.034) $(0.034) $(0.038) $(0.025)
-------- -------- -------- --------
Net asset value, end of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total return++ ................. 3.46% 3.42% 3.76% 2.48%
======== ======== ======== ========
Ratios to average net assets/
Supplemental data:
Net assets, end of year (in
000's) ....................... $280,950 $224,999 $222,808 $222,985
Ratio of operating
expenses to average net
assets ....................... 0.14% 0.15% 0.15% 0.13%
Ratio of net investment
income to average net
assets ....................... 3.40% 3.36% 3.69% 2.52%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tax-Exempt Cash Portfolio
-----------------------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1993 1992 1991 1990 1989+
------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Net investment income .......... 0.023 0.033 0.047 0.057 0.061
Distributions from net
investment income ............. $ (0.023) $ (0.033) $ (0.047) $ (0.057) $ (0.061)
-------- -------- -------- -------- --------
Net asset value, end of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return++ ................. 2.34% 3.30% 4.83% 5.85% 6.27%
======== ======== ======== ======== ========
Ratios to average net assets/
Supplemental data:
Net assets, end of year (in
000's) ....................... $106,590 $125,826 $ 81,394 $107,283 $ 69,047
Ratio of operating
expenses to average net
assets ....................... 0.13% 0.15% 0.16% 0.15% 0.15%*
Ratio of net investment
income to average net
assets ....................... 2.33% 3.21% 4.78% 5.78% 6.31%*
</TABLE>
- --------------------
+ The Portfolio commenced operations on November 10, 1988.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
3
<PAGE>
<TABLE>
<CAPTION>
Core Fixed Income Portfolio***
----------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1997 1996 1995 1994
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
year ........................... $ 10.29 $ 10.36 $ 9.89 $ 10.84
------- ------- ------- -------
Income from investment
operations:
Net investment income .......... 0.68 0.66 0.69 0.64
Net realized and unreal-
ized gain/(loss) on
investments ................... 0.17 ( 0.08) 0.46 ( 0.96)
------- -------- ------- --------
Total from investment
operations ................... 0.85 0.58 1.15 ( 0.32)
------- -------- ------- --------
Less Distributions:
Distribution from net
investment income ............. ( 0.68) ( 0.65) ( 0.68) ( 0.63)
Distributions from net
realized capital gains ........ -- -- -- --
-------- -------- -------- --------
Total Distributions ............ ( 0.68) ( 0.65) ( 0.68) ( 0.63)
-------- -------- -------- --------
Net asset value, end of
year ......................... $ 10.46 $ 10.29 $ 10.36 $ 9.89
======== ======== ======== ========
Total rturn++ ................. 8.63% 5.88% 12.06% ( 3.03)%
======== ======== ======== ========
Ratios to average net assets/
Supplemental data:
Net assets, end of year (in
000's) ........................ $266,733 $259,503 $342,874 $333,797
Ratio of operating
expenses to average net
assets ........................ 0.13% 0.16% 0.11% 0.12%
Ratio of gross expenses to
average net assets ............ 0.43%** 0.16% 0.11% 0.14%**
Ratio of net investment
income to average net
assets ........................ 6.67% 6.37% 6.67% 6.06%
Portfolio turnover rate ........ 307% 47% 228% 165%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Core Fixed Income Portfolio***
-----------------------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1993 1992 1991 1990 1989+
-------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year ........................... $ 10.76 $ 10.61 $ 10.11 $ 10.28 $ 10.00
------- ------- ------- ------- -------
Income from investment
operations:
Net investment income .......... 0.66 0.74 0.87 0.88 0.86
Net realized and unreal-
ized gain/(loss) on
investments ................... 0.41 0.22 0.56 ( 0.07) 0.22
------- ------- ------- -------- -------
Total from investment
operations ................... 1.07 0.96 1.43 0.81 1.08
------- ------- ------- -------- -------
Less Distributions:
Distribution from net
investment income ............. ( 0.67) ( 0.70) ( 0.93) ( 0.89) ( 0.80)
Distributions from net
realized capital gains ........ ( 0.32) ( 0.11) -- ( 0.09) --
-------- -------- -------- -------- -------
Total Distributions ............ ( 0.99) ( 0.81) ( 0.93) ( 0.98) ( 0.80)
-------- -------- -------- -------- -------
Net asset value, end of
year ......................... $ 10.84 $ 10.76 $ 10.61 $ 10.11 $ 10.28
======== ======== ======== ======== =======
Total rturn++ ................. 10.38% 9.34% 14.75% 8.32% 11.20%
======== ======== ======== ======== =======
Ratios to average net assets/
Supplemental data:
Net assets, end of year (in
000's) ........................ $581,823 $445,816 $265,963 $207,182 $187,012
Ratio of operating
expenses to average net
assets ........................ 0.14% 0.16% 0.16% 0.14% 0.14%
Ratio of gross expenses to
average net assets ............ 0.16%** 0.16% 0.16% 0.14% 0.14%*
Ratio of net investment
income to average net
assets ........................ 6.03% 7.03% 8.22% 8.75% 9.07%*
Portfolio turnover rate ........ 83% 39% 91% 94% 29%
</TABLE>
- --------------------
+ The Portfolio commenced operations on November 17, 1988.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
** The annualized operating expense ratios exclude interest expense. The ratios
including interest expense for the years ended October 31, 1997, October
31, 1994 and October 31, 1993 wer 0.13%, 0.12% and 0.14%, respectively.
*** The Intermediate Government Portfolio was renamed the Core Fixed Income
Portfolio effective September 25, 1997.
4
<PAGE>
<TABLE>
<CAPTION>
Muni Intermediate Portfolio
----------------------------------------------------------------------------------
Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1997 1996 1995 1994 1993 1992+
----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ..... $ 10.26 $ 10.32 $ 9.74 $ 10.59 $ 10.00 $ 10.00
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income ................. 0.52 0.53 0.53 0.53 0.44 0.11
Net realized and unrealized
gain/loss on investments ............ .14 ( 0.06) 0.58 ( 0.85) 0.59 ( 0.03)
------- ------- ------- ------- ------- -------
Total from investment operations....... 0.66 0.47 1.11 ( 0.32) 1.03 0.08
------- ------- ------- ------- ------- -------
Distributions from net investment
income .............................. ( 0.52) ( 0.53) ( 0.53) ( 0.53) ( 0.44) ( 0.08)
------- ------- ------- ------- ------- -------
Net asset value, end of year .......... $ 10.40 $ 10.26 $ 10.32 $ 9.74 $ 10.59 $ 10.00
======= ======= ======= ======= ======= =======
Total return++ ........................ 6.69% 4.67% 11.76% ( 3.13)% 10.54% 0.74%
======= ======= ======= ======= ======= =======
Ratios to average net assets/
Supplemental data:
Net assets, end of year (in 000's) $19,219 $18,471 $18,096 $22,097 $94,803 $ 42,533
Ratio of operating expenses to
average net assets .................. 0.34% 0.32% 0.28% 0.25% 0.25% 0.25%*
Ratio of net investment income to
average net assets .................. 5.09% 5.16% 5.23% 4.78% 4.41% 4.22%*
Portfolio turnover rate ............... 21% 44% 28% 11% 10% 3%
</TABLE>
- --------------------
+ The Portfolio commenced operations on June 5, 1992.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New Jersey Muni Portfolio
---------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
1997 1996 1995 1994+
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 9.97 $ 10.00 $ 9.22 $ 10.00
------- -------- ------- -------
Income from investment operations:
Net investment income ............................... 0.44 0.44 0.41 0.32
Net realized and unrealized loss on investments ..... 0.23 ( 0.03) 0.78 ( 0.82)
------- -------- ------- -------
Total from investment operations .................. 0.67 0.41 1.19 ( 0.50)
------- -------- ------- -------
Distributions from net investment income ............. ( 0.44) ( 0.44) ( 0.41) ( 0.28)
------- -------- ------- -------
Net asset value, end of period ....................... $ 10.20 $ 9.97 $ 10.00 $ 9.22
======= ======== ======= =======
Total return++ ....................................... 6.90% 4.24% 13.25% ( 5.13)%
======= ======== ======= =======
Ratios to average net assets/ Supplemental data:
Net assets, end of period (in 000's) ................ $12,117 $ 7,545 $ 5,932 $ 4,564
Ratio of operating expenses to average net assets 0.31% 0.24% 0.53% 0.60%*
Ratio of net investment income to average net
assets ............................................ 4.42% 4.56% 4.30% 3.60%*
Portfolio turnover rate ............................. 19% 33% 12% 65%
</TABLE>
- --------------------
+ The Portfolio commenced operations on November 1, 1993.
++ Total return represents aggregate total return for the period indicated.
* Annualized.
5
<PAGE>
PERFORMANCE CALCULATIONS
From time to time, the Government Cash Portfolio and the Tax-Exempt Cash
Portfolio (each a "Cash Portfolio," collectively, the "Cash Portfolios") may
advertise or quote its "yield" and "effective yield." The "yield" of either of
the Cash Portfolios refers to the income generated by an investment in each
such Portfolio over a seven-day period (which period will be stated in the
advertisement or quote). 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 such a Portfolio 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 Core Fixed Income, Muni Intermediate and New Jersey Muni Portfolios
also may advertise or quote yield data from time to time. The yield of such
Portfolios is computed based on the net income of the Portfolio during a 30-day
(or one-month) period, which period will be identified in connection with the
particular yield quotation. More specifically, each such Portfolio's yield is
computed by dividing the Portfolio's net income per share during a 30-day (or
one-month) period by the maximum offering price per share on the last day of
the period and annualizing the result on a semi-annual basis.
The Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios'
"tax-equivalent yields" may be advertised or quoted from time to time. The tax
equivalent yield shows the level of taxable yield needed to produce an
after-tax equivalent to each such Portfolio's tax-free yield. This is done by
increasing each such Portfolio's yield (calculated as above) by the amount
necessary to reflect the payment of Federal and/or State income tax at a stated
tax rate.
Each of the Core Fixed Income, Muni Intermediate and New Jersey Muni
Portfolios may advertise or quote total return data from time to time. Total
return will be calculated on an average annual total return basis and also may
be calculated on an aggregate total return basis, for various periods. Average
annual total return reflects the average annual percentage change in value of
an investment in the particular Portfolio. Aggregate total return reflects the
total percentage change in value over the measuring period. Both methods of
calculating total return assume that dividend and capital gains distributions
made by the Portfolio during the period are reinvested in additional Portfolio
shares.
Each of the Core Fixed Income, Muni Intermediate and New Jersey Muni
Portfolios may compare their total returns, and their yields, to that of other
investment companies with similar investment objectives and to bond and other
relevant indices such as those compiled by Merrill Lynch, Lehman Brothers or
others or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For
example, the total return or the yield of the Core Fixed Income, Muni
Intermediate or New Jersey Muni Portfolios may be compared to data prepared by
Lipper Analytical Services, Inc. Total return and yield data as reported in
national financial publications such as Money Magazine, Forbes, Barron's, The
Wall Street Journal and The New York Times, or in publications of a local or
regional nature, also may be used in comparing the performance of the Core
Fixed Income, Muni Intermediate or New Jersey Muni Portfolios.
Performance quotations represent a Portfolio's past performance and should
not be considered as indicative of future results. Since performance will
fluctuate, performance data for a Portfolio should not be used to compare an
investment in the Portfolio's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield/return for a stated period of time. Shareholders should remember
that performance is generally a function of the kind and quality of the
instruments held in a Portfolio, portfolio maturity, operating expenses and
market conditions. Any management fees charged by the Advisor or an Affiliate
to its respective clients will not be included in the Portfolio's calculations
of yield, effective yield, tax-equivalent yield or total return. See
"Investment Advisor."
INVESTMENT POLICIES AND RISK FACTORS
The investment objective of each Portfolio is not fundamental and may be
changed by the particular Funds' Board members without shareholder approval.
GOVERNMENT CASH PORTFOLIO
The objective of the Government Cash Portfolio is to provide maximum
current interest income consistent with the preservation of capital and
liquidity. The Government Cash Portfolio seeks to achieve its objective by
investing in
6
<PAGE>
short-term U.S. dollar-denominated money market instruments issued by the U.S.
Treasury, U.S. Government agencies, or other agencies, enterprises or
instrumentalities sponsored by the U.S. Government and by entering into
repurchase agreements secured thereby. During normal market conditions, the
Portfolio will invest at least 65% of its total assets in such instruments.
The Portfolio may invest in the following securities provided they are
"eligible securities," as defined below ("Eligible Securities"), which the
Advisor believes presents minimal credit risk at the time of purchase: (i)
straight-debt and mortgage-backed obligations issued by the U.S. Government or
its sponsored agencies, enterprises or instrumentalities; (ii) securities of
international institutions (Asian Development Bank, Export-Import Bank, Inter
American Development Bank, International Bank for Reconstruction and
Development, Government Trust Certificates, Private Export Funding Corp. and
Agency for International Development) which are not direct obligations of the
U.S. Government but which involve governmental agencies, instrumentalities or
enterprises (such investments will represent no more than 25% of the
Portfolio's total assets); and (iii) any publicly or privately placed, unrated
securities issued by the U.S. Government, its agencies, enterprises or
instrumentalities, including floating and variable rate securities, which, in
the Advisor's opinion, are equivalent in credit quality to securities rated AAA
by Standard & Poor's Ratings Group, Division of McGraw Hill ("S&P") or Aaa by
Moody's Investors Service, Inc. ("Moody's"). The Portfolio will invest in
securities maturing within 13 months from the date of purchase, except that
securities collateralizing repurchase agreements may bear maturities exceeding
13 months, and the Portfolio may also purchase bonds with longer final
maturities if such bonds pursuant to a demand feature provide for an earlier
redemption date within 13 months from the date of purchase.
Obligations of certain agencies and instrumentalities of the U.S.
Government, such as the Government National Mortgage Association and the
Export-Import Bank of the United States, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the right of the issuer to borrow from
the Treasury; others are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others, such as those of
the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation,
are supported only by the credit of the instrumentality. No assurance can be
given that the U.S. Government would provide financial support to U.S.
Government-sponsored agencies or instrumentalities if it is not obligated to do
so by law.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of principal
if held to maturity. However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a shareholder owns shares
of the Portfolio. See "Investment Policies -- Core Fixed Income Portfolio" for
a description of obligations of certain agencies, enterprises and
instrumentalities of the U.S. Government. Securities in which the Government
Cash Portfolio may invest may not earn as much income as longer term and/or
lower quality securities.
The Government Cash Portfolio may only invest in: (i) securities rated in
the two highest rating categories of a nationally recognized statistical rating
organization (an "NRSRO"), provided that if they are rated by more than one
NRSRO, at least one other NRSRO rates them in one of its two highest
categories; and (ii) unrated securities determined to be of comparable quality
at the time of purchase (collectively, "Eligible Securities"). The rating
symbols of the NRSROs which the Fund may use are described in the Appendix in
the Statement of Additional Information.
For a description of other securities in which the Portfolio may invest,
see "Common Investment Policies and Risk Factors."
TAX-EXEMPT CASH PORTFOLIO
The objective of the Tax-Exempt Cash Portfolio is to provide maximum
current interest income exempt from Federal income taxes consistent with the
preservation of capital and liquidity. The Tax-Exempt Cash Portfolio seeks to
achieve its objective by investing primarily in short-term, high quality
Municipal Obligations (defined below). Under normal circumstances, at least 80%
of the net assets of the Portfolio will be invested in Municipal Obligations,
the interest on which, in the opinion of bond counsel or the issuer's counsel,
is exempt from regular Federal income tax and does not constitute an item of
tax preference for purposes of the Federal alternative minimum tax ("Tax-Exempt
Interest"). Glenmede Fund will use its best efforts to not invest any of the
Tax-Exempt Cash Portfolio's assets in Municipal Obligations the interest on
which constitutes an item of tax preference for purposes of the Federal
alternative minimum tax.
Municipal Obligations in which the Portfolio may invest include the
following, provided at the time of purchase they are Eligible Securities which
the Advisor believes presents minimal credit risk: project notes, demand notes,
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short-term municipal obligations (including tax anticipation notes, revenue
anticipation notes, bond anticipation notes, tax and revenue anticipation
notes, construction loan notes, and short-term discount notes) rated SP-1+ or
SP-1 by S&P or MIG-1 by Moody's; tax-exempt commercial paper rated A-1+ or A-1
by S&P or Prime-1 by Moody's; municipal bonds with a remaining effective
maturity of 13 months or less, rated AA or better by S&P or Aa or better by
Moody's; variable rate demand notes rated "VMIG-1" by Moody's; and any
non-rated tax-exempt, privately placed securities which, in the Advisor's
opinion, are equivalent in credit quality to an AA or Aa-rated security as
determined by S&P or Moody's, respectively.
The Portfolio will invest in securities maturing within 13 months from the
date of purchase, except that securities collateralizing repurchase agreements
may bear maturities exceeding 13 months; and the Portfolio may purchase bonds
with final maturities exceeding 13 months if such bonds pursuant to a demand
feature provide for an earlier redemption date within 13 months from the date
of purchase.
Municipal Obligations. The two principal classifications of Municipal
Obligations are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special or specific excise tax or other specific revenue source such as the
user of the facility being financed. Revenue securities include private
activity bonds which are not payable from the unrestricted revenues of the
issuer. Consequently, the credit quality of private activity bonds is usually
directly related to the credit standing of the corporate user of the facility
involved.
Municipal Obligations may also include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which
created the issuer.
Municipal Obligations may include variable rate demand notes, provided
they are Eligible Securities. Such notes are frequently not rated by credit
rating agencies, but unrated notes will be purchased by the Portfolio if they
are comparable in quality at the time of the purchase to rated Eligible
Securities as determined by the Advisor. Where necessary to ensure that a note
is an Eligible Security, the Portfolio will require that the issuer's
obligation to pay the principal of the note be backed by an unconditional bank
letter or line of credit, guarantee or commitment to lend. While there may be
no active secondary market with respect to a particular variable rate demand
note purchased by the Portfolio, the Portfolio may, upon the notice specified
in the note, demand payment of the principal of the note at any time or during
specified periods not exceeding 13 months, depending upon the instrument
involved. The absence of such an active secondary market, however, could make
it difficult for the Portfolio to dispose of a variable rate demand note if the
issuer defaulted on its payment obligation or during the periods that the
Portfolio is not entitled to exercise its demand rights. The Portfolio could,
for this or other reasons, suffer a loss to the extent of the default. The
Portfolio invests in variable rate demand notes only when the Advisor deems the
investment to involve minimal credit risk. The Advisor also monitors the
continuing creditworthiness of issuers of such notes and parties providing
credit enhancement to determine whether the Portfolio should continue to hold
the notes.
For a further discussion of Municipal Obligations, see the Appendix to the
Statement of Additional Information.
For a description of other securities in which the Portfolio may invest,
see "Common Investment Policies and Risk Factors."
CORE FIXED INCOME PORTFOLIO
The objective of the Core Fixed Income Portfolio is to provide maximum,
long-term total return consistent with reasonable risk to principal. The Core
Fixed Income Portfolio seeks to achieve its objective by investing primarily in
a diversified portfolio of mortgage-backed securities and fixed income
securities issued by the U.S. Treasury, U.S. Government agencies, or other
agencies, enterprises or instrumentalities sponsored by the U.S. Government.
The Portfolio seeks to achieve consistent results over the long-term. While
portfolio securities will be traded, the Portfolio is not expected to engage in
active trading under normal circumstances. The net asset value of the Portfolio
will fluctuate, and it is anticipated that the Portfolio will maintain an
average weighted maturity of 3 to 10 years.
The Portfolio may invest in the following securities: (i) straight-debt
and mortgage-backed obligations issued by the U.S. Government or its sponsored
agencies, enterprises or instrumentalities; (ii) securities of international
institutions which are not direct obligations of the U.S. Government but which
involve governmental agencies, enterprises or instrumentalities; (iii) any
other publicly or privately placed, unrated securities issued by the U.S.
Government, its
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agencies, enterprises or instrumentalities, which, in the Advisor's opinion,
are equivalent in credit quality to securities rated at least A by S&P or
Moody's; (iv) mortgage-backed and asset-backed obligations which are privately
issued with a rating of at least A by S&P or Moody's or which if unrated, are
in the Advisor's opinion equivalent in credit quality to securities so rated;
and (v) debt obligations of domestic and foreign companies rated at least A by
S&P or Moody's or which if unrated, are in the Advisor's opinion equivalent in
credit quality to securities so rated. Any of the above securities may be
variable or floating rate. Under normal circumstances, at least 65% of the Core
Fixed Income Portfolio's total assets will be invested in U.S. government
securities and repurchase agreements relating thereto, and no more than 35% of
the value of its total assets will be invested in the securities described in
(ii) and (v) of the first sentence of this paragraph.
Mortgage-Backed Obligations. Mortgage-backed obligations represent an
ownership interest in a pool of residential mortgage loans, the interests in
which are issued and guaranteed by an agency or instrumentality of the U.S.
Government, though not necessarily by the U.S. Government itself.
One such type of mortgage-backed obligation in which the Portfolio may
invest is a Government National Mortgage Association ("GNMA") Certificate. GNMA
Certificates are backed as to the timely payment of principal and interest by
the full faith and credit of the U.S. Government. Another type is a Federal
National Mortgage Association ("FNMA") Certificate; the principal and interest
of which are guaranteed only by FNMA itself, not by the full faith and credit
of the U.S. Government. Another type is a Federal Home Loan Mortgage
Association ("FHLMC") Participation Certificate. This type of obligation is
guaranteed by FHLMC as to timely payment of principal and interest. However,
like a FNMA security, it is not guaranteed by the full faith and credit of the
U.S. Government. Another type is a privately issued obligation with a rating of
at least A by S&P or Moody's or which if unrated, is in the Advisor's opinion
equivalent in credit quality to securities so rated. Mortgage-backed
obligations issued by private issuers, whether or not such obligations are
subject to guarantees by the private issuer, may entail greater risk than
obligations directly or indirectly guaranteed by the U.S. Government.
Mortgage-backed obligations are characterized by monthly payments to the
security holder, reflecting the monthly payments, net of certain fees, made by
the mortgagors of the underlying mortgage loans. The payments to the security
holders (such as the Portfolio), similar to the payments on the underlying
loans, represent both principal and interest. Although the underlying mortgage
loans are for specified periods of time (such as thirty years) the borrowers
can, and typically do, repay them sooner. Thus, the security holders frequently
receive prepayments of principal, in addition to the principal which is part of
the regular monthly payments. A borrower is more likely to prepay a mortgage
which bears a relatively high rate of interest. Therefore, in times of
declining interest rates, some of the Portfolio's higher yielding securities
might be repaid and thereby converted to cash and the Portfolio will be forced
to accept lower interest rates when that cash is used to purchase additional
securities. The Portfolio normally will not distribute principal payments
(whether regular or prepaid) to its shareholders. Interest received by the
Portfolio will, however, be distributed to shareholders in the form of
dividends. For a further discussion of mortgage-backed obligations, see the
Appendix to the Statement of Additional Information.
Asset-Backed Securities. Asset-backed securities consist of undivided
fractional interests in pools of consumer loans or receivables held in a trust.
Examples include certificates for automobile receivables and credit card
receivables. Payments of principal and interest on the loans or receivables are
passed through to certificate holders. Asset-backed securities are not issued
or guaranteed by the the U.S. Government or its agencies or instrumentalities,
they may be guaranteed up to a certain amount by a private issuer, however,
through a letter of credit. Payment on asset-backed securities of private
issuers is typically supported by some form of credit enhancement, such as a
letter of credit, surety bond, limited guaranty, or subordination. The extent
of credit enhancement varies, but usually amounts to only a fraction of the
asset-backed security's par value until exhausted. Ultimately, asset-backed
securities are dependent upon payment of the consumer loans or receivables by
individuals, and the certificate holder frequently has no recourse to the
entity that originated the loans or receivables.
An asset-backed security's underlying assets may be prepaid with the
result of shortening the certificate's weighted average life. Prepayment rates
vary widely and may be affected by changes in market interest rates. It is not
possible to accurately predict the average life of a particular pool of loans
or receivables. The proceeds of prepayments received by the Portfolio must be
reinvested in securities whose yields reflect interest rates prevailing at the
time. Thus, the Portfolio's ability to maintain a portfolio which includes
high-yielding asset-backed securities will be adversely affected to the extent
reinvestments are in lower yielding securities. The actual maturity and
realized yield will therefore vary based upon the prepayment experience of the
underlying asset pool and prevailing interest rates at the time of prepayment.
Asset-backed securities may be subject to greater risk of default during
periods of economic
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downturn than other instruments. Also, while the secondary market for
asset-backed securities is ordinarily quite liquid, in times of financial
stress the secondary market may not be as liquid as the market for other types
of securities, which could result in the Portfolio's experiencing difficulty in
valuing or liquidating such securities.
Debt Obligations. Debt obligations of domestic and foreign companies may
include a broad range of fixed and variable rate bonds, debentures and notes.
Although government-guaranteed or sponsored securities reduce credit risk
(the possibility that issuers of bonds will default on payments of interest and
principal), the Portfolio's shares are still subject to the risk of market
value fluctuations inherent in owning fixed income securities, including
securities of international institutions and corporate debt obligations. The
market value of securities held by the Core Fixed Income Portfolio is expected
to vary according to, among other factors, changes in prevailing interest rates
and the average weighted maturity of the Portfolio maintained by the Advisor.
In general, if interest rates increase from the time a fixed income investment
is made, the market value of that investment is likely to decline. Similarly,
if interest rates fall from the time a fixed income investment is made, the
market value of that investment is likely to increase. Also, in general, for a
given change in interest rates, a fixed income investment with a longer
maturity is likely to fluctuate more in market value than a comparable
investment with a shorter maturity. An investment in the Core Fixed Income
Portfolio is expected to be subject to such market risks.
For a description of other securities in which the Core Fixed Income
Portfolio may invest, see "Common Investment Policies and Risk Factors."
MUNI INTERMEDIATE PORTFOLIO AND NEW JERSEY MUNI PORTFOLIO
The objective of each of the Muni Intermediate and New Jersey Muni
Portfolios is to seek as high a level of current income exempt from Federal
income tax as is consistent with preservation of capital. To the extent
possible, the Muni Intermediate Portfolio seeks to achieve its objective by
investing primarily in intermediate and long-term Municipal Obligations issued
by the Commonwealth of Pennsylvania and its political subdivisions, agencies,
instrumentalities and authorities ("Pennsylvania Municipal Obligations") and
the New Jersey Muni Portfolio seeks to achieve its objective by investing
primarily in intermediate and long-term Municipal Obligations issued by the
State of New Jersey and its political subdivisions, agencies, instrumentalities
and authorities ("New Jersey Municipal Obligations"). Municipal Obligations
acquired by these Portfolios will be rated at the time of purchase within the
three highest ratings assigned by Moody's (i.e., Aaa, Aa, A) or by S&P (AAA,
AA, A) in the case of bonds, rated SP-1 or higher by S&P or MIG-2 or higher by
Moody's in the case of notes, rated A-1 or higher by S&P or Prime-1 or higher
by Moody's in the case of tax-exempt commercial paper or in unrated securities
determined by the Advisor at the time of purchase to be of comparable quality.
If a portfolio security is reduced below A by Moody's or S&P, the Advisor will
dispose of the security in an orderly fashion as soon as practicable. The Muni
Intermediate and New Jersey Muni Portfolios may not be able to achieve as high
a level of current income under all market conditions as would be possible if
they were permitted to invest in lower quality and longer term securities
which, however, generally are less liquid, have greater market risk and are
generally subject to more fluctuation of market value. See "Investment
Policies--Tax-Exempt Cash Portfolio" for a description of Municipal Obligations
and the Appendix to the SAI for a description of Moody's and S&P's ratings.
To the extent possible, during normal market conditions at least 65% of
the net assets of the New Jersey Muni Portfolio will be invested in New Jersey
Municipal Obligations. It is anticipated that the New Jersey Portfolio and the
Muni Intermediate Portfolio will each maintain an average weighted maturity of
three to ten years.
During normal market conditions: up to 20% of each Portfolio's net assets
may be invested in securities which are not Municipal Obligations; and at least
80% of the Portfolio's net assets will be invested in intermediate and long-term
Municipal Obligations, the interest on which is Tax-Exempt Interest. Each of
the Portfolios may invest up to 20% of its net assets in Municipal Obligations,
the interest on which is exempt from regular Federal income tax but is an item
of tax preference for purposes of the Federal alternative minimum tax. During
temporary defensive periods, each Portfolio may invest without limitation in
obligations which are not Municipal Obligations and may hold without limitation
uninvested cash reserves. Such securities may include, without limitation,
bonds, notes, variable rate demand notes and commercial paper, provided such
securities are rated within the relevant categories applicable to Municipal
Obligations set forth above, or if unrated, are of comparable quality as
determined by the Advisor and may also include, without limitation, other debt
obligations, such as bank obligations which are also of comparable quality as
determined by the Advisor. Each Portfolio may acquire "stand-by commitments"
with respect to Municipal Obligations held by it. Under a stand-by commitment,
a dealer agrees to purchase, at the Portfolio's option, specified
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Municipal Obligations at a specified price. The acquisition of a stand-by
commitment may increase the cost, and thereby reduce the yield, of the
Municipal Obligation to which such commitment relates. Each Portfolio will
acquire stand-by commitments solely to facilitate portfolio liquidity and does
not intend to exercise its rights thereunder for trading purposes.
Each Portfolio is classified as non-diversified under the Investment
Company Act of 1940, as amended (the "1940 Act"). Investment returns on a
non-diversified portfolio typically are dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. Consequently, the change in value of any one security may affect the
overall value of a non-diversified portfolio more than it would a diversified
portfolio. Additionally, a non-diversified portfolio may be more susceptible to
economic, political and regulatory developments than a diversified portfolio
with a similar objective.
Since each of the Muni Intermediate and New Jersey Muni Portfolios will
invest primarily in securities issued by issuers located in one state, each of
these Portfolios is susceptible to adverse changes in value due to changes in
the economic condition and governmental policies of that state and its
political subdivisions, agencies, instrumentalities and authorities. A
comparable municipal bond fund which is not concentrated in obligations issued
by issuers located in one state would be less susceptible to these risks. If
any issuer of securities held by one of these Portfolios is unable to meet its
financial obligations, that Portfolio's income, capital, and liquidity may be
adversely affected.
With respect to the Commonwealth of Pennsylvania, although the balance in
the General Fund of the Commonwealth (the principal operating fund of the
Commonwealth) experienced deficits in fiscal 1990 and 1991, tax increases and
spending decreases have resulted in surpluses the last several years; as of
June 30, 1996, the General Fund had a surplus of $635.2 million. The deficit in
the Commonwealth's unreserved/undesignated funds also has been eliminated.
The concentration of investments by the New Jersey Muni Portfolio in New
Jersey Municipal Obligations also raises special investment considerations. The
State of New Jersey generally has a diversified economic base consisting of,
among others, commerce and service industries, selective commercial
agriculture, insurance, tourism, petroleum refining and manufacturing, although
New Jersey's manufacturing industry has shown a downward trend in the last few
years. New Jersey is a major recipient of Federal assistance and, of all the
states, is among the highest in the amount of Federal aid received. Therefore,
a decrease in Federal financial assistance may adversely affect New Jersey's
financial condition. While New Jersey's economic base has become more
diversified over time and thus its economy appears to be less vulnerable during
recessionary periods, a recurrence of high levels of unemployment could
adversely affect New Jersey's overall economy and its ability to meet its
financial obligations. In addition, because New Jersey maintains a balanced
budget which restricts total appropriation increases to only 5% annually to any
municipality or county, the balanced budget plan may actually adversely affect
a particular municipality's or county's ability to repay its obligations.
See "Common Investment Policies and Risk Factors" for a description of
other investment policies.
COMMON INVESTMENT POLICIES AND RISK FACTORS
There can be no assurance that any of the Portfolios will achieve its
stated investment objective. There are a number of investment policies common
to each of the Portfolios.
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements with qualified
brokers, dealers, banks and other financial institutions deemed creditworthy by
the Advisor. Under normal circumstances, however, the Muni Intermediate and New
Jersey Muni Portfolios will not enter into repurchase agreements if entering
into such agreements would cause, at the time of entering into such agreements,
more than 20% of the value of the total assets of the particular Portfolio to
be subject to repurchase agreements.
In a repurchase agreement, a Portfolio purchases a security and
simultaneously commits to resell that security at a future date to the seller
(a qualified bank or securities dealer) at an agreed upon price plus an agreed
upon market rate of interest (itself unrelated to the coupon rate or date of
maturity of the purchased security). The securities held subject to a
repurchase agreement may have stated maturities exceeding 13 months, provided
that with respect to the Cash Portfolios, the repurchase agreement itself
matures in less than 13 months. The Advisor currently expects that repurchase
agreements with respect to the Core Fixed Income, Muni Intermediate and New
Jersey Muni Portfolios also will mature in less than 13 months. The seller
under a repurchase agreement will be required to maintain the value of the
securities subject to the agreement at not less than 101% of the repurchase
price including accrued interest. The
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Funds' administrator will mark to market daily the value of the securities
purchased, and the Advisor will, if necessary, require the seller to deposit
additional securities to ensure that the value is in compliance with the 101%
requirement stated above. The Advisor will consider the creditworthiness of a
seller in determining whether a Portfolio should enter into a repurchase
agreement, and the Portfolios will only enter into repurchase agreements with
banks and dealers which are determined to present minimal credit risk by the
Advisor under procedures adopted by the Board members.
In effect, by entering into a repurchase agreement, a Portfolio is lending
its funds to the seller at the agreed upon interest rate, and receiving a
security as collateral for the loan. Such agreements can be entered into for
periods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
The use of repurchase agreements involves certain risks. For example, if
the seller of a repurchase agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of these securities has
declined, a Portfolio may incur a loss upon disposition of them. Default by the
seller would also expose a Portfolio to possible loss because of delays in
connection with the disposition of the underlying obligations. If the seller of
an agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a bankruptcy court may determine that
the underlying securities are collateral not within the control of a Portfolio
and therefore subject to sale by the trustee in bankruptcy. Further, it is
possible that a Portfolio may not be able to substantiate its interest in the
underlying securities.
REVERSE REPURCHASE AGREEMENTS
The Government Cash and Core Fixed Income Portfolios may enter into
reverse repurchase agreements. In a reverse repurchase agreement a Portfolio
sells a security and simultaneously commits to repurchase that security at a
future date from the buyer. In effect, the Portfolio is temporarily borrowing
funds at an agreed upon interest rate from the purchaser of the security, and
the sale of the security represents collateral for the loan. The Portfolio
retains record ownership of the security and the right to receive interest and
principal payments on the security. At an agreed upon future date, the
Portfolio repurchases the security by remitting the proceeds previously
received, plus interest. In certain types of agreements, there is no agreed
upon repurchase date and interest payments are calculated daily, often based on
the prevailing overnight repurchase rate. These agreements, which are treated
as if reestablished each day, are expected to provide the Government Cash
Portfolio and the Core Fixed Income Portfolio with a flexible borrowing tool.
Reverse repurchase agreements are considered to be borrowings by a Portfolio
under the 1940 Act.
A Portfolio's investment of the proceeds of a reverse repurchase agreement
is the speculative factor known as leverage. The Portfolio may enter into a
reverse repurchase agreement only if the interest income from investment of the
proceeds is greater than the interest expense of the transaction and the
proceeds are invested for a period no longer than the term of the agreement. A
Portfolio will maintain with the custodian a separate account with a segregated
portfolio of liquid securities at least equal to its purchase obligations under
these agreements. The Advisor will consider the creditworthiness of the other
party in determining whether a Portfolio will enter into a reverse repurchase
agreement.
The Government Cash and Core Fixed Income Portfolios are each permitted to
invest up to one-third of each of their total assets in reverse repurchase
agreements and securities lending transactions. Investments in reverse
repurchase agreements and securities lending transactions will be aggregated
for purposes of this investment limitation.
The use of reverse repurchase agreements involves certain risks. For
example, the other party to the agreement may default on its obligation or
become insolvent and unable to deliver the securities to the Portfolio at a
time when the value of the securities has increased. Reverse repurchase
agreements also involve the risk that a Portfolio may not be able to
substantiate its interest in the underlying securities.
BORROWING
As a temporary measure for extraordinary or emergency purposes, a
Portfolio may borrow money from banks. However, none of the Portfolios will
borrow money for speculative purposes.
LENDING OF SECURITIES
Each Portfolio may lend its portfolio securities with a value of up to
one-third of its total assets (including the value of the collateral for the
loans) to qualified brokers, dealers, banks and other financial institutions
for the purpose
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of realizing additional net investment income through the receipt of interest
on the loan. Such loans would involve risks of delay in receiving additional
collateral in the event the value of the collateral decreased below the value
of the securities loaned or of delay in recovering the securities loaned or
even loss of rights in the collateral should the borrower of the securities
fail financially. Loans will be made only to borrowers deemed by the Advisor to
be of good standing.
MUNICIPAL OBLIGATIONS
The Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios may
each invest 25% or more of its net assets in Municipal Obligations, the
interest on which is paid solely from revenues of similar projects, and may
invest up to 20% of its total assets in private activity bonds when added
together with any taxable investments held by the Portfolio when, in the
opinion of the Advisor, the investment is warranted. To the extent a
Portfolio's assets are invested in Municipal Obligations payable from the
revenues of similar projects or are invested in private activity bonds, the
particular Portfolio will be subject to the peculiar risks presented by the
laws and economic conditions relating to such projects and bonds to a greater
extent than it would be if its assets were not so invested.
"WHEN ISSUED," "DELAYED SETTLEMENT" AND "FORWARD DELIVERY" SECURITIES
The Portfolios may purchase and sell securities on a "when issued,"
"delayed settlement" or "forward delivery" basis. "When issued" or "forward
delivery" refers to securities whose terms and indenture are available and for
which a market exists, but which are not available for immediate delivery. When
issued or forward delivery transactions may be expected to occur one month or
more before delivery is due. Delayed settlement is a term used to describe
settlement of a securities transaction in the secondary market which will occur
sometime in the future. No payment or delivery is made by a Portfolio in a when
issued, delayed settlement or forward delivery transaction until the Portfolio
receives payment or delivery from the other party to the transaction. A
Portfolio will maintain a separate account of cash, U.S. Government securities
or other high grade debt obligations at least equal to the value of purchase
commitments until payment is made. Such segregated securities will either
mature or, if necessary, be sold on or before the settlement date. Although a
Portfolio receives no income from the above described securities prior to
delivery, the market value of such securities is still subject to change. A
Portfolio receives no income from "when issued," "delayed settlement" or
"forward delivery" securities prior to delivery of such securities.
A Portfolio will engage in when issued transactions to obtain what is
considered to be an advantageous price and yield at the time of the
transaction. When a Portfolio engages in when issued, delayed settlement or
forward delivery transactions, it will do so for the purpose of acquiring
securities consistent with its investment objective and policies and not for
the purpose of speculation. Each Portfolio's when issued, delayed settlement
and forward delivery commitments are not expected to exceed 25% of its total
assets absent unusual market circumstances, and each Portfolio will only sell
securities on such a basis to offset securities purchased on such a basis.
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INVESTMENT COMPANY SECURITIES
In connection with the management of their daily cash positions, the
Portfolios may each invest in securities issued by other open-end investment
companies with investment objectives and policies that are consistent with
those of the investing portfolio. Except as otherwise permitted under the 1940
Act, each Portfolio limits its investments so that, as determined immediately
after a securities purchase is made: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of the value of its total assets will be invested in the
aggregate in the securities of investment companies as a group; and (c) not
more than 3% of the outstanding voting stock of any one investment company will
be owned by the Portfolio. As a shareholder of another investment company, the
Portfolio would bear its pro rata portion of the other investment company's
advisory fees and other expenses, in addition to the expenses the Portfolio
bears directly in connection with its own operations.
ILLIQUID SECURITIES
No Portfolio will invest more than 10% of its net assets in securities
that are illiquid.
Unless specified above and except as described under "Investment
Limitations," the foregoing investment policies are not fundamental, and the
particular Funds' Board members may change such policies without shareholder
approval.
PURCHASE OF SHARES
Shares of each Portfolio are sold without a sales commission on a
continuous basis to the Advisor acting on behalf of its or an Affiliate's
clients ("Clients") and to other institutions (the "Institutions"), at the net
asset value per share
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next determined after receipt of the purchase order by the transfer agent. See
"Valuation of Shares." The minimum initial investment for each Portfolio is
$25,000; the minimum for subsequent investments for each Portfolio is $1,000.
The Funds reserve the right to reduce or waive the minimum initial and
subsequent investment requirements from time to time. Beneficial ownership of
shares will be reflected on books maintained by the Advisor or the
Institutions. A prospective investor wishing to purchase shares in the Funds
should contact the Advisor or his or her Institution.
It is the responsibility of the Advisor or Institutions to transmit orders
for share purchases to Investment Company Capital Corp. ("ICC"), the Funds'
transfer agent, and deliver required funds to The Chase Manhattan Bank, N.A.,
Brooklyn, New York, the Funds' custodian, on a timely basis. Shares purchased
in the Cash Portfolios before 12:00 noon (Eastern time) begin earning dividends
on the same business day provided Federal funds are available to the particular
Portfolio before 12:00 noon (Eastern time) that day.
The Funds reserve the right, in its sole discretion, to suspend the
offering of shares of its Portfolios or reject purchase orders when, in the
judgment of management, such suspension or rejection is in the best interests
of the Fund.
Purchases of a Portfolio's shares will be made in full and fractional
shares of the Portfolio calculated to three decimal places. In the interest of
economy and convenience, certificates for shares will not be issued except upon
the written request of the shareholder. Certificates for fractional shares,
however, will not be issued.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the
redemption request by the transfer agent. Generally, a properly signed written
request is all that is required. Any redemption may be more or less than the
purchase price of the shares depending on the market value of the investment
securities held by the Portfolio. An investor wishing to redeem shares should
contact the Advisor or his or her Institution. It is the responsibility of the
Advisor or Institutions to transmit promptly redemption orders to the transfer
agent.
Payment of the redemption proceeds will ordinarily be made within one
business day, but in no event more than seven days, after receipt of the order
in proper form by the transfer agent. Redemption orders are effected at net
asset value per share next determined after receipt of the order in proper form
by the transfer agent. The Funds may suspend the right of redemption or
postpone the date of payment at times when the New York Stock Exchange (the
"Exchange") is closed, or under any emergency circumstances as determined by
the Securities and Exchange Commission (the "Commission"). See "Valuation of
Shares" for the days on which the Exchange is closed.
If the Funds' Board determines that it would be detrimental to the best
interests of the remaining shareholders of the Funds to make payment wholly or
partly in cash, the Funds may pay the redemption proceeds in whole or in part
by a distribution in-kind of securities held by a Portfolio in lieu of cash in
conformity with applicable rules of the Commission. Investors may incur
brokerage charges on the sale of portfolio securities received as a redemption
in kind.
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION
OF SHARES OF THE PORTFOLIOS
The Funds may, from time to time, in its sole discretion appoint one or
more entities as its agent to receive purchase and redemption orders of shares
of the Portfolios and cause these orders to be transmitted, on a net basis, to
the Funds' transfer agent. In these instances, orders are effected at the net
asset value per share next determined after receipt of that order by the
entity, if the order is actually received by the Funds' transfer agent not
later than the next business morning.
VALUATION OF SHARES
The net asset value of the Portfolios is determined by dividing the total
market value of each Portfolio's investments and other assets, less any
liabilities of that Portfolio, by the total outstanding shares of that
Portfolio. For the Cash Portfolios, net asset value per share is determined as
of 12:00 noon (Eastern time) on each day that the Exchange is open for business
(an "Exchange Business Day"). Currently the Exchange is closed on weekends and
the customary national business holidays of New Year's Day, Dr. Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day (or the days on which they are
observed). For the Core Fixed Income, Muni Intermediate and New Jersey Muni
Portfolios, net asset value per share
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is determined as of the close of regular trading hours of the Exchange on each
Exchange Business Day on which the Portfolio receives an order to purchase or
redeem its shares. One or more pricing services may be used to provide
securities valuations in connection with the determination of the net asset
value of each Portfolio.
GOVERNMENT CASH AND TAX-EXEMPT CASH PORTFOLIOS
For the purpose of calculating each Cash Portfolio's net asset value per
share, securities are valued by the "amortized cost" method of valuation, which
does not take into account unrealized gains or losses. The amortized cost
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than
the price the Portfolio would receive if it sold the instrument.
The use of amortized cost and the maintenance of each Portfolio's per
share net asset value at $1.00 is based on its election to operate under the
provisions of Rule 2a-7 under the 1940 Act. As a condition of operating under
that Rule, each Cash Portfolio must maintain an average weighted maturity of 90
days or less, purchase only instruments deemed to have remaining maturities of
13 months or less, and invest only in securities which are determined by the
Advisor, pursuant to procedures established by the Board, to present minimal
credit risks and which are Eligible Securities, pursuant to procedures
established by the Board.
The Board has established procedures reasonably designed to stabilize the
net asset value per share for the purposes of sales and redemptions at $1.00.
These procedures include daily review of the relationship between the amortized
cost value per share and a net asset value per share based upon available
indications of market value.
In the event of a deviation of over 1/2 of 1% between a Cash Portfolio's
net asset value based upon available market quotations or market equivalents
and $1.00 per share based on amortized cost, the Board members will promptly
consider what action, if any, should be taken. The Board members also will take
such action as they deem appropriate to eliminate or to reduce to the extent
reasonably practicable any material dilution or other unfair results which
might arise from differences between the two. Such action may include
redemption in kind, selling instruments prior to maturity to realize capital
gains or losses or to shorten the average weighted maturity, exercising puts,
withholding dividends, paying distributions from capital or capital gains or
utilizing a net asset value per share as determined by using available market
quotations.
The net asset value per share of each Cash Portfolio will ordinarily
remain at $1.00, but each Cash Portfolio's daily dividends will vary in amount.
There can be no assurance, however, that the Cash Portfolios will maintain a
constant net asset value per share of $1.00.
<PAGE>
CORE FIXED INCOME PORTFOLIO
Bonds and other fixed income securities are valued according to the
broadest and most representative market, which will ordinarily be the
over-the-counter market, at the most recent quoted bid price, or when stock
exchange valuations are used, at the latest quoted sale price on the day of
valuation. If there is not such a reported sale, the latest quoted bid price
will be used. Net asset value includes interest on fixed income securities
which is accrued daily. In addition, bond and other fixed income securities may
be valued on the basis of prices provided by a pricing service when the Advisor
believes such prices reflect the fair market value of such securities. The
prices provided by a pricing service are determined without regard to bid or
last sale prices but take into account institutional size trading in similar
groups of securities and any developments related to specific securities. Debt
securities with remaining maturities of 60 days or less are valued at amortized
cost, pursuant to which (i) such securities shall be valued initially at cost
on the date of purchase or, in the case of securities purchased with more than
60 days maturity, at their market or fair value on the 61st day prior to
maturity, and (ii) thereafter (absent unusual circumstances), a constant
proportionate amortization of any discount or premium shall be assumed until
maturity of the security.
The value of other assets and securities for which no quotations are
readily available (including restricted securities) is determined in good faith
at fair value using methods determined by the Board.
MUNI INTERMEDIATE AND NEW JERSEY MUNI PORTFOLIOS
Municipal Obligations for which quotations are readily available are
valued at the most recent quoted bid price provided by investment dealers,
provided that Municipal Obligations may be valued on the basis of prices
provided by a pricing service when such prices are determined by the
administrator to reflect the fair market value of such
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Municipal Obligations. Municipal Obligations for which market quotations are
not readily available are valued at fair market value as determined in good
faith by or under the direction of the particular Board. Debt obligations with
remaining maturities of 60 days or less are valued on the basis of amortized
cost, pursuant to which (i) such securities are valued initially at cost on the
date of purchase or, in the case of securities purchased with more than 60 days
maturity, at their market or fair value on the 61st day prior to maturity, and
(ii) thereafter (absent unusual circumstances), a constant proportionate
amortization of any discount or premium shall be assumed until maturity of the
security.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolios have the following dividend and capital gains policies:
(a) The Cash Portfolios declare dividends daily and normally distribute
substantially all of their net investment income to shareholders
monthly.
(b) The Core Fixed Income, Muni Intermediate and New Jersey Muni Portfolios
normally will distribute substantially all of their net investment
income to shareholders in the form of monthly dividends.
If any net capital gains are realized, the Portfolios normally distribute
such gains at least once a year. However, see "Dividends, Capital Gains
Distributions and Taxes--Federal Taxes--Miscellaneous," for a discussion of the
Federal excise tax applicable to certain regulated investment companies.
Undistributed net investment income is included in a Portfolio's net
assets for the purpose of calculating net asset value per share. Therefore, on
the Core Fixed Income, Muni Intermediate and New Jersey Muni Portfolios' "ex-
dividend" date, the net asset value per share excludes the dividend (i.e., is
reduced by the per share amount of the dividend). Dividends paid shortly after
the purchase of shares of the Core Fixed Income, Muni Intermediate and New
Jersey Muni Portfolios by an investor, although in effect a return of capital,
are taxable to the investor.
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Portfolio of liability for Federal income taxes to the
extent its earnings are distributed in accordance with the Code.
<PAGE>
Taxable Portfolios. Qualification as a regulated investment company under
the Code for a taxable year requires, among other things, that a taxable
Portfolio distribute to its shareholders an amount at least equal to 90% of its
investment company taxable income and 90% of its net exempt interest income (if
any) for such taxable year. In general, a Portfolio's investment company
taxable income will be its net investment income, including interest and
dividends, subject to certain adjustments, and net short-term capital gains and
excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year. Each Portfolio
intends to distribute as dividends substantially all of its investment company
taxable income each year. Such dividends will be taxable as ordinary income to
each Portfolio's shareholders who are not currently exempt from Federal income
taxes, whether such income or gain is received in cash or reinvested in
additional shares. The dividends received deduction for corporations will apply
to such ordinary income distributions to the extent the total qualifying
dividends received by a Portfolio are from domestic corporations for the
taxable year. It is anticipated that none of the dividends paid by the
Government Cash and Core Fixed Income Portfolios will be eligible for the
dividends received deduction.
Substantially all of each Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. A
Portfolio generally will have no tax liability with respect to such gains and
the distributions will be taxable to the shareholders who are not currently
exempt from Federal income taxes as mid-term or other long-term capital gains,
regardless of how long the shareholders have held the shares and whether such
gains are received in cash or reinvested in additional shares.
With respect to shares of the Core Fixed Income, Muni Intermediate and New
Jersey Muni Portfolios, a shareholder considering buying shares of a fund on or
just before the record date of a dividend should be aware that the amount of
the forthcoming dividend payment, although in effect a return of capital, will
be taxable.
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A taxable gain or loss may be realized by a shareholder upon redemption or
transfer of shares of the Core Fixed Income, Muni Intermediate and New Jersey
Muni Portfolios, depending upon the tax basis of such shares and their price at
the time of redemption or transfer.
Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios.
Exempt-interest dividends may be treated by shareholders as items of interest
excludable from their gross income under Section 103(a) of the Code, unless
under the circumstances applicable to the particular shareholder the exclusion
would be disallowed. (See "Additional Information Concerning Taxes" in the SAI.)
Distributions of net income may be taxable to investors under state or local law
as dividend income even though a substantial portion of such distributions may
be derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such income taxes.
If the Portfolio should hold certain private activity bonds issued after
August 7, 1986, shareholders must include, as an item of tax preference, the
portion of dividends paid by a Portfolio that is attributable to interest on
such bonds in their Federal alternative minimum taxable income for purposes of
determining liability (if any) for the alternative minimum tax. Corporate
shareholders must also take all exempt-interest dividends into account in
determining certain adjustments for Federal alternative minimum tax purposes.
For individuals, the alternative minimum tax rate is 26% for alternative
minimum taxable income in excess of an exemption amount and 28% for any amount
of alternative minimum taxable income in excess of the exemption amount plus
$175,000. For corporations, the alternative minimum tax rate is 20%.
Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
To the extent that dividends paid to shareholders are derived from taxable
interest or from long-term or short-term capital gains, such dividends will be
subject to Federal income tax (whether such dividends are paid in cash or
additional shares) and may also be subject to state and local taxes.
Miscellaneous. Dividends declared in October, November or December of any
year payable to shareholders of record on a specified date in such months will
be deemed to have been received by the shareholders and paid by a Portfolio on
December 31, in the event such dividends are paid during January of the
following year.
A 4% nondeductible excise tax is imposed on regulated investment companies
that fail to currently distribute specified percentages of their ordinary
taxable income and net capital gain (excess of capital gains over capital
losses). Each Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and any net capital gain prior to
the end of each calendar year to avoid liability for this excise tax.
<PAGE>
The foregoing summarizes some of the important tax considerations
generally affecting the Portfolios and their shareholders and is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Portfolios should consult their tax advisers with specific reference to
their own tax situation.
The foregoing discussion of tax consequences is based on tax laws and
regulations in effect on the date of this Prospectus, which are subject to
change by legislative or administrative action.
Shareholders will be advised at least annually as to the federal income
tax consequences of distributions made each year.
Each Portfolio will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or gross proceeds realized
upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, who are subject to withholding by
the IRS for failure properly to include on their return payments of taxable
interest or dividends, or who have failed to certify to the Portfolio that they
are not subject to backup withholding when required to do so or that they are
"exempt recipients."
PENNSYLVANIA TAX CONSIDERATIONS
Shareholders of the Muni Intermediate Portfolio will not be subject to
Pennsylvania Personal Income Tax on distributions from the Portfolio
attributable to interest income from Pennsylvania Municipal Obligations held by
the Portfolio, either when received by the Portfolio or when credited or
distributed to the shareholders. The exemption from Pennsylvania Personal
Income Tax also will extend to interest on obligations of the United States,
its territories and certain of its agencies and instrumentalities ("Federal
Securities"). Shareholders of the Portfolio will not be subject to the
Philadelphia School District Net Income Tax imposed on Philadelphia residents
on distributions from the Portfolio attributable to interest income from
Pennsylvania Municipal Obligations or Federal Securities held by the Portfolio,
either when received by the Portfolio or when credited or distributed to the
shareholders.
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For purposes of the Pennsylvania Personal Income Tax and the School
District Tax, distributions derived from investments in other than Pennsylvania
Municipal Obligations and Federal Securities and distributions from net
realized capital gains in respect of such investments will be taxable.
Distributions qualifying as capital gain dividends for Federal income tax
purposes are not taxable for purposes of the School District Tax. Gain on the
disposition of a share of the Muni Intermediate Portfolio will be subject to
the Pennsylvania Personal Income Tax and the School District Tax, except that
gain realized with respect to a share held for more than six months is not
subject to the School District Tax.
Shareholders of the Muni Intermediate Portfolio are not subject to the
Pennsylvania personal property tax imposed by many counties in Pennsylvania to
the extent that the Portfolio is comprised of Pennsylvania Municipal
Obligations and Federal Securities. In addition, Glenmede Fund has obtained a
Certificate of Authority to do business as a foreign corporation in
Pennsylvania, and currently does business in that state. Accordingly, the
shares of the Glenmede Fund will be exempt from Pennsylvania Personal Property
Taxes.
NEW JERSEY TAX CONSIDERATIONS
It is anticipated that substantially all dividends paid by the New Jersey
Muni Portfolio will not be subject to New Jersey personal income tax. In
accordance with the provisions of New Jersey law, as currently in effect,
distributions paid by a "qualified investment fund" will not be subject to the
New Jersey personal income tax to the extent that the distributions are
attributable to income received as interest or gain from New Jersey Municipal
Obligations, or as interest or gain from direct U.S. Government obligations.
Distributions by a qualified investment fund that are attributable to most
other sources will be subject to the New Jersey personal income tax. If the New
Jersey Muni Portfolio qualifies as a qualified investment fund under New Jersey
law, any gain on the redemption or sale of the Portfolio's shares will not be
subject to the New Jersey personal income tax. To be classified as a qualified
investment fund, at least 80% of the Portfolio's investment must consist of New
Jersey Municipal Obligations or direct U.S. Government obligations; it must
have no investments other than interest-bearing obligations, obligations issued
at a discount, and cash and cash items (including receivables) and financial
options, futures and forward contracts related to interest bearing obligations
issued at a discount; and it must satisfy certain reporting obligations and
provide certain information to its shareholders. Shares of the Portfolio are
not subject to property taxation by New Jersey or its political subdivisions.
To the extent that a shareholder is subject to state or local taxes outside New
Jersey, dividends earned by an investment in the Fund may represent taxable
income.
The New Jersey personal income tax is not applicable to corporations. For
all corporations subject to the New Jersey Corporation Business Tax, dividend
and distributions from a "qualified investment fund" are included in the net
income tax base for purposes of computing the Corporation Business Tax.
Furthermore, any gain upon the redemption or sale of Fund shares by a corporate
shareholder is also included in the net income tax base for purposes of
computing the Corporation Business Tax.
The foregoing is only a summary of certain New Jersey tax considerations
generally affecting the Portfolio and its shareholders, and is not intended as
a substitute for careful tax planning. Shareholders are urged to consult their
tax advisors with specific reference to their own tax situations.
OTHER STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions
from the Funds. A shareholder should consult with his or her tax adviser with
respect to the tax status of distributions from the Funds in a particular state
and locality.
INVESTMENT ADVISOR
The Advisor, a limited purpose trust company chartered in 1956, provides
fiduciary and investment services to endowment funds, foundations, employee
benefit plans and other institutions and individuals. The Advisor is a
wholly-owned subsidiary of The Glenmede Corporation and is located at One
Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania
19103. At December 31, 1997, the Advisor had over $13 billion in assets in the
accounts for which it serves in various capacities including as executor,
trustee or investment advisor.
Under Investment Advisory Agreements (the "Investment Advisory
Agreements") with the Funds, the Advisor, subject to the control and
supervision of the particular Fund's Board and in conformance with the stated
investment objective and policies of each Portfolio, manages the investment and
reinvestment of the assets of each Portfolio. It is the responsibility of the
Advisor to make investment decisions for the Portfolios and to place each
Portfolio's purchase and sales orders.
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The Advisor does not receive any fee from the Funds for its investment
services provided to the Portfolios described in this Prospectus. However,
shareholders in the Funds who are clients of the Advisor or an Affiliate pay
fees which vary depending on the capacity in which the Advisor or the Affiliate
provides fiduciary and investment services to the particular client (e.g.,
personal trust, estate settlement, advisory and custodian services).
Shareholders in the Funds who are customers of other Institutions may pay fees
to those Institutions.
Mary Ann B. Wirts, First Vice President and Manager of the Fixed Income
Division of the Advisor, has been the portfolio manager primarily responsible
for the management of the Tax-Exempt Cash Portfolio since that Portfolio
commenced operations. Since November 1, 1996, Mrs. Wirts has also been the
portfolio manager primarily responsible for the management of the Government
Cash Portfolio. Mrs. Wirts has been employed by the Advisor since 1982.
Laura LaRosa is the portfolio manager primarily responsible for the
management of the Muni Intermediate and New Jersey Muni Portfolios. Ms. LaRosa
has been primarily responsible for the management of those Portfolios since
November 1994. Prior to her employment with the Advisor, Ms. LaRosa was Vice
President of Institutional Sales at Hopper Soliday, Philadelphia from 1986
through October 1994. Ms. LaRosa has been employed by the Advisor since
November 1994.
Timothy M. Woolley, CFA is the portfolio manager primarily responsible for
the management of the Core Fixed Income Portfolio. Mr. Woolley has been
primarily responsible for the management of this Portfolio since January 1,
1998. Mr. Woolley is a Fixed Income Portfolio Manager and analyst specializing
in mortgage-backed securities. Prior to his employment with the Adviser, Mr.
Woolley was with Meridian Capital Markets and Meridian Bank for five years,
most recently serving as Vice President specializing in mortgage research. Mr.
Woolley had been employed by the Adviser since 1994.
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES
ICC serves as the Funds' administrator, transfer agent and dividend paying
agent pursuant to a Master Services Agreement, and in those capacities
supervises all aspects of the Funds' day-to-day operations, other than
management of the Funds' investments. ICC is an indirect subsidiary of Bankers
Trust New York Corporation. For its services as administrator, transfer agent
and dividend paying agent, ICC is entitled to receive fees from the Funds equal
to .12% of the first $100 million of the combined net assets of the Funds; .08%
of the next $150 million of the combined net assets of the Funds; .04% of the
next $500 million of the combined net assets of the Funds and .03% of the
combined net assets of the Funds over $750 million. For the fiscal year ended
October 31, 1997, ICC received fees at the rate of .04% of the Government Cash
Portfolio's average net assets; .04% of the Tax-Exempt Cash Portfolio's average
net assets; .04% of the Core Fixed Income Portfolio's average net assets; .04%
of the Muni Intermediate Portfolio's average net assets; and .04% of the New
Jersey Muni Portfolio's average net assets.
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SHAREHOLDER SERVICING PLANS
Glenmede Portfolios has adopted a Shareholder Servicing Plan effective
January 1, 1995 and Glenmede Fund has adopted an Amended and Restated
Shareholder Servicing Plan (collectively, the "Plans") effective January 1,
1998 under which the Funds may pay a fee to broker/dealers, banks and other
financial institutions (including the Advisor and its affiliates) that are
dealers of record or holders of record or which have a servicing relationship
("Servicing Agents") with the beneficial owners of shares in any of the
Portfolios. Under the Plans, Servicing Agents enter into Shareholder Servicing
Agreements (the "Agreements") with the Funds. Pursuant to such Agreements,
Servicing Agents provide shareholder support services to their clients
("Customers") who beneficially own shares of the Portfolios. The fee, which is
at an annual rate of .05%, is computed monthly and is based on the average
daily net assets of the shares beneficially owned by Customers of such
Servicing Agents. All expenses incurred by the Portfolios in connection with
the Agreements and the implementation of the Plans shall be borne entirely by
the holders of the shares of the particular Portfolio involved and will result
in an equivalent increase to each Portfolio's Total Annual Portfolio Operating
Expenses. The Advisor has entered into an Agreement with the Funds.
The services provided by the Servicing Agents under the Agreements may
include aggregating and processing purchase and redemption requests from
Customers and transmitting purchase and redemption orders to the transfer
agent; providing Customers with a service that invests the assets of their
accounts in shares pursuant to specific or pre-authorized instructions;
processing dividend and distribution payments from the Funds on behalf of
Customers; providing information periodically to Customers showing their
positions; arranging for bank wires; responding to Customers' inquiries
concerning their investments; providing sub-accounting with respect to shares
beneficially owned
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by Customers or the information necessary for sub-accounting; if required by
law, forwarding shareholder communications (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to Customers; and providing such other similar services as may
be reasonably requested.
INVESTMENT LIMITATIONS
Each Portfolio will not:
(a) purchase more than 10% of any class of the outstanding voting securities
of any issuer;
(b) acquire any securities of companies within one industry if, as a result
of such acquisition, more than 25% of the value of the Portfolio's total
assets would be invested in securities of companies within such
industry; provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government, its
agencies, enterprises or instrumentalities;
(c) pledge, mortgage, or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value, except as described
in this Prospectus and the Statement of Additional Information and in
connection with entering into futures contracts, but the deposit of
assets in a segregated account in connection with the writing of covered
put and call options and the purchase of securities on a when issued,
delayed settlement or forward delivery basis and collateral arrangements
with respect to initial or variation margin for futures contracts will
not be deemed to be pledges of a Portfolio's assets or the purchase of
any securities on margin for purposes of this investment limitation;
(d) issue senior securities except that a Portfolio may borrow money in
accordance with investment limitation (e), purchase securities on a when
issued, delayed settlement or forward delivery basis and enter into
reverse repurchase agreements; and
(e) borrow money except as a temporary measure for extraordinary or
emergency purposes, and then not in excess of 10% of its total assets at
the time of borrowing (entering into reverse repurchase agreements and
purchasing securities on a when issued, delayed settlement or forward
delivery basis are not subject to this investment limitation).
With respect to investment limitation (b), (a) there is no limitation with
respect to (i) instruments issued or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia
or any of their authorities, agencies, instrumentalities or political
subdivisions, and (ii) repurchase agreements secured by the instruments
described in clause (i); (b) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are primarily
related to financing the activities of the parents; and (c) utilities will be
divided according to their services; for example, gas, gas transmission,
electric and gas, electric and telephone will each be considered a separate
industry.
Each Portfolio, with the exceptions of the Muni Intermediate and New
Jersey Muni Portfolios, also will not:
(a) with respect to 75% of its total assets, invest more than 5% of its
total assets at the time of purchase in the securities of any single
issuer (other than obligations issued or guaranteed by the U.S.
Government, its agencies, enterprises or instrumentalities).
Pursuant to Rule 2a-7 under the 1940 Act, each of the Government Cash
Portfolio and the Tax-Exempt Cash Portfolio may not invest more than 5% of its
total assets in securities of any one issuer (other than U.S. Government
securities, repurchase agreements collateralized by such obligations, certain
money market fund securities and securities subject to certain guarantees which
are issued by persons that, directly or indirectly, do not control and are not
controlled by or under common control with the issuer). Each of these
Portfolios may, however, invest more than 5% of its total assets in First Tier
Securities (as defined in Rule 2a-7) of a single issuer for a period of three
business days after the purchase thereof. For the Government Cash Portfolio and
the Tax-Exempt Cash Portfolio, compliance with the diversification provisions
of Rule 2a-7 under the 1940 Act will be deemed to be in compliance with the
diversification limitation in paragraph (a). Each of the Muni Intermediate and
New Jersey Muni Portfolios is classified as a "non-diversified" investment
company under the 1940 Act, which means that each Portfolio is not limited by
the 1940 Act in the proportion of its assets that it may invest in the
securities of a single issuer. However, each Portfolio intends to conduct its
operations so as to qualify as a "regulated investment company" for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), which generally
will relieve the Portfolio of any liability for federal income tax to the
extent its earnings are distributed to shareholders. In order to qualify as a
regulated investment company, the Code requires, among other things, that at
the end of each quarter, no more than 5% of the value of a Portfolio's total
20
<PAGE>
assets may be invested in the securities of any one issuer, and no more than
10% of the outstanding voting securities of such issuer may be held by the
Portfolio, except that (a) up to 50% of the value of the Portfolio's total
assets may be invested without regard to these limitations, provided that no
more than 25% of the value of the Portfolio's total assets are invested in the
securities of any one issuer (or two or more issuers which the Portfolio
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses); (b) the foregoing limitations do not apply to
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (c) a Portfolio will be considered to have violated
these diversification requirements only if the noncompliance results from an
acquisition of securities during the quarter and is not cured within 30 days
after the end of the quarter.
If a percentage restriction for a Portfolio is adhered to at the time an
investment is made, a later increase in percentage resulting from a change in
value or assets will not constitute a violation of such restriction. If a
Portfolio's borrowings are in excess of 5% (excluding overdrafts) of its total
net assets, additional portfolio purchases will not be made until the amount of
such borrowing is reduced to 5% or less.
The investment limitations described here and in the SAI other than those
relating to Rule 2a-7 are fundamental policies of the Portfolios and may be
changed only with the approval of the holders of a majority of the outstanding
shares (as defined in the 1940 Act) of the affected Portfolio.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
Glenmede Fund was organized as a Maryland corporation on June 30, 1988.
Glenmede Fund's Articles of Incorporation authorize the Board members to issue
2,500,000,000 shares of common stock, with a $.001 par value. The Board has the
power to designate one or more classes ("Portfolios") of shares of common stock
and to classify or reclassify any unissued shares with respect to such
Portfolios. Currently, Glenmede Fund is offering shares of ten Portfolios.
Glenmede Portfolios was organized as a Massachusetts business trust on
March 3, 1992. Glenmede Portfolios' Master Trust Agreement authorizes Glenmede
Portfolios' Board to issue an unlimited number of shares of beneficial interest
with a $.001 par value. Glenmede Portfolios' Board has the power to designate
one or more series (Sub-Trusts) of shares of beneficial interest and to
classify or reclassify any unissued shares with respect to such Sub-Trusts.
Currently, Glenmede Portfolios is offering shares of two Sub-Trusts, the Muni
Intermediate and New Jersey Muni Portfolios.
The shares of each Portfolio have no preference as to conversion,
exchange, dividends, retirement or other rights, and, when issued and paid for
as provided in this Prospectus, will be fully paid and non-assessable. The
shares of each Portfolio have no pre-emptive rights and do not have cumulative
voting rights, which means that the holders of more than 50% of the shares of a
Fund voting for the election of its Board members can elect 100% of the Board
of that Fund if they choose to do so. A shareholder is entitled to one vote for
each full share held (and a fractional vote for each fractional share held),
then standing in his or her name on the books of the particular Fund. The Funds
will not hold annual meetings of shareholders, except as required by the 1940
Act, the next sentence and other applicable law. Each Fund has undertaken that
its Board will call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or members if such a meeting is
requested in writing by the holders of not less than 10% of the outstanding
shares of the particular Fund. To the extent required by the undertaking, the
particular Fund will assist shareholder communication in such matters. The
staff of the Commission has expressed the view that the use of this combined
Prospectus for the Funds may subject a Fund to liability for misstatements,
inaccuracies or incomplete disclosure about the other Fund.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as Glenmede Fund shall not be deemed to have been effectively
acted upon unless approved by a majority of the outstanding shares of the
Portfolio or class affected by the matter. The Portfolio or class is affected
by a matter unless it is clear that the interests of the Portfolio or class in
the matter are substantially identical or that the matter does not affect any
interest of the Portfolio or class. Under Rule 18f-2, the approval of an
investment advisory agreement or any change in a fundamental investment policy
would be effectively acted upon with respect to the Portfolio only if approved
by a majority of the outstanding shares of the Portfolio. However, the Rule
also provides that the ratification of independent public accountants and the
election of directors may be effectively acted upon by shareholders of the
Glenmede Fund voting without regard to the Portfolio.
21
<PAGE>
Notwithstanding any provision of Maryland law requiring a greater vote of
Glenmede Fund's common stock (or of the shares of the Portfolio or class voting
separately as a class) in connection with any corporate action, unless
otherwise provided by law (for example by Rule 18f-2 discussed above) or by
Glenmede Fund's Articles of Amendment and Restatement, Glenmede Fund may take
or authorize such action upon the favorable vote of the holders of more than
50% of the outstanding common stock of Glenmede Fund entitled to vote thereon.
At January 31, 1998, the Advisor was the record owner of substantially all
of the outstanding shares of each Portfolio.
DISTRIBUTOR
ICC Distributors, Inc., P.O. Box 7558, Portland, Maine 04101, serves as
the Funds' distributor.
CUSTODIAN
The Chase Manhattan Bank, N.A., Brooklyn, New York, serves as the
custodian of the Funds' respective assets.
TRANSFER AGENT
ICC, One South Street, Baltimore, Maryland 21202, acts as the Funds'
transfer agent.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., Philadelphia, Pennsylvania, serves as
independent accountants for each of the Funds and will audit its respective
financial statements annually.
REPORTS
Shareholders receive unaudited semi-annual financial statements and
audited annual financial statements.
COUNSEL
Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania, serves as counsel
to each of the Funds.
22
<PAGE>
BOARD MEMBERS AND OFFICERS
The business and affairs of each of the Funds are managed under the
direction of its Board. The following is a list of the Board members and
officers of each of the Funds and a brief statement of their principal
occupations during the past five years:
<TABLE>
<CAPTION>
Name and Address Age Principal Occupation During Past Five Years
- ------------------------------------- ----- --------------------------------------------------------------------
<S> <C> <C>
H. Franklin Allen, Ph.D. 41 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
Finance Department Nippon Life Professor of Finance and Economics; Professor of
The Wharton School Finance and Economics from 1990-1996; Vice Dean and Director of
University of Pennsylvania Wharton Doctoral Programs from 1990-1993. He has been employed
Philadelphia, PA 19104-6367 by The University of Pennsylvania since 1980.
Willard S. Boothby, Jr. 76 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
600 East Gravers Lane Director, Penn Engineering & Manufacturing Corp.; Former Director
Wyndmoor, PA 19118 of Georgia-Pacific Corp.; Former Managing Director of Paine
Webber, Inc.
John W. Church, Jr.* 65 Chairman and Director of Glenmede Fund; Chairman and Trustee of
44 Wistar Road The Glenmede Portfolios; Retired, formerly the Executive Vice
Villanova, PA 19085 President and Chief Investment Officer of The Glenmede Trust
Company. Mr. Church was employed by The Glenmede Trust
Company from 1979-1997.
Francis J. Palamara 72 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
P.O. Box 44024 Trustee of Gintel Fund; Director, XTRA Corporation; Former
Phoenix, AZ 85064-4024 Executive Vice President--Finance of ARAMARK, Inc.
G. Thompson Pew, Jr.* 55 Director of Glenmede Fund; Trustee of The Glenmede Portfolios;
310 Caversham Road Director of The Glenmede Trust Company; Former Director of
Bryn Mawr, PA 19010 Brown & Glenmede Holdings, Inc.; Former Co-Director, Principal
and Officer of Philadelphia Investment Banking Co.; Former Director
and Officer of Valley Forge Administrative Services Company.
Mary Ann B. Wirts 46 President of Glenmede Fund and The Glenmede Portfolios; First Vice
One Liberty Place President and Manager of the Fixed Income Division of The
1650 Market Street, Suite 1200 Glenmede Trust Company. She has been employed by The Glenmede
Philadelphia, PA 19103 Trust Company since 1982.
Kimberly C. Osborne 32 Executive Vice President of Glenmede Fund and The Glenmede
One Liberty Place Portfolios; Vice President of The Glenmede Trust Company. She has
1650 Market Street, Suite 1200 been employed by The Glenmede Trust Company since 1993. From
Philadelphia, PA 19103 1992-1993, she was a Client Service Manager with Mutual Funds
Service Company, and from 1987-1992, she was a Client
Administrator with The Vanguard Group, Inc.
Michael P. Malloy 38 Secretary of Glenmede Fund and The Glenmede Portfolios; Partner in
Philadelphia National Bank Building the law firm of Drinker Biddle & Reath LLP.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 54 Assistant Secretary of Glenmede Fund and The Glenmede Portfolios;
One South Street Principal, BT Alex. Brown Inc.; Executive Vice President of ICC.
Baltimore, MD 21202
Joseph A. Finelli 41 Treasurer of Glenmede Fund and The Glenmede Portfolios. He has
One South Street been a Vice President of BT Alex. Brown Inc. since 1995. Prior
Baltimore, MD 21202 thereto, he was Vice President and Treasurer of The Delaware Group.
</TABLE>
- --------------------
* Board members Church and Pew are "interested persons" of the Funds as that
term is defined in the 1940 Act.
For additional information concerning remuneration of Board members see
"Management of the Funds" in the SAI.
--------------------
Shareholder inquiries should be addressed to the Funds at the address or
telephone number stated on the cover page.
23
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
One South Street, Baltimore, Maryland 21202
================================================================================
Prospectus
Dated March 2, 1998
Investment Advisor Administrator and Transfer Agent
The Glenmede Trust Company Investment Company Capital Corp.
One Liberty Place One South Street
1650 Market Street, Suite 1200 Baltimore, Maryland 21202
Philadelphia, PA 19103
Distributor
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
- --------------------------------------------------------------------------------
Table of Contents
Page
-----
Expenses of the Portfolios ....................... 2
Financial Highlights ............................. 3
Performance Calculations ......................... 6
Investment Policies and Risk Factors ............. 6
Common Investment Policies and
Risk Factors ................................... 11
Purchase of Shares ............................... 13
Redemption of Shares ............................. 14
Additional Information on the Purchase and
Redemption of Shares of the Portfolios ......... 14
Page
---
Valuation of Shares .............................. 14
Dividends, Capital Gains Distributions and
Taxes .......................................... 16
Investment Advisor ............................... 18
Administrative, Transfer Agency and
Dividend Paying Services ....................... 19
Shareholder Servicing Plans ...................... 19
Investment Limitations ........................... 20
General Information .............................. 21
Board Members and Officers ....................... 23
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Funds' Statement of
Additional Information, in connection with the offering made by this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Funds or their Distributor. This
Prospectus does not constitute an offering by the Funds or the Distributor in
any jurisdiction in which such offering may not lawfully be made.
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
(800) 442-8299
STATEMENT OF ADDITIONAL INFORMATION
March 2, 1998
This Statement of Additional Information is not a prospectus but should
be read in conjunction with The Glenmede Fund, Inc.'s ("Glenmede Fund") and The
Glenmede Portfolios' ("Glenmede Portfolios" and collectively with Glenmede Fund,
the "Funds") Prospectuses dated January 1, 1998 and March 2, 1998, as amended or
supplemented from time to time (the "Prospectuses"). This Statement of
Additional Information is for the Government Cash, Tax-Exempt Cash, Core Fixed
Income, International, Equity, Small Capitalization Equity, Large Cap Value,
Muni Intermediate and New Jersey Muni Portfolios. To obtain any of the
Prospectuses, please call the Funds at the above telephone number.
Capitalized terms used in this Statement of Additional Information
and not otherwise defined have the same meanings given to them in the Funds'
Prospectuses.
Table of Contents
Page
THE FUNDS................................................. 2
INVESTMENT OBJECTIVES AND POLICIES........................ 2
PURCHASE OF SHARES........................................ 3
REDEMPTION OF SHARES...................................... 4
SHAREHOLDER SERVICES...................................... 4
PORTFOLIO TURNOVER........................................ 4
INVESTMENT LIMITATIONS.................................... 4
MANAGEMENT OF THE FUNDS................................... 8
INVESTMENT ADVISORY AND OTHER SERVICES..................... 9
DISTRIBUTOR............................................... 12
PORTFOLIO TRANSACTIONS.................................... 12
ADDITIONAL INFORMATION CONCERNING TAXES................... 13
PERFORMANCE CALCULATIONS.................................. 24
GENERAL INFORMATION....................................... 29
FINANCIAL STATEMENTS...................................... 30
OTHER INFORMATION......................................... 30
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS.........A-1
<PAGE>
THE FUNDS
On February 27, 1997, the Model Equity Portfolio changed its name to
the Large Cap Value Portfolio. On September 25, 1997, the Intermediate
Government Portfolio changed its name to the Core Fixed Income Portfolio.
References in this Statement of Additional Information are to a Portfolio's
current name.
On March 1, 1991 the Small Capitalization Equity Portfolio commenced
operations offering a single class of shares. On January 1, 1998 the Small
Capitalization Portfolio began to offer a second class of shares known as
"Institutional Shares." The original class of shares has been designated as
"Advisor Shares." Historical information concerning expenses and performance
prior to January 1, 1998 is that of the Advisor Shares.
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and
policies set forth in the Funds' Prospectuses:
Repurchase Agreements
Repurchase agreements that do not provide for payment to a Portfolio
within seven days after notice without taking a reduced price are considered
illiquid securities.
Forward Foreign Exchange Contracts
The International Portfolio may enter into forward foreign exchange
contracts. A forward foreign currency exchange contract involves an obligation
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract as agreed by the parties,
at a price set at the time of the contract. In the case of a cancelable
forward contract, the holder has the unilateral right to cancel the contract
at maturity by paying a specified fee. The contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for trades. A
foreign currency futures contract is a standardized contract for the future
delivery of a specified amount of a foreign currency at a future date at a
price set at the time of the contract. Foreign currency futures contracts
traded in the United States are designed by and traded on exchanges regulated
by the CFTC such as the New York Mercantile Exchange. The International
Portfolio would enter into foreign currency futures contracts solely for
hedging or other appropriate investment purposes as defined in CFTC
regulations.
-2-
<PAGE>
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in any
given month. Forward contracts may be in any amounts agreed upon by the
parties rather than predetermined amounts. Also, forward foreign exchange
contracts are traded directly between currency traders so that no intermediary
is required. A forward contract generally requires no margin or other deposit.
At the maturity of a forward contract, the International Portfolio
may either accept or make delivery of the currency specified in the contract,
or at or prior to maturity enter into a closing transaction involving the
purchase or sale of an offsetting contract. Closing transactions with respect
to forward contracts are usually effected with the currency trader who is a
party to the original forward contract.
Securities Lending
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to
deliver securities or completing arbitrage operations. By lending its
investment securities, a Portfolio attempts to increase its income through the
receipt of interest on the loan. Any gain or loss in the market price of the
securities loaned that might occur during the term of the loan would be for
the account of the Portfolio. Each Portfolio may lend its investment
securities to qualified brokers, dealers, domestic and foreign banks or other
financial institutions, so long as the terms, the structure and the aggregate
amount of such loans are not inconsistent with the Investment Company Act of
1940 (the "1940 Act") or the rules and regulations or interpretations of the
Securities and Exchange Commission (the "Commission") thereunder. The
Portfolios may, from time to time, pay negotiated fees in connection with the
lending of securities.
PURCHASE OF SHARES
The purchase price of shares of each Portfolio is the net asset value
next determined after receipt of the purchase order by the particular Fund.
Each Portfolio reserves the right in its sole discretion (i) to
suspend the offering of its shares, (ii) to reject purchase orders when in the
judgment of management such rejection is in the best interest of the
particular Fund, and (iii) to reduce or waive the minimum for initial and
subsequent investments from time to time.
-3-
<PAGE>
At the discretion of the Funds, investors may be permitted to
purchase Portfolio shares by transferring securities to the Portfolio that
meet the Portfolios investment objectives and policies.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date
of payment (i) during any period that the Exchange is closed, or trading on
the Exchange is restricted as determined by the Commission, (ii) during any
period when an emergency exists as defined by the rules of the Commission as a
result of which it is not reasonably practicable for a Portfolio to dispose of
securities owned by it, or fairly to determine the value of its assets, and
(iii) for such other periods as the Commission may permit.
No charge is made by any Portfolio for redemptions. Any redemption
may be more or less than the shareholder's initial cost depending on the
market value of the securities held by the Portfolio.
SHAREHOLDER SERVICES
Shareholders may transfer shares of the Portfolios to another person.
An investor wishing to transfer shares should contact the Advisor.
PORTFOLIO TURNOVER
The Portfolios will not normally engage in short-term trading, but
reserve the right to do so. A high portfolio turnover rate can result in
corresponding increases in brokerage commissions; however, the Advisor will
not consider turnover rate a limiting factor in making investment decisions
consistent with that Portfolio's investment objectives and policies. The
Portfolios' portfolio turnover rates for each of the past fiscal years are set
forth under "Financial Highlights" in the Funds' Prospectuses. Changes in the
Portfolios' turnover rates were due to market fluctuations and investment
opportunities.
INVESTMENT LIMITATIONS
Each Portfolio is subject to the following restrictions. The numbered
restrictions are fundamental policies and may not be changed without the
approval of the lesser of: (1) 67% of the voting securities of the affected
Portfolio present at a meeting if the holders of more than 50% of the
outstanding voting securities of the affected Portfolio are present or
represented by proxy, or (2) more than 50% of the outstanding voting securities
of the affected Portfolio. Each Portfolio will not:
-4-
<PAGE>
(1) invest in commodities or commodity contracts, except that
each Portfolio may invest in futures contracts and options;
(2) purchase or sell real estate, although it may purchase and
sell securities of companies which deal in real estate and
may purchase and sell securities which are secured by
interests in real estate;
(3) make loans, except (i) by purchasing bonds, debentures
or similar obligations (including repurchase agreements,
subject to the limitation described in investment limitation
(9) below, and money market instruments, including bankers
acceptances and commercial paper, and selling securities on a
when issued, delayed settlement or forward delivery basis)
which are publicly or privately distributed, and (ii) by
lending its portfolio securities to banks, brokers, dealers
and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or
interpretations of the Commission thereunder;
(4) purchase on margin or sell short, except as specified above
in investment limitation (1);
(5) purchase more than 10% of any class of the outstanding
voting securities of any issuer;
(6) issue senior securities, except that a Portfolio may borrow
money in accordance with investment limitation (7) below,
purchase securities on a when issued, delayed settlement or
forward delivery basis and enter into reverse repurchase
agreements;
(7) borrow money, except as a temporary measure for extraordinary
or emergency purposes, and then not in excess of 10% of its
total assets at the time of the borrowing (entering into
reverse repurchase agreements and purchasing securities on a
when issued, delayed settlement or forward delivery basis are
not subject to this investment limitation);
(8) pledge, mortgage, or hypothecate any of its assets to an
extent greater than 10% of its total assets at fair market
value, except as described in the Prospectus and this
Statement of Additional Information and in connection with
entering into futures contracts, but the deposit of assets in
a segregated account in connection with the writing of covered
put and call options and the purchase of securities on a when
issued, delayed settlement or forward delivery basis
-5-
<PAGE>
and collateral arrangements with respect to initial or
variation margin for futures contracts will not be deemed to
be pledges of a Portfolio's assets or the purchase of any
securities on margin for purposes of this investment
limitation;
(9) underwrite the securities of other issuers or invest more than
an aggregate of 10% of the total assets of the Portfolio, at
the time of purchase, in securities subject to legal or
contractual restrictions on resale or securities for which
there are no readily available markets, including repurchase
agreements which have maturities of more than seven days;
(10) invest for the purpose of exercising control over
management of any company;
(11) invest its assets in securities of any investment company,
except in connection with mergers, acquisitions of assets or
consolidations and except as may otherwise be permitted by
the 1940 Act;
(12) acquire any securities of companies within one industry if, as
a result of such acquisition, more than 25% of the value of
the Portfolio's total assets would be invested in securities
of companies within such industry; provided, however, that
there shall be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities, or instruments issued by
U.S. banks; and
(13) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.
Each Portfolio, with the exception of the Muni Intermediate and New
Jersey Muni Portfolios, also will not:
(1) with respect as to 75% of its total assets, invest more than
5% of its total assets at the time of purchase in the
securities of any single issuer (other than obligations
issued or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities).
Pursuant to Rule 2a-7 under the 1940 Act, each of the Government Cash
Portfolio and the Tax-Exempt Cash Portfolio may not invest more than 5% of its
total assets in securities of any one issuer (other than U.S. Government
securities, repurchase agreements collateralized by such obligations, certain
money market fund securities and securities subject to certain guarantees
-6-
<PAGE>
which are issued by persons that, directly or indirectly, do not control
and are not controlled by or under common control with the issuer). Each of
these portfolios may, however, invest more than 5% of its total assets in
First Tier Securities (as defined in Rule 2a-7) of a single issuer for a
period of three business days after the purchase thereof. For the Government
Cash Portfolio and the Tax-Exempt Cash Portfolio compliance with the
diversification provisions of Rule 2a-7 under the 1940 Act will be deemed to
be compliance with the diversification limitation in paragraph (1).
Each of the Muni Intermediate and New Jersey Muni Portfolios is
classified as a "non-diversified" investment company under the 1940 Act, which
means the Portfolio is not limited by the 1940 Act in the proportion of its
assets that it may invest in the securities of a single issuer. However, each
Portfolio intends to conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended, which generally will relieve the Portfolio of any liability for
federal income tax to the extent its earnings are distributed to shareholders.
In order to qualify as a regulated investment company for federal income tax
purposes, the Portfolio generally will diversify its investments such that at
the close of each quarter of the taxable year at least 50% of the value of its
total assets will be represented by specified investments, provided that the
Portfolio may not, invest more than 5% of its total assets at the time of
purchase in the securities of any single issuer (other than obligations issued
or guaranteed by the U.S. Government, its agencies, enterprises or
instrumentalities).
If a percentage restriction is adhered to at the time an investment
is made, a later increase in percentage resulting from a change in value or
assets will not constitute a violation of such restriction.
With regard to limitation (11), the 1940 Act currently prohibits an
investment company from acquiring securities of another investment company if,
as a result of the transaction, the acquiring company and any company or
companies controlled by it would own in the aggregate: (i) more than 3% of the
total outstanding voting stock of the acquired company, (ii) securities issued
by the acquired company having an aggregate value in excess of 5% of the value
of the total assets of the acquiring company, or (iii) securities issued by
the acquired company and all other investment companies (other than treasury
stock of the acquired company) having an aggregate value in excess of 10% of
the value of the total assets of the acquiring company. In addition to the
advisory fees and other expenses that a Portfolio bears directly in connection
with its own operations, as a shareholder of another investment company, such
Portfolio would bear its "pro rata" portion of the other investment company's
-7-
<PAGE>
advisory fees and other expenses. Therefore, to the extent that a
Portfolio is invested in shares of other investment companies, such
Portfolio's shareholders will be subject to expenses of such other investment
companies, in addition to expenses of the Portfolio.
As a matter of policy which may be changed by the particular Fund's
Board without shareholder approval, with respect to limitation (12),
Portfolios other than the Government Cash Portfolio and the Tax-Exempt Cash
Portfolio will not invest more than 25% of the value of their respective total
assets in instruments issued by U.S. banks.
In addition, with respect to investment limitation (12), (a) there is
no limitation with respect to (i) instruments issued or guaranteed by the
United States, any state, territory or possession of the United States, the
District of Columbia or any of their authorities, agencies, instrumentalities
or political subdivisions, and (ii) repurchase agreements secured by the
instruments described in clause (i); (b) wholly-owned finance companies will
be considered to be in the industries of their parents if their activities are
primarily related to financing the activities of the parents; and (c)
utilities will be divided according to their services; for example, gas, gas
transaction, electric and gas, electric and telephone will each be considered
a separate industry.
With regard to limitation (13), the purchase of securities of a
corporation, a subsidiary of which has an interest in oil, gas or other
mineral exploration or development programs shall not be deemed to be
prohibited by the limitation.
MANAGEMENT OF THE FUNDS
Each Fund's officers, under the supervision of the particular Board,
manage the day-to-day operations of the Fund. The Board members set broad
policies for each Fund and choose its officers. A list of the Board members
and officers and a brief statement of their current positions and principal
occupations during the past five years is set forth in the Funds'
Prospectuses.
Remuneration of Board Members
Glenmede Fund pays each Board member, other than officers of the
Advisor, an annual fee of $8,000 plus $1,250 for each Board meeting attended
and each Board Valuation Committee meeting attended (unless such meeting was
held in conjunction with a Board meeting) and out-of-pocket expenses incurred
in attending Board meetings. Glenmede Portfolios pays each Board member, other
than officers of the Advisor, an annual fee of $1,000 per year and
-8-
<PAGE>
out-of-pocket expenses incurred in attending Board meetings. Officers of
the Funds receive no compensation as officers from the Funds.
Set forth in the table below is the compensation received by Board
members for the fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Aggregate Benefits Estimated
Compensation Compensation Total Annual Total
from from Part of Benefits Compensation
Name of Glenmede Glenmede the Funds' Upon from the
Person, Position Fund Portfolios Expense Retirement Funds
---------------- ------------ ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Dr. H. Franklin Allen, Ph.D., $15,459 $1,041 None None $16,500
Director/Trustee
Willard S. Boothby, Jr., $14,196 $1,054 None None $15,250
Director/Trustee
John W. Church, Jr. None None None None None
Director/Trustee
Francis J. Palamara, $14,196 $1,054 None None $15,250
Director/Trustee
G. Thompson Pew, Jr., $16,696 $1,054 None None $17,750
Director/Trustee
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
The Advisor, The Glenmede Trust Company, is the wholly-owned
subsidiary of The Glenmede Corporation (the "Corporation") whose shares are
closely held by 76 shareholders. The Corporation has a nine person Board of
Directors which, at September 30, 1997, collectively, owned 98.67% of the
Corporation's voting shares and 37.80% of the Corporation's total outstanding
shares. The members of the Board and their respective interests in the
Corporation at September 30, 1997 are as follows:
The Glenmede Corporation Percent of Percent of
Board of Directors Voting Shares Total Shares
- ------------------------ ------------- ------------
Susan W. Catherwood..................... 10.83% 1.23%
Richard F. Pew.......................... 10.83% 1.07%
Thomas W. Langfitt, M.D................. 11.07% 8.69%
Arthur E. Pew III....................... 10.83% 1.07%
J. Howard Pew, II....................... 10.83% 1.43%
J. N. Pew, III.......................... 11.07% 5.45%
J. N. Pew, IV........................... 11.07% 1.43%
R. Anderson Pew......................... 11.07% 6.03%
Ethel Benson Wister..................... 11.07% 11.40%
------ ------
98.67% 37.80%
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As noted in the Prospectuses, the Advisor does not receive any fee
from the Government Cash, Tax-Exempt Cash, Core Fixed Income, International,
Equity, Large Cap Value, Muni Intermediate and New Jersey Muni Portfolios for
its investment services. Prior to January 1, 1998, the Advisor did not receive
any fee from The Small Capitalization Equity Portfolio for its investment
services. Effective January 1, 1998, the Advisor is entitled to receive a fee
from the Small Capitalization Equity Portfolio for its investment services
computed daily and payable monthly, at an annual rate of .55% of that
Portfolio's average daily net assets. Additionally, all shareholders in the
Portfolios are clients of the Advisor or an Affiliate and, as clients, pay
fees which vary depending on the capacity in which the Advisor or Affiliate
provides fiduciary and investment services to the particular client. Such
services may include personal trust, estate settlement, advisory and custodian
services. For example, for advisory services, the Advisor charges its clients
up to 1% on the first $1 million of principal, .60% on the next $1 million of
principal, .50% on the next $3 million of principal and .40% on the next $5
million of principal, with a minimum annual fee of $10,000. For accounts in
excess of $10 million of principal, the fee would be determined by special
analysis.
Since July 1, 1995, administrative, transfer agency and dividend
paying services have been provided to each of the Funds by ICC, pursuant to a
Master Services Agreement between each of the Funds and ICC. See
"Administrative, Transfer Agency and Dividend Paying Services" in the
Prospectuses for information concerning the substantive provisions of each
Master Services Agreement. For the fiscal year ended October 31, 1997, the
Funds paid ICC fees of $178,351 for the Government Cash Portfolio, $99,450 for
the Tax-Exempt Cash Portfolio, $101,654 for the Core Fixed Income Portfolio,
$342,102 for the International Portfolio, $45,406 for the Equity Portfolio,
$144,610 for the Small Capitalization Equity Portfolio, $24,893 for the Large
Cap Value Portfolio, $7,183 for the Muni Intermediate Portfolio and $3,821 for
the New Jersey Muni Portfolio.
For the fiscal year ended October 31, 1996, the Funds paid ICC fees
of $183,151 for the Government Cash Portfolio, $95,073 for the Tax-Exempt Cash
Portfolio, $110,811 for the Core Fixed Income Portfolio, $216,069 for the
International Portfolio, $33,415 for the Equity Portfolio, $101,413 for the
Small Capitalization Equity Portfolio, $12,716 for the Large Cap Value
Portfolio, $7,474 for the Muni Intermediate Portfolio and $2,571 for the New
Jersey Muni Portfolio.
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<PAGE>
For the period July 1, 1995 to October 31, 1995, the Funds paid ICC fees
of $59,300 for the Government Cash Portfolio, $30,104 for the Tax-Exempt Cash
Portfolio, $48,906 for the Core Fixed Income Portfolio, $55,781 for the
International Portfolio, $11,445 for the Equity Portfolio, $24,932 for the
Small Capitalization Equity Portfolio, $2,615 for the Large Cap Value
Portfolio, $2,663 for the Muni Intermediate Portfolio and $808 for the New
Jersey Muni Portfolio.
From the close of business on May 6, 1994 to the close of business on
June 30, 1995, administrative services were provided to each Fund by The
Shareholder Services Group, Inc. ("TSSG"), pursuant to Administration
Agreements. For the period November 1, 1994 to June 30, 1995, the Funds paid
TSSG administrative fees of $238,455 for the Government Cash Portfolio,
$126,195 for the Tax-Exempt Cash Portfolio, $193,903 for the Core Fixed Income
Portfolio, $172,504 for the International Portfolio, $38,056 for the Equity
Portfolio, $76,001 for the Small Capitalization Equity Portfolio, $11,371 for
the Large Cap Value Portfolio, $11,012 for the Muni Intermediate Portfolio and
$2,829 for the New Jersey Muni Portfolio.
As described more fully in the Prospectuses, the Advisor provides
shareholder support services to their clients who beneficially own shares of
the Portfolios pursuant to a Shareholder Servicing Agreement ("Agreement")
with each of the Funds. Shareholder servicing fees payable for the fiscal year
ended October 31, 1997 for the Government Cash, Tax-Exempt Cash, Core Fixed
Income, Muni Intermediate, New Jersey Muni, Equity, International, Small
Capitalization Equity and Large Cap Value Portfolios were $233,912, $130,408,
$129,813, $9,418, $5,023, $59,674, $448,678, $189,976 and $32,710,
respectively.
Shareholder servicing fees payable for the fiscal year ended October
31, 1996 for the Government Cash, Tax-Exempt Cash, Core Fixed Income, Muni
Intermediate, New Jersey Muni, Equity, International, Small Capitalization
Equity and Large Cap Value Portfolios were $226,624, $117,082, $136,249,
$9,135, $3,168, $42,934, $265,082, $125,390 and $15,789, respectively.
Shareholder servicing fees payable for the period January 1, 1995 to
October 31, 1995 for the Government Cash, Tax-Exempt Cash, Core Fixed Income,
Muni Intermediate, New Jersey Muni, Equity, International, Small
Capitalization Equity and Large Cap Value Portfolios were $179,403, $88,295,
$137,633, $7,721, $2,177, $29,441, $130,533, $ 61,932, and $7,699,
respectively.
Custody services are provided to each Portfolio by The Chase
Manhattan Bank, N.A., Brooklyn, New York.
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<PAGE>
DISTRIBUTOR
Shares of the Funds are distributed continuously and are offered
without a sales load by ICC Distributors, Inc. ("ICC Distributors"), pursuant
to Distribution Agreements between the Funds and ICC Distributors. ICC
Distributors receives no fee from the Funds for its distribution services.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Advisor to select
the brokers or dealers that will execute the purchases and sales of investment
securities for each of the Portfolios and direct the Advisor to use its best
efforts to obtain the best available price and most favorable execution with
respect to all transactions for the Portfolios. The Advisor may, however,
consistent with the interests of a Portfolio, select brokers on the basis of
the research, statistical and pricing services they provide to a Portfolio.
Information and research received from such brokers will be in addition to,
and not in lieu of, the services required to be performed by the Advisor under
the Investment Advisory Agreements. A commission paid to such brokers may be
higher than that which another qualified broker would have charged for
effecting the same transaction, provided that such commissions are paid in
compliance with the Securities Exchange Act of 1934, as amended, and that the
Advisor determines in good faith that such commission is reasonable in terms
either of the transaction or the overall responsibility of the Advisor to a
Portfolio and the Advisor's other clients.
During the fiscal year ended October 31, 1997, the Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios paid
$80,102, $1,256,020, $592,458 and $171,033 in brokerage commissions,
respectively. During the fiscal year ended October 31, 1996, the Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios paid
$99,329, $726,803, $487,995 and $165,881 in brokerage commissions,
respectively. During the fiscal year ended October 31, 1995, the Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios paid
$157,547, $453,721, $343,683 and $165,103 in brokerage commissions,
respectively.
The Government Cash, Core Fixed Income, Muni Intermediate and New
Jersey Muni Portfolios do not currently expect to incur any brokerage
commission expense on transactions in their portfolio securities because debt
instruments are generally traded on a "net" basis with dealers acting as
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<PAGE>
principal for their own accounts without a stated commission. The price of the
security, however, usually includes a profit to the dealer.
Because shares of the Portfolios are not marketed through intermediary
brokers or dealers, it is not the Funds' practice to allocate brokerage or
effect principal transactions with dealers on the basis of sales of shares which
may be made through such firms. However, the Advisor may place portfolio orders
with qualified broker-dealers who refer clients to the Advisor.
Some securities considered for investment by each Portfolio may also
be appropriate for other clients served by the Advisor. If purchase or sale of
securities is consistent with the investment policies of a Portfolio and one
or more of these other clients served by the Advisor and is considered at or
about the same time, transactions in such securities will be allocated among
the Portfolio and clients in a manner deemed fair and reasonable by the
Advisor. While in some cases this practice could have a detrimental effect on
the price, value or quantity of the security as far as a Portfolio is
concerned, in other cases it is believed to be beneficial to the Portfolios.
ADDITIONAL INFORMATION CONCERNING TAXES
General. The following summarizes certain additional tax
considerations generally affecting the Portfolios and their shareholders that
are not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Portfolios or their shareholders, and
the discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers
with specific reference to their own tax situation.
Each Portfolio is treated as a separate corporate entity under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to qualify
as a regulated investment company. Qualification as a regulated investment
company under the Code requires, among other things, that each Portfolio
distribute to its shareholders an amount equal to at least the sum of 90% of
its investment company taxable income and 90% of its tax-exempt income (if
any) net of certain deductions for a taxable year. In addition, each Portfolio
must satisfy certain requirements with respect to the source of its income for
a taxable year. At least 90% of the gross income of each Portfolio must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities or foreign
currencies, and other income (including, but not limited to, gains from
options, futures, or forward contracts) derived with respect to the
Portfolio's business of investing in such stock, securities or currencies. The
Treasury Department may by regulation exclude from qualifying income foreign
currency gains which are not directly related to a Portfolio's principal
business of investing in stock or securities, or options and futures with
respect to stock or securities. Any income derived by a Portfolio from a
partnership or trust is treated for this purpose as derived with respect to
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<PAGE>
the Portfolio's business of investing in stock, securities or currencies
only to the extent that such income is attributable to items of income which
would have been qualifying income if realized by the Portfolio in the same
manner as by the partnership or trust.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to a shareholder as long-term capital gain,
regardless of how long the shareholder has held the distributing Portfolio's
shares and whether such distribution is received in cash or additional
Portfolio shares. Each Portfolio will designate such distributions as capital
gain dividends in a written notice mailed to shareholders within 60 days after
the close of the Portfolio's taxable year. Shareholders should note that, upon
the sale or exchange of Portfolio shares, if the shareholder has not held such
shares for more than six months, any loss on the sale or exchange of those
shares will be treated as long-term capital loss to the extent of the capital
gain dividends received with respect to the shares.
Under the Taxpayer Relief Act of 1997, for capital gains on
securities recognized after July 28, 1997, the maximum tax rate for
individuals is 20% if the property was held more than 18 months; for property
held for more than 12 months, but no longer than 18 months, the maximum tax
rate on capital gains continues to be 28%. For sales or exchanges on or before
July 28, 1997, an individual's net capital gains are still taxable at a
maximum rate of 28%. Ordinary income of individuals is taxable at a maximum
marginal rate of 39.6%, but because of limitations on itemized deductions
otherwise allowable and the phase-out of personal exemptions, the maximum
effective marginal rate of tax for some taxpayers may be higher. For
corporations, long-term capital gains and ordinary income are both taxable at
a maximum nominal rate of 35% (although surtax provisions apply at certain
income levels to result in marginal rates as high as 39%).
The following Portfolios have available capital loss carryforwards to
offset future net capital gains through the indicated expiration dates as
follows:
<TABLE>
<CAPTION>
Expiring Expiring Expiring Expiring Expiring Expiring Expiring
Portfolio in 1999 in 2000 in 2001 in 2002 in 2003 in 2004 in 2005
- --------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Government Cash - - $127 $1,000 $26,819 - $7,815
Tax Exempt Cash $18,922 - 19,079 8,905 27,815 $13 -
Core Fixed Income - - - 9,261,440 - - -
Muni Intermediate - $656 4,787 215,936 549,436 2,107 42,723
New Jersey Muni - - - 56,594 21,708 11,660 -
</TABLE>
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<PAGE>
If for any taxable year a Portfolio does not qualify for the special
Federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to Federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions (including amounts derived from interest on tax-exempt
obligations in the case of the Tax-Exempt Cash, Muni Intermediate and New Jersey
Muni Portfolios) would be taxable as ordinary income to shareholders to the
extent of the Portfolio's current and accumulated earnings and profits, and
would be eligible for the dividends received deduction for corporations.
Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios. As
described in the Prospectus, these Portfolios are designed to provide
investors with current tax-exempt interest income. Shares of the Portfolios
would not be suitable for tax-exempt institutions and may not be suitable for
retirement plans qualified under Section 401 of the Code, H.R. 10 plans and
individual retirement accounts since such plans and accounts are generally
tax-exempt and, therefore, would not only fail to gain any additional benefit
from each such Portfolio's dividends being tax-exempt, but such dividends
would be ultimately taxable to the beneficiaries when distributed to them. In
addition, the Portfolios may not be an appropriate investment for entities
which are "substantial users" of facilities financed by private activity bonds
or "related persons" thereof. "Substantial user" is defined under U.S.
Treasury Regulations to include a non-exempt person who regularly uses a part
of such facilities in his trade or business and whose gross revenues derived
with respect to the facilities financed by the issuance of bonds are more than
5% of the total revenues derived by all users of such facilities, who occupies
more than 5% of the usable area of such facilities or for whom such facilities
or a part thereof were specifically constructed, reconstructed or acquired.
"Related persons" include certain related natural persons, affiliated
corporations, a partnership and its partners and an S corporation and its
shareholders.
The percentage of total dividends paid by each Portfolio with respect
to any taxable year which qualify as Federal exempt-interest dividends will be
the same for all shareholders receiving dividends for such year. In order for
each Portfolio to pay exempt-interest dividends with respect to any taxable
year, at the close of each quarter of its taxable year at least 50% of the
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<PAGE>
aggregate value of each Portfolio's assets must consist of exempt-interest
obligations. After the close of its taxable year, each Portfolio will notify
its shareholders of the portion of the dividends paid by it which constitutes
an exempt-interest dividend with respect to such year. However, the aggregate
amount of dividends so designated by each Portfolio cannot exceed the excess
of the amount of interest exempt from tax under Section 103 of the Code
received by the particular Portfolio for the taxable year over any amounts
disallowed as deductions under Sections 265 and 171(a)(2) of the Code.
Interest on indebtedness incurred by a shareholder to purchase or
carry such a Portfolio's shares generally is not deductible for Federal income
tax purposes if the Portfolio distributes exempt-interest dividends during the
shareholder's taxable year.
While each Portfolio will seek to invest substantially all of its
assets in tax-exempt obligations (except on a temporary basis or for temporary
defensive periods), any investment company taxable income earned by a
Portfolio will be distributed. In general, each Portfolio's investment company
taxable income will be its taxable income (including taxable interest received
from temporary investments and any net short-term capital gains realized by a
Portfolio) subject to certain adjustments and excluding the excess of any net
long-term capital gains for the taxable year over the net short-term capital
loss, if any, for such year.
Federal Taxation of Certain Financial Instruments. Generally, certain
foreign currency contracts entered into and held by the International
Portfolio at the close of the Fund's taxable year may be treated for Federal
income tax purposes as sold for their fair market value on the last business
day of such year, a process known as "mark-to-market." Forty percent of any
gain or loss resulting from such constructive sale will be treated as
short-term capital gain or loss and sixty percent of such gain or loss will be
treated as long-term capital gain or loss without regard to the length of time
the Portfolio holds the foreign currency contract ("the 40-60 rule"). To
receive such Federal income tax treatment, a foreign currency contract must
meet the following conditions: (1) the contract must require delivery of a
foreign currency of a type in which regulated futures contracts are traded or
upon which the settlement value of the contract depends; (2) the contract must
be entered into at arm's length at a price determined by reference to the
price in the interbank market; and (3) the contract must be traded in the
interbank market. The amount of any capital gain or loss actually realized by
the Portfolio in a subsequent sale or other disposition of those foreign
currency contracts will be adjusted to reflect any capital gain or loss taken
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<PAGE>
into account by the Portfolio in a prior year as a result of the constructive
sale of the contracts. The Treasury Department has broad authority to issue
regulations under the provisions respecting foreign currency contracts. As of
the date of this Statement of Additional Information, the Treasury has not
issued any such regulations. Other foreign currency contracts entered into by
the International Portfolio may result in the creation of one or more
straddles for Federal income tax purposes, in which case certain loss
deferral, short sales, and wash sales rules and the requirement to capitalize
interest and carrying charges may apply.
Special rules govern the Federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules include
the following: (i) the acquisition of, or becoming the obligor under, a bond
or other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instrument if such
instrument is not marked to market. The disposition of a currency other than
the U.S. dollar by a U.S. taxpayer is also treated as a transaction subject to
the special currency rules. However, foreign currency-related regulated
futures contracts and non-equity options are generally not subject to the
special currency rules if they are or would be treated as sold for their fair
market value at year-end under the mark-to-market rules, unless an election is
made to have such currency rules apply. With respect to transactions covered
by the special rules, foreign currency gain or loss is calculated separately
from any gain or loss on the underlying transaction and is normally taxable as
ordinary gain or loss. A taxpayer may elect to treat as capital gain or loss
foreign currency gain or loss arising from certain identified forward
contracts, futures contracts and options that are capital assets in the hands
of the taxpayer and which are not part of a straddle. In accordance with
Treasury regulations under which certain transactions that are part of a
"section 988 hedging transaction" (as defined in the Code and the Treasury
regulations) will be integrated and treated as a single transaction or
otherwise treated consistently for purposes of the Code. Any gain or loss
attributable to the foreign currency component of a transaction engaged in by
a Portfolio which is not subject to the special currency rules (such as
foreign equity investments other than certain preferred stocks) will be
treated as capital gain or loss and will not be segregated from the gain or
loss on the underlying transaction. It is anticipated that some of the
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<PAGE>
non-U.S. dollar denominated investments and foreign currency contracts the
International Portfolio may make or enter into will be subject to the special
currency rules described above.
Special Considerations Regarding Investment In Pennsylvania
Municipal Obligations.
The concentration of investments in Pennsylvania Municipal Obligations
by the Muni Intermediate Portfolio raises special investment considerations. In
particular, changes in the economic condition and governmental policies of the
Commonwealth of Pennsylvania and its municipalities could adversely affect the
value of the Portfolio and its portfolio securities. This section briefly
describes current economic trends in Pennsylvania.
Pennsylvania's economy historically has been dependent on heavy
industry although recent declines in the coal, steel and railroad industries
have led to diversification of the Commonwealth's economy. Recent sources of
economic growth in Pennsylvania are in the service sector, including trade,
medical and health services, education and financial institutions. Agriculture
continues to be an important component of the Commonwealth's economic
structure, with nearly one-third of the Commonwealth's total land area devoted
to cropland, pasture and farm woodlands.
The Commonwealth utilizes the fund method of accounting and over 120
funds have been established for purposes of recording receipts and
disbursements of the Commonwealth, of which the General Fund is the largest.
Most of the Commonwealth's operating and administrative expenses are payable
from the General Fund. The major tax sources for the General Fund are the
sales tax, the personal income tax and the corporate net income tax. Major
expenditures of the Commonwealth include funding for education, public health
and welfare, transportation, and economic development.
The constitution of the Commonwealth provides that operating budget
appropriations of the Commonwealth may not exceed the estimated revenues and
available surplus in the fiscal year for which funds are appropriated. Annual
budgets are enacted for the General Fund and for certain special revenue funds
which together represent the majority of expenditures of the Commonwealth.
Although the balance in the General Fund of the Commonwealth (the principal
operating fund of the Commonwealth) experienced deficits in fiscal 1990 and
1991, tax increases and spending decreases have resulted in surpluses the last
four years; as of June 30, 1996, the General Fund had a surplus of $635.2
million.
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<PAGE>
Current constitutional provisions permit the Commonwealth to issue
the following types of debt: (i) electorate approved debt, (ii) debt for
capital projects subject to an aggregate debt limit of 1.75 times the annual
average tax revenues of the preceding five fiscal years, (iii) tax
anticipation notes payable in the fiscal year of issuance and (iv) debt to
suppress insurrection or rehabilitate areas affected by disaster. Certain
state-created agencies issue debt supported by assets of, or revenues derived
from, the various projects financed and the debt of such agencies is not an
obligation of the Commonwealth although some of the agencies are indirectly
dependent on Commonwealth appropriations.
Certain litigation is pending against the Commonwealth that could
adversely affect the ability of the Commonwealth to pay debt service on its
obligations including suits relating to the following matters: (a) the ACLU
has filed suit in federal court demanding additional funding for child welfare
services; the Commonwealth settled a similar suit in the Commonwealth Court of
Pennsylvania and is seeking the dismissal of the federal suit, inter alia,
because of that settlement; after its earlier denial was reversed by the Third
Circuit Court of Appeals, the district court granted class certification to
the ACLU, and the parties are proceeding with discovery (no available
estimates of potential liability); (b) in 1987, the Supreme Court of
Pennsylvania held that the statutory scheme for county funding of the judicial
system to be in conflict with the constitution of the Commonwealth, but stayed
judgment pending enactment by the legislature of funding consistent with the
opinion; a special master appointed by the Court submitted an implementation
plan in 1997, recommending a four phase transition to state funding of a
unified judicial system; the special master recommended that the
implementation of the phase should be effective July 1, 1998, with the
completion of the final phase early next century; objections to the Special
Master's report were due by September 1, 1997; the General Assembly has yet to
consider legislation implementing the Court's judgment; (c) litigation has
been filed in both state and federal court by an association of rural and
small schools and several individual school districts and parents challenging
the constitutionality of the Commonwealth's system for funding local school
districts -- the federal case has been stayed pending resolution of the state
case; the state trial, post-trial briefing, and oral arguments have been
completed, and the judge has taken the case under advisement (no available
estimate of potential liability); (d) Envirotest/Synterra Partners
("Envirotest") filed suit against the Commonwealth asserting that it sustained
damages in excess of $350 million as a result of investments it made in
reliance on a contract to conduct emissions testing before the emissions
testing program was suspended. Envirotest has entered into a Settlement
Agreement resolve to which Envirotest's claims that will say Environtest a
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<PAGE>
conditional sum of $195 million over four years; (e) in litigation brought by
the Pennsylvania Human Relations Commission to remedy unintentional conditions
of segregation in the Philadelphia public schools, the School District of
Philadelphia filed a third-party complaint against the Commonwealth asking the
Commonwealth Court to require the Commonwealth to supply funding necessary for
the District to comply with orders of the court; the Commonwealth Court found
that the School District was entitled to receive an additional $45.2 million
for the 1996-97 school year, but the Pennsylvania Supreme Court vacated this
decision in September 1996; pursuant to the Court's orders, the parties have
briefed certain issues, but oral argument has not yet been scheduled (no
available estimate of potential liability); (f) in February 1997, five
residents of the City of Philadelphia, joined by the City, the School District
and Others, filed a civil action in the Commonwealth Court for declaratory
judgment against the Commonwealth and certain Commonwealth officers and
officials that the defendants had failed to provide an adequate quality of
education in Philadelphia, as required by the Pennsylvania Constitution; after
preliminary objections and briefs were filed, the Court heard oral argument en
banc in September 1997, and has taken the matter under advisement (no
available estimate of potential liability); (g) in April 1995, the
Commonwealth reached a settlement agreement with Fidelity Bank and certain
other banks with respect to the constitutional validity of the Amended Bank
Shares Act and related legislation; although this settlement agreement did not
require expenditure of Commonwealth funds, the petitions of other banks are
currently pending with the Commonwealth court (no available estimate of
potential liability); and (h) suit has been filed in state court against the
State Employees' Retirement Board claiming that the use of gender distinct
actuarial factors to compute benefits received before August 1, 1983 violates
the Pennsylvania Constitution (gender-neutral factors have been used since
August 1, 1983, the date on which the U.S. Supreme Court held in Arizona
Governing Committee v. Norris that the use of such factors violated the
Federal Constitution); in 1996, the Commonwealth Court heard oral argument en
banc, and in 1997 denied the plaintiff's motion for judgment on the pleadings
(no available estimate of potential liability).
Local government units in the Commonwealth of Pennsylvania (which
include, among other things, counties, cities, boroughs, towns, townships,
school districts and other municipally created units such as industrial
development authorities and municipality authorities, including water and
sewer authorities) are permitted to issue debt for capital projects: (i) in
any amount so long as the debt has been approved by the voters of the local
government unit; or (ii) without electoral approval if the aggregate
outstanding principal amount of debt of the local government unit is not in
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<PAGE>
excess of 100% of its borrowing base (in the case of a school district of
the first class), 300% of its borrowing base (in the case of a county) or 250%
of its borrowing base (in the case of all other local government units); or
(iii) without electoral approval and without regard to the limit described in
(ii) in any amount in the case of certain subsidized debt and self-liquidating
debt (defined to be debt with no claim on taxing power, secured solely by
revenues from a specific source which have been projected to be sufficient to
pay debt service on the related debt). Lease rental debt may also be issued,
in which case the total debt limits described in section (ii) (taking into
account all existing lease rental debt in addition to all other debt) are
increased. The borrowing base for a local government unit is the average of
total revenues for the three fiscal years preceding the borrowing. The risk of
investing in debt issued by any particular local government unit depends, in
the case of general obligation bonds secured by tax revenues, on the
creditworthiness of that issuer or, in the case of revenue bonds, on the
revenue producing ability of the project being financed, and not directly on
the credit-worthiness of the Commonwealth of Pennsylvania as a whole.
The City of Philadelphia (the "City") experienced a series of General
Fund deficits for Fiscal Years 1988 through 1992 and, while its general
financial situation has improved, the City is still seeking a long-term
solution for its economic difficulties. The City has no legal authority to
issue deficit reduction bonds on its own behalf, but state legislation has
been enacted to create an Intergovernmental Cooperation Authority (the
"Authority") to provide fiscal oversight for Pennsylvania cities (primarily
Philadelphia) suffering recurring financial difficulties. The Authority is
broadly empowered to assist cities in avoiding defaults and eliminating
deficits by encouraging the adoption of sound budgetary practices and issuing
bonds. In order for the Authority to issue bonds on behalf of the City, the
City and the Authority entered into an intergovernmental cooperative agreement
providing the Authority with certain oversight powers with respect to the
fiscal affairs of the City, and in recent years, the Authority has issued
approximately $1.76 billion of Special Revenue Bonds on behalf of the City.
The City currently is operating under a five year plan approved by the
Authority in 1996, with technical amendments officially incorporated on July
18, 1996. The audited balance of the City's General Fund as of June 30, 1996
showed a surplus of approximately $118.5 million up from approximately $80.5
million as of June 30, 1995.
The Authority's power to issue further bonds to finance capital
projects or deficit expired on December 31, 1994. The Authority's power to
issue debt to finance a cash flow deficit expired on December 31, 1996, and
its ability to refund outstanding bonds is unrestricted. The Authority had
-21-
<PAGE>
approximately $1.1 billion in Special Revenue Bonds outstanding as of June 30,
1997.
The foregoing information as to certain Pennsylvania risk factors
constitutes only a brief summary, does not purport to be a complete
description of Pennsylvania risk factors and is principally drawn from
official statements relating to securities offerings of the Commonwealth of
Pennsylvania that have come to the Funds' attention and were available as of
the date of this Statement of Additional Information.
Special Considerations Regarding Investment in New Jersey
Municipal Obligations
The State of New Jersey (the "State") and its political subdivisions,
agencies and public authorities are authorized to issue two general classes of
indebtedness; general obligation bonds and revenue bonds. Both classes of
bonds may be included in the New Jersey Muni Portfolio. The repayment of
principal and interest on general obligation bonds is secured by the full
faith and credit of the issuer, backed by the issuer's taxing authority,
without recourse to any special project or source of revenue. Special
obligation or revenue bonds may be repaid only from revenues received in
connection with the project for which the bonds are issued, special excise
taxes, or other special revenue sources and generally are issued by entities
without taxing power. Neither the State of New Jersey nor any of its
subdivisions is liable for the repayment of principal or interest on revenue
bonds except to the extent stated in the preceding sentences.
General obligation bonds of the state are repaid from revenues
obtained through the state's general taxing authority. An inability to
increase taxes may adversely affect the state's ability to authorize or repay
debt.
Public authorities, private non-profit corporations, agencies and
similar entities of New Jersey ("Authorities") are established for a variety
of beneficial purposes, including economic development, housing and mortgage
financing, health care facilities and public transportation. The Authorities
are not operating entities of the State of New Jersey, but are separate legal
entities that are managed independently. The state oversees the Authorities by
appointing the governing boards, designating management, and by significantly
influencing operations. The Authorities are not subject to New Jersey
constitutional restrictions on the incurrence of debt, applicable to the State
of New Jersey itself, and may issue special obligation or private activity
bonds in legislatively authorized amounts.
-22-
<PAGE>
An absence or reduction of revenue will affect a bond-issuing
Authority's ability to repay debt on special obligation bonds and no assurance
can be given that sufficient revenues will be obtained to make such payments,
although in some instances repayment may be guaranteed or otherwise secured.
Various Authorities have issued bonds for the construction of health
care facilities, transportation facilities, office buildings and related
facilities, housing facilities, pollution control facilities, water and
sewerage facilities and power and electric facilities. Each of these
facilities may incur different difficulties in meeting its debt repayment
obligations. Hospital facilities, for example, are subject to changes in
Medicare and Medicaid reimbursement regulations, attempts by Federal and state
legislatures to limit the costs of health care and management's ability to
complete construction projects on a timely basis as well as to maintain
projected rates of occupancy and utilization. At any given time, there are
several proposals pending on a Federal and state level concerning health care
which may further affect a hospital's debt service obligation.
Housing facilities may be subject to increases in operating costs,
management's ability to maintain occupancy levels, rent restrictions and
availability of Federal or state subsidies, while power and electric
facilities may be subject to increased costs resulting from environmental
restrictions, fluctuations in fuel costs, delays in licensing procedures and
the general regulatory framework in which these facilities operate. All of
these entities are constructed and operated under rigid regulatory guidelines.
Some entities which financed facilities with proceeds of private
activity bonds issued by the New Jersey Economic Development Authority, a
major issuer of special obligation bonds, have defaulted on their debt service
obligations. Because these special obligation bonds were repayable only from
revenue received from the specific projects which they funded, the New Jersey
Economic Development Authority was unable to repay the debt service to
bondholders for such facilities. Each issue of special obligation bonds,
however, depends on its own revenue for repayment, and thus these defaults
should not affect the ability of the New Jersey Economic Development Authority
to repay obligations on other bonds that it issues in the future.
The state has experienced a gradual economic recovery since hitting a
recessionary peak during 1992. Recently, the state's unemployment rate has
fallen, and job growth has been experienced in several sectors of the state's
economy. To the extent that any adverse conditions exist in the future which
affect the obligor's ability to repay debt, the value of the Portfolio may be
immediately and substantially affected.
-23-
<PAGE>
The following are cases presently pending or threatened in which the
State has a potential for either a significant loss of revenue or a
significant unanticipated expenditure: (i) several labor unions have
challenged 1994 legislation mandating a revaluation of several public employee
pension funds which resulted in a refund of millions of dollars in public
employer contributions to the State and significant ongoing annual savings to
the State; (ii) several cases filed in the State courts challenged the basis
on which recoveries of certain costs for residents in State psychiatric
hospitals and other facilities are shared between the State Department of
Human Services and the State's county governments, and certain counties are
seeking the recovery from the Department of costs they have incurred for the
maintenance of such residents; (iii) the County of Passaic and other parties
have filed suit alleging the State violated a 1984 consent order concerning
the construction of a resource recovery facility in that county; (iv) several
Medicaid eligible children and the Association for Children of New Jersey have
filed suit claiming the Medicaid reimbursement rates for services rendered to
such children are inadequate under federal law; (v) a coalition of churches
and church leaders in Hudson County have filed suit asserting the State-owned
Liberty State Park in Jersey City violates environmental standards; (vi)
representatives of the trucking industry have filed a constitutional challenge
to annual hazardous and solid waste licensure renewal fees; (vii) the
Education Law Center filed a motion compelling the State to close the spending
gap between poor urban school districts and wealthy rural school districts;
(viii) a group of insurance companies have filed a constitutional challenge to
the challenge to the State's assessment of monies pursuant to the Fair
Automobile Insurance Reform Act of 1990; (ix) a class action consisting of
prisoners with serious mental disorders has been filed against officers of the
Department of Corrections, alleging sex discrimination, violation of the
Americans with Disabilities Act of 1990, and constitutional violations; (x) a
class action has been brought in federal court challenging the State's method
of determining the monthly needs of a spouse of an institutionalized person
under the Medicare Catastrophic Act; (xi) several suits have been filed
against the State in federal court alleging that the State committed
securities fraud and environmental violations in the financing of a new
Atlantic City highway and tunnel; (xii) a class action has been filed against
the State alleging the State's breach of contract for not paying certain
Medicare co-insurance and deductibles; and (xiii) an action has been filed
challenging the State's issuance of bonds to fund the accrued liability in its
pension funds under the Pension Bond Financing Act of 1997.
Although the Portfolio generally intends to invest its assets
primarily in New Jersey Municipal Obligations rated no lower than A, MIG2 or
Prime-1 by Moody's or A SP-1 or A-1 by S&P, there can be no assurance that
-24-
<PAGE>
such ratings will remain in effect until the bond matures or is redeemed or
will not be revised downward or withdrawn. Such a revision or withdrawal may
have an adverse affect on the market price of such securities.
PERFORMANCE CALCULATIONS
From time to time, the Government Cash Portfolio and the Tax-Exempt Cash
Portfolio (the "Cash Portfolios"), may advertise or quote yield, effective
yield or total return. The "yield" and "effective yield" of the Government
Cash and Tax-Exempt Cash Portfolios, and the "tax-equivalent yield" of the
Tax-Exempt Cash Portfolio, are calculated according to formulas prescribed by
the Commission. The standardized seven-day yield of each of these Portfolios
is computed by determining the net change, exclusive of capital changes, in
the value of a hypothetical pre-existing account in the particular Portfolio
having a balance of one share at the beginning of the period, dividing the net
change in account value by the value of the account at the beginning of the
base period to obtain the base period return, and multiplying the base period
return by (365/7). The net change in the value of an account in the Cash
Portfolios includes the value of additional shares purchased with dividends
from the original share, and dividends declared on both the original share and
any such additional shares, net of all fees, other than nonrecurring account
or sales charges, that are charged by the Fund to all shareholder accounts in
proportion to the length of the base period and the Portfolio's average
account size. The capital changes to be excluded from the calculation of the
net change in account value are realized gains and losses from the sale of
securities and unrealized appreciation and depreciation. An effective
annualized yield for the Cash Portfolios may be computed by compounding the
unannualized base period return (calculated as above) by adding 1 to the base
period return, raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result.
The Tax-Exempt Cash Portfolio's "7-day tax-equivalent yield" may be
computed by dividing the tax-exempt portion of the Portfolio's yield
(calculated as above) by one minus a stated Federal income tax rate and adding
the product to that portion, if any, of the Portfolio's yield that is not
tax-exempt. The Tax-Exempt Cash Portfolio's tax-equivalent yield, and the Cash
Portfolios' yield and effective yield, do not reflect any fees charged by the
Advisor to its clients. See "Investment Advisor."
Set forth below is an example, for purposes of illustration only, of
the current yield calculations for each of the Cash Portfolios for the seven
day period ended October 31, 1997.
-25-
<PAGE>
Government Cash Tax-Exempt
Portfolio Cash Portfolio
10/31/97 10/31/97
--------------- --------------
7-Day Yield (Net Change
X 365/7 average net
asset value) 5.56% 3.52%
7-Day Effective Yield 5.71% 3.58%
7-Day Tax-Equivalent Yield 8.06% 5.10%*
- ---------------------------------
* Assumes an effective Federal income tax rate of 31%
The Commission yield of the Core Fixed Income Portfolio, Muni
Intermediate Portfolio and the New Jersey Muni Portfolio for the 30-day period
ended October 31, 1997 was 7.22%, 4.75% and 4.22%, respectively. These yields
were calculated by dividing the net investment income per share (as described
below) earned by the Portfolio during a 30-day (or one month) period by the
maximum offering price per share on the last day of the period and annualizing
the result on a semi-annual basis by adding one to the quotient, raising the
sum to the power of six, subtracting one from the result and then doubling the
difference. The Portfolio's net investment income per share earned during the
period is based on the average daily number of shares outstanding during the
period entitled to receive dividends and includes dividends and interest
earned during the period minus expenses accrued for the period, net of
reimbursements. This calculation can be expressed as follows:
Yield = 2 [( a-b + 1)6 - 1]
---
cd
Where: a = dividends and interest earned during the
period.
b = expenses accrued for the period net of
reimbursements.
c = the average daily number of
shares outstanding during the
period that were entitled to
receive dividends.
d = maximum offering price per share
on the last day of the period.
For the purpose of determining net investment income earned during
the period (variable "a" in the formula), interest earned on any debt
obligations held by the Core Fixed Income, Muni Intermediate or New Jersey
Muni Portfolios is calculated by computing the yield to maturity of each
obligation held by the Portfolio based on the market value of the obligation
(including actual accrued interest) at the close of business on the last
business day of each month, or, with respect to obligations purchased during
the month, the purchase price (plus actual accrued interest) and dividing the
result by 360 and multiplying the quotient by the market value of the
-26-
<PAGE>
obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that
the obligation is held by the particular Portfolio. For purposes of this
calculation, it is assumed that each month contains 30 days. The maturity of
an obligation with a call provision is the next call date on which the
obligation reasonably may be expected to be called or, if none, the maturity
date. With respect to debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect changes in the
market values of such debt obligations.
Undeclared earned income will be subtracted from the maximum offering
price per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the base period, has not been
declared as a dividend, but is reasonably expected to be and is declared and
paid as a dividend shortly thereafter. The Core Fixed Income, Muni
Intermediate and New Jersey Muni Portfolios' yields do not reflect any fees
charged by the Advisor or an Affiliate to its clients. See "Investment
Advisor."
The Muni Intermediate and New Jersey Muni Portfolios'
"tax-equivalent" yield is computed by dividing the portion of the yield that
is exempt from Federal and/or State income taxes by one minus a stated Federal
income tax rate and/or the State income tax rate and by adding that figure to
that portion, if any, of the yield that is not tax-exempt. The 30 day
tax-equivalent yield for the Muni Intermediate Portfolio and New Jersey
Portfolio for the 30-day period ended October 31, 1997 was 7.18% and 6.65%,
respectively (assuming a marginal Federal income tax rate of 31% and marginal
Pennsylvania and New Jersey income tax rates of 2.80 and 5.525%,
respectively).
The Core Fixed Income, Equity, International, Small Capitalization
Equity, Muni Intermediate, New Jersey Muni and Large Cap Value Portfolios each
compute their respective average annual total returns separately for each
class by determining the average annual compounded rates of return during
specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by dividing the ending
redeemable value of a hypothetical $1,000 initial payment by $1,000 and
raising the quotient to a power equal to one divided by the number of years
(or fractional portion thereof) covered by the computation and subtracting one
from the result. This calculation can be expressed as follows:
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<PAGE>
T = [( ERV )1/n - 1]
---
P
Where: T = average annual total return.
ERV = ending redeemable value
at the end of the period
covered by the
computation of a
hypothetical $1,000
payment made at the
beginning of the period.
P = hypothetical initial
payment of $1,000.
n = period covered by the computation,
expressed in terms of years.
The Core Fixed Income, Equity, International, Small Capitalization
Equity, Muni Intermediate, New Jersey Muni and Large Cap Value Portfolios
compute their aggregate total returns separately for each class by determining
the aggregate rates of return during specified periods that likewise equate
the initial amount invested to the ending redeemable value of such investment.
The formula for calculating aggregate total return is as follows:
T = [( ERV ) - 1]
---
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain
distributions. The ending redeemable value (variable "ERV" in each formula) is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges at the end of the period covered by
the computations. Each Portfolio's average annual total return and aggregate
total return do not reflect any fees charged by the Advisor to its clients.
See "Investment Advisor."
As of January 1, 1998, the Small Capitalization Equity Portfolio
began to offer Institutional Shares. Institutional Shares are subject to an
annual .05% fee payable pursuant to the Amended and Restated Shareholder
Servicing Plan ("Shareholder Servicing Fee"). Prior to January 1, 1998, the
Small Capitalization Equity Portfolio did not have an advisory fee and Advisor
Shares had a .05% Shareholder Servicing Fee. Performance of the Institutional
Shares prior to January 1, 1998 is represented by performance of the Advisor
Shares.
Set forth below are the average annual total return figures for the
Core Fixed Income, Equity, International, Small Capitalization Equity, Muni
Intermediate, Large Cap Value and New Jersey Muni Portfolios since inception
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<PAGE>
and for the one year and five year periods ended October 31, 1997.
<TABLE>
<CAPTION>
Small
Core Fixed Capitalization Muni
Income Equity International Equity Intermediate
Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- ------------- --------------- ------------
Advisor Institutional
Shares Shares
------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 Year Ended 10/31/97 8.63% 36.39% 16.35% 41.80% N/A 6.69%
5 Years Ended 10/31/97 6.65% 20.71% 15.98% 22.83% N/A 5.97%
Inception to 10/31/97 8.55% 15.79% 11.61% 19.05% N/A 5.65%
Large Cap New
Value Jersey Muni
Portfolio Portfolio
--------- ------------
1 Year Ended 10/31/97 36.55% 6.90%
Inception to 10/31/97 18.44% 4.62%
Inception Dates:
Core Fixed Income Portfolio.................................. 11/17/88
Equity Portfolio............................................. 07/20/89
International Portfolio...................................... 11/17/88
Small Capitalization Equity Portfolio........................ 03/01/91
Muni Intermediate Portfolio.................................. 06/05/92
Large Cap Value Portfolio.................................... 12/31/92
New Jersey Muni Portfolio.................................... 11/01/93
</TABLE>
Set forth below are the aggregate total return figures for the Core
Fixed Income, Equity, International, Small Capitalization Equity, Muni
Intermediate, Large Cap Value and New Jersey Muni Portfolios from inception to
October 31, 1997.
Portfolio Inception Date Aggregate Total Return
- --------- -------------- ----------------------
Core Fixed Income 11/17/88 108.50%
Equity 07/20/89 236.96%
International 11/17/88 167.39%
Small Capitalization Equity 03/01/91 219.93%(1)
Muni Intermediate 06/05/92 34.65%
Large Cap Value 12/31/92 126.25%
New Jersey Muni 11/01/93 19.73%
- ---------------
(1) Represents performance of Advisor Shares
GENERAL INFORMATION
Dividends and Capital Gains Distributions
Each Portfolio's policy is to distribute substantially all of its net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed
income and gains (see discussion under "Dividends, Capital Gains Distributions
and Taxes" in the Prospectus). As set forth in the Prospectuses, the
Government Cash and the Tax-Exempt Cash Portfolios declare dividends daily and
normally distribute substantially all of their net investment income to
shareholders monthly; the International, Equity, Small Capitalization Equity
and Large Cap Value Portfolios normally distribute substantially all of their
net investment income to shareholders in the form of a quarterly dividend and
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<PAGE>
the Core Fixed Income, Muni Intermediate and New Jersey Muni Portfolios
normally distribute substantially all of their net investment income to
shareholders in the form of a monthly dividend. If any net capital gains are
realized by a Portfolio, that Portfolio normally distributes such gains at
least once a year. The amounts of any income dividends or capital gains
distributions for a Portfolio cannot be predicted.
Any dividend or distribution paid shortly after the purchase of
shares of a Portfolio by an investor may have the effect of reducing the per
share net asset value of that Portfolio by the per share amount of the
dividend or distribution. Furthermore, such dividends or distributions,
although in effect a return of capital, are subject to income taxes as set
forth in the Prospectus.
Certain Record Holders
As of January 31, 1998, the Advisor held of record substantially all of
the outstanding shares of each Portfolio. For more information about the
Advisor, see "Investment Advisor" in the Prospectus. As of January 31, 1998
the directors/trustees and officers of the Funds collectively owned less than
1% of the outstanding shares of each of the Funds' Portfolios.
FINANCIAL STATEMENTS
The Funds' Financial Statements for the Government Cash, Tax-Exempt
Cash, Core Fixed Income, International, Equity, Small Capitalization Equity,
Large Cap Value, Muni Intermediate and New Jersey Muni Portfolios for the year
ended October 31, 1997 and the financial highlights for each of the respective
periods presented, appearing in the 1997 Annual Report to Shareholders, and
the reports thereon of Coopers & Lybrand L.L.P., the Funds' independent
accountants, also appearing therein, are incorporated by reference in this
Statement of Additional Information. No other parts of the 1997 Annual Report
to Shareholder are incorporated herein.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information do not
contain all the information included in the Registration Statement filed with
the Commission under the Securities Act of 1933 with respect to the securities
offered by the Prospectus. Certain portions of the Registration Statement have
been omitted from the Prospectus and this Statement of Additional Information
pursuant to the rules and regulations of the SEC. The Registration Statement,
including the exhibits filed therewith, may be examined at the office of the
SEC in Washington, D.C.
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<PAGE>
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other documents
referred to are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of
Additional Information form a part, each such statement being qualified in all
respects by such reference.
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<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. Description of Bond Ratings
Excerpts from Moody's description of its highest bond ratings: Aaa --
judged to be the best quality; carry the smallest degree of investment risk;
Aa -- judged to be of high quality by all standards; A -- judged to be of
upper medium quality; factors giving security to principal and interest
considered adequate but elements may be present which suggest a susceptibility
to impairment sometime in the future; Baa -- judged to be of medium quality;
lacking outstanding investment characteristics and in fact having speculative
characteristics.
Excerpts from S&P description of its highest bond ratings: AAA --
highest grade obligations; indicates an extremely strong capacity to pay
interest and repay principal; AA -- also qualify as high grade obligations;
indicates a very strong capacity to pay interest and repay principal and
differs from AAA issues only in small degree; A -- qualifies as upper medium
grade obligations; have strong capacity to pay interest and repay principal,
although somewhat more susceptible to adverse effects of change in
circumstances and economic conditions than higher rated bonds; BBB --
indicates adequate capacity to pay interest and repay principal, although
adverse economic conditions are likely to weaken such capacity.
Description of Moody's ratings of state and municipal notes: Moody's
ratings for state and municipal notes, other short-term obligations and
variable rate demand obligations are as follows: MIG-1/VMIG-1 -- Best quality,
enjoying strong protection by established cash flows, superior liquidity
support or demonstrated broadbased access to the market for refinancing;
MIG-2/VMIG-2 -- High quality with margins of protection ample although not so
large as in the preceding group.
Description of Moody's highest commercial paper rating: Prime-1
("P-1") -- judged to be of the best quality. Issuers rated P-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations.
Excerpt from S&P rating of municipal note issues: SP-1+ --
overwhelming capacity to pay principal and interest; SP-1 -- very strong or
strong capacity to pay principal and interest.
Description of S&P highest commercial papers ratings: A-1+ -- this
designation indicates the degree of safety regarding timely payment is
overwhelming. A-1 -- this designation indicates the degree of safety regarding
timely payment is either overwhelming or very strong.
A-1
<PAGE>
II. Description of Mortgage-Backed Securities
Mortgage-Related Securities. The Core Fixed Income Portfolio may
purchase mortgage-backed securities that are secured by entities such as the
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
commercial banks, trusts, financial companies, finance subsidiaries of
industrial companies, savings and loan associations, mortgage banks and
investment banks. These certificates are in most cases pass-through instruments,
through which the holder receives a share of all interest and principal payments
from the mortgages underlying the certificate, net of certain fees. The average
life of a mortgage-backed security varies with the underlying mortgage
instruments, which have maximum maturities of 40 years. The average life is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities as the result of prepayments, mortgage refinancings or
foreclosure. Mortgage prepayment rates are affected by factors including the
level of interest rates, general economic conditions, the location and age of
the mortgage and other social and demographic conditions. Such prepayments are
passed through to the registered holder with the regular monthly payments of
principal and interest and have the effect of reducing future payments.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities guaranteed
by GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments under
its guarantee. Mortgage-related securities issued by FNMA include FNMA
guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
which are solely the obligations of FNMA, are not backed by or entitled to the
full faith and credit of the United States and are supported by the right of the
issuer to borrow from the Treasury. FNMA is a government-sponsored organization
owned entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of principal and interest by FNMA. Mortgage related securities issued by
the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are
not guaranteed by the United States or by any Federal Home
A-2
<PAGE>
Loan Banks and do not constitute a debt or obligation of the United States or of
any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of
interest, which is guaranteed by FHLMC. FHLMC guarantees either ultimate
collection or timely payment of all principal payments on the underlying
mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC
may remit the amount due on account of its guarantee of ultimate payment of
principal at any time after default on an underlying mortgage, but in no event
later than one year after it becomes payable.
III. Description of Asset-Backed Securities
Asset-Backed Securities. The Core Fixed Income Portfolio may invest in
asset-backed securities. Asset-backed securities include interest in pools of
receivables, such as motor vehicle installment purchase obligations and credit
card receivables. Such securities are generally issued as pass-through
certificates, which represent undivided fractional ownership interests in the
underlying pools of assets. Such securities may also be debt instruments, which
are also known as collateralized obligations and are generally issued as the
debt of a special purpose entity organized solely for the purpose of owning such
assets and issuing such debt. Asset-backed securities are not issued or
guaranteed by the U.S. Government or its agencies or instrumentalities; however,
the payment of principal and interest on such obligations may be guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities.
The purchase of asset-backed securities may raise considerations
peculiar to the financing of the instruments underlying such securities. For
example, most organizations that issue asset-backed securities relating to motor
vehicle installment purchase obligations perfect their interests in the
respective obligations only by filing a financing statement and by having the
servicer of the obligations, which is usually the orginator, take custody
thereof. In such circumstances, if the servicer were to sell the same
obligations to another party, in violation of its duty not to do so, there is a
risk that such party could acquire an interest in the obligations superior to
that of the holders of the asset-back securities. Also, although most of such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset-backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
A-3
<PAGE>
the asset-backed securities. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and federal laws give
the motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related asset-backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances 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 cardholder.
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IV. Description of U.S. Government Securities and Certain Other Securities
The term "U.S. Government securities" refers to a variety of
securities which are issued or guaranteed by the United States Government, and
by various instrumentalities which have been established or sponsored by the
United States Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by Federal agencies and
U.S. Government sponsored enterprises or instrumentalities may or may not be
backed by the full faith and credit of the United States. In the case of
securities not backed by the full faith and credit of the United States, an
investor must look principally to the agency, enterprise or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the
agency, enterprise or instrumentality does not meet its commitment. Agencies
which are backed by the full faith and credit of the United States include the
Export Import Bank, Farmers Home Administration, Federal Financing Bank and
others. Certain agencies, enterprises and instrumentalities, such as the
Government National Mortgage Association are, in effect, backed by the full
faith and credit of the United States through provisions in their charters
that they may make "indefinite and unlimited" drawings on the Treasury, if
needed to service its debt. Debt from certain other agencies, enterprises and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S.
Treasury to purchase certain amounts of their securities to assist the
institution in meeting its debt obligations. Finally, other agencies,
enterprises and instrumentalities, such as the Farm Credit System and the
Federal Home Loan Mortgage Corporation, are federally chartered institutions
under Government supervision, but their debt securities are backed only by the
creditworthiness of those institutions, not the U.S.
Government.
Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under Federal charter with Government
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supervision. Instrumentalities issuing or guaranteeing securities include, among
others, Overseas Private Investment Corporation, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate Credit
Banks and the Federal National Mortgage Association.
International institutions that issue securities which the Core Fixed
Income Portfolio may purchase include the Asian Development Bank,
Inter-American Development Bank and the International Bank for Reconstruction
and Development (the "World Bank").
V. Description of Municipal Obligations
Municipal Obligations generally include debt obligations issued by
states and their political subdivisions, and duly constituted authorities and
corporations, to obtain funds to construct, repair or improve various public
facilities such as airports, bridges, highways, hospitals, housing, schools,
streets and water and sewer works. Municipal Obligations may also be issued to
refinance outstanding obligations as well as to obtain funds for general
operating expenses and for loan to other public institutions and facilities.
The two principal classifications of Municipal Obligations are
"general obligation" and "revenue" or "special tax" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue or special tax bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise or
other tax, but not from general tax revenues. The Tax-Exempt Cash Portfolio
may also invest in tax-exempt industrial development bonds, short-term
municipal obligations (rated SP-1+ or SP-1 by S&P or MIG-1/VMIG-1 by Moody's),
project notes, demand notes and tax-exempt commercial paper (rated A-1+ or A-1
by S&P or P-1 by Moody's), and municipal bonds with a remaining effective
maturity of 13 months or less (rated AA or better by S&P or Aa or better by
Moody's).
Industrial revenue bonds in most cases are revenue bonds and
generally do not have the pledge of the credit of the issuer. The payment of
the principal and interest on such industrial revenue bonds is dependent
solely on the ability of the user of the facilities financed by the bonds to
meet its financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment. Short-term municipal
obligations issued by states, cities, municipalities or municipal agencies,
include Tax Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation
Notes, Construction Loan Notes and Short-Term Discount Notes. Project Notes
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are instruments guaranteed by the Department of Housing and Urban Development
but issued by a state or local housing agency. While the issuing agency has
the primary obligation on Project Notes, they are also secured by the full
faith and credit of the United States.
Municipal Obligations may also include "moral obligation" bonds,
which are normally issued by special purpose public authorities. If the issuer
of moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Note obligations with demand or put options may have a stated
maturity in excess of 13 months, but permit any holder to demand payment of
principal plus accrued interest upon a specified number of days' notice.
Frequently, such obligations are secured by letters of credit or other credit
support arrangements provided by banks. The issuer of such notes normally has
a corresponding right, after a given period, to repay in its discretion the
outstanding principal of the note plus accrued interest upon a specific number
of days' notice to the bondholders. The interest rate on a demand note may be
based upon a known lending rate, such as a bank's prime rate, and be adjusted
when such rate changes, or the interest rate on a demand note may be a market
rate that is adjusted at specified intervals. The demand notes in which the
Tax-Exempt Cash Portfolio will invest are payable on not more than thirteen
months notice.
The yields of Municipal Obligations depend on, among other things,
general money market conditions, conditions in the Municipal Obligation
market, the size of a particular offering, the maturity of the obligation, and
the rating of the issue. The ratings of Moody's and S&P represent their
opinions of the quality of the Municipal Obligations rated by them. It should
be emphasized that such ratings are general and are not absolute standards of
quality. Consequently, Municipal Obligations with the same maturity, coupon
and rating may have different yields, while Municipal Obligations of the same
maturity and coupon, but with different ratings may have the same yield. It
will be the responsibility of the Advisor to appraise independently the
fundamental quality of the bonds held by the Tax-Exempt Cash Portfolio.
Municipal Obligations are sometimes purchased on a "when issued"
basis, which means the buyer has committed to purchase certain specified
securities at an agreed upon price when they are issued. The period between
commitment date and issuance date can be a month or more. It is possible that
the securities will never be issued and the commitment cancelled.
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From time to time proposals have been introduced before Congress to
restrict or eliminate the Federal income tax exemption for interest on
Municipal Obligations. Similar proposals may be introduced in the future. If
any such proposal were enacted, it might restrict or eliminate the ability of
the Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios to
achieve their investment objectives. In that event the Funds' Board members
and officers would reevaluate the Tax-Exempt Cash, Muni Intermediate and New
Jersey Muni Portfolios' investment objectives and policies and consider
recommending to their shareholders changes in such objectives and policies.
VI. Foreign Investments
Investors should recognize that investing in foreign companies
involves certain special considerations which are not typically associated
with investing in U.S. companies. Because the stocks of foreign companies are
frequently denominated in foreign currencies, and because the Equity,
International, Small Capitalization Equity and Large Cap Value Portfolios may
temporarily hold uninvested reserves in bank deposits in foreign currencies,
the Equity, International, Small Capitalization Equity and Large Cap Value
Portfolios may be affected favorably or unfavorably by changes in currency
rates and in exchange control regulations, and may incur costs in connection
with conversions between various currencies. The investment policies of the
International Portfolio permit the Portfolio to enter into forward foreign
currency exchange contracts in order to hedge the Portfolio's holdings and
commitments against changes in the level of future currency rates. Such
contracts involve an obligation to purchase or sell a specific currency at a
future date at a price set at the time of the contract.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more
volatile than securities of comparable domestic companies. There is generally
less government supervision and regulation of stock exchanges, brokers and
listed companies than in the U.S. In addition, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in foreign
countries.
Although the Equity, International, Small Capitalization Equity and
Large Cap Value Portfolios will endeavor to achieve most favorable execution
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costs in its portfolio transactions, commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will
reduce the income received from the foreign companies comprising the
Equity, International, Small Capitalization Equity and Large Cap Value
Portfolios.
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