<PAGE>
As filed with the Securities and Commission on February 28, 2000
Registration Nos. 33-46593
811-6578
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 12 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 13 |X|
----------------------------
The Glenmede Portfolios
(Exact Name of Registrant as Specified in Charter)
One South Street
Baltimore, Maryland 21202
(Address of Principal Executive Offices)
Registrant's Telephone Number:
1-800-442-8299
Michael P. Malloy, Esq., Secretary
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, Pennsylvania 19103-6996
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest.
- --------------------------------------------------------------------------------
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
Prospectus
February 28, 2000
Money Market Portfolios
Government Cash Portfolio
Tax-Exempt Cash Portfolio
Bond Portfolios
Core Fixed Income Portfolio
Muni Intermediate Portfolio
New Jersey Muni Portfolio
Investment Advisor
The Glenmede Trust Company
The Securities and Exchange Commission has not approved or disapproved the
Portfolios' securities or determined if this prospectus is accurate or complete.
It is a criminal offense to state otherwise.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY.....................................................
INVESTMENTS.............................................................
PRICE OF PORTFOLIO SHARES...............................................
PURCHASE OF SHARES......................................................
REDEMPTION OF SHARES....................................................
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF
SHARES OF THE PORTFOLIOS..............................................
DIVIDENDS AND DISTRIBUTIONS.............................................
TAXES...................................................................
MANAGEMENT OF THE PORTFOLIOS............................................
GENERAL INFORMATION.....................................................
FINANCIAL HIGHLIGHTS....................................................
<PAGE>
RISK/RETURN SUMMARY
Money Market Portfolios
<TABLE>
<CAPTION>
Investment Objective Principal Investment Strategies
<S> <C> <C>
Government Cash Portfolio Maximum current interest income The Portfolio invests primarily in short-term
consistent with the preservation of securities issued by the U.S. Treasury or
capital and liquidity U.S. Government-related agencies, and
repurchase agreements secured by such
instruments.
Tax-Exempt Cash Portfolio Maximum current interest income The Portfolio invests primarily in tax-exempt
exempt from Federal income short-term, high quality municipal obligations,
taxes consistent with the including, for example, project and demand notes,
preservation of capital and tax, revenue or bond anticipation notes, municipal
liquidity bonds, variable rate demand notes and non-rated
privately placed securities.
Each Money Market Portfolio invests in securities
which the Advisor believes present minimal credit
risks at the time of purchase and which mature or
provide for redemption within 13 months from the date
of purchase. The dollar-weighted average maturity of
each Money Market Portfolio is expected to be 90 days
or less.
</TABLE>
3
<PAGE>
Bond Portfolios
-----------------------------------------------------------------
Important Concept
Total return consists of net income (dividend and interest income
Side-Note: from portfolio securities less expenses of the Portfolio) and
capital gains and losses, both realized and unrealized, from
portfolio securities.
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Objective Principal Investment Strategies
<S> <C> <C>
Core Fixed Income Portfolio Maximum long-term total return The Portfolio invests primarily in mortgage-backed
consistent with reasonable and fixed income securities issued by the U.S.
risk to principal Treasury or U.S. Government-related agencies. The
Portfolio may also invest in privately issued
mortgage-backed securities, debt obligations of
domestic and foreign companies, repurchase agreements
collateralized by U.S. Government securities and
may enter into reverse repurchase agreements.
The Advisor purchases securities that it believes have
potential for higher returns than other securities
with similar characteristics and risk, considering
factors such as, maturity, coupon, credit and any
prepayment options. The Advisor will generally sell a
security for a number of reasons, including when the
expected performance has been realized or to purchase
another security with similar characteristics and risk
but that the Advisor believes has a higher expected
return.
Such securities will be rated at least A by Standard
& Poor's Rating Group ("S&P") or Moody's Investors
Service, Inc. ("Moody's") and if unrated, determined
to be of comparable quality at the time of purchase.
Muni Intermediate Portfolio As high a level of current income The Portfolio invests primarily in intermediate and
exempt from Federal income tax long-term tax-exempt obligations of the Commonwealth
as is consistent with preservation of Pennsylvania and its political subdivisions,
of capital agencies, instrumentalities and authorities.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
New Jersey Muni Portfolio As high a level of current income The Portfolio invests primarily in intermediate
exempt from Federal income tax as and long-term tax-exempt obligations of the State
is consistent with preservation of New Jersey and its political subdivisions,
of capital agencies, instrumentalities and authorities.
Each Muni Portfolio purchases municipal obligations
that the Advisor believes have the best value compared
to securities of similar credit quality and maturity
range. The Portfolios generally sell municipal
obligations for a number of reasons, including a
change in credit quality, to extend maturity, to
increase yield or to raise funds to cover redemptions.
Each Muni Portfolio will invest in securities that
are rated at the time of purchase within the three
highest ratings assigned by Moody's (i.e., Aaa, Aa,
A) or S&P (AAA, AA, A) in the case of bonds, or rated
SP-1 or higher by S&P or MIG-2 or higher by Moody's
in the case of notes. Each Portfolio may invest in
unrated securities if they are determined to be of
comparable quality at the time of purchase.
Each Bond Portfolio expects to maintain a
dollar-weighted average maturity of 3 to 10 years.
</TABLE>
Principal Risks of
Investing
<TABLE>
<CAPTION>
<S> <C> <C>
All Portfolios The strategy that the Advisor uses may fail to produce the
intended result.
An investment in a Portfolio is not a deposit of The
Glenmede Trust Company and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other
government agency.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
All Bond Portfolios The value of fixed income securities tends to fluctuate with
changes in interest rates. Generally, their value will
decrease when interest rates rise and increase when interest
rates fall. Fixed income securities are also subject to the
risk that an issuer will be unable to make principal and
interest payments when due. Therefore, you could lose money
by investing in the Portfolios.
Fixed income securities with longer maturities are more
susceptible to interest rate fluctuations than those with
shorter maturities. Therefore, the risk of interest rate
fluctuation is greater to the extent that the Portfolios
invest in long-term securities.
Core Fixed Income Portfolio The Core Fixed Income Portfolio may make loans through
collateralized repurchase agreements. It may also borrow
money through reverse repurchase agreements. Although loans
made by the Portfolio are collateralized with the borrower's
securities, the Portfolio could suffer a loss if the
borrower defaults on its obligation to buy the securities
back under the terms of the repurchase agreement.
The Core Fixed Income Portfolio is subject to prepayment
risk. Prepayment risk is the risk that a debt security may
be paid off and the proceeds returned to the Portfolio
earlier than anticipated. Depending on market conditions,
proceeds may be reinvested at lower interest rates.
Muni Portfolios The Muni Intermediate Portfolio and New Jersey Muni
Portfolio are subject to additional risks. Because the Muni
Intermediate Portfolio invests primarily in Pennsylvania
municipal obligations and the New Jersey Muni Portfolio
invests primarily in New Jersey municipal obligations, they
are classified as non-diversified. This means that each
Portfolio may invest a greater percentage of its assets in a
particular issuer, and that a Portfolio's performance will
be dependent upon a smaller category of securities than is a
diversified portfolio. Accordingly, each Portfolio may
experience greater fluctuations in net asset value and may
have greater risk of loss.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Muni Intermediate Portfolio and the New Jersey Muni
Portfolio are each especially susceptible to the economic,
political and regulatory events that affect Pennsylvania and
New Jersey, respectively.
Each of the Muni Portfolios is subject to call risk. Call
risk is the risk that changes in interest rates may cause
certain municipal securities to be paid off much sooner or
later than expected, which could adversely affect a
Portfolio's value.
All Money Market Portfolios Although these Portfolios invest in money market instruments
which the Advisor believes present minimal credit risks at
the time of purchase, there is a risk that an issuer may not
be able to make principal and interest payments when due.
Although the Portfolios seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money
by investing in the Portfolios.
The Government Cash Portfolio may make loans through
collateralized repurchase agreements. Although loans made by
the Portfolio are collateralized with the borrower's
securities, the Portfolio could suffer a loss if the
borrower defaults on its obligation to buy the securities
back under the terms of the repurchase agreement.
</TABLE>
Who may want to
invest in the
<TABLE>
<CAPTION>
<S> <C> <C>
Bond Portfolios The Bond Portfolios may be appropriate for you if you seek a
regular stream of income with higher potential returns than
money market funds and if you are also willing to accept
some risk.
Money Market Portfolios The Money Market Portfolios may be appropriate for you if
you seek monthly income with minimal risk to principal. The
Portfolios are NOT appropriate for you if you are seeking a
high level of monthly income or long-term total return.
</TABLE>
7
<PAGE>
Bar Charts and
Performance Tables
<TABLE>
<CAPTION>
<S> <C>
The bar charts and tables below show the Portfolios' annual
total returns, their long-term performance and provide some
indication of the risks of investing in the Portfolios. The
bar charts show how the performance of the Portfolios has
varied from year to year. The tables show how each
Portfolio's average annual total returns for one, five and
ten years compare to those of selected market indices. The
bar charts and performance tables assume reinvestment of
dividends and distributions. The Portfolios' past
performance does not necessarily indicate how they will
perform in the future.
</TABLE>
Government Cash Portfolio
1990 8.32%
1991 6.13%
1992 3.85%
1993 3.18%
1994 4.19%
1995 5.92%
1996 5.40%
1997 5.58%
1998 5.51%
1999 5.07%
During the periods shown in the bar chart, the highest quarterly return
was 2.48% (for the quarter ended June 30, 1989) and the lowest quarterly return
was .78% (for the quarter ended June 30, 1993).
Tax-Exempt Cash Portfolio
1990 5.87%
1991 4.53%
1992 3.07%
1993 2.22%
1994 2.70%
1995 3.83%
1996 3.33%
1997 3.51%
1998 3.30%
1999 3.11%
8
<PAGE>
During the periods shown in the bar chart, the highest quarterly return
was 1.71% (for the quarter ended June 30, 1989) and the lowest quarterly return
was .53% (for the quarter ended March 31, 1994.
Core Fixed Income Portfolio
1990 10.25%
1991 15.02%
1992 6.74%
1993 8.84%
1994 -2.35%
1995 14.45%
1996 3.88%
1997 9.68%
1998 9.08%
1999 -0.64%
During the periods shown in the bar chart, the highest quarterly return
was 6.34% (for the quarter ended June 30, 1989) and the lowest quarterly return
was -2.54% (for the quarter ended March 31, 1994).
Muni Intermediate Portfolio
1993 8.99%
1994 -4.44%
1995 13.69%
1996 4.36%
1997 7.15%
1998 5.57%
1999 0.86%
During the periods shown in the bar chart, the highest quarterly return
was 6.22% (for the quarter ended March 31, 1995) and the lowest quarterly return
was -3.39% (for the quarter ended March 31, 1994).
New Jersey Muni Portfolio
1994 -5.44%
1995 15.03%
1996 4.13%
1997 7.00%
1998 5.67%
1999 -0.16%
9
<PAGE>
During the periods shown in the bar chart, the highest quarterly return
was 3.39% (for the quarter ended June 30, 1995) and the lowest quarterly return
was -4.17% (for the quarter ended March 31, 1994).
<TABLE>
<CAPTION>
The Portfolios' Average Annual Total
Returns for the Periods Ended December 31,
1999
Money Market Portfolios
<S> <C> <C> <C> <C>
- ------------------------------------------ ---------------------------------- ------------ ------------ ------------
Past 1 Past 5 Past 10
o IBC's U.S. Government and Agencies Year Years Years
Money Fund Average(TM)is comprised of
money market funds investing in U.S. ---------------------------------- ------------ ------------ ------------
treasury securities and government Government Cash Portfolio 5.07% 5.49% 5.31%
agency obligations.
---------------------------------- ------------ ------------ ------------
o IBC's Stock Broker and General IBC's U.S. Government and 4.52% 4.68% 5.08%
Purpose Tax-Free Average(TM) is Agencies Money Fund Average(TM)
comprised of money market funds ---------------------------------- ------------ ------------ ------------
investing in fixed-income securities
issued by state and local
governments. Generally, interest
payments on securities qualify for ---------------------------------- ------------ ------------ ------------
exemption from Federal income taxes. Past 1 Past 5 Past 10
Funds may also own municipal Year Years Years
securities subject to the alternative
minimum tax. ---------------------------------- ------------ ------------ ------------
3.11% 3.42% 3.54%
- ------------------------------------------ Tax-Exempt Cash Portfolio
---------------------------------- ------------ ------------ ------------
IBC's Stock Broker and General 2.70% 2.89% 3.40%
Purpose Tax-Free Average(TM)
---------------------------------- ------------ ------------ ------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Bond Portfolios
<S> <C> <C> <C> <C>
- ------------------------------------------ ---------------------------------- ------------ ------------ ------------
Past 1 Past 5 Past 10
o The Lehman Brothers Aggregate Bond Year Years Years
Index is an unmanaged index made up
of the Lehman Brothers Government ---------------------------------- ------------ ------------ ------------
Corporate Bond, Mortgage Backed Core Fixed Income Portfolio -0.64% 7.17% 7.35%
Securities, and Asset Backed
Securities Indexes. ---------------------------------- ------------ ------------ ------------
Lehman Brothers Aggregate -0.83% 7.73% 7.69%
o The Lipper Intermediate U.S. Bond Index
Government Fund Index is comprised of
the 30 largest funds in the Lipper ---------------------------------- ------------ ------------ ------------
Intermediate U.S. Government Fund Lipper Intermediate U.S. -1.40% 6.63% 6.59%
Average. The Average consists of Government Fund Index
funds that invest at least 65% of
their assets in securities issued or ---------------------------------- ------------ ------------ ------------
guaranteed by the U.S. government,
its agencies or instrumentalities
with dollar-weighted average ---------------------------------- ------------ ------------ ------------
maturities of 5 to 10 years. Since
Past 1 Past 5 June 5,
o The Lehman Brothers Municipal 5-Year Year Years 1992
Bond Index is an unmanagd total
return performance benchmark for the ---------------------------------- ------------ ------------ ------------
short-intermediate, investment-grade Muni Intermediate Portfolio 0.86% 6.24% 5.09%
tax-exempt bond market.
---------------------------------- ------------ ------------ ------------
o The Lipper Intermediate Municipal Lehman Brothers Municipal 0.74% 5.71% 5.47%
Debt Fund Index is comprised of the 5-Year Bond Index
30 largest funds in the Lipper
Intermediate Municipal Debt Fund ---------------------------------- ------------ ------------ ------------
Average. The Average consists of Lipper Intermediate Municipal -1.39% 5.59% 5.21%
funds that invest in municipal debt Debt Fund Index
issues with dollar-weighted average
maturities of 5 to 10 years. ---------------------------------- ------------ ------------ ------------
o The Lipper New Jersey Municipal Debt
Fund Index is comprised of the 10 ---------------------------------- ----------- ------------- ------------
largest funds in the Lipper New Since
Jersey Municipal Debt Fund Average. Past 1 Past 5 November
The Average consists of funds that Year Years 1, 1993
invest only in securities that are
exempt from taxation in New Jersey or ---------------------------------- ----------- ------------- ------------
cities in New Jersey. New Jersey Muni Portfolio -0.16% 6.22% 4.13%
- ------------------------------------------ ---------------------------------- ----------- ------------- ------------
Lehman Brothers Municipal 0.74% 5.71% 4.59%
5-Year Bond Index
---------------------------------- ----------- ------------- ------------
Lipper New Jersey Municipal Debt -4.43% 5.65% 3.73%
Fund Index
---------------------------------- ----------- ------------- ------------
</TABLE>
11
<PAGE>
Fees and Expenses of the Portfolios
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolios.
<TABLE>
<CAPTION>
Money Market Portfolios Bond Portfolios
- ---------------------------------------------------------------------|----------------------------------------------
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 Fees (fees paid |
directly from your investment) |
|
Maximum Account Fee 1.00% 1.00% | 1.00% 1.00% 1.00%
(annual percentage of assets under |
management)* |
|
Annual Portfolio Operating Expenses |
(expenses that are deducted |
from Portfolio assets) |
Management Fees .00% .00% | .00% .00% .00%
Other Expenses .11% .12% | .55%** .20% .24%
---- ---- | ---- --- ----
Operating Expenses .11% .12% | .12% .20% .24%
Interest Expenses** | .43%
|
Total Annual Portfolio |
Operating Expenses .11% .12% | .55%** .20% .24%
=== === | === === ===
- ---------------------------------------------------------------------|----------------------------------------------
</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 affiliated companies ("Affiliates"). However, investors
in these Portfolios must be clients of the Advisor, its Affiliates or
certain financial institutions, or must be certain employee benefit plans.
The "Maximum Account Fee" in the above table is the current maximum annual
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 Affiliates for such services vary depending on a number of
factors, including the particular services provided to the client, but are
generally lower than 1% of the client's assets under management. Investors
may also have to pay various fees to others to become shareholders of the
Portfolios. See "Purchase of Shares."
** "Other Expenses" includes interest expenses of the Core Fixed Income
Portfolio generated from its investment in reverse repurchase agreements. If
such interest expenses were not included, "Total Annual Portfolio Operating
Expenses" would be 0.12% for the Core Fixed Income Portfolio.
12
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the
Portfolios with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolios for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolios' operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
Money Market Portfolios Bond Portfolios
- ------------------------------------------------------------|-------------------------------------------
Government Tax-Exempt | Core Fixed Muni New Jersey
Cash Cash | Income Intermediate Muni
Portfolio Portfolio | Portfolio Portfolio Portfolio
- ------------------------------------------------------------|-------------------------------------------
<S> <C> <C> | <C> <C> <C>
One Year $ 11 $ 12 | $ 56 $ 20 $ 25
|
Three Years $ 35 $ 39 | $ 176 $ 64 $ 77
|
Five Years $ 62 $ 68 | $ 307 $113 $135
|
Ten Years $141 $154 | $ 699 $255 $306
- ------------------------------------------------------------|-------------------------------------------
</TABLE>
13
<PAGE>
INVESTMENTS
Objective and Principal Strategies
To help you decide which Portfolio is appropriate for you, this section
looks more closely at the Portfolios' investment objectives and policies. You
should carefully consider your own investment goals, time horizon and risk
tolerance before investing in a Portfolio.
Each Portfolio's investment objective may be changed by the Board
members without shareholder approval.
Money Market Portfolios
Government Cash Portfolio
The investment objective of the Government Cash Portfolio is to provide
maximum current interest income consistent with the preservation of capital and
liquidity.
Under normal market conditions, the Government Cash Portfolio invests
at least 65% of its total assets in short-term securities issued by the U.S.
Treasury, U.S. Government agencies, or other agencies or instrumentalities
sponsored by the U.S. Government, and enters into repurchase agreements secured
by such instruments.
Tax-Exempt Cash Portfolio
The investment 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 invests primarily in short-term, high
quality municipal obligations. Municipal obligations may include the following:
project notes, demand notes, 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), municipal bonds, variable rate demand notes, and non-rated tax-exempt,
privately placed securities. Under normal circumstances, the Portfolio will
invest at least 80% of its net assets in municipal obligations which pay
interest that is exempt from regular Federal income tax and Federal alternative
minimum tax. The Portfolio will use its best efforts to avoid investing any of
its assets in municipal obligations which pay interest that may be subject to
Federal alternative minimum tax.
Investment Duration and Quality:
Each Portfolio will invest in securities maturing within 13 months from
the date of purchase. While this limitation also applies to the Portfolio's
investments in repurchase agreements, securities collateralizing those
repurchase agreements may bear maturities exceeding 13 months. Each Portfolio
may also purchase bonds with longer final maturities if, pursuant to a demand
feature, they provide for redemption within 13 months from the date of purchase.
Each Portfolio's dollar-weighted average maturity is expected to be 90 days or
less.
14
<PAGE>
The Portfolios may invest only in securities which the Advisor believes
present minimal credit risk at the time of purchase. Eligible securities are:
(i) securities rated in the two highest rating categories of a nationally
recognized statistical rating organization. If they are rated by more than one
such rating agency, at least one other rating agency must rate them in one of
its two highest categories; and (ii) unrated securities determined to be of
comparable quality at the time of purchase.
Bond Portfolios
Core Fixed Income Portfolio
The investment objective of the Core Fixed Income Portfolio is to
provide maximum long-term total return consistent with reasonable risk to
principal.
The Portfolio invests primarily in mortgage-backed securities and fixed
income securities issued by the U.S. Treasury, U.S. Government agencies, or
other agencies or instrumentalities sponsored by the U.S. Government
(collectively, "U.S. Government Securities"). The Portfolio may also invest in
privately issued mortgage-backed securities and debt obligations of domestic and
foreign companies. The Portfolio expects to achieve consistent results over the
long term. The dollar-weighted average maturity of the Portfolio is expected to
be between three and ten years. Under normal circumstances, at least 65% of the
Portfolio's total assets will be invested in U.S. Government Securities and
repurchase agreements collateralized by U.S. Government Securities. The
Portfolio may, from time to time, take a temporary defensive position that is
inconsistent with its principal investment strategy in response to adverse
market, economic, political or other conditions. Such investments may include,
for example, cash and short-term debt instruments which meet the Portfolio's
quality criteria. A defensive position, taken at the wrong time, would have an
adverse impact on the Portfolio's performance. To the extent the Portfolio
employs a temporary defensive investment strategy, it may not achieve its
investment objective. The net asset value of the Portfolio will fluctuate.
The Advisor purchases securities that it believes have potential for
higher returns than other securities with similar characteristics and risk,
considering factors such as, maturity, coupon, credit and any prepayment
options. The Advisor will generally sell a security for a number of reasons,
including when the expected performance has been realized or to purchase another
security with similar characteristics and risk but that the Advisor believes has
a higher expected return.
The Portfolio may actively trade portfolio securities to achieve its
principal investment strategies. A high rate of portfolio turnover involves
correspondingly high transaction costs, which may adversely affect the
Portfolio's performance. High portfolio turnover may also result in the
realization of short-term capital gains. Distributions derived from such gains
will be treated as ordinary income for federal income tax purposes.
15
<PAGE>
Muni Intermediate Portfolio and New Jersey Muni Portfolio
The investment objective 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.
The Muni Intermediate Portfolio invests primarily in intermediate and
long-term tax-exempt obligations of the Commonwealth of Pennsylvania and its
political subdivisions, agencies and authorities.
The New Jersey Muni Portfolio invests at least 65% of its net assets in
intermediate and long-term tax-exempt obligations of the State of New Jersey and
its political subdivisions, agencies and authorities.
During normal market conditions, the Muni Intermediate Portfolio and
New Jersey Muni Portfolio will invest at least 80% of their net assets in
intermediate and long-term municipal obligations, which pay tax-exempt interest.
Each of the Portfolios may invest up to 20% of its net assets in municipal
obligations which pay interest which is exempt from regular Federal income tax,
but may be subject to Federal alternative minimum tax. The Portfolios may, from
time to time, take temporary defensive positions that are inconsistent with
their principal investment strategies in response to adverse market, economic,
political, or other conditions. Such investments may include, for example, cash
reserves and short-term instruments such as tax-exempt money market securities.
A defensive position, taken at the wrong time, would have an adverse impact on
the Portfolio's performance. To the extent a Portfolio employs a temporary
defensive investment strategy, it may not achieve its investment objective. The
net asset value of the Portfolios will fluctuate.
The Muni Intermediate and New Jersey Muni Portfolios purchase municipal
obligations that the Advisor believes have the best value compared to securities
of similar credit quality and maturity range. The Portfolios generally sell
municipal obligations for a number of reasons, including a change in credit
quality, to extend maturity, to increase yield or a need to raise funds to cover
redemptions.
Investment Duration and Quality:
Each Portfolio expects to maintain a dollar-weighted average maturity
of 3 to 10 years.
The Core Fixed Income Portfolio's investments in privately issued
mortgage-backed obligations, debt obligations of domestic and foreign companies,
and any other publicly or privately placed U.S. Government Securities will be
rated at least A by Standard & Poor's Ratings Group ("S&P") or Moody's Investors
Service, Inc. ("Moody's"). The Portfolio may invest in unrated securities if
they are determined to be of comparable quality at the time of purchase.
The Muni Intermediate and New Jersey Muni Portfolios will invest in
securities that are rated at the time of purchase within the three highest
ratings assigned by Moody's (i.e., Aaa, Aa, A) or S&P (AAA, AA, A) in the case
of bonds, or rated SP-1 or higher by S&P or MIG-2 or higher by Moody's in the
case of notes. Each Portfolio may invest in unrated securities if they are
determined to be of comparable quality at the time of purchase. If a portfolio
security's rating is reduced to below the above levels, the Advisor will dispose
of the security in an orderly fashion as soon as practicable.
16
<PAGE>
Risks
All Bond and Money Market Portfolios
The risks of investing in any of the Bond or Money Market Portfolios
have been described above in the Risk/Return Summary. The following supplements
that description.
Interest Rate Risks
Generally, a fixed-income security will increase in value when interest
rates fall and decrease in value when interest rates rise. Longer-term
securities are generally more sensitive to interest rate changes than
shorter-term securities, but they usually offer higher yields to compensate
investors for the greater risks.
A Bond Portfolio's dollar-weighted average maturity is a measure of how
the Portfolio will react to interest rate changes. The stated maturity of a bond
is the date the issuer must repay the bond's entire principal value to an
investor. A bond's term to maturity is the number of years remaining to
maturity. A Bond Portfolio does not have a stated maturity, but it does have a
dollar-weighted average maturity. This is calculated by averaging the terms to
maturity of bonds held by a Portfolio, with each maturity "weighted" according
to the percentage of net assets it represents.
Credit Risks
The risk that an issuer will be unable to make principal and interest
payments when due is known as "credit risk." U.S. Government Securities are
generally considered to be the safest type of investment in terms of credit
risk. Municipal obligations generally rank between U.S. Government Securities
and corporate debt securities in terms of credit safety. Corporate debt
securities, particularly those rated below investment grade, may present the
highest credit risk.
Ratings published by Rating Agencies are widely accepted measures of
credit risk. The lower a bond issue is rated by an agency, the more credit risk
it is considered to represent. Lower-rated bonds generally pay higher yields to
compensate investors for the greater risk.
Mortgage-Backed Obligations
The Core Fixed Income Portfolio may invest in mortgage-backed
securities (including collateralized mortgage obligations) that represent pools
of mortgage loans assembled for sale to investors by various government-related
organizations. These organizations include the Government National Mortgage
Association (whose obligations are guaranteed by the U.S. Government), and the
Federal National Mortgage Association and Federal Home Loan Mortgage Corporation
(whose obligations are not guaranteed by the U.S. Government). Mortgage-backed
securities provide a monthly payment consisting of interest and principal
payments. Additional payments may be made out of unscheduled repayments of
principal resulting from the sale of the underlying residential property,
refinancing or foreclosure. When interest rates are declining, prepayments of
principal on mortgage-backed securities may tend to increase due to refinancing
of mortgages. Any premium paid by the Portfolio on purchases of mortgage-backed
securities may be lost if an underlying mortgage is prepaid. The yield of the
Portfolio may be affected when it reinvests prepayments it receives.
17
<PAGE>
Debt Obligations
Debt obligations of domestic and foreign companies may include a broad
range of fixed and variable rate bonds, debentures and notes. The Core Fixed
Income Portfolio's shares are subject to the risk of market value fluctuations.
The market value of securities held by the Portfolio is expected to vary
according to factors such as changes in interest rates and changes in the
average weighted maturity of the Portfolio.
Municipal Revenue 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, which
pay interest and principal from revenues of similar projects. Each Portfolio may
also invest up to 20% of its total assets in taxable investments including
private activity bonds. Such investments involve risks presented by the laws and
economic conditions relating to such projects and bonds. These securities do not
carry the general obligation of the issuer and are not backed by taxing power.
In many cases, the Internal Revenue Service has not ruled on whether
the interest received on a municipal obligation is tax-exempt. The Portfolios
and the Advisor rely on the opinion of bond counsel to the issuers at the time
of issuance and will not review the bases for them.
The Muni Intermediate and New Jersey Muni Portfolios invest primarily
in Pennsylvania Municipal and New Jersey Municipal Obligations, respectively. If
Pennsylvania or New Jersey or any of their political subdivisions, agencies,
instrumentalities and authorities were to suffer serious financial difficulties
that might jeopardize the ability to pay their obligations, the value of the
affected Portfolio could be adversely affected.
Repurchase Agreements
The Government Cash and Core Fixed Income Portfolios may enter into
collateralized repurchase agreements with qualified brokers, dealers, banks and
other financial institutions deemed creditworthy by the Advisor. Such agreements
can be entered into for periods of one day or for a fixed term.
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 seller under a repurchase agreement will be
required to maintain the value of the securities which are subject to the
agreement and held by a Portfolio at not less than the agreed upon repurchase
price. If the seller defaults on its repurchase obligation, the Portfolio
holding such obligation suffers a loss to the extent that the proceeds from a
sale of the underlying securities (including accrued interest) is less than the
repurchase price (including accrued interest) under the agreement. In the event
that such a defaulting seller files for bankruptcy or becomes insolvent,
disposition of such securities by the Portfolio might be delayed pending court
action.
18
<PAGE>
Reverse Repurchase Agreements
The Core Fixed Income Portfolio may enter into an agreement to sell a
security and simultaneously commit 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.
The 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. The
Portfolio will maintain liquid securities at least equal to the value of its
purchase obligations under these agreements. The Advisor will consider the
creditworthiness of the other party in determining whether the Portfolio will
enter into a reverse repurchase agreement.
The Portfolio is permitted to invest up to one-third of its total
assets in reverse repurchase agreements and securities lending transactions
combined.
The use of reverse repurchase agreements involves certain risks. For
example, the securities acquired by the Portfolio with the proceeds of such an
agreement may decline in value and the market value of the securities sold by
the Portfolio may decline below the repurchase price. Neither eventuality
affects the Portfolio's responsibility to complete the transaction at full
value. The Portfolio will invest the proceeds of reverse repurchase agreements
in overnight repurchase agreements.
Selection of Investments
The Advisor evaluates the rewards and risks presented by all securities
purchased by the Portfolios and how they may advance the Portfolios' investment
objective. It is possible, however, that these evaluations will prove to be
inaccurate.
Other Types of Investments
This Prospectus describes each Portfolio's principal investment
strategies, and the particular types of securities which each Portfolio may
select for investment. Each Portfolio may make other types of investments and
pursue other investment strategies in support of its overall investment goal.
These supplemental investment strategies--and the risks involved--are described
in the Statement of Additional Information, which is referred to on the Back
Cover of this Prospectus.
19
<PAGE>
PRICE OF PORTFOLIO SHARES
The price of shares issued by each Portfolio is based on its net asset
value ("NAV"). The NAV per share of each Money Market Portfolio is determined as
of 12:00 noon (Eastern time) on each day that the New York Stock Exchange is
open for business (a "Business Day"). The NAV per share of the Core Fixed
Income, Muni Intermediate and New Jersey Muni Portfolios is determined as of the
close of regular trading hours of the Exchange on each Business Day currently
4:00 p.m. (Eastern time).
Government Cash and Tax-Exempt Cash Portfolios
For the purpose of calculating each Money Market Portfolio's NAV per
share, securities are valued at "amortized cost."
Bond Portfolios
Marketable fixed income securities are priced at market value. Debt
securities with remaining maturities of 60 days or less are valued at amortized
cost. The value of other assets and securities for which quotations are
unreliable or not readily available (including restricted securities) is
determined in good faith at fair value using methods determined by the Board of
Directors or the Board of Trustees.
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 clients or the clients
of its Affiliates ("Clients") and to other institutions, including brokers
acting on behalf of their clients (the "Institutions"), at the NAV per share
next determined after receipt, in proper order, of the purchase order by the
transfer agent. We consider orders to be in "proper order" when all required
documents are properly completed, signed and received. The minimum initial
investment for each Portfolio is $25,000; the minimum for subsequent investments
for each Portfolio is $1,000. The minimum initial and subsequent investment
requirements may be reduced or waived from time to time. Beneficial ownership of
shares will be reflected on books maintained by the Advisor or the Institutions.
The Advisor has informed the Funds that it and its Affiliates' minimum and
subsequent investment requirements for their Clients' investments in the
Portfolios are the same as those for the Funds. Other Institutions may have such
requirements. If you wish to purchase shares in the Funds, you should contact
the Advisor by telephone or facsimile or contact your Institution.
Your Institution may charge you for purchasing or selling shares of the
Portfolios. There is no transaction charge for shares purchased directly from
the Portfolios through the Advisor.
Shares purchased in the Money Market 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.
Purchases of a Portfolio's shares will be made in full and fractional
shares calculated to three decimal places. In the interest of economy and
convenience, certificates for shares will not be issued except upon your written
request. Certificates for fractional shares, however, will not be issued.
20
<PAGE>
REDEMPTION OF SHARES
You may redeem shares of each Portfolio at any time, without cost, at
the NAV per share next determined after the transfer agent receives your
redemption order. Generally, a properly signed written order is all that is
required. If you wish to redeem your shares, you should contact the Advisor by
telephone or facsimile or contact your Institution.
You will ordinarily be paid your redemption proceeds within one
business day, but in no event more than seven days, after the Funds' transfer
agent receives your order in proper form. The Funds may suspend the right of
redemption or postpone the date of payment under any emergency circumstances as
determined by the Securities and Exchange Commission (the "SEC").
Redemption proceeds are normally paid in cash, although the Funds have
the right to limit each shareholder to cash redemptions of $250,000 or 1% of
such Portfolio's NAV, whichever is less, within a 90-day period. Any additional
redemption proceeds would be made in readily marketable securities.
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION
OF SHARES OF THE PORTFOLIOS
The Glenmede Fund, Inc. and The Glenmede Portfolios (together, the
"Funds") may appoint one or more entities as their agent to receive purchase and
redemption orders of shares of the Portfolios and cause these orders to be
transmitted, on an aggregated basis, to the Funds' transfer agent. In these
instances, orders are effected at the NAV per share next determined after
receipt of that order by the entity, if the order is actually received by the
transfer agent not later than the next business morning.
DIVIDENDS AND DISTRIBUTIONS
The Portfolios have the following dividend and capital gains policies:
(a) The Money Market 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 distribute substantially all of their net
investment income to shareholders monthly.
The Portfolios normally distribute any realized net capital gains at
least once a year.
21
<PAGE>
TAXES
Federal Taxes
Taxable Portfolios. Each Portfolio contemplates declaring, as dividends
each year, all or substantially all of its taxable income, including its net
capital gain (the excess of long-term capital gain over short-term capital
loss). Distributions attributable to the net capital gain of a Portfolio will be
taxable to you as long-term capital gain, regardless of how long you have held
your shares. Other Portfolio distributions (other than exempt-interest
dividends, discussed below) will generally be taxable as ordinary income. You
will be subject to income tax on Portfolio distributions regardless of whether
they are paid in cash or reinvested in additional shares. You will be notified
annually of the tax status of distributions to you.
The investment objectives of the Bond and Money Market Portfolios will
generally cause their annual distributions to consist primarily of ordinary
income.
The one major exception to these tax principles is that distributions
on, and sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
Tax-Exempt Cash, Muni Intermediate and New Jersey Muni Portfolios
("Tax-Exempt Portfolios"). Each Tax-Exempt Portfolio anticipates that
substantially all of its income dividends will be "exempt interest dividends,"
which are exempt from Federal income taxes. However, some dividends will be
taxable, such as dividends that are derived from occasional taxable investments,
and distributions of short and long-term capital gains.
Interest on indebtedness you incur to purchase or carry shares of each
Tax-Exempt Portfolio generally will not be deductible for Federal income tax
purposes.
A portion of the exempt-interest dividends paid by the Tax-Exempt
Portfolios may constitute an item of tax preference for purposes of determining
Federal alternative minimum tax liability. Exempt-interest dividends will also
be considered along with other adjusted gross income in determining whether any
Social Security or railroad retirement payments received by you are subject to
Federal income taxes.
If you receive an exempt-interest dividend with respect to any share
and the share is held by you for six months or less, any loss on the sale or
exchange of the share will be disallowed to the extent of such dividend amount.
Miscellaneous. If you purchase shares of the Core Fixed Income, Muni
Intermediate and New Jersey Muni Portfolios, just before a distribution, the
purchase price will reflect the amount of the upcoming distribution, but you
will be taxed on the entire amount of the distribution received, even though,
as an economic matter, the distribution simply constitutes a return of capital.
This is known as "buying into a dividend."
22
<PAGE>
You will recognize taxable gain or loss on a sale, exchange or
redemption of your shares of the Core Fixed Income, Muni Intermediate and New
Jersey Muni Portfolios, including an exchange for shares of another Portfolio,
based on the difference between your tax basis in the shares and the amount you
receive for them. (To aid in computing your tax basis, you should retain your
account statements for the periods during which you held shares.) Generally,
this gain or loss will be long-term or short-term depending on whether your
holding period for the shares exceeds 12 months, except that any loss realized
on shares held for six months or less will be treated as a long-term capital
loss to the extent of any long-term capital gain distributions that were
received on the shares.
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. 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 (collectively, "Federal
Securities"). In addition, shareholders of the Portfolio who are Philadelphia
residents will not be subject to the Philadelphia School District Net Income Tax
on distributions from the Portfolio attributable to interest income from
Pennsylvania municipal obligations or Federal Securities.
Distributions derived from investments other than Pennsylvania
Municipal Obligations and Federal Securities and distributions from net realized
capital gains will be subject to the Pennsylvania Personal Income Tax and the
Philadelphia School District Tax, except that distributions attributable to
capital gains on investments held by the Portfolio for more than six months are
not subject to the Philadelphia School District Tax. Gain on the disposition of
a share of the Muni Intermediate Portfolio will be subject to 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.
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, 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 New Jersey Muni Portfolio may represent
taxable income.
23
<PAGE>
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 New Jersey Muni Portfolio
shares by a corporate shareholder is also included in the net income tax base
for purposes of computing the Corporation Business Tax.
MANAGEMENT OF THE PORTFOLIOS
Investment Advisor
The Glenmede Trust Company with principal offices at One Liberty Place,
1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103, serves as
investment advisor to the Portfolios. 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. At December 31, 1999, the Advisor had over $17 billion in assets in
the accounts for which it serves in various capacities including as executor,
trustee or investment advisor.
Under its 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 sale orders.
The Advisor does not receive any fee from the Funds for its investment
services provided to the Portfolios. However, shareholders in the Funds who are
clients of the Advisor, or an Affiliate of the Advisor, pay fees which vary,
depending on the capacity in which the Advisor or the Affiliate provides them
with fiduciary and investment services (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 on November 7, 1988. 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. Ms. LaRosa has been employed by the Advisor as a portfolio
manager since 1994. Prior to her employment with the Advisor in 1994, Ms. LaRosa
had been Vice President of Institutional Sales at Hopper Soliday, Philadelphia.
24
<PAGE>
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. Mr. Woolley has been employed by the Advisor as a
portfolio manager since 1994. Prior to his employment with the Advisor in 1994,
Mr. Woolley had been with Meridian Capital Markets and Meridian Bank for five
years, most recently serving as Vice President specializing in mortgage
research.
GENERAL INFORMATION
If you have any questions regarding the Portfolios contact the Funds at
the address or telephone number stated on the back cover page.
25
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand
each Portfolio's financial performance for the past 5 years. Certain information
reflects financial results for a single Portfolio share. The total returns in
the table represent the rate that an investor would have earned or lost on an
investment in each Portfolio (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Portfolios' financial statements, are included in
the Annual Report, which is available upon request.
Core Fixed Income Portfolio
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............. $ 10.70 $ 10.46 $ 10.29 $ 10.36 $ 9.89
-------- -------- -------- -------- --------
Income from Investment Operations:
Net Investment Income.......................... 0.63 0.64 0.68 0.66 0.69
Net Gain/(Loss) on Securities
(both realized and unrealized)................ (0.54) 0.24 0.17 (0.08) 0.46
-------- -------- -------- -------- --------
Total From Investment Operations............... 0.09 0.88 0.85 0.58 1.15
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment income)......... (0.63) (0.64) (0.68) (0.65) (0.68)
Distributions (from capital gains)............. -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions............................ (0.63) (0.64) (0.68) (0.65) (0.68)
-------- -------- -------- -------- --------
Net Aset Value, End of Year.................... $ 10.16 $ 10.70 $ 10.46 $ 10.29 $ 10.36
======== ======== ======== ======== ========
Total Return(1)................................ 0.91% 9.32% 8.63% 5.88% 12.06%
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net Assets, End of Year (in 000's)........... $230,684 $258,986 $266,733 $259,503 $342,874
Ratio of Expenses to Average Net Assets...... 0.12% 0.11% 0.13% 0.16% 0.11%
Ratio of Gross Expense to Average Net Assets.
Ratio of Net Investment Income to Average 0.55%(2) 0.99%(2) 0.43%(2) 0.16% 0.11%
Net Assets.................................
Portfolio Turnover Rate...................... 6.08% 6.58% 6.67% 6.37% 6.67%
191% 93% 307% 47% 228%
</TABLE>
- -----------------
(1) Total Return represents aggregate total return for the period indicated.
(2) The annualized gross expense ratio includes interest expense. The ratios
excluding interest expense for the years ended October 31, 1999, 1998 and
1997 were 0.12%, 0.11% and 0.13%, respectively.
26
<PAGE>
Muni Intermediate Portfolio
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year....... $ 10.56 $ 10.40 $ 10.26 $ 10.32 $ 9.74
-------- -------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income.................... 0.51 0.51 0.52 0.53 0.53
Net Gain/(Loss) on Securities
(both realized and unrealized)......... (0.42) 0.16 0.14 (0.06) 0.58
-------- -------- --------- --------- ---------
Total From Investment Operations......... 0.09 0.67 0.66 0.47 1.11
-------- -------- --------- --------- ---------
Less Distributions:
Dividends (from net investment income)... (0.51) (0.51) (0.52) (0.53) (0.53)
-------- -------- --------- --------- ---------
Net Asset Value, End of Year............. $ 10.14 $ 10.56 $ 10.40 $ 10.26 $ 10.32
======== ======== ========= ========= =========
Total Return(1).......................... 0.91% $ 6.63% 6.69% 4.67% 11.76%
======== ======== ========= ========= =========
Ratios/Supplemental Data:
Net Assets, End of Year (in 000's)..... $ 16,526 $ 19,975 $ 19,219 $ 18,471 $ 18,096
Ratio of Expenses to Average Net Assets 0.20% 0.30% 0.34% 0.32% 0.28%
Ratio of Net Investment Income to
Average Net Assets................... 4.90% 4.88% 5.09% 5.16% 5.23%
Portfolio Turnover Rate................ 6% 11% 21% 44% 28%
</TABLE>
- ----------------------
(1) Total Return represents aggregate total return for the period indicated.
27
<PAGE>
New Jersey Muni Portfolio
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............ $ 10.43 $ 10.20 $ 9.97 $ 10.00 $ 9.22
--------- -------- ------- ------- -------
Income from Investment Operations:
Net Investment Income......................... 0.44 0.44 0.44 0.44 0.41
Net Gain/(Loss) on Securities
(both realized and unrealized............... (0.43) 0.23 0.23 (0.03) 0.78
--------- -------- ------- ------- -------
Total From Investment Operations.............. 0.01 0.67 0.67 0.41 1.19
--------- -------- ------- ------- -------
Less Distributions:
Dividends (from net investment income)........ (0.44) (0.44) (0.44) (0.44) (0.41)
--------- -------- ------- ------- -------
Net Asset Value, End of Year.................. $ 10.00 $ 10.43 $ 10.20 $ 9.97 $ 10.00
========= ======== ======= ======= =======
Total Return(1)............................... 0.08% 6.71% 6.90% 4.24% 13.25%
========= ======== ======= ======= =======
Ratios/Supplemental Data:
Net Assets, End of Year (in 000's)......... $17,953 $17,492 $12,117 $ 7,545 $ 5,932
Ratio of Expenses to Average Net Assets.... 0.24% 0.30% 0.31% 0.24% 0.53%
Ratio of Net Investment Income to
Average Net Assets....................... 4.34% 4.33% 4.42% 4.56% 4.30%
Portfolio Turnover Rate.................... 10% 7% 19% 33% 12%
</TABLE>
- -----------------
(1) Total Return represents aggregate total return for the period indicated.
28
<PAGE>
Government Cash Portfolio
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income......................... 0.049 0.051 0.054 0.053 0.059
Less Distributions:
Dividends (from net investment income)........ (0.049) (0.051) (0.054) (0.053) (0.059)
-------- --------- --------- --------- ---------
Net Asset Value, End of Year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ========= ========= =========
Total Return(1)............................... 5.00% 5.63% 5.53% 5.46% 5.87%
======== ========= ========= ========= =========
Ratios/Supplemental Data:
Net Assets, End of Year (in 000's).......... $405,907 $ 430,165 $ 451,038 $ 452,395 $ 408,605
Ratio of Expenses to Average Net Assets..... 0.11% 0.11% 0.13% 0.16% 0.15%
Ratio of Net Investment Income to Average
Net Assets.............................. 4.87% 5.41% 5.39% 5.32% 5.71%
</TABLE>
- ----------------
(1) Total Return represents aggregate total return for the period indicated.
29
<PAGE>
Tax-Exempt Cash Portfolio
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- --------- -------- ---------
Income from Investment Operations:
Net Investment Income.......................... 0.030 0.034 0.034 0.034 0.038
Less Distributions:
Dividends (from net investment income)......... (0.030) (0.034) (0.034) (0.034) (0.038)
-------- -------- --------- -------- ---------
Net Asset Value, End of Year................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ========= ======== =========
Total Return(1)................................ 3.02% 3.41% 3.46% 3.42% 3.76%
======== ======== ========= ======== =========
Ratios/Supplemental Data:
Net Assets, End of Year (in 000's)........... $350,032 $375,924 $ 280,950 $224,999 $ 222,808
Ratio of Expenses to Average Net Assets...... 0.12% 0.13% 0.14% 0.15% 0.15%
Ratio of Net Investment Income to Average
Net Assets............................... 2.97% 3.37% 3.40% 3.36% 3.69%
</TABLE>
- ------------
(1) Total Return represents aggregate total return for the period indicated.
30
<PAGE>
Where to find more information
More Portfolio information is available to you upon request and without charge:
Annual and Semi-Annual Report
The Annual and Semi-Annual Reports provide additional information about the
Portfolios' investments and performance. The Annual Report also contains a
discussion of the market conditions and investment strategies that significantly
affected the Portfolios' performance during the last fiscal year.
Statement of Additional Information (SAI)
The SAI includes additional information about the Portfolios' investment
policies, organization and management. It is legally part of this prospectus (it
is incorporated by reference).
You can get free copies of the Portfolios' Annual Report, Semi-Annual Report or
SAI. You may also request other information about the Portfolios, and make
inquiries.
Write to:
The Glenmede Fund/Portfolios
One South Street
Baltimore, MD 21202
By phone:
1-800-442-8299
Information about the Portfolios (including the Portfolios' SAI) can be reviewed
and copied at the Securities and Exchange Commission's Public Reference Room in
Washington, DC. Information about the operation of the Public Reference Room may
be obtained by calling the SEC at 1-202-942-8090. Reports and other information
about the Portfolios are available on the EDGAR Database on SEC's Internet site
at http://www.sec.gov. Copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the Public Reference Section of the SEC,
Washington, DC 20549-0102.
The Glenmede Fund, Inc. Investment Company Act File No. is 811-5577
The Glenmede Portfolios Investment Company Act File No. is 811-6578
31
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THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
(800) 442-8299
STATEMENT OF ADDITIONAL INFORMATION
February 28, 2000
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 the Glenmede
Fund, the "Funds") Prospectuses dated February 28, 2000, as amended or
supplemented from time to time (the "Prospectuses"). No investment in shares of
a Portfolio should be made without first reading the Prospectus of the
Portfolio. This Statement of Additional Information is for the Government Cash,
Tax-Exempt Cash, Core Fixed Income, International, Strategic Equity, Small
Capitalization Value (Advisor Shares and Institutional Shares), Large Cap Value,
Core Value, Small Capitalization Growth, Muni Intermediate, New Jersey Muni,
Institutional International, Emerging Markets and Global Equity Portfolios. This
Statement of Additional Information is incorporated by reference in its entirety
into each Prospectus. The Funds' audited financial statements and financial
highlights appearing in the 1999 Annual Report to Shareholders are incorporated
by reference into this Statement of Additional Information. A copy of the Funds'
Prospectuses and Annual Report are available without charge, upon request, by
calling 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......................................................................1
INVESTMENT STRATEGIES..........................................................1
COMMON INVESTMENT POLICIES AND RISKS..........................................11
PRICE OF PORTFOLIO SHARES.....................................................17
PURCHASE OF SHARES............................................................19
REDEMPTION OF SHARES..........................................................20
SHAREHOLDER SERVICES..........................................................20
PORTFOLIO TURNOVER............................................................20
INVESTMENT LIMITATIONS........................................................20
MANAGEMENT OF THE FUNDS.......................................................23
INVESTMENT ADVISORY AND OTHER SERVICES........................................25
PORTFOLIO TRANSACTIONS........................................................31
ADDITIONAL INFORMATION CONCERNING TAXES.......................................33
PERFORMANCE CALCULATIONS......................................................42
GENERAL INFORMATION...........................................................48
FINANCIAL STATEMENTS..........................................................49
OTHER INFORMATION.............................................................49
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS............................A-1
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THE FUNDS
The Glenmede Fund was organized as a Maryland corporation on June 30,
1988. The Glenmede Fund's Articles of Incorporation authorize its Board of
Directors to issue 2,500,000,000 shares of common stock, with a $.001 par value.
The Board has the power to subdivide these shares into one or more investment
portfolios ("Portfolios") from time to time. The Board also has the power to
designate separate classes of shares within the same Portfolio. Currently, the
Glenmede Fund is offering shares of the following twelve Portfolios:
International Portfolio, Large Cap Value Portfolio, Small Capitalization Value
Portfolio (Advisor Shares and Institutional Shares), Strategic Equity Portfolio,
Core Value Portfolio, Small Capitalization Growth Portfolio, Government Cash
Portfolio, Tax-Exempt Cash Portfolio, Core Fixed Income Portfolio, Emerging
Markets Portfolio, Global Equity Portfolio and Institutional International
Portfolio.
The Glenmede Portfolios was organized as a Massachusetts business trust
on March 3, 1992. The Glenmede Portfolios' Master Trust Agreement authorizes its
Board of Trustees to issue an unlimited number of shares of beneficial interest
with a $.001 par value. The Board has the power to subdivide these shares into
one or more investment portfolios (Sub-Trusts). Currently, the Glenmede
Portfolios is offering shares of two Sub-Trusts, the Muni Intermediate and New
Jersey Muni Portfolios.
Each Fund is an open-end, management investment company. The
International, Large Cap Value, Small Capitalization Value, Strategic Equity,
Core Value, Small Capitalization Growth, Core Fixed Income, Government Cash,
Tax-Exempt Cash, Institutional International, Emerging Markets and Global Equity
Portfolios are diversified Portfolios of the Glenmede Fund. The Muni
Intermediate and New Jersey Muni Portfolios are non-diversified Portfolios of
the Glenmede Portfolios.
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. On
February 28, 2000, the Small Capitalization Equity Portfolio (Advisor and
Institutional Shares) changed its name to the Small Capitalization Value
Portfolio (Advisor and Institutional Shares). On August 20, 1998, the Equity
Portfolio changed its name to the Tax Managed Equity Portfolio, and then on
February 28, 2000, it changed its name to the Strategic Equity Portfolio.
References in this Statement of Additional Information are to a Portfolio's
current name.
On March 1, 1991 the Small Capitalization Value Portfolio commenced
operations offering a single class of shares. On January 1, 1998, the Small
Capitalization Value 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 STRATEGIES
The following investment strategies supplement those set forth in the
Funds' Prospectuses. Unless specified below and except as described under
"Investment Limitations," the following investment strategies are not
fundamental and a particular Fund's Board may change such strategies without
shareholder approval.
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Government Cash Portfolio
During normal market conditions, the Portfolio will invest at least 65%
of its total assets in 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
repurchase agreements secured by such instruments.
The Portfolio may invest in the following Eligible 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 (e.g., 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 ("S&P") or Aaa by Moody's Investors Service, Inc.
("Moody's"). Additionally, the Portfolio may enter into reverse repurchase
agreements.
Tax-Exempt Cash Portfolio
Municipal obligations in which the Portfolio may invest include the
following Eligible Securities: project notes, demand notes, 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 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.
The municipal obligations in which the Portfolio invests may include
variable rate demand notes. Such notes are frequently not rated by credit rating
agencies, but unrated notes will be purchased by the Portfolio if they are
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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.
Core Fixed Income Portfolio
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 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, the Portfolio will invest
no more than 35% of the value of its total assets in the securities described in
(ii) and (v) of the first sentence of this paragraph.
The Portfolio's securities held subject to repurchase agreements may
have stated maturities exceeding 13 months, however, the Advisor currently
expects that repurchase agreements will mature in less than 13 months.
Asset-Backed Securities. The Core Fixed Income Portfolio may invest in
asset-backed securities consisting 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 U.S. Government or
its agencies or instrumentalities, however, they may be guaranteed up to a
certain amount by a private issuer 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.
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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
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.
Muni Intermediate and New Jersey Muni Portfolios
The Portfolios' investments in municipal obligations may also include
tax-exempt commercial paper rated A-1 or higher by S&P or Prime-1 or higher by
Moody's.
For a description of the two principal classifications of municipal
obligations, "general obligation" securities and "revenue" securities, see the
"Tax-Exempt Cash Portfolio" above.
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 as set forth above and in the Portfolios'
prospectus under the heading "Bond Portfolios--Investment Duration and Quality,"
or if unrated, are of comparable quality as determined by the Advisor.
Additionally, each Portfolio may invest, without limitation, in other
non-municipal debt obligations, such as bank obligations which are also of
comparable quality as determined by the Advisor. Furthermore, 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 municipal obligations at a specified price. Each Portfolio
will acquire stand-by commitments solely to facilitate portfolio liquidity and
does not intend to exercise its rights thereunder for trading purposes.
International Portfolio
The securities which the Portfolio may purchase include the following:
common stocks of companies located outside the U.S.; shares of closed-end
investment companies which invest chiefly in the shares of companies located
outside the U.S. (such shares will be purchased by the Portfolio within the
limits prescribed by the 1940 Act); and U.S. or foreign securities convertible
into foreign common stock.
The Portfolio intends to remain, for the most part, fully invested in
equity securities of companies located outside of the United States. However,
the Portfolio may invest a portion of its assets (up to 35% under normal
circumstances) in the following fixed income and money market securities:
obligations of the U.S. Government and its guaranteed or sponsored agencies,
including shares of open-end or closed-end investment companies which invest in
such obligations (such shares will be purchased within the limits prescribed by
the 1940 Act and would subject a shareholder of the Portfolio to expenses of the
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other investment company in addition to the expenses of the Portfolio);
short-term money market instruments issued in the U.S. or abroad, denominated in
dollars or any foreign currency, including short-term certificates of deposit
(including variable rate certificates of deposit), time deposits with a maturity
no greater than 180 days, bankers' acceptances, commercial paper rated A-1 by
S&P or Prime-1 by Moody's, or in equivalent money market securities; and high
quality fixed income securities denominated in U.S. dollars, any foreign
currency, or a multi-national currency unit such as the European Currency Unit.
The Portfolio may also enter into forward currency exchange contracts
only to hedge against uncertainty in the level of future foreign exchange rates
in the purchase and sale of investment securities; it may not enter into such
contracts for speculative purposes.
Large Cap Value Portfolio
From time to time, the Advisor may revise its equity computer model
programs to try to maintain or enhance the Portfolio's performance.
The Portfolio intends to remain, for the most part, fully invested in
equity securities which may include American Depositary Receipts ("ADRs") listed
on the New York Stock Exchange. The Portfolio will not engage in "market timing"
transactions. However, for temporary purposes the Portfolio may invest a portion
of its assets (up to 20%) in short-term money market instruments issued by U.S.
or foreign issuers, denominated in dollars or any foreign currency, including
short-term certificates of deposit (including variable rate certificates of
deposit), time deposits with a maturity no greater than 180 days, bankers'
acceptances, commercial paper rated A-1 by S&P or Prime-1 by Moody's, or in
similar money market securities.
Small Capitalization Value Portfolio
The Portfolio may invest in securities of companies located outside the
United States.
Under normal market conditions, at least 65% of the Portfolio's total
assets will be invested in equity securities of companies with market
capitalizations, at the time of purchase, that are below the maximum
capitalization permitted for a stock in the Russell 2000 Index. However, if
warranted in the judgement of the Advisor, the Portfolio may invest a portion of
its assets (up to 20% under normal circumstances) in preferred stocks and
convertible debentures with a minimum rating of BBB by S&P or Baa by Moody's,
and the following fixed income and money market securities: obligations of the
U.S. Government and its guaranteed or sponsored agencies, including shares of
open-end or closed-end investment companies which invest in such obligations
(such shares will be purchased within the limits prescribed by the 1940 Act and
would subject a shareholder of the Portfolio to expenses of the other investment
company in addition to the expenses of the Portfolio); short-term money market
instruments issued in the U.S. or abroad, denominated in dollars or any foreign
currency, including short-term certificates of deposit (including variable rate
certificates of deposit), time deposits with a maturity no greater than 180
days, bankers' acceptances, commercial paper rated A-1 by S&P or Prime-1 by
Moody's, or in equivalent money market securities; and high quality fixed income
securities denominated in U.S. dollars, any foreign currency, or a
multi-national currency unit such as the European Currency Unit.
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The Portfolio's holdings will tend to be characterized by relatively
low price-to-earnings ratios. There is no mandated income requirement for
securities held by the Portfolio. The Portfolio generally will be more volatile
and have a higher expected growth rate than the overall market. In certain
periods, the Portfolio may fluctuate independently of broad, larger
capitalization indices such as the S&P 500.
Strategic Equity Portfolio
The Portfolio expects to have a low portfolio turnover rate relative to
other funds with similar investment objectives. It is impossible to predict the
impact of such a strategy on the realization of gains and losses. Additionally,
the Portfolio reserves the right to sell securities irrespective of how long
they have been held.
The Portfolio may sell a particular security, even though it may
realize a short-term capital gain, if the value of that security is believed to
have reached its peak or is expected to decline before the Portfolio would have
held it for the long-term holding period. The Portfolio may also be required to
sell securities in order to generate cash to pay expenses or satisfy shareholder
redemptions. Certain equity and other securities held by the Portfolio will
produce ordinary taxable income on a regular basis.
The Portfolio intends to remain, for the most part, fully invested in
equity securities, which may include securities of companies located outside the
United States, and will not engage in "market timing" transactions. However, the
Portfolio may invest a portion of its assets (up to 20% under normal
circumstances) in preferred stocks, convertible debentures, and the following
fixed income and money market securities: obligations of the U.S. Government and
its guaranteed or sponsored agencies, including shares of open-end or closed-end
investment companies which invest in such obligations (such shares will be
purchased within the limits prescribed by the 1940 Act and would subject a
shareholder of the Portfolio to expenses of the other investment company in
addition to the expenses of the Portfolio); short-term money market instruments
issued in the U.S. or abroad, denominated in dollars or any foreign currency,
including short-term certificates of deposit (including variable rate
certificates of deposit), time deposits with a maturity no greater than 180
days, bankers' acceptances, commercial paper rated A-1 by S&P or Prime-1 by
Moody's, or in equivalent money market securities; and high quality fixed income
securities denominated in U.S. dollars, any foreign currency, or a
multi-national currency unit such as the European Currency Unit.
The Portfolio may also purchase or write call and put options on
appropriate securities or securities indices. The aggregate value of the
Portfolio's assets subject to options written may not exceed 50% of its total
assets (taken at market value on the date written) and the aggregate premiums on
options purchased by the Portfolio will not exceed 50% of its total assets.
Options can attempt to enhance return through price appreciation of the option,
increase income, hedge to reduce overall portfolio risk, and/or hedge to reduce
individual security risk. Additionally, the Portfolio may also enter into
closing sale transactions in order to realize gains or minimize losses on
options it has purchased.
Purchasing Options. The Portfolio may purchase call options in
anticipation of an increase in the market value of securities of the type in
which it may invest. The purchase of a call option entitles the Portfolio, in
return for the premium paid, to purchase specified securities at a specified
price during the option period. The Portfolio will ordinarily realize a gain if,
during the option period, the value of such securities exceeds the sum of the
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exercise price, the premium paid and transaction costs; otherwise the Portfolio
will realize either no gain or a loss on the purchase of the call option.
The Portfolio will normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio or in securities in
which it may invest. The purchase of a put option entitles the Portfolio, in
exchange for the premium paid, to sell specified securities at a specified price
during the option period. The purchase of puts is designed to offset or hedge
against a decline in the market value of the Portfolio's securities. Put options
may also be purchased by the Portfolio for the purpose of affirmatively
benefiting from a decline in the price of securities which it does not own. The
Portfolio will ordinarily realize a gain if, during the option period, the value
of the underlying securities decreases below the exercise price sufficiently to
more than cover the premium and transaction costs; otherwise the Portfolio will
realize either no gain or a loss on the purchase of the put option. Gains and
losses on the purchase of put options will tend to be offset by countervailing
changes in the value of the underlying portfolio securities.
The Portfolio will purchase put and call options on securities indices
for the same purposes as it will purchase options on individual securities.
Writing Covered Options. The Portfolio may write covered call and put
options on any securities in which it may invest. A call option written by the
Portfolio obligates the Portfolio to sell specified securities to the holder of
the option at a specified price if the option is exercised at any time before
the expiration date. All call options written by the Portfolio will be covered,
which means that the Portfolio will own the securities subject to the option as
long as the option is outstanding or the Portfolio will use the other methods
described below. The Portfolio's purpose in writing covered call options is to
realize greater income than would be realized on portfolio securities
transactions alone. However, the Portfolio foregoes the opportunity to profit
from an increase in the market price of the underlying security that exceeds the
exercise price of the call option.
A put option written by the Portfolio obligates the Portfolio to
purchase specified securities from the option holder at a specified price if the
option is exercised at any time before the expiration date. All put options
written by the Portfolio will be covered, which means that the Portfolio will
segregate cash or liquid assets with a value at least equal to the exercise
price of the put option. The purpose of writing such options is to generate
additional income for the Portfolio. However, in return for the option premium,
the Portfolio accepts the risk that it may be required to purchase the
underlying securities at a price in excess of the securities' market value at
the time of purchase.
Call and put options written by the Portfolio will also be considered
to be covered to the extent that the Portfolio's liabilities under such options
are wholly or partially offset by its rights under call and put options
purchased by the Portfolio.
In addition, a written call option or put option may be covered by
segregating cash or liquid assets, by entering into an offsetting forward
contract and/or by purchasing an offsetting option which, by virtue of its
exercise price or otherwise, reduces the Portfolio's net exposure on its written
option position.
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The Portfolio may also write covered call and put options on any
securities index composed of securities in which it may invest. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options requires cash payments and does not involve
the actual purchase or sale of securities. In addition, securities index options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Portfolio may cover call options on a securities index by owning
securities whose price changes are expected to be similar to those of the
underlying index, or by having an absolute and immediate right to acquire such
securities without additional cash consideration (or for additional cash
consideration segregated by the Portfolio) upon conversion or exchange of other
securities in its portfolio. The Portfolio may cover call and put options on a
securities index by segregating cash or liquid assets with a value equal to the
exercise price.
The Portfolio may terminate its obligations under an exchange traded
call or put option by purchasing an option identical to the one it has written.
Obligations under over-the-counter options may be terminated only by entering
into an offsetting transaction with the counterparty to such option. Such
purchases are referred to as "closing purchase transactions."
Small Capitalization Growth Portfolio
The Portfolio may invest in securities of companies located outside the
United States.
Under normal market conditions, at least 65% of the Portfolio's total
assets will be invested in equity securities of companies with market
capitalizations, at the time of purchase, that are below the maximum
capitalization permitted for a stock in the Russell 2000 Growth Index. However,
if warranted in the judgement of the Sub-Advisors, the Portfolio may invest a
portion of its assets (up to 20% under normal circumstances) in preferred stocks
and convertible debentures with a minimum rating of BBB by S&P or Baa by
Moody's, and the following fixed income and money market securities: obligations
of the U.S. Government and its guaranteed or sponsored agencies, including
shares of open-end or closed-end investment companies which invest in such
obligations (such shares will be purchased within the limits prescribed by the
1940 Act and would subject a shareholder of the Portfolio to expenses of the
other investment company in addition to the expenses of the Portfolio);
short-term money market instruments issued in the U.S. or abroad, denominated in
dollars or any foreign currency, including short-term certificates of deposit
(including variable rate certificates of deposit), time deposits with a maturity
no greater than 180 days, bankers' acceptances, commercial paper rated A-1 by
S&P or Prime-1 by Moody's, or in equivalent money market securities; and high
quality fixed income securities denominated in U.S. dollars, any foreign
currency, or a multi-national currency unit such as the European Currency Unit.
Core Value Portfolio
From time to time, the Advisor may revise its equity computer model
programs to try to maintain or enhance the Portfolio's performance.
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The Portfolio intends to remain, for the most part, fully invested in
equity securities which may include American Depositary Receipts ("ADRs") listed
on the New York Stock Exchange. The Portfolio will not engage in "market timing"
transactions. However, for temporary purposes this Portfolio may invest a
portion of its assets (up to 20%) in short-term money market instruments issued
by U.S. or foreign issuers, denominated in dollars or any foreign currency,
including short-term certificates of deposit (including variable rate
certificates of deposit), time deposits with a maturity no greater than 180
days, bankers' acceptances, commercial paper rated A-1 by S&P or Prime-1 by
Moody's, or in similar money market securities.
Institutional International Portfolio
The securities which the Portfolio may purchase include the following:
common stocks of companies located outside the U.S.; shares of closed-end
investment companies which invest chiefly in the shares of companies located
outside the U.S. (such shares will be purchased by the Portfolio within the
limits prescribed by the 1940 Act); and U.S. or foreign securities convertible
into foreign common stock.
The Portfolio intends to remain, for the most part, fully invested in
equity securities of companies located outside of the United States. However,
the Portfolio may invest a portion of its assets (up to 20% under normal
circumstances) in the following fixed income and money market securities:
obligations of the U.S. Government and its guaranteed or sponsored agencies,
including shares of open-end or closed-end investment companies which invest in
such obligations (such shares will be purchased within the limits prescribed by
the 1940 Act and would subject a shareholder of the Portfolio to expenses of the
other investment company in addition to the expenses of the Portfolio);
short-term money market instruments issued in the U.S. or abroad, denominated in
dollars or any foreign currency, including short-term certificates of deposit
(including variable rate certificates of deposit), time deposits with a maturity
no greater than 180 days, bankers' acceptances, commercial paper rated A-1 by
S&P or Prime-1 by Moody's, or in equivalent money market securities; and high
quality fixed income securities denominated in U.S. dollars, any foreign
currency, or a multi-national currency unit such as the European Currency Unit.
The Portfolio may also enter into forward currency exchange contracts
only to hedge against uncertainty in the level of future foreign exchange rates
in the purchase and sale of investment securities; it may not enter into such
contracts for speculative purposes.
Emerging Markets Portfolio
The Portfolio may invest up to 35% of its total assets in debt
securities (defined as bonds, notes, debentures, convertible bonds, commercial
paper, certificates of deposit, time deposits and bankers' acceptances) which
are rated at least Baa by Moody's or BBB by S&P or are unrated debt securities
deemed to be of comparable quality by the Sub-Advisor. Certain debt securities
can provide the potential for long-term growth of capital based on various
factors such as changes in interest rates, economic and market conditions,
improvement in an issuer's ability to repay principal and pay interest, and
ratings upgrades. Additionally, convertible bonds can provide the potential for
long-term growth of capital through the conversion feature, which enables the
holder of the bond to benefit from increases in the market price of the
securities into which they are convertible. However, there can be no assurances
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that debt securities or convertible bonds will provide long-term growth of
capital.
The Portfolio may invest in European Depositary Receipts ("EDRs"), and
may enter into forward foreign currency contracts and reverse repurchase
agreements. When deemed appropriate by the Sub-Advisor, the Portfolio may invest
cash balances in repurchase agreements and other money market investments to
maintain liquidity in an amount to meet expenses or for day-to-day operating
purposes.
When the Sub-Advisor believes that market conditions warrant, the
Portfolio may adopt a temporary defensive position and may invest up to 100% of
its total assets in the following high-quality (that is, rated Prime-1 by
Moody's or A or better by S&P or, if unrated, of comparable quality as
determined by the Sub-Advisor) money market securities, denominated in U.S.
dollars or in the currency of any foreign country, issued by entities organized
in the United States or any foreign country: short-term (less than twelve months
to maturity) and medium-term (not greater than five years to maturity)
obligations issued or guaranteed by the U.S. Government or the governments of
foreign countries, their agencies or instrumentalities; finance company and
corporate commercial paper, and other short-term corporate obligations;
obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks; and repurchase agreements with banks and broker-dealers
with respect to such securities. The Portfolio also may purchase shares of
closed-end investment companies which invest chiefly in the shares of companies
located outside the U.S. (such shares will be purchased by the Portfolio within
the limits prescribed by the 1940 Act).
Global Equity Portfolio
The Portfolio intends to remain, for the most part, fully invested in
equity securities and securities convertible into equity securities. However,
the Portfolio may invest a portion of its assets (up to 20% under normal
circumstances) in the following fixed income and money market securities:
obligations of the U.S. Government and its guaranteed or sponsored agencies,
including shares of open-end or closed-end investment companies which invest in
such obligations (such shares will be purchased within the limits prescribed by
the 1940 Act and would subject a shareholder of the Portfolio to expenses of the
other investment company in addition to the expenses of the Portfolio);
short-term money market instruments issued in the U.S. or abroad, denominated in
dollars or any foreign currency, including short-term certificates of deposit
(including variable rate certificates of deposit), time deposits with a maturity
no greater than 180 days, bankers' acceptances, commercial paper rated A-1 by
S&P or Prime-1 by Moody's, or in equivalent money market securities; and high
quality fixed income securities denominated in U.S. dollars, any foreign
currency, or a multi-national currency unit such as the European Currency Unit.
The Portfolio may also enter into forward currency exchange contracts
only to hedge against uncertainty in the level of future foreign exchange rates
in the purchase and sale of investment securities; it may not enter into such
contracts for speculative purposes. Additionally, the Portfolio may enter into
reverse repurchase agreements.
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COMMON INVESTMENT POLICIES AND RISKS
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 International, Large Cap
Value, Core Value, Small Capitalization Growth, Institutional International,
Small Capitalization Value, Strategic Equity, Emerging Markets, Global Equity,
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. The International
and Institutional International Portfolios will generally enter into repurchase
transactions to invest cash reserves and for temporary defensive purposes.
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.
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 seller under a repurchase agreement will be
required to maintain the value of the securities which are subject to the
agreement and held by a Portfolio at not less than the agreed upon repurchase
price.
If the seller defaults on its repurchase obligation, a Portfolio
holding such obligation will suffer a loss to the extent that the proceeds from
a sale of the underlying securities (including accrued interest) were less than
the repurchase price (including accrued interest) under the agreement. In the
event that such a defaulting seller files for bankruptcy or becomes insolvent,
disposition of such securities by a Portfolio might be delayed pending court
action.
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.
Borrowing
As a temporary measure for extraordinary or emergency purposes, each
Portfolio may borrow money from banks. However, none of the Portfolios will
borrow money for speculative purposes. If the market value of a Portfolio's
securities should decline, the Portfolio may experience difficulty in repaying
the borrowing.
Securities Lending
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 who
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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. A Portfolio may lend
its portfolio securities only when the terms, the structure and the aggregate
amount of such loans are not inconsistent with the 1940 Act or the rules and
regulations or interpretations of the SEC thereunder. All relevant facts and
circumstances, including the creditworthiness of the broker, dealer or
institution, will be considered by the Advisor in making decisions with respect
to the lending of securities, subject to review by the particular Fund's Board.
When lending portfolio securities, the securities may not be available
to a Portfolio on a timely basis. Therefore, a Portfolio may lose the
opportunity to sell the securities at a desirable price. Such loans would also
involve risks of delay in receiving additional collateral if the value of the
collateral decreases below the value of the securities loaned or even the loss
of rights to the collateral should the borrower of the securities fail
financially. Additionally, if a borrower of securities files for bankruptcy or
becomes insolvent, disposition of the securities may be delayed pending court
action. A Portfolio may, from time to time, pay negotiated fees in connection
with the lending of securities.
"When Issued," "Delayed Settlement," and Forward Delivery Securities
Each Portfolio 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 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.
Securities purchased or sold on a "when issued," "delayed settlement"
or "forward delivery" basis are subject to changes in value based upon changes
in the general level of interest rates. In when-issued and delayed settlement
transactions, a Portfolio relies on the seller to complete the transaction; the
seller's failure to do so may cause a Portfolio to miss an advantageous price or
yield.
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Investment Company Securities
In connection with the management of their daily cash positions, the
Portfolios (other than the Emerging Markets Portfolio) may each invest in
securities issued by other open-end or closed-end investment companies which
invest in the obligations of the U.S. Government and its guaranteed or sponsored
agencies. In addition, the International, Institutional International and
Emerging Markets Portfolios may each invest in shares of closed-end investment
companies which invest chiefly in the shares of companies located outside of the
U.S. 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. Furthermore, the investment company securities in which a Portfolio
invests may decline in value.
Illiquid Securities
The Portfolios (other than the Emerging Markets, Small Capitalization
Growth and Global Equity Portfolios) will not invest more than 10% of their
respective net assets in securities that are illiquid. The Emerging Markets,
Small Capitalization Growth and Global Equity Portfolios will not invest more
than 15% of their respective net assets in securities that are illiquid. These
securities are subject to the risk that should a Portfolio need to dispose of
such securities, there may not be a ready market or the Portfolio may have to
sell such securities at an undesirable price.
Stand-by Commitments
The Muni Intermediate and New Jersey Muni Portfolios may acquire
stand-by commitments which may increase the cost, and thereby reduce the yield,
of the municipal obligation to which such commitment relates.
Foreign Securities
The International, Strategic Equity, Small Capitalization Value, Large
Cap Value, Core Value, Small Capitalization Growth, Institutional International,
Emerging Markets and Global Equity Portfolios may invest in foreign securities.
Such investments may involve higher costs than investments in U.S. securities,
including higher transaction costs and additional taxes by foreign governments.
Foreign investments may also present additional risks associated with currency
exchange rates, differences in accounting, auditing and financial reporting
standards, holding securities in domestic and foreign custodian banks and
depositories, less complete financial information about the issuers, less market
liquidity, and political instability. Future political and economic
developments, the possible imposition of withholding taxes on dividends, the
possible seizure or nationalization of foreign holdings, the possible
establishment of exchange controls, or the adoption of other governmental
restrictions, might adversely affect the payment of dividends or principal and
interest on foreign obligations.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
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difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of a Portfolio are uninvested and no return is
earned. The inability of a Portfolio to make intended security purchases due to
these and other settlement problems could cause such Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to a Portfolio due
to subsequent declines in value of the portfolio security or, if the Portfolio
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Additionally, a Portfolio may encounter difficulties
or be unable to pursue legal remedies and obtain judgments in foreign courts.
Although the Portfolios may invest in securities denominated in foreign
currencies, the Portfolios value their securities and other assets in U.S.
dollars. As a result, the NAV of the Portfolios' shares may fluctuate with U.S.
dollar exchange rates as well as with price changes of a Portfolio's securities
in the various local markets and currencies. Thus, an increase in the value of
the U.S. dollar compared to the currencies in which the Portfolios make their
investments could reduce the effect of increases and magnify the effect of
decreases in the prices of the Portfolios' securities in their local markets.
Conversely, a decrease in the value of the U.S. dollar will have the opposite
effect of magnifying the effect of increases and reducing the effect of
decreases in the prices of the Portfolios' securities in their local markets. In
addition to favorable and unfavorable currency exchange rate developments, the
Portfolios are subject to the possible imposition of exchange control
regulations or freezes on convertibility of currency.
The Emerging Markets, International, Institutional International and
Global Equity Portfolios may invest in emerging market countries. Developing
countries may impose restrictions on a Portfolio's ability to repatriate
investment income or capital. Even if there is no outright restriction on
repatriation of investment income or capital, the mechanics of repatriation may
affect certain aspects of the operations of the Portfolio. For example, funds
may be withdrawn from the People's Republic of China only in U.S. or Hong Kong
dollars and only at an exchange rate established by the government once each
week.
Some of the currencies in emerging markets have experienced
devaluations relative to the U.S. dollar, and major adjustments have been made
periodically in certain of such currencies. Certain developing countries face
serious exchange constraints.
Lastly, governments of some developing countries exercise substantial
influence over many aspects of the private sector. In some countries, the
government owns or controls many companies, including the largest in the
country. As such, government actions in the future could have a significant
effect on economic conditions in developing countries in these regions, which
could affect private sector companies, a Portfolio and the value of its
securities. Furthermore, certain developing countries are among the largest
debtors to commercial banks and foreign governments. Trading in debt obligations
issued or guaranteed by such governments or their agencies and instrumentalities
involves a high degree of risk.
Depositary Receipts
The International, Large Cap Value, Core Value, Institutional
International, Emerging Markets and Global Equity Portfolios may purchase
certain sponsored or unsponsored depositary receipts. In sponsored programs, an
issuer makes arrangements to have its securities traded in the form of
depositary receipts. For purposes of a Portfolio's investment policies, the
Portfolio's investments in depositary receipts will be deemed to be investments
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in the underlying securities. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the depositary receipts.
The International, Large Cap Value, Core Value, Institutional
International, Global Equity and Emerging Markets Portfolios may invest in
American Depositary Receipts ("ADRs"). ADRs are depositary receipts issued in
registered form by a U.S. bank or trust company evidencing ownership of
underlying securities issued by a foreign company. ADRs may be listed on a
national securities exchange or may be traded in the over-the-counter market.
ADR prices are denominated in U.S. dollars although the underlying securities
are denominated in a foreign currency.
The Emerging Markets and Global Equity Portfolios may also purchase
European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs")
which are designed for use in either foreign or domestic exchanges and their
respective over-the-counter markets. EDRs and GDRs are depositary receipts
typically issued by foreign banks or trust companies, although they also may be
issued by U.S. banks or trust companies, and evidence ownership of underlying
securities issued by either a foreign or a United States corporation.
Generally, depositary receipts in registered form are designed for use
in the U.S. securities market and depositary receipts in bearer form are
designed for use in securities markets outside the United States. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Investments in ADRs,
EDRs and GDRs involve risks similar to those accompanying direct investments in
foreign securities.
Forward Foreign Exchange Contracts
The Institutional International, International, Emerging Markets and
Global Equity Portfolios may enter into forward foreign exchange contracts, but
such contracts may not be used for speculative purposes. 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 Commodity Futures Trading Commission (the "CFTC")
such as the New York Mercantile Exchange. The Portfolios would enter into
foreign currency futures contracts solely for hedging or other appropriate
investment purposes as defined in CFTC regulations.
Forward foreign currency exchange contracts allow a Portfolio to hedge
the currency risk of portfolio securities denominated in a foreign currency.
This method of protecting the value of a Portfolio's investment securities
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against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange at a future date. Although such contracts tend to minimize the risk of
loss due to a decline in the value of the hedged currency, at the same time they
tend to limit any potential gain which might result should the value of such
currency increase. Additionally, investments in foreign currency exchange
contracts involve other risks similar to those accompanying direct investments
in foreign securities.
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, a 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.
Reverse Repurchase Agreements
The Government Cash, Core Fixed Income, Emerging Markets and Global
Equity Portfolios may enter into reverse repurchase agreements. In a reverse
repurchase agreement the 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 Portfolio with a flexible borrowing tool. Reverse repurchase
agreements are considered to be borrowings by the Portfolio under the 1940 Act.
The 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. The
Portfolio will maintain 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.
A Portfolio is permitted to invest up to one-third of its total assets
in reverse repurchase agreements and securities lending transactions. Reverse
repurchase agreements and securities lending transactions will be aggregated for
purposes of this investment limitation.
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The use of reverse repurchase agreements involves certain risks. For
example, the securities acquired by a Portfolio with the proceeds of such an
agreement may decline in value, although the Portfolio is obligated to repay the
proceeds. In addition, the market value of the securities sold by a Portfolio
may decline below the repurchase price, to which the Portfolio remains
committed.
Interest Rate Risks
The Portfolios may invest in fixed-income securities. Generally, a
fixed-income security will increase in value when interest rates fall and
decrease in value when interest rates rise. Longer-term securities are generally
more sensitive to interest rate changes than shorter-term securities, but they
usually offer higher yields to compensate investors for the greater risks.
Credit Risks
Because the Portfolios may invest in fixed-income securities, they are
subject to "credit risk"-- the risk that an issuer will be unable to make
principal and interest payments when due. U.S. Government Securities are
generally considered to be the safest type of investment in terms of credit
risk. Municipal obligations generally rank between U.S. Government Securities
and corporate debt securities in terms of credit safety. Corporate debt
securities, particularly those rated below investment grade, may present the
highest credit risk.
The Small Capitalization Value, Small Capitalization Growth and
Emerging Markets Portfolios may invest in securities which have the lowest
rating in the investment grade category (i.e., Baa by Moody's or BBB by S&P).
Such securities are considered to have some speculative characteristics and are
more sensitive to economic change than higher rated securities.
Ratings published by nationally recognized statistical rating
organizations are widely accepted measures of credit risk. The lower a bond
issue is rated by an agency, the more credit risk it is considered to represent.
Lower-rated bonds generally pay higher yields to compensate investors for the
greater risk.
U.S. Government Obligations
The Portfolios may invest in obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. Direct obligations of the
U.S. Government such as Treasury bills, notes and bonds are supported by its
full faith and credit. Indirect obligations issued by federal agencies and
government-sponsored entities generally are not backed by the full faith and
credit of the U.S. Treasury. Some of these indirect obligations may be 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 are supported only by the credit of the
instrumentality.
PRICE OF PORTFOLIO SHARES
The NAV per share of each Portfolio is determined by dividing the total
market value of its investments and other assets, less liabilities, by the total
number of its shares outstanding.
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Equity securities listed on a U.S. securities exchange for which
quotations are readily available are valued at the last quoted sale price as of
the close of the exchange's regular trading hours on the day the valuation is
made. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted U.S. equity securities and listed
securities not traded on the valuation date for which market quotations are
readily available are valued not in excess of the asked prices or less than the
bid prices.
For the purpose of calculating the Government Cash and Tax-Exempt Cash
Portfolio's (collectively, the "Money Market Portfolios") NAV 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 Money Market
Portfolio's per share NAV 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 Money Market 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 NAV 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 NAV per share based upon available indications of market
value.
In the event of a deviation of over 1/2 of 1% between a Money Market
Portfolio's NAV 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 NAV
per share as determined by using available market quotations.
The NAV per share of each Money Market Portfolio will ordinarily remain
at $1.00, but each Portfolio's daily dividends will vary in amount. There can be
no assurance, however, that the Portfolios will maintain a constant NAV per
share of $1.00.
Marketable 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. NAV 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 or by using a matrix or formula, 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
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securities and any developments related to specific securities. The matrix
pricing method values securities by reference to prices of comparable securities
obtained from sources the Advisor deems accurate and reliable. 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.
Securities listed on a foreign exchange and unlisted foreign securities
are valued at the latest quoted sales price available when assets are valued. If
a subsequent occurrence is believed to have changed such value, however, the
fair value of those securities may be determined through consideration of other
factors by or under the direction of the Board. These securities may trade on
days when shares of a Portfolio are not priced; as a result, the NAV of shares
of such Portfolio may change on days when shareholders will not be able to
purchase or redeem the Portfolio's shares. Foreign currency amounts are
translated into U.S. dollars at the bid prices of such currencies against U.S.
dollars last quoted by a major bank.
The 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 Advisor to reflect the fair market value
of such 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 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.
PURCHASE OF SHARES
The purchase price of shares of each Portfolio is the NAV next
determined after receipt of the purchase order by the particular Fund. 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 to deliver required funds to The Chase Manhattan Bank, N.A., the
Funds' custodian, on a timely basis.
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.
At the discretion of the Funds, investors may be permitted to purchase
Portfolio shares by transferring securities to the Portfolio that meet the
Portfolio's investment objective and policies.
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<PAGE>
REDEMPTION OF SHARES
Redemption proceeds are normally paid in cash, although the Funds have
elected to be governed by rule 18f-1 under the 1940 Act which permits them to
limit each shareholder to cash redemptions of $250,000 or 1% of such Portfolio's
NAV, whichever is less, within a 90-day period. Any additional redemption
proceeds would be made in readily marketable securities.
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 and the
particular Sub-Advisor (with respect to the Emerging Markets and Small
Capitalization Growth Portfolios), will not consider turnover rate a limiting
factor in making investment decisions consistent with that Portfolio's
investment objective and policies. Changes in the Core Fixed Income Portfolio's
turnover rate over the last two most recently completed fiscal years 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:
(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 SEC thereunder;
-20-
<PAGE>
(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% (15% in the case of the Emerging Markets and
Global Equity Portfolios) 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 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 with respect to
each Portfolio other than the Global Equity, Core Value and Small
Capitalization Growth Portfolios, invest more than an aggregate of
10% (15% in the case of the Emerging Markets Portfolio) of the
total assets of the Portfolio, at the time of purchase, in
securities for which there are no readily available markets,
including repurchase agreements which have maturities of more than
seven days or, in the case of each Portfolio (other than the
Emerging Markets Portfolio), securities subject to legal or
contractual restrictions on resale;
(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, and
(13) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
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<PAGE>
Each Portfolio, with the exception of the Muni Intermediate and New
Jersey Muni Portfolios, also will not:
(14) 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 compliance with the diversification limitation
in paragraph (14).
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 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 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.
With respect to the International, Large Cap Value, Core Value, Small
Capitalization Growth, Small Capitalization Value, Strategic Equity,
Institutional International, Emerging Markets and Global Equity Portfolios,
borrowings including reverse repurchase agreements and securities purchased on a
when issued, delayed settlement or forward delivery basis may not exceed 33 1/3%
of each Portfolio's total net assets.
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<PAGE>
With respect to investment limitations (7) and (8), the Institutional
International, International, Emerging Markets and Global Equity Portfolios may
borrow money as a temporary measure for extraordinary or emergency purposes,
enter into reverse repurchase agreements and purchase securities on a
when-issued, delayed settlement or forward delivery basis, which activities may
involve a borrowing, provided that the aggregate of such borrowings shall not
exceed 33 1/3% of the value of each Portfolio's total assets (including the
amount borrowed) less liabilities (other than borrowings) and may pledge up to
33 1/3% of the value of its total assets to secure borrowings.
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 transmission,
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.
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.
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.
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:
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<PAGE>
<TABLE>
<CAPTION>
Name and Address Age Principal Occupation During Past Five Years
- ------------------------------- --- -------------------------------------------------------------------------------
<S> <C> <C>
H. Franklin Allen, Ph.D. 43 Director of the Glenmede Fund; Trustee of the Glenmede Portfolios; Nippon Life
Finance Department Professor of Finance and Economics; Professor of Finance and Economics from
The Wharton School 1990-1996; Vice Dean and Director of Wharton Doctoral Programs from 1990-1993.
University of Pennsylvania Employed by The University of Pennsylvania since 1980.
Philadelphia, PA 19104-6367
Willard S. Boothby, Jr. 78 Director of the Glenmede Fund; Trustee of the Glenmede Portfolios; Director,
600 East Gravers Lane Penn Engineering & Manufacturing Corp.; Former Director of Georgia-Pacific
Wyndmoor, PA 19118 Corp.; Former Chairman and Chief Executive Officer Blyth Eastman Dillon & Co.,
Inc.; Former Managing Director of Paine Webber, Inc.; Former Chairman of U.S.
Securities Industry Association.
John W. Church, Jr.* 67 Chairman and Director of the Glenmede Fund; Chairman and Trustee of the Glenmede
44 Wistar Road Portfolios; Retired, Executive Vice President and Chief Investment Officer of
Villanova, PA 19085 The Glenmede Trust Company from 1979 - 1997.
Francis J. Palamara 74 Director of the Glenmede Fund; Trustee of the Glenmede Portfolios; Trustee of
P.O. Box 44024 Gintel Fund; Former Director of XTRA Corporation; Former Executive Vice
Phoenix, AZ 85064-4024 President--Finance of ARAMARK, Inc.
G. Thompson Pew, Jr.* 57 Director of the Glenmede Fund; Trustee of the Glenmede Portfolios; Director of
310 Caversham Road The Glenmede Trust Company; Former Director of Brown & Glenmede Holdings, Inc.;
Bryn Mawr, PA 19010 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 48 President of the Glenmede Fund and the Glenmede Portfolios; First Vice President
One Liberty Place and Manager of The Fixed Income Division of The Glenmede Trust Company. Employed
1650 Market Street, Suite 1200 by The Glenmede Trust Company since 1982.
Philadelphia, PA 19103
Kimberly C. Osborne 34 Executive Vice President and Treasurer of the Glenmede Fund and the Glenmede
One Liberty Place Portfolios; Vice President of The Glenmede Trust Company. Employed by The
1650 Market Street, Suite 1200 Glenmede Trust Company since 1993.
Philadelphia, PA 19103
Michael P. Malloy 40 Secretary of the Glenmede Fund and the Glenmede Portfolios; Partner in the law
One Logan Square firm of Drinker Biddle & Reath LLP.
18th and Cherry Streets
Philadelphia, PA 19103-6996
</TABLE>
- --------------
*Board members Church and Pew are "interested persons" of the Funds as that
term is defined in the 1940 Act.
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<PAGE>
Messrs. Allen, Boothby, Church, Palamara and Pew are members of the
Audit and Valuation Committees of the Boards. The Funds' Audit Committees, among
other things, review the results of the annual audit and recommend to the Funds
the firm to be selected as independent auditors. The Glenmede Fund's Valuation
Committee determines, in consultation with the Fund's administrator and Advisor,
the fair value of certain securities pursuant to procedures adopted by the
Glenmede Fund's Board.
Remuneration of Board Members
The Glenmede Fund pays each Board member, other than officers of the
Advisor, an annual fee of $11,000 plus $1,250 for each Board meeting attended
and out-of-pocket expenses incurred in attending Board meetings. The Glenmede
Portfolios pays each Board member, other than officers of the Advisor, an annual
fee of $1,000 per year and out-of-pocket expenses incurred in attending Board
meetings. Board members receive no compensation as members of the Audit or
Valuation Committees. 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, 1999.
<TABLE>
<CAPTION>
Pension or
Retirement Estimated
Aggregate Aggregate Benefits Annual Total
Compensation Compensation Total Benefits Compensation
Name of from from Glenmede Part of the Upon from the
Person, Position Glenmede Fund Portfolios Funds' Expense Retirement Funds
---------------- ------------- ------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
H. Franklin Allen, Ph.D., $14,943.59 $1,056.41 None None $16,000
Director/Trustee
Willard S. Boothby, Jr., $14,943.59 $1,056.41 None None $16,000
Director/Trustee
John W. Church, Jr. $14,943.59 $1,056.41 None None $16,000
Director/Trustee
Francis J. Palamara, $14,943.59 $1,056.41 None None $16,000
Director/Trustee
G. Thompson Pew, Jr., $14,943.59 $1,056.41 None None $16,000
Director/Trustee
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisor and Sub-Advisors
The Advisor, The Glenmede Trust Company, a limited purpose trust
company chartered in 1956, provides fiduciary and investment services to
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<PAGE>
endowment funds, foundations, employee benefit plans and other institutions and
individuals. The Advisor is a wholly-owned subsidiary of The Glenmede
Corporation (the "Corporation") whose shares are closely held by 79
shareholders. The Corporation has a nine person Board of Directors which, at
December 31, 1999, collectively, owned 34.77% of the Corporation's voting shares
and 98.67% of the Corporation's total outstanding shares. The members of the
Board and their respective interests in the Corporation at December 31, 1999 are
as follows:
<TABLE>
<CAPTION>
The Glenmede Corporation Percent of Percent of
Board of Directors Voting Shares Total Shares
- ------------------- ------------- ------------
<S> <C> <C>
Susan W. Catherwood.................................. 10.83% 1.12%
Richard F. Pew....................................... 10.83% .96%
Thomas W. Langfitt, M.D.............................. 11.07% 8.62%
Arthur E. Pew III.................................... 10.83% .96%
J. Howard Pew, II.................................... 10.83% 1.30%
J. N. Pew, III....................................... 11.07% 4.86%
J. N. Pew, IV........................................ 11.07% 1.31%
R. Anderson Pew...................................... 11.07% 5.42%
Ethel Benson Wister.................................. 11.07% 10.22%
------ ------
98.67% 34.77%
</TABLE>
The Sub-Advisor to the Emerging Markets Portfolio, Pictet International
Management Limited, is an affiliate of Pictet and Cie, a Swiss private bank,
which was founded in 1805. Pictet and Cie is owned by eight partners.
A Sub-Advisor to the Small Capitalization Growth Portfolio, Winslow
Capital Management, Inc., was founded in 1992 to manage a limited number of
growth equity portfolios for corporations, endowments, foundations, public funds
and other institutions. The firm is 100% employee owned. These shareholders also
act as the firm's Board of Directors and their respective interests in the firm
at December 31, 1999 are as follows:
Name Percent of Ownership
---- --------------------
Clark J. Winslow 57%
Richard E. Pyle, CFA 21%
R. Bart Wear, CFA 10%
Joseph J. Docter, CFA 6%
Jon R. Foust 6%
----
100%
A Sub-Advisor to the Small Capitalization Growth Portfolio, TCW
Investment Management Company ("TCW"), is a wholly-owned subsidiary of The TCW
Group, Inc. ("TCW Group") (TCW changed its name from TCW Funds Management, Inc.
on January 1, 2000.) Established in 1971, TCW Group, including TCW, provide a
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<PAGE>
variety of trust, investment management and investment advisory services.
Ownership of TCW Group lies approximately 95% with employees and 5% with the
directors. Robert A. Day, who is Chairman of the Board of Directors of TCW Group
may be deemed to be a control person of TCW, by virtue of the aggregate
ownership by Mr. Day and his family of more than 25% of the outstanding voting
stock of TCW Group.
As noted in the Prospectuses, the Advisor does not receive any fee from
the Government Cash, Tax-Exempt Cash, Core Fixed Income, International,
Strategic Equity, Large Cap Value, Muni Intermediate and New Jersey Muni
Portfolios for its investment services.
The Advisor is entitled to receive a fee from the Small Capitalization
Value Portfolio for its investment services calculated daily and payable
monthly, at an annual rate of .55% of the Portfolio's average daily net assets.
Prior to January 1, 1998, the Advisor did not receive any fee from the Small
Capitalization Value Portfolio for its investment services. For the fiscal year
ended October 31, 1999 and for the period January 1, 1998 to October 31, 1998,
the Small Capitalization Value Portfolio paid the Advisor fees of $1,755,859 and
$1,965,405, respectively.
The Advisor is entitled to receive a fee from the Institutional
International Portfolio for its services, calculated daily and payable monthly,
at the annual rate of .75% of the Portfolio's average daily net assets. The
Advisor has agreed to waive its fees to the extent necessary to ensure that the
Institutional International Portfolio's annual total operating expenses do not
exceed 1.00% of average net assets. There were no waivers necessary for the
fiscal years ended October 31, 1999, 1998 and 1997 respectively. For the fiscal
years ended October 31, 1999, 1998 and 1997, the Institutional International
Portfolio paid the Advisor advisory fees of $1,011,323, $718,993 and $564,533,
respectively.
The Advisor is entitled to receive a fee from the Emerging Markets
Portfolio for its services, calculated daily and payable monthly, at the annual
rate of .75% of the Portfolio's average daily net assets, and the Sub-Advisor is
entitled to receive a fee from the Emerging Markets Portfolio for its services,
calculated daily and payable monthly, at the annual rate of .50% of the
Portfolio's average daily net assets. Prior to November 1, 1996, the Advisor and
Sub-Advisor were entitled to receive fees from the Emerging Markets Portfolio
for their services, calculated daily and payable monthly at the annual rate of
.50% and .75%, respectively, of the Portfolio's average daily net assets. For
the fiscal years ended October 31, 1999, 1998 and 1997, the Emerging Markets
Portfolio paid the Advisor advisory fees of $523,210, $570,667 and $794,794,
respectively, and paid the Sub-Advisor sub-advisory fees of $348,806, $380,444
and $529,863, respectively.
The Advisor is entitled to receive a fee from the Global Equity
Portfolio for its investment services, calculated daily and payable monthly, at
the annual rate of .70% of the Portfolio's average daily net assets. For the
fiscal year ended October 31, 1999 and the period November 3, 1997 (commencement
of operations) to October 31, 1998, the Global Equity Portfolio paid the Advisor
advisory fees of $201,240 and $178,727, respectively.
The Advisor is entitled to receive a fee from the Small Capitalization
Growth Portfolio for its services, calculated daily and payable monthly, at the
annual rate of .25% of the Portfolio's average daily net assets, and each
Sub-Advisor is entitled to receive a fee from the Small Capitalization Growth
Portfolio for its services, calculated daily and payable monthly, at the annual
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<PAGE>
rate of .60% of that portion of the Portfolio's average daily net assets that
the Sub-Advisor manages. For the fiscal year ended October 31, 1999, no advisory
or sub-advisory fees were paid by the Small Capitalization Growth Portfolio
because it had not commenced operations.
The Advisor is entitled to receive a fee from the Core Value Portfolio
for its services, calculated daily and payable monthly, at the annual rate of
0.45% of the Portfolio's average daily net assets. For the fiscal year ended
October 31, 1999, no advisory fees were paid by the Core Value Portfolio because
it had not commenced operations.
Additionally, many 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 $2 million of
principal, .60% on the next $3 million of principal and .50% on the next $5
million of principal. For accounts in excess of $10 million of principal, the
fee would be determined by special analysis.
Administrative, Transfer Agency and Dividend Paying Services
ICC, One South Street, Baltimore, Maryland 21202, 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 Deutsche Bank AG. For its services as administrator,
transfer agent and dividend paying agent, ICC is entitled to receive fees from
the Funds based on the combined net assets of all Portfolios of the Funds
according to the following schedule: .12% of the first $100 million; .08% of the
next $150 million; .04% of the next $500 million; and .03% over $750 million.
The fee is allocated to each Portfolio based on its relative net assets. For the
fiscal year ended October 31, 1999, ICC received fees at the rate of .04% of the
average net assets of each of the Funds' Portfolios other than the Small
Capitalization Growth and Core Value Portfolios, which had not commenced
operations as of October 31, 1999.
For the fiscal year ended October 31, 1999, the Funds paid ICC fees of
$177,284 for the Government Cash Portfolio, $136,105 for the Tax-Exempt Cash
Portfolio, $94,966 for the Core Fixed Income Portfolio, $472,896 for the
International Portfolio, $56,347 for the Strategic Equity Portfolio, $113,673
for the Small Capitalization Value Portfolio, $27,038 for the Large Cap Value
Portfolio, $6,477 for the Muni Intermediate Portfolio and $6,639 for the New
Jersey Muni Portfolio, $25,405 for the Emerging Markets Portfolio, $52,101 for
the Institutional International Portfolio and $10,505 for the Global Equity
Portfolio.
For the fiscal year ended October 31, 1998, the Funds paid ICC fees of
$172,208 for the Government Cash Portfolio, $109,335 for the Tax-Exempt Cash
Portfolio, $93,997 for the Core Fixed Income Portfolio, $430,419 for the
International Portfolio, $58,477 for the Strategic Equity Portfolio, $171,862
for the Small Capitalization Value Portfolio, $27,783 for the Large Cap Value
Portfolio, $7,047 for the Muni Intermediate Portfolio, $5,131 for the New Jersey
Muni Portfolio, $28,180 for the Emerging Markets Portfolio and $36,343 for the
Institutional International Portfolio. For the period November 3, 1997
(commencement of operations) to October 31, 1998, ICC received fees of $9,297
for the Global Equity Portfolio.
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<PAGE>
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 Strategic Equity Portfolio, $144,610
for the Small Capitalization Value Portfolio, $24,893 for the Large Cap Value
Portfolio, $7,183 for the Muni Intermediate Portfolio, $3,821 for the New Jersey
Muni Portfolio, $40,354 for the Emerging Markets Portfolio and $28,484 for the
Institutional International Portfolio.
Shareholder Services Plan
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. As of
the date of this Statement of Additional Information, the Institutional
International, Emerging Markets and Global Equity Portfolios are not subject to
the Plans and, accordingly, pay no shareholder servicing fees. 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% (.25% for
the Small Capitalization Growth Portfolio and for the Advisor Shares of the
Small Capitalization Value Portfolio), is computed monthly and is based on the
average daily net assets of the shares beneficially owned by Customers of such
Servicing Agents. For the period November 1, 1997 through December 31, 1997,
Advisor Shares of the Small Capitalization Value Portfolio paid shareholder
servicing fees at an annual rate of .05% of average daily net assets. 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 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 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.
The Advisor has entered into an Agreement with the Funds and provides
shareholder support services to their clients who beneficially own shares of
certain Portfolios listed below. For the fiscal year ended October 31, 1999, the
Small Capitalization Growth and Core Value Portfolios did not have any shares
issued or outstanding. Shareholder servicing fees paid to the Advisor for the
fiscal year ended October 31, 1999 for the Government Cash, Tax-Exempt Cash,
Core Fixed Income, Muni Intermediate, New Jersey Muni, Strategic Equity,
International, Small Capitalization Value (Advisor Shares), Small Capitalization
Value (Institutional Shares) and Large Cap Value Portfolios were $240,169,
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$185,886, $130,098, $8,847, $9,197, $76,980, $665,111, $722,155, $15,192 and
$36,258, respectively.
Shareholder servicing fees paid to the Advisor for the fiscal year
ended October 31, 1998 for the Government Cash, Tax-Exempt Cash, Core Fixed
Income, Muni Intermediate, New Jersey Muni, Strategic Equity, International,
Small Capitalization Value (Advisor Shares) and Large Cap Value Portfolios were
$232,765, $147,783, $130,578, $9,527, $7,046, $79,117, $621,378, $849,585 and
$37,371, respectively.
Shareholder servicing fees paid to the Advisor for the period January
2, 1998 (commencement of operations of Institutional Shares) to October 31, 1998
for the Small Capitalization Value Portfolio (Institutional Shares) were
$16,036.
Shareholder servicing fees paid to the Advisor for the fiscal year
ended October 31, 1997 for the Government Cash, Tax-Exempt Cash, Core Fixed
Income, Muni Intermediate, New Jersey Muni, Strategic Equity, International,
Small Capitalization Value 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.
Custodian
Custody services are provided to each Portfolio by The Chase Manhattan
Bank, N.A., 3 Chase Metrotech Center, Brooklyn, New York 11245.
Distributor
Shares of the Funds are distributed continuously and are offered
without a sales load by ICC Distributors, Inc. ("ICC Distributors"), Two
Portland Square, Portland, Maine 04101, pursuant to Distribution Agreements
between the Funds and ICC Distributors. ICC Distributors receives no fee from
the Funds for its distribution services.
Independent Accountants
PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore, MD,
21201, serves as the Funds' independent accountants and will audit their
financial statements annually.
Counsel
Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry Streets,
Philadelphia, Pennsylvania 19103-6996, serves as counsel to the Funds.
Reports
Shareholders receive unaudited semi-annual financial statements and
audited annual financial statements.
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PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements and the Sub-Advisory Agreements
authorize the Advisor, and the Sub-Advisors (Emerging Markets and Small
Capitalization Growth Portfolios), 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 or each Sub-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 or Sub-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 or
Sub-Advisor under each Investment Advisory Agreement and each Sub-Advisory
Agreement. 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 or Sub-Advisor determines
in good faith that such commission is reasonable in terms either of the
transaction or the overall responsibility of the Advisor or Sub-Advisor to a
Portfolio and the Advisor's or Sub-Advisor's other clients.
The Funds are required to identify any securities of their regular
brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or their
parents that the Portfolios have acquired during the Funds' most recent fiscal
year. During the fiscal year ended October 31, 1999, the Core Fixed Income,
Large Cap Value, Global Equity, International and Institutional International
Portfolios acquired and sold securities of their regular broker/dealers. At
October 31, 1999, the Core Fixed Income Portfolio held Goldman Sachs & Co. debt
securities with a value of $3,805,080, and Merrill Lynch, Pierce, Fenner & Smith
Inc. debt securities with a value of $4,572,700; the Large Cap Value Portfolio
held Morgan Stanley Dean Witter equity securities with a value of $728,062; the
Global Equity Portfolio held Morgan Stanley Dean Witter equity securities with a
value of $88,250; the International Portfolio held ABN Amro Incorporated equity
securities with a value of $20,055,821; and the Institutional International
Portfolio held ABN Amro Incorporated equity securities with a value of
$2,102,237.
During the fiscal year ended October 31, 1999, the Strategic Equity,
International, Small Capitalization Value, Large Cap Value, Institutional
International, Emerging Markets and Global Equity Portfolios paid $172,117,
$1,189,519, $922,862, $1,254,914, $184,218, $714,797 and $33,657 in brokerage
commissions, respectively. During the fiscal year ended October 31, 1998, the
Strategic Equity, International, Small Capitalization Value, Large Cap Value,
Institutional International and Emerging Markets Portfolios paid $191,112,
$889,483, $613,021, $225,179, $89,805 and $630,185 in brokerage commissions,
respectively. For the period November 3, 1997 (commencement of operations) to
October 31, 1998, the Global Equity Portfolio paid $84,877 in brokerage
commissions. During the fiscal year ended October 31, 1997, the Strategic
Equity, International, Small Capitalization Value, Large Cap Value,
Institutional International and Emerging Markets Portfolios paid $80,102,
$1,256,020, $592,458, $171,033, $21,782 and $118,807 in brokerage commissions,
respectively.
During the fiscal year ended October 31, 1999, the Small Capitalization
Growth and Core Value Portfolios had not yet commenced operations. The
Government Cash, Tax-Exempt 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 principal for their
own accounts without a stated commission. The price of the security, however,
usually includes a profit to the dealer.
To the extent that a Portfolio effects brokerage transactions with a
broker/dealer affiliated directly or indirectly with the Funds, the Advisor,
Sub-Advisors or ICC Distributors, such transactions will be reasonable and fair
compared to the commissions, fees or other remuneration received by other
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brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time.
During the fiscal year ended October 31, 1999, the Emerging Markets,
International and Institutional International Portfolios paid $1,975, $14,840
and $1,501, respectively, in brokerage commissions to affiliated persons
(representing 0.28%, 1.25% and 0.81%, respectively, of total commissions paid).
These commissions were paid to Bankers Trust Company, DB Alex Brown LLC and
Deutsche Morgan Grenfell Proprietary Limited who were affiliated with two of the
Fund's officers prior to June 14, 1999. The total amount of transactions on
which brokerage commissions were paid by the Emerging Markets, International and
Institutional International Portfolios was $151,852,434, $557,244,184 and
$85,256,061, respectively, of which 0.43%, 1.34% and 0.89%, respectively,
involved the payment of commissions effected through affiliated persons.
During the fiscal year ended October 31, 1998, the Emerging Markets
Portfolio paid $1,777 in brokerage commissions to Bankers Trust Company
(representing 0.28% of total commissions paid). The total amount of transactions
on which brokerage commissions were paid was $124,570,709, of which 0.28%
involved the payment of commissions effected through affiliated persons.
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 or each Sub-Advisor may
place portfolio orders with qualified broker-dealers who refer clients to it.
Some securities considered for investment by each Portfolio may also be
appropriate for other clients served by the Advisor or Sub-Advisor. If the
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 or a
Sub-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 or such Sub-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.
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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 Prospectuses. 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 Prospectuses 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
Code, and intends to qualify as a regulated investment company. Such
qualification generally relieves a Portfolio of liability for Federal income
taxes to the extent its earnings are distributed in accordance with the Code.
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 general, a Portfolio's investment company taxable income will
be the sum of its net investment income, including interest and dividends,
subject to certain adjustments, and net short-term capital gain over net
long-term capital loss, if any, for such 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 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. 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 distributions received with
respect to the shares.
The following Portfolios have available capital loss carryforwards to
offset future net capital gains through the indicated expiration dates as
follows:
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<TABLE>
<CAPTION>
Expiring Expiring Expiring Expiring Expiring Expiring Expiring Expiring
Portfolio in 2000 in 2001 in 2002 in 2003 in 2004 in 2005 in 2006 in 2007
- --------- -------- -------- -------- -------- -------- -------- ------- --------
<S> <C> <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 - $ 7,168
Core Fixed Income - - 7,273,798 1,869,325 -
Muni Intermediate - - 143,831 549,436 2,107 42,723 -
New Jersey Muni - - 56,593 21,708 11,660 - 1,722 $ 2,683
Small Capitalization - - - - - - 20,153,292
Value
Emerging Markets - - - - - - 25,319,729
</TABLE>
If the Emerging Markets Portfolio retains net capital gains for
reinvestment, the Portfolio may elect to treat such amounts as having been
distributed to shareholders. As a result, the shareholders would be subject to
tax on undistributed net capital gains, would be able to claim their
proportionate share of the Federal income taxes paid by the Portfolio on such
gains as a credit against their own Federal income tax liabilities, and would be
entitled to an increase in their basis in their Portfolio shares.
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.
International, Institutional International, Emerging Markets and Global Equity
Portfolios
Income received from sources within foreign countries may be subject to
withholding and other income or similar taxes imposed by such countries. If more
than 50% of the value of a Portfolio's total assets at the close of its taxable
year consists of stock or securities of foreign corporations, each Portfolio
will be eligible and intends to elect to "pass-through" to its shareholders the
amount of foreign taxes paid by it. Pursuant to this election, each shareholder
will be required to include in gross income (in addition to taxable dividends
actually received) his pro rata share of the foreign taxes paid by the
Portfolio, and will be entitled either to deduct (as an itemized deduction) his
pro rata share of foreign taxes in computing his taxable income or to use it as
a foreign tax credit against his U.S. Federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions, but such a shareholder may be eligible to claim the
foreign tax credit (see below). Each shareholder will be notified within 60 days
after the close of a Portfolio's taxable year whether the foreign taxes paid by
the Portfolio will "pass-through" for that year.
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
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Portfolios are not 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
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.
While each Portfolio seeks 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.
Other Tax Matters
The tax principles applicable to transactions in financial instruments
and futures contracts and options that may be engaged in by a Portfolio, and
investments in passive foreign investment companies ("PFICs"), are complex and,
in some cases, uncertain. Such transactions and investments may cause a
Portfolio to recognize taxable income prior to the receipt of cash, thereby
requiring the Portfolio to liquidate other positions, or to borrow money, so as
to make sufficient distributions to shareholders to avoid corporate-level tax.
Moreover, some or all of the taxable income recognized may be ordinary income or
short-term capital gain, so that the distributions may be taxable to
shareholders as ordinary income.
In addition, in the case of any shares of a PFIC in which a Portfolio
invests, the Portfolio may be liable for corporate-level tax on any ultimate
gain or distributions on the shares if the Fund fails to make an election to
recognize income annually during the period of its ownership of the PFIC shares.
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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.
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, or 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."
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
seven years; as of June 30, 1998, the General Fund had a surplus of $1,958.9
million. The deficit in the Commonwealth's unreserved/undesignated funds also
has been eliminated.
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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 as of June 1, 1999, suits relating to the following
matters: (i) In February 1999, a taxpayer filed a petition for review in the
Commonwealth Court of Pennsylvania asking the court to declare that Chapter 5
(relating to Sports Facilities Financing) of the Capital Facilities Debt
Enabling Act is in violation of the Pennsylvania Constitution. Commonwealth
Court denied the taxpayer's motion for a preliminary injunction and the Supreme
Court denied an appeal of such denial. The respondents have filed preliminary
objections in the nature of a demurrer, requesting the Court dismiss the case
with prejudice. Oral arguments before the Commonwealth Court regarding the
preliminary objections were scheduled for May 19, 1999, (ii) The American Civil
Liberties Union ("ACLU") 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, among other things, because of that settlement. After its earlier
denial of class certification 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. In July 1998, a settlement agreement was
reached with the City of Philadelphia. The Commonwealth has agreed to pay
$100,000 to settle plaintiffs' $1.4 million claim for attorney's fees and to
take other actions in exchange for a full and final release and dismissal of the
case against the Commonwealth parties. The settlement was approved by the
district court on February 1, 1999, and the case was dismissed; (iii) In 1987,
the Supreme Court of Pennsylvania held the statutory scheme for county funding
of the judicial system to be in conflict with the constitution of the
Commonwealth, but it stayed judgment pending enactment by the legislature of
funding consistent with the opinion, and the legislature has yet to consider
legislation implementing the judgment. In 1992, a new action in mandamus was
filed seeking to compel the Commonwealth to comply with the original decision.
The Court issued a writ in mandamus and appointed a special master in 1996 to
submit a plan for implementation, which it intended to require by January 1,
1998. In January 1997, the Court established a committee, consisting of the
special master and representatives of the Executive and Legislative branches, to
develop an implementation plan; an implementation plan was filed in July 1997.
In April 1998 the General Assembly appropriated approximately $12 million for
the funding of county court administrators, under the implementation plan.
However, no legislation has been approved for the payment of Commonwealth
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compensation of county court administrators. In May 1998, an action was filed by
the Administrative Governing Board of the First Judicial District claiming the
city government has failed to provide adequate Funds for the Operation of the
courts of the First Judicial District. In November 1998, the First Judicial
District Governing Board filed with the Supreme Court a renewed motion for entry
of an order providing emergency relief, which requests the City of Philadelphia
to provide funds to the First Judicial District Courts, in order to maintain
necessary judicial operations throughout the end of the fiscal year. Although
the Supreme Court issued no order, the City is apparently continuing its funding
of the courts; (iv) Litigation was filed in both state and federal courts 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 the
resolution of the state case; a trial in the state case commenced in January
1997 and has recessed; no briefing schedule or date for oral argument has yet
been set; On July 9, 1998 the state court issued an opinion dismissing the
petitioners' claim in its entirety. On July 20, 1998 the petitioner filed a
timely motion for post-trial relief, taking exception to the state court's
findings of fact and conclusions of law. The Supreme Court, after assuming
jurisdiction in the case directed that all parties submit briefs on all issues
presented in the petitioners' motion for post-trial relief; and (v) In 1995, the
Commonwealth, the Governor of Pennsylvania, the City of Philadelphia and the
Mayor of Philadelphia were joined as additional respondents in an enforcement
action commenced in Commonwealth Court in 1973 by the Pennsylvania Human
Relations Commission against the School District of Philadelphia pursuant to the
Pennsylvania Human Relations Act. The Commonwealth and the City were joined to
determine their liability, if any, to pay additional costs necessary to remedy
segregation-related conditions found to exist in Philadelphia public schools. In
January 1997, the Pennsylvania Supreme Court ordered the parties to brief
certain issues. The Supreme Court heard oral argument on the issues in February
1998 but no decision has been issued, (vi) 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. In March 1998, the
Commonwealth Court dismissed the case on the grounds that the issues prescribed
are not justifiable. An appeal to the Supreme Court of Pennsylvania is pending,
(vii) 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; In
January 1998 a panel of the Commonwealth Court ruled in favor of the
Commonwealth, finding no constitutional violation. Royal Bank filed exceptions,
which the Commonwealth Court en banc denied. Royal Bank appealed to the Supreme
Court and briefing has been completed. The Court has not yet scheduled oral
arguments. (viii) Suit has been filed in state court against the State
Employees' Retirement Board claiming that the use of gender district 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 judgement on the pleading. The case is
currently in discovery. (ix) In March 1997, Rite Aid of Pennsylvania, Inc. filed
in the United States District Court for the Eastern District of Pennsylvania, a
civil action against the Secretary of Public Welfare alleging that regulations
promulgated in October 1995 governing payment rates for prescription drugs and
related services provided to recipients of benefits under the Pennsylvania
Medical Assistance Program violated provisions of Title XIX of the Social
Security Act and regulations of the U.S. Department of Health and Human
Services, as well as provisions of State law and Federal constitutional due
process. In August 1998, the court declared that certain pharmacy reimbursement
rates were in violation of the Medicaid Act and enjoined the Secretary from
using these rates to reimburse for any prescription drugs and related services
provided to Medicaid recipients on and after October 1, 1998. The Secretary
filed motions for appeal and in March 1999, the U.S. Court of Appeals for the
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Third Circuit reversed the district court's order and remanded the case for
further proceedings. The plaintiffs on April 5, 1999 filed an application for
rehearing. (x) On March 9, 1998 several residents of the City of Philadelphia
along with the School District of Philadelphia and others brought suit in the
United States District Court for the Eastern District of Pennsylvania against
the Governor, the Secretary of Education and others alleging that the defendants
are violating a regulation of the U.S. Department of Education promulgated under
Title VI of the Civil Rights Act of 1964 in that the Commonwealth's system for
funding public schools has the effect of discrimination on the basis of race. On
November 18, 1998, the district court dismissed the action with prejudice. An
appeal by the plaintiffs was filed and the parties are awaiting the scheduling
of oral argument.
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 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 $2.37 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, 1998 showed a surplus of approximately $169.2 million up from
approximately $128.8 million as of June 30, 1997.
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
approximately $1.1 billion in Special Revenue Bonds outstanding as of April 15,
1999.
-39-
<PAGE>
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 concentration of investments by the New Jersey Muni Portfolio in
New Jersey Municipal Obligations also raises special investment considerations.
The State of New Jersey (the "State") generally has a diversified economic base
consisting of, among others, commerce and service industries, selective
commercial agriculture, insurance, tourism, petroleum refining and
manufacturing, although the State's manufacturing industry has shown a downward
trend in the last few years. Recently, the state's unemployment rate has fallen,
and job growth has been experienced in several sectors of the state's economy.
While the State's economic base has become more diversified over time and thus
its economy appears to be less vulnerable during recessionary periods, adverse
conditions including a recurrence of high levels of unemployment, could
adversely affect the State's overall economy and its ability to meet its
financial obligations. 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.
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.
-40-
<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.
Certain litigation is pending against the State in which the State has
a potential for either a significant loss of revenue or a significant
unanticipated expenditure including as of August 1, 1999, suits relating to the
following matters: (i) 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; (ii) Representatives of the trucking
industry have filed a constitutional challenge to annual hazardous and solid
waste licensure renewal fees; (iii) Several suits have been filed against the
State to compel the State to close the spending gap between poor urban school
districts and wealthy rural school districts; (iv) 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; (v) 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; (vi) A class action 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 is now being
appealed to the U.S. Supreme Court by the plaintiff; (vii) Several suits have
been filed against the State in federal court alleging that the State committed
-41-
<PAGE>
securities fraud and environmental violations in the financing of a new Atlantic
City highway and tunnel; (viii) A class action filed against the State alleging
the State's breach of contract for not paying certain Medicare co-insurance and
deductibles has been appealed by the plaintiff; (ix) 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; (x) Several cases
have been filed by state hospitals with respect to Medicaid hospital
reimbursement that challenge the state's compliance with federal regulations and
the correctness of reimbursement rates. This Chapter 11 case commenced when
United Hospital closed and demands that the bankruptcy court take jurisdiction
of and decide certain Medicaid reimbursement matters pending in New Jersey
administrative proceedings or the New Jersey appellate courts; (xi) Several
plaintiffs have filed a complaint seeking damages and injunctive relief on
constitutional grounds on behalf of individuals who did not obtain an increase
in welfare benefits under the "family cap" provisions of the State Work First
New Jersey Act; (xii) Several cases have been filed by various hospitals
alleging the $10 per adjusted hospital admission charge is a "tax" as opposed to
a "regulatory fee" and is in violation of the State's constitution; and (xiii)
The owner of a resource recovery facility in South Camden who filed suit to have
the county's solid waste process halted to clarify bid specifications has filed
a motion for leave to appeal to the Supreme Court of New Jersey.
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 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
Each of the Strategic Equity, International, Small Capitalization
Value, Core Value, Small Capitalization Growth, Institutional International and
Large Cap Value Portfolios may compare their total returns for the shares to
that of other investment companies with similar investment objectives and to
stock and other relevant indices such as the S&P 500, the Dow Jones Industrial
Average, the Russell Indexes or the NASDAQ Composite Index 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 of
the shares of the Strategic Equity, International, Small Capitalization Value,
Institutional International, Core Value, Small Capitalization Growth or Large
Cap Value Portfolios may also be compared to data prepared by Lipper, Inc.
("Lipper"). In addition, for example, the International or Institutional
International Portfolios' total return may also be compared to the Morgan
Stanley Capital International EAFE Index (the "EAFE Index").
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.
Each of the Government Cash and Tax-Exempt Portfolios may compare their
yields to that of other investment companies with similar investment objectives
and to other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of mutual
funds. For example, the yield of the Government Cash or Tax-Exempt Portfolios
may be compared to data prepared by IBC Financial Data, Inc.
-42-
<PAGE>
The Emerging Markets Portfolio may compare its total return to that of
other investment companies with similar investment objectives and to stock and
other relevant indices 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 of the Emerging Markets Portfolio may be compared
to data prepared by Lipper, the Morgan Stanley Capital International Emerging
Markets Free Index (also known as the Emerging Markets Index) and the
International Financial Corporation Composite Index.
The Global Equity Portfolio may compare its total return to that of
other investment companies with similar investment objectives and to stock and
other relevant indices 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 of the Portfolio may be compared to data prepared
by Lipper, the MSCI World Index and the EAFE Index.
Total return, yield (for the Core Fixed Income, Muni Intermediate and
New Jersey Muni Portfolios), and other performance 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, may also be used in comparing the performances of the 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. 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, an Affiliate, or Institutions to their respective
clients will not be included in a Portfolio's calculations of yield, effective
yield, tax-equivalent yield or total return, as appropriate.
From time to time, the Government Cash Portfolio and the Tax-Exempt
Cash Portfolio, may advertise or quote yield, effective yield, tax-equivalent
yield (Tax-Exempt Cash Portfolio only), 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 SEC. 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 Money Market 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 Money Market 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.
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<PAGE>
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 Money
Market Portfolios' yield and effective yield, do not reflect any fees charged by
the Advisor to its clients. See "Investment Advisor" in the Prospectus.
Set forth below is an example, for purposes of illustration only, of
the current yield calculations for each of the Money Market Portfolios for the
seven-day period ended October 31, 1999.
<TABLE>
<CAPTION>
Government Tax-Exempt
Cash Portfolio Cash Portfolio
10/31/99 10/31/99
-------------- --------------
<S> <C> <C>
7-Day Yield (Net Change X 365/7 average NAV) 5.13% 3.17%
7-Day Effective Yield 5.26% 3.22%
7-Day Tax-Equivalent Yield N/A 5.33%*
</TABLE>
- ---------------------------------
* Assumes an effective Federal income tax rate of 39.6%
The SEC yield of the Core Fixed Income Portfolio, Muni Intermediate
Portfolio and the New Jersey Muni Portfolio for the 30-day period ended October
31, 1999 was 6.54%, 4.82% and 4.48%, 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:
6
Yield = 2 [(a-b + 1) - 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
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<PAGE>
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 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" in the
Prospectus.
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, 1999 was 8.21% and 7.92%, respectively (assuming a Federal
income tax rate of 39.6% and Pennsylvania and New Jersey income tax rates of
2.80% and 6.37%, respectively).
The Core Fixed Income, Strategic Equity, International, Small
Capitalization Value, Muni Intermediate, New Jersey Muni, Large Cap Value, Core
Value, Small Capitalization Growth, Institutional International, Emerging
Markets and Global Equity 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>
n
P (1 + T) = ERV
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, Strategic Equity, International, Small
Capitalization Value, Muni Intermediate, New Jersey Muni, Large Cap Value, Core
Value, Small Capitalization Growth, Institutional International, Emerging
Markets and Global Equity 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.
None of the Portfolio's average annual total return and aggregate total return
reflects any fees charged by the Advisor, an Affiliate, or Institutions to their
clients. See "Investment Advisor" in the Prospectuses.
On January 2, 1998, the Small Capitalization Value 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 Value Portfolio did not have an advisory fee and Advisor Shares
had a .05% Shareholder Servicing Fee. Performance of the Institutional Shares
prior to January 2, 1998 is represented by performance of the Advisor Shares.
Set forth below are the average annual total return figures for the
Core Fixed Income, Strategic Equity, International, Small Capitalization Value,
Muni Intermediate, Large Cap Value, New Jersey Muni, Institutional
International, Emerging Markets and Global Equity Portfolios since inception and
for the one-, five-, and ten-year periods ended October 31, 1999. The Small
Capitalization Growth and Core Value Portfolios had not commenced investment
operations as of October 31, 1999.
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<PAGE>
<TABLE>
<CAPTION>
Small
Core Fixed Strategic Capitalization Muni
Income Equity International Value Intermediate
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ----------------------- ---------
Advisor Institutional
Shares Shares
------ ------
<S> <C> <C> <C> <C> <C> <C>
1 Year Ended 10/31/99 0.91% 23.88% 24.65% -0.32% -0.10% 0.91%
5 Years Ended 10/31/99 7.29% 23.55% 13.01% 10.57% N/A 6.08%
10 Years Ended 10/31/99 7.54% 16.00% 12.32% N/A N/A N/A
Inception to 10/31/99 7.90% 15.67% 12.35% 11.67% 11.72% 5.13%
</TABLE>
<TABLE>
<CAPTION>
Large Cap New Institutional Emerging Global
Value Jersey Muni International Markets Equity Government Tax-Exempt Cash
Portfolio Portfolio Portfolio Portfolio Portfolio Cash Portfolio Portfolio
--------- --------- --------- --------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year Ended 10/31/99 19.59% 0.08% 22.98% 41.23% 21.18% 5.00% 3.02%
5 Years Ended 10/31/99 18.38% 6.15% 11.86%* N/A N/A 5.50% 3.41%
10 Years Ended 10/31/99 N/A N/A N/A N/A N/A 5.36% 3.58%
Inception to 10/31/99 16.50% 4.19% 13.44%* -2.10% 11.45% 5.72% 3.83%
</TABLE>
* The Institutional International Portfolio's average annual total return
figures for the 5 Year and since Inception periods above are net of fee waivers.
The Portfolio's average annual total return figures without fee waivers for the
5-Year and since Inception periods would have been lower.
Inception Dates:
Core Fixed Income Portfolio.................................. 11/17/88
Strategic Equity Portfolio................................... 07/20/89
International Portfolio...................................... 11/17/88
Small Capitalization Value Portfolio
Advisor Shares.......................................... 03/01/91
Institutional Shares.................................... 01/02/98
Muni Intermediate Portfolio.................................. 06/05/92
Large Cap Value Portfolio.................................... 01/04/93
New Jersey Muni Portfolio.................................... 11/01/93
Institutional International Portfolio........................ 08/01/92
Emerging Markets Portfolio................................... 12/14/94
Global Equity Portfolio...................................... 11/03/97
Government Cash Portfolio.................................... 11/07/88
Tax-Exempt Cash Portfolio.................................... 11/10/88
Small Capitalization Growth Portfolio........................ 12/29/99
Core Value Portfolio......................................... 02/28/00
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<PAGE>
Set forth below are the aggregate total return figures for the Core
Fixed Income, Strategic Equity, International, Small Capitalization Value, Muni
Intermediate, Large Cap Value, New Jersey Muni, Institutional International,
Emerging Markets and Global Equity Portfolios from inception to October 31,
1999. The Small Capitalization Growth and Core Value Portfolios had not
commenced investment operations as of October 31, 1999.
Portfolio Inception Date Aggregate Total Return
- --------- -------------- ----------------------
Core Fixed Income 11/17/88 130.01%
Strategic Equity 07/20/89 346.64%
International 11/17/88 258.11%
Small Capitalization Value
Advisor Shares 03/01/91 160.40%
Institutional Shares 01/02/98 161.41%
Muni Intermediate 06/05/92 44.88%
Large Cap Value 01/04/93 183.48%
New Jersey Muni 11/01/93 27.87%
Institutional International 08/01/92 149.34%
Emerging Markets 12/14/94 -9.82%
Global Equity 11/03/97 24.07%
GENERAL INFORMATION
Description of Shares and Voting Rights
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 SEC has
expressed the view that the use of a 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 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 or trustees may
be effectively acted upon by shareholders of the Fund voting without regard to
the Portfolio.
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<PAGE>
Notwithstanding any provision of Maryland law requiring a greater vote
of the 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 the
Glenmede Fund's Articles of Amendment and Restatement, the 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 the Glenmede Fund entitled to vote
thereon.
Certain Record Holders
As of February 1, 2000, the Advisor held of record substantially all of
the outstanding shares of each Portfolio (including the Advisor and
Institutional Share classes of the Small Capitalization Value Portfolio). For
more information about the Advisor, see "Investment Advisor" in the
Prospectuses. As of February 1, 2000, the directors/trustees and officers of the
Funds collectively owned less than 1% of the outstanding shares of each of the
Funds' Portfolios. As of February 1, 2000, no shares of the Core Value Portfolio
were issued or outstanding. As of the date of this Statement of Additional
Information, the Advisor, the Core Value Portfolio's Initial Shareholder, owned
all of its outstanding shares.
Dividends and 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. The amounts of any income dividends or capital gains distributions
for a Portfolio cannot be predicted.
FINANCIAL STATEMENTS
The Funds' Financial Statements for the Government Cash, Tax-Exempt
Cash, Core Fixed Income, International, Tax-Managed Equity (currently, Strategic
Equity), Small Capitalization Equity (currently, Small Capitalization Value),
Large Cap Value, Muni Intermediate, New Jersey Muni, Institutional
International, Emerging Markets and Global Equity Portfolios for the year or
period ended October 31, 1999, and the financial highlights for each of the
respective periods presented, appearing in the 1999 Annual Report to
Shareholders, and the reports thereon of PricewaterhouseCoopers LLP, the Funds'
independent accountants, also appearing therein, are incorporated by reference
in this Statement of Additional Information. No other parts of the 1999 Annual
Report to Shareholders are incorporated herein. No financial statements are
supplied for the Small Capitalization Growth and Core Value Portfolios because
they had not commenced operations during the period ended October 31, 1999.
OTHER INFORMATION
The Funds' Prospectuses and this Statement of Additional Information do
not contain all the information included in the Registration Statement filed
with the SEC under the Securities Act of 1933 with respect to the securities
offered by the Prospectuses. 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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Statements contained in the Prospectuses 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 Prospectuses and this Statement of
Additional Information form a part, each such statement being qualified in all
respects by such reference.
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APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current opinion of the
creditworthiness of an obligor with respect to financial obligations having an
original maturity of no more than 365 days. The following summarizes the rating
categories used by Standard & Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The "D" rating will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability of issuers
to repay senior debt obligations punctually, not having an original maturity in
excess of one year, unless explicitly noted. The following summarizes the rating
categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
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leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
II. Corporate and Municipal Long-Term Debt Ratings
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as having
significant speculative characteristics. "BB" indicates the least degree of
speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
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"BB" - An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.
"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
"CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action taken, but payments on this
obligation are being continued.
"D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"c" - The 'c' subscript is used to provide additional information to
investors that the bank may terminate its obligation to purchase tendered bonds
if the long-term credit rating of the issuer is below an investment-grade level
and/or the issuer's bonds are deemed taxable.
"p" - The letter 'p' indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the risk of
default upon failure of such completion. The investor should exercise his own
judgment with respect to such likelihood and risk.
* Continuance of the ratings is contingent upon Standard & Poor's
receipt of an executed copy of the escrow agreement or closing documentation
confirming investments and cash flows.
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"r" - The 'r' highlights derivative, hybrid, and certain other
obligations that Standard & Poor's believes may experience high volatility or
high variability in expected returns as a result of noncredit risks. Examples of
such obligations are securities with principal or interest return indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an 'r'
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
N.R. Not rated. Debt obligations of issuers outside the United States
and its territories are rated on the same basis as domestic corporate and
municipal issues. The ratings measure the creditworthiness of the obligor but do
not take into account currency exchange and related uncertainties.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds are considered as medium-grade obligations, (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca" and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" indicates poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C" represents the
lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default.
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Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from "Aa" through "Caa." The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of its generic rating category.
III. Municipal Note Ratings
A Standard & Poor's note rating reflects the liquidity factors and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's for municipal notes:
"SP-1" - The issuers of these municipal notes exhibit a strong capacity
to pay principal and interest. Those issues determined to possess a very strong
capacity to pay debt service are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
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"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.
IV. 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 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
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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.
The Core Fixed Income Portfolio may invest in mortgage-backed
securities issued or sponsored by both government and non-governmental entities.
Privately issued mortgage-backed securities are generally backed by pools of
conventional (i.e., non-government guaranteed or insured) mortgage loans.
Privately-issued mortgage backed securities must have 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. The ratings assigned by a rating
organization (e.g., S&P or Moody's) to privately-issued mortgage-backed
securities address the likelihood of the receipt of all distributions on the
underlying mortgage loans by the related certificate-holders under the
agreements pursuant to which such certificates are issued. A rating
organization's ratings take into consideration the credit quality of the related
mortgage pool, including any credit support providers, structural and legal
aspects associated with such certificates, and the extent to which the payment
stream on such mortgage pool is adequate to make payments required by such
certificates. A rating organization's ratings on such certificates do not,
however, constitute a statement regarding frequency of prepayments on the
related mortgage loans. Additionally, in order to receive a high quality rating
from the rating organizations, privately issued mortgaged-backed securities
normally are structured with one or more types of "credit enhancement." Credit
enhancement falls generally into two categories: (i) liquidity protection and
(ii) protection against losses resulting from default by an obligor on the
underlying assets. Liquidity protection refers to the provision of advances,
generally by the entity administering the pools of mortgages, the provision of a
reserve fund, or a combination thereof, to ensure, subject to certain
limitations, that scheduled payments on the underlying pool are made in a timely
fashion. Protection against losses resulting from default ensures ultimate
payment of the obligations on at least a portion of the assets in the pool. Such
credit support can be provided by, among other things, payment guarantees,
letters of credit, pool insurance, subordination, or any combination thereof.
The Core Fixed Income Portfolio may also invest in multiple class
securities, including collateralized mortgage obligations ("CMOs") and Real
Estate Mortgage Investment Conduit ("REMIC") pass-through or participation
certificates. CMOs provide an investor with a specified interest in the cash
flow from a pool of underlying mortgages or of other mortgage-backed securities.
These securities may be issued by U.S. Government agencies and instrumentalities
such as Fannie Mae or sponsored enterprises such as Freddie Mac or by trusts
formed by private originators of, or investors in, mortgage loans, including
savings and loan associations, mortgage bankers, commercial banks, insurance
companies, investment banks and special purpose subsidiaries of the foregoing.
In general, CMOs are debt obligations of a legal entity that are collateralized
by, and multiple class mortgage-backed securities represent direct ownership
interests in, a pool of mortgage loans or mortgage-backed securities the
payments on which are used to make payments on the CMOs or multiple class
mortgage-backed securities.
Fannie Mae REMIC certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
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will be obligated to distribute the principal balance of each class of REMIC
certificates in full, whether or not sufficient funds are otherwise available.
Freddie Mac guarantees the timely payment of interest on Freddie Mac
REMIC certificates and also guarantees the payment of principal as payments are
required to be made on the underlying mortgage participation certificates
("PCs"). PCs represent undivided interests in specified level payment,
residential mortgages or participations therein purchased by Freddie Mac and
placed in a PC pool. With respect to principal payments on PCs, Freddie Mac
generally guarantees ultimate collection of all principal of the related
mortgage loans without offset or deduction. Freddie Mac also guarantees timely
payment of principal of certain PCs.
CMOs and guaranteed REMIC certificates issued by Fannie Mae and Freddie
Mac are types of multiple class mortgage-backed securities. Investors may
purchase beneficial interests in REMICs, which are known as "regular" interests
or "residual" interests. The Funds do not intend to purchase residual interests
in REMICs. The REMIC certificates represent beneficial ownership interests in a
REMIC trust, generally consisting of mortgage loans or Fannie Mae, Freddie Mac
or Ginnie Mae guaranteed mortgage-backed securities. The obligations of Fannie
Mae or Freddie Mac under their respective guaranty of the REMIC certificates are
obligations solely of Fannie Mae or Freddie Mac, respectively.
CMOs are issued in multiple classes, each with a specified fixed or
floating interest rate and a final scheduled distribution date. In most cases,
payments of principal are applied to the CMO classes in order of their
respective stated maturities, so that no principal payments will be made on a
CMO class until all other classes having an earlier stated maturity date are
paid in full. These are referred to as "sequential pay" CMOs, or REMIC
Certificates. A REMIC is a CMO that qualifies for special tax treatment under
the Code, and invests in certain mortgages principally secured by interests in
real property and other permitted investments.
Additional structures of CMOs and REMIC certificates include, among
others, "parallel pay" CMOs and REMIC certificates. Parallel pay CMOs or REMIC
certificates are those which are structured to apply principal payments and
prepayments of mortgage assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of REMIC certificates may be issued in sequential pay or
parallel pay structures. These securities include accrual certificates (also
known as "Z-Bonds"), which only accrue interest at a specified rate until all
other certificates having an earlier final distribution date have been retired
and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay REMIC
certificates that generally require that specified amounts of principal be
applied on each payment date to one or more classes or REMIC certificates (the
"PAC Certificates"), even though all other principal payments and prepayments of
the mortgage assets are then required to be applied to one or more other classes
of the certificates. The scheduled principal payments for the PAC Certificates
generally have the highest priority on each payment date after interest due has
been paid to all classes entitled to receive interest currently. Shortfalls, if
any, are added to the amount payable on the next payment date. The PAC
Certificate payment schedule is taken into account in calculating the final
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distribution date of each class of PAC. In order to create PAC tranches, one or
more tranches generally must be created that absorb most of the volatility in
the underlying mortgage assets. These tranches tend to have market prices and
yields that are much more volatile that other PAC classes.
CMOs may involve additional risks other than those found in other types
of mortgage-related obligations. CMOs may exhibit more price volatility and
interest rate risk than other types of mortgage-related obligations. During
periods of rising interest rates, CMOs may lose their liquidity as CMO market
makers may choose not to repurchase, or may offer prices, based on current
market conditions, which are unacceptable to the Portfolio based on the
Portfolio's analysis of the market value of the security.
The Core Fixed Income Portfolio may also invest in stripped
mortgage-backed securities ("SMBS") (including interest only and principal only
securities), which are derivative multiple class mortgage-backed securities. The
Core Fixed Income Portfolio may also invest in privately-issued SMBS. Although
the market for such securities is increasingly liquid, privately-issued SMBS'
may not be readily marketable and will be considered illiquid for purposes of
the Portfolio's limitation on investments in illiquid securities. The Advisor
may determine that SMBS' which are U.S. Government securities are liquid for
purposes of the Portfolio's limitation on investments in illiquid securities.
SMBS are usually structured with two different classes: one that
receives 100% of the interest payments and the other that receives 100% of the
principal payments from a pool of mortgage loans. If the underlying mortgage
loans experience different than anticipated prepayments of principal, the Fund
may fail to fully recoup its initial investment in these securities. The market
value of the class consisting entirely of principal payments generally is
unusually volatile in response to changes in interest rates. The yields on a
class of SMBS that receives all or most of the interest from mortgage loans are
generally higher than prevailing market yields on other mortgage-backed
securities because their cash flow patterns are more volatile and there is a
greater risk that the initial investment will not be fully recouped.
Because derivative mortgage-backed securities (such as principal-only
(POs), interest-only (IOs) or inverse floating rate securities) are more exposed
to mortgage prepayments, they generally involve a greater amount of risk. Small
changes in prepayments can significantly impact the cash flow and the market
value of these securities. The risk of faster than anticipated prepayments
generally adversely affects IOs, super floaters and premium priced
mortgage-backed securities. The risk of slower than anticipated prepayments
generally adversely affects POs, floating-rate securities subject to interest
rate caps, support tranches and discount priced mortgage-backed securities. In
addition, particular derivative securities may be leveraged such that their
exposure (i.e., price sensitivity) to interest rate and/or prepayment risk is
magnified.
V. Description of Asset-Backed Securities
Asset-Backed Securities. The Core Fixed Income Portfolio may invest in
asset-backed securities. Asset-backed securities include interests in pools of
receivables, such as motor vehicle installment purchase obligations and credit
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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 originator, 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-backed 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
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 owed 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.
VI. 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
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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 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").
VII. 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.
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 are instruments guaranteed by the
A-11
<PAGE>
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.
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.
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.
VIII. 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 Strategic Equity,
International, Small Capitalization Value, Large Cap Value, Core Value, Small
A-12
<PAGE>
Capitalization Growth, Institutional International, Emerging Markets and Global
Equity Portfolios may temporarily hold uninvested reserves in bank deposits in
foreign currencies, these 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, Institutional International, Emerging Markets and
Global Equity Portfolios permit the Portfolios 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 Strategic Equity, International, Small Capitalization
Value, Large Cap Value, Core Value, Small Capitalization Growth, Institutional
International, Emerging Markets and Global Equity Portfolios will endeavor to
achieve most favorable execution 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 Strategic Equity,
International, Small Capitalization Value, Large Cap Value, Core Value, Small
Capitalization Growth, Institutional International, Emerging Markets and Global
Equity Portfolios.
IX. Options
The Strategic Equity Portfolio's writing and purchase of options is a
highly specialized activity which involves investment analysis and risks that
are different from those associated with ordinary portfolio securities
transactions.
Purchasing options to attempt to increase return through their price
appreciation involves the risk of loss of option premium if the Advisor is
incorrect in its expectation of the direction or magnitude of the change in
securities prices. Writing options to seek to increase income in the Portfolio
involves the risk of net loss (after receiving the option premium) if the
Advisor is incorrect in its expectation of the direction or magnitude of the
change in securities prices. The successful use of options for hedging purposes
also depends in part on the degree of correlation between the option and a
security or index of securities. If the Advisor is incorrect in its expectation
A-13
<PAGE>
of changes in securities prices or its estimation of the correlation between the
option and a security index, the investment performance of the Portfolio will be
less favorable than it would have been in the absence of such options
transactions. The use of options may increase the Portfolio's portfolio turnover
rate. Higher rates of turnover may result in increased brokerage commissions,
and could increase the amount of income received by the Portfolio that
constitutes taxable capital gains. To the extent capital gains are realized,
distributions from those gains may be ordinary income for federal tax purposes.
Additionally, there is no assurance that a liquid secondary market on
an options exchange will exist for any particular exchange-traded option or
option traded over-the-counter at any particular time. If the Portfolio is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Portfolio will not be able to sell the underlying securities
or dispose of segregated assets until the options expire or are exercised.
Similarly, if the Portfolio is unable to effect a closing sale transaction with
respect to options it has purchased, it will have to exercise the options in
order to realize any profit and will incur transaction costs upon the purchase
or sale of the underlying securities.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options; (iv) unusual
or unforeseen circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or (v) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that class
or series of options) would cease to exist, although outstanding options on that
exchange that had been issued by the Options Clearing Corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.
The Portfolio may purchase and sell both options that are traded on
U.S. exchanges and options traded over-the-counter with broker-dealers who make
markets in these options. The ability to terminate over-the-counter options is
more limited than with exchange-traded options and may involve the risk that
broker-dealers participating in such transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, the
Portfolio will treat purchased over-the-counter options and all assets used to
cover written over-the-counter options as illiquid securities.
A-14
<PAGE>
THE GLENMEDE PORTFOLIOS
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) Master Trust Agreement dated March 3, 1992 is incorporated herein by
reference to Exhibit 1 to Post-Effective Amendment No. 6 to the
Registrant's Registration Statement on Form N-1A (Nos.
33-46593/811-6578) filed with the SEC on December 29, 1995 ("PEA #6").
(b) By-Laws of Registrant dated March 3, 1992 are incorporated herein by
reference to Exhibit 2 to PEA #6.
(c) See: Articles IV and V of Registrant's Master Trust Agreement which is
incorporated herein by reference as Exhibit (a); and Article 7 of
Registrant's By-laws which are incorporated herein by reference as
Exhibit (b).
(d) (1) Investment Advisory Agreement between Registrant and The Glenmede Trust
Company dated June 5, 1992 is incorporated herein by reference to
Exhibit 5(a) to PEA #6.
(2) Supplement dated March 2, 1993 to Investment Advisory Agreement
relating to the New Jersey Muni and Maryland Muni Portfolios between
Registrant and The Glenmede Trust Company is incorporated herein by
reference to Exhibit 5(b) to PEA #6.
(3) Amendment No. 1 dated September 13, 1994 to Investment Advisory
Agreement between Registrant and The Glenmede Trust Company is
incorporated herein by reference to Exhibit 5(c) to PEA #6.
(e) Distribution Agreement dated September 10, 1997, between Registrant and
ICC Distributors, Inc. is incorporated herein by reference to Exhibit 6
to Post Effective Amendment No. 9 to the Registrant's Registration
Statement on Form N-1A (Nos. 33-46593-811-6578) filed with the SEC on
March 2, 1998 (PEA #9).
(f) Not Applicable.
(g) (1) Custody Agreement between Registrant and The Chase Manhattan Bank, N.A.
dated May 1, 1995 is incorporated herein by reference to Exhibit 8(a)
to PEA #6.
(2) Amendment dated May 1, 1995 to Custody Agreement between Registrant and
The Chase Manhattan Bank, N.A. dated May 1, 1995 is incorporated herein
by reference to Exhibit 8(b) to PEA #6.
<PAGE>
(h) (1) Master Services Agreement between Registrant and Investment Company
Capital Corp. dated July 1, 1995 is incorporated herein by reference to
Exhibit 9(a) to PEA #6.
(2) Amended and Restated Shareholder Servicing Plan dated December 5, 1995
and Form of Shareholder Servicing Agreement attached thereto as
Appendix A is incorporated herein by reference to Exhibit 9(b) to PEA
#6.
(i) Opinion of Counsel as to Legality of Securities Being Registered is
incorporated herein by reference to Exhibit 10 to PEA #9.
(j) (1) Consent of Drinker Biddle & Reath LLP.
(2) Consent of PricewaterhouseCoopers LLP.
(k) Not Applicable.
(l) (1) Purchase Agreement between Registrant and The Glenmede Trust Company is
incorporated herein by reference to Exhibit 13(a) to PEA #9.
(2) Purchase Agreement between the Registrant and The Glenmede Trust
Company relating to the New Jersey Muni and Maryland Muni Portfolios
dated November 1, 1993 is incorporated herein by reference to Exhibit
13(b) to PEA #6.
(m) Not Applicable.
(n) Not Applicable.
Item 24. Persons Controlled by or Under Common Control with Registrant
Registrant is not controlled by or under common control with any
person. Registrant is controlled by its Board of Trustees.
Item 25. Indemnification
Reference is made to Article VI of Registrant's Master Trust
Agreement which is incorporated herein by reference as Exhibit 1. Insofar as
indemnification for liability arising under the Securities Act of 1933 may
be permitted to trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion
of counsel the
-2-
<PAGE>
matter has been settled by controlling precedent, submit to court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 26. Business and Other Connections of Investment Advisor
Reference is made to the caption of "Investment Advisor" in
the Prospectus in Part A of this Registration Statement and "Investment
Advisory and Other Services" in Part B of this Registration Statement.
Set forth below is a list of all of the directors, senior
officers and those officers primarily responsible for Registrant's affairs
and, with respect to each such person, the name and business address of the
Company (if any) with which such person has been connected at any time since
October 31, 1997, as well as the capacity in which such person was
connected.
<TABLE>
<CAPTION>
Name and Principal
Name and Position Business Address Connection with
with Investment Adviser of other Company other Company
----------------------- ------------------- ---------------
<S> <C> <C>
Susan W. Catherwood The Glenmede Corporation Director
The Glenmede Trust Company Director
of New Jersey
PECO Energy Director
University of Pennsylvania Vice Chairman,
Board of Trustees
The World Affairs Council Board Member
of Philadelphia
Monell Chemical Senses Director
Center
The Christopher Ludwick Vice Chairman,
Foundation Member,
Board of Managers
Executive Service Corps Vice Chairman,
of the Delaware Valley Board of Directors
Montessori Genesis II Advisory Board
Member
United Way of Southeastern Director
Pennsylvania
Thomas Harrison Skelton Board Member
Foundation
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Name and Principal
Name and Position Business Address Connection with
with Investment Adviser of other Company other Company
----------------------- ------------------- ---------------
<S> <C> <C>
The Catherwood Foundation Board Member
Richard F. Pew The Glenmede Corporation Director
Yellowstone Center Director
for Mountain Environments
Mountain Research Center, Director
Montana State University
Teton Science School; Director
Kelly Wyoming
Thomas W. Langfitt, M.D. The Glenmede Corporation Director
Medical Committee on Chairman
Automotive Safety,
General Motors Corporation
University of Pennsylvania Board Member
Medical Center
The American Philosophical Member
Society
Greater Philadelphia Urban Board Member
Affairs Coalition
The Philadelphia Public Board Member
School/Business Partnership
for Reform Governing Board
Secretary's Advisory Board Member
Committee on Infant
Mortality, Department of
Health and Human Services
Community College of Director
Philadelphia
National Museum of Trustee
American History -
Smithsonian Institution
Arthur E. Pew, III The Glenmede Corporation Director
Minnesota Transportation Member, Board of
Museum, Inc. Trustees
Institute of Medicine Board Member
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Name and Principal
Name and Position Business Address Connection with
with Investment Adviser of other Company other Company
----------------------- ------------------- ---------------
<S> <C> <C>
Museum of Transportation Chairman of the
Development Corporation, Board
St. Paul, Minnesota
Manitou Island Association Member, Board of
(White Bear Lake, Minnesota) Directors
Osceola and St. Croix Member, Board of
Valley Railway (Osceola, Directors
Wisconsin)
J. Howard Pew, II The Glenmede Corporation Director
J.N. Pew, III The Glenmede Corporation Director
J.N. Pew, IV, M.D. The Glenmede Corporation Director
The Glenmede Trust Company Director
of New Jersey
Private Practice President
of Internal Medicine
Flying Hills Self Storage, President
Inc.
American Red Cross, Director
Berks County
French and Pickering Creek Director
Conservation Trust, Inc.
R. Anderson Pew The Glenmede Corporation Director, Chairman
of the Board
The Glenmede Trust Company, Director
N.A.
Sun Company, Inc. Director
Bryn Mawr College Vice Chairman,
Board of Trustees
The Children's Hospital Vice Chairman of
of Philadelphia Board of Trustees
The Jackson Library Member, Corporation Board
of Trustees
The Curtis Institute Member, Board of Trustees
of Music, Philadelphia
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Name and Principal
Name and Position Business Address Connection with
with Investment Adviser of other Company other Company
----------------------- ------------------- ---------------
<S> <C> <C>
Aircraft Owners and Pilots Chairman of the Board
Association
AOPA Air Safety Chairman of
Foundation the Board of Trustees
Academy of Music Member,
Philadelphia, Inc. AOM Committee
Ethel Benson Wister The Glenmede Corporation Director
Academy of Music Committee Member
Philadelphia, Inc.
Concerto Soloists Orchestra Arts Award 1997
Recipient
Scheie Eye Institute/Department Recipient, Guest of Honor
Of Ophthalmology-University of Award 1998 - Scheie
Pennsylvania Odyssey Ball
Philadelphia Television Network, Board Member
Inc.
</TABLE>
Item 27. Principal Underwriters.
(a) In addition to The Glenmede Portflios, ICC Distributors, Inc. ("ICC
Distributors") currently acts as distributor for The Glenmede Fund, Inc., BT
Advisor Funds, BT Institutional Funds, BT Investment Funds, BT Pyramid Mutual
Funds, Flag Investors Series Funds, Inc. (formerly Flag Investors International
Fund, Inc.), Flag Investors Emerging Growth Fund, Inc., Flag Investors Equity
Partners Fund, Inc., Flag Investors Communications Fund, Inc., Flag Investors
Real Estate Securities Fund, Inc., Flag Investors Value Builder Fund, Inc.,
Total Return U.S. Treasury Fund, Inc., Flag Investors Short Intermediate Income
Fund, Inc., Managed Municipal Fund, Inc., Deutsche Banc Alex. Brown Cash Reserve
Fund, Inc. (formerly BT Alex. Brown Cash Reserve Fund, Inc.), Flag Investors
Portfolios Trust (formerly Deutsche Portfolios), Flag Investors Funds, Inc.
(formerly Deutsche Funds, Inc.), Morgan Grenfell Investment Trust, Cash
Management Portfolio, Intermediate Tax Free Portfolio, Tax Free Money Portfolio,
NY Tax Free Money Portfolio, Treasury Money Portfolio, International Equity
Portfolio, Equity 500 Index Portfolio, Capital Appreciation Portfolio, Asset
Management Portfolio, BT Investment Portfolios, and DP Trust. ICC Distributors
is registered with the Securities and Exchange Commission as a broker-dealer and
is a member of the National Association of Securities Dealers.
(b)
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address with Principal Underwriter with Registrant
- ------------------ -------------------------- ---------------
<S> <C> <C>
John Y. Keffer President None
David I. Goldstein Secretary None
Benjamin L. Niles Vice President None
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address with Principal Underwriter with Registrant
- ------------------ -------------------------- ---------------
<S> <C> <C>
Nanette K. Chern Chief Compliance Officer None
Ronald H. Hirsch Treasurer None
Marc D. Keffer Assistant Secretary None
Federick Skillin Assistant Treasurer None
</TABLE>
(c) Not Applicable.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder will be maintained at the offices of:
(1) The Glenmede Trust Company
One Liberty Place
1650 Market Street, Suite 1200
Philadelphia, Pennsylvania 19103
(records relating to its functions as investment advisor)
(2) The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081
(records relating to its functions as
custodian)
(3) Investment Company Capital Corp.
One South Street
Baltimore, Maryland 21202
(records relating to its functions as administrator, transfer agent
and dividend disbursing agent)
(4) ICC Distributors, Inc.
Two Portland Square
Portland, Maine 04101
(records relating to its functions as
distributor)
(5) Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Street
Philadelphia, Pennsylvania 19103-6996
(Registrant's minute books)
-7-
<PAGE>
Item 29. Management Services.
Not Applicable.
Item 30. Undertakings.
(a) Registrant undertakes to comply with the provisions of
Section 16(c) of the 1940 Act in regard to shareholders' right to call a
meeting of shareholders for the purpose of voting on the removal of
trustees and to assist in shareholder communications in such matters, to
the extent required by law. Specifically, the Registrant will, if requested
to do so by the holders of at least 10% of the Registrant's outstanding
voting shares, call a meeting of shareholders for the purpose of voting
upon the question of the removal of trustees, and the Registrant will
assist in shareholder communications as required by Section 16(c) of the
1940 Act.
(b) Registrant undertakes to furnish to each person to whom a
prospectus is delivered, a copy of Registrant's latest annual report to
shareholders, upon request and without delay.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all of the requirements for effectiveness of this Post-Effective
Amendment No. 12 to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933, as amended, and has duly caused this Post-Effective
Amendment No. 12 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Philadelphia, and Commonwealth of Pennsylvania on the
28th day of February, 2000.
THE GLENMEDE PORTFOLIOS
By: /s/ Mary Ann B. Wirts
-------------------------------------
Mary Ann B. Wirts
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 12 to the Registration Statement of The
Glenmede Portfolios has been signed by the following persons in the capacities
and on the date indicated.
Signature Title Date
- --------- ----- ----
* John W. Church Chairman February 28, 2000
- ------------------------
John W. Church, Jr.
/s/ Mary Ann B. Wirts President and February 28, 2000
- ------------------------ Chief Executive
Mary Ann B. Wirts Officer
* H. Franklin Allen Trustee February 28, 2000
- ------------------------
H. Franklin Allen, Ph.D.
* Willard S. Boothby Trustee February 28, 2000
- ------------------------
Willard S. Boothby, Jr.
* Francis J. Palamara Trustee February 28, 2000
- ------------------------
Francis J. Palamara
-9-
<PAGE>
* G. Thompson Pew, Jr. Trustee February 28, 2000
- ------------------------
G. Thompson Pew, Jr.
/s/ Kimberly C. Osborne Executive Vice February 28, 2000
- ------------------------ President and
Kimberly C. Osborne Treasurer
*By: /s/ Michael P. Malloy
---------------------------------------
Michael P. Malloy, Attorney-in-fact
-10-
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
Power of Attorney
I hereby appoint John W. Church, Jr., Michael P. Malloy or Mary Ann B.
Wirts attorney for me, with full power of substitution, and in my name and on my
behalf as a director or trustee to sign any Registration Statement or Amendment
thereto of THE GLENMEDE FUND, INC. and/or THE GLENMEDE PORTFOLIOS to be filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 and generally to do and perform all
things necessary to be done in that connection.
I have signed this Power of Attorney on January 23, 2000.
/s/ H. Franklin Allen, Ph.D.
---------------------------------
H. Franklin Allen, Ph.D.
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
Power of Attorney
I hereby appoint John W. Church, Jr., Michael P. Malloy or Mary Ann B.
Wirts attorney for me, with full power of substitution, and in my name and on my
behalf as a director or trustee to sign any Registration Statement or Amendment
thereto of THE GLENMEDE FUND, INC. and/or THE GLENMEDE PORTFOLIOS to be filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 and generally to do and perform all
things necessary to be done in that connection.
I have signed this Power of Attorney on January 28, 2000.
/s/ Willard S. Boothby, Jr.
---------------------------------
Willard S. Boothby, Jr.
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
Power of Attorney
I hereby appoint John W. Church, Jr., Michael P. Malloy or Mary Ann B.
Wirts attorney for me, with full power of substitution, and in my name and on my
behalf as a director or trustee to sign any Registration Statement or Amendment
thereto of THE GLENMEDE FUND, INC. and/or THE GLENMEDE PORTFOLIOS to be filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 and generally to do and perform all
things necessary to be done in that connection.
I have signed this Power of Attorney on January 29, 2000.
/s/ Francis J. Palamara
---------------------------------
Francis J. Palamara
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
Power of Attorney
I hereby appoint John W. Church, Jr., Michael P. Malloy or Mary Ann B.
Wirts attorney for me, with full power of substitution, and in my name and on my
behalf as a director or trustee to sign any Registration Statement or Amendment
thereto of THE GLENMEDE FUND, INC. and/or THE GLENMEDE PORTFOLIOS to be filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 and generally to do and perform all
things necessary to be done in that connection.
I have signed this Power of Attorney on January 21, 2000.
/s/ G. Thompson Pew, Jr.
---------------------------------
G. Thompson Pew, Jr.
<PAGE>
THE GLENMEDE FUND, INC.
THE GLENMEDE PORTFOLIOS
Power of Attorney
I hereby appoint Michael P. Malloy or Mary Ann B. Wirts attorney for
me, with full power of substitution, and in my name and on my behalf as the
Chairman and a director or trustee to sign any Registration Statement or
Amendment thereto of THE GLENMEDE FUND, INC. and/or THE GLENMEDE PORTFOLIOS to
be filed with the Securities and Exchange Commission under the Securities Act of
1933 and/or the Investment Company Act of 1940 and generally to do and perform
all things necessary to be done in that connection.
I have signed this Power of Attorney on January 21, 2000.
/s/ John W. Church, Jr.
--------------------------------
John W. Church, Jr.
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
(j) (1) Consent of Drinker Biddle & Reath LLP.
(2) Consent of PricewaterhouseCoopers LLP
-11-
<PAGE>
Exhibit (j)(1)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference
to our Firm under the caption "Counsel" in the Prospectus that is included in
Post-Effective Amendment No. 12 to the Registration Statement (No. 33-46593) on
Form N-1A under the Securities Act of 1933, as amended, and Post-Effective
Amendment No. 13 to the Registration Statement (No. 811-6578) on Form N-1A under
the Investment Company Act of 1940, as amended, of The Glenmede Portfolios. This
consent does not constitute a consent under section 7 of the Securities Act of
1933, and in consenting to the use of our name and the references to our Firm
under such caption we have not certified any part of the Registration Statement
and do not otherwise come within the categories of persons whose consent is
required under said section 7 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ DRINKER BIDDLE & REATH LLP
----------------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
February 28, 2000
<PAGE>
Exhibit (j)(2)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 12 (File No. 33-46593) under the Securities Act of 1933 and
Post-Effective Amendment No. 13 (File No. 811-6578) under the Investment Company
Act of 1940 to the registration statement on Form N-1A ("Registration
Statement") of our reports dated December 13, 1999 relating to the financial
statements and financial highlights which appear in the October 31, 1999 Annual
Reports to Shareholders of The Glenmede Fund, Inc. and The Glenmede Portfolios
as of October 31, 1999, which is also incorporated by reference in this
Registration Statement.
We also consent to the reference to us under the headings "Financial Highlights"
in the Prospectus and "Independent Accountants" and "Financial Statements" in
the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
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PricewaterhouseCoopers LLP
Baltimore, Maryland
February 25, 2000
