<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 15, 1996.
File No. 33-65436
File No. 811-7830
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 7 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 8 /X/
MARQUIS FUNDS
(Exact Name of Registrant as Specified in Charter)
c/o CT Corporation
2 Oliver Street
Boston, Massachusetts 02109
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (800) 932-7781
Robert A. Nesher
c/o SEI Corporation
680 East Swedesford Road
Wayne, Pennsylvania 19087
(Name and Address of Agent for Service)
Copies to:
Richard W. Grant, Esquire John H. Grady, Jr., Esquire
Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP
2000 One Logan Square 1800 M Street, N.W.
Philadelphia, PA 19103 Washington, D.C. 20036
- --------------------------------------------------------------------------------
/ /immediately upon filing pursuant to paragraph (b)
/ /on [date] pursuant to paragraph (b)
/ /60 days after filing pursuant to paragraph (a)
/X/75 days after filing pursuant to paragraph (a)
/ /on [date] pursuant to paragraph (a) of Rule 485.
- --------------------------------------------------------------------------------
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, an indefinite number of units of beneficial interest is being registered
by this Registration Statement. Registrant's Rule 24f-2 Notice for fiscal year
ended September 30, 1996 was filed on November 13, 1996.
- --------------------------------------------------------------------------------
<PAGE>
MARQUIS FUNDS
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
N-1A ITEM NO. LOCATION
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
PART A - Treasury Securities Money Market Fund - Trust Class
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant The Trust; Investment Objectives; Investment Policies;
General Information
Item 5. Management of the Fund General Information; The Adviser; The Administrator;
The Shareholder Servicing Agent and Transfer Agent;
The Distributor
Item 5A. Management's Discussion of Fund Performance *
Item 6. Capital Stock and Other Securities Taxes; General Information
Item 7. Purchase of Securities Being Offered Purchase of Shares
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings *
PART A - Treasury Securities Money Market Fund - Retail Class
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant The Trust; Investment Objectives; Investment Policies;
General Information
Item 5. Management of the Fund General Information; The Adviser; The Administrator;
The Shareholder Servicing Agent and Transfer Agent;
The Distributor
Item 5A. Management's Discussion of Fund Performance *
Item 6. Capital Stock and Other Securities Taxes; General Information
Item 7. Purchase of Securities Being Offered Purchase of Shares
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings *
PART A - Treasury Securities Money Market Fund - Cash Sweep Class
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary
Item 3. Condensed Financial Information *
Item 4. General Description of Registrant The Trust; Investment Objectives; Investment Policies;
General Information
Item 5. Management of the Fund General Information; The Adviser; The Administrator;
The Shareholder Servicing Agent and Transfer Agent;
The Distributor
Item 5A. Management's Discussion of Fund Performance *
Item 6. Capital Stock and Other Securities Taxes; General Information
Item 7. Purchase of Securities Being Offered Purchase of Shares
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings *
<CAPTION>
PART A - Government Securities, Louisiana Tax-Free Income, Balanced, Value Equity, Growth Equity, Investment Grade Income, Small
Cap Equity and International Equity Funds - Class A and Class B
<S> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant The Trust; Investment Objectives; Investment Policies
and Information; General Investment Policies and
Information; General Information
Item 5. Management of Fund General Information; The Adviser; The Administrator;
The Shareholder Servicing Agent and Transfer Agent;
The Distributor
Item 5A. Management's Discussion of Fund Performance *
Item 6. Capital Stock and Other Securities General Information; Taxes
Item 7. Purchase of Securities Being Offered How to Purchase Shares; Alternative Sales Charge
Options; Exchanges
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings *
PART A - Institutional Money Market Fund
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant The Trust; Investment Objectives; Investment Policies
and Information; General Investment Policies and
Information; General Information
Item 5. Management of Fund General Information; The Adviser; The Administrator;
The Shareholder Servicing Agent and Transfer Agent;
The Distributor
Item 5A. Management's Discussion of Fund Performance *
Item 6. Capital Stock and Other Securities General Information; Taxes
Item 7. Purchase of Securities Being Offered How to Purchase Shares; Alternative Sales Charge
Options; Exchanges
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings *
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
PART A - Tax Exempt Money Market Fund
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant The Trust; Investment Objectives; Investment Policies
and Information; General Investment; Policies and
Information; General Information
Item 5. Management of Fund General Information; The Adviser; The Administrator;
The Shareholder Servicing Agent and Transfer Agent;
The Distributor
Item 5A. Management's Discussion of Fund Performance *
Item 6. Capital Stock and Other Securities General Information; Taxes
Item 7. Purchase of Securities Being Offered How to Purchase Shares; Alternative Sales Charge
Options; Exchanges
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings *
PART B - All Portfolios
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History The Trust
Item 13. Investment Objectives and Policies Additional Description of Permitted Investments;
Investment Limitations; Non-Fundamental Policies
Item 14. Management of the Registrant General Information (Prospectus); Trustees and Officers
of the Trust; The Administrator
Item 15. Control Persons and Principal Holders of Securities Trustees and Officers of the Trust; General Information
(Prospectus)
Item 16. Investment Advisory and Other Services The Adviser; The Administrator; The Distributor;
Experts; The Shareholder Servicing Agent and Transfer
Agent (Prospectus)
Item 17. Brokerage Allocation Fund Transactions; Trading Practices and Brokerage
Item 18. Capital Stock and Other Securities Description of Shares
Item 19. Purchase, Redemption, and Pricing of Securities Purchase of Shares (Prospectus) [or] How to Purchase
Being Offered Shares (Prospectus) and Alternative Sales Charge
Options (Prospectus); Redemption of Shares
(Prospectus); Purchase and Redemption of Shares;
Conversion Feature; Letter of Intent; Determination of
Net Asset Value
Item 20. Tax Status Taxes (Prospectus); Taxes
Item 21. Underwriters The Distributor
Item 22. Calculation of Yield Quotations Performance (Prospectus); Computation of Yield;
Calculation of Total Return
Item 23. Financial Statements Financial Statements
</TABLE>
iii
<PAGE>
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of the Registration Statement.
*Not Applicable.
iv
<PAGE>
The Prospectuses for the Trust Class of the Treasury Securities Money Market
Fund; Retail Class of the Treasury Securities Money Market Fund; Cash Sweep
Class of the Treasury Securities Money Market Fund; Institutional Money Market
Fund; and Tax Exempt Money Market Fund, included as part of Post-Effective
Amendment No. 5 to the Registrant's Registration Statement on Form N-1A (File
No. 33-65436), filed with the Securities and Exchange Commission on January 29,
1996 pursuant to Rule 485(b) under the Securities Act of 1933, and supplements
to the Prospectuses and Statement of Additional Information with respect to the
Tax Exempt Money Market Fund and Growth Equity Fund, included as part of
Post-Effective Amendment No. 6 to the Registrant's Registration Statement on
Form N-1A (File No. 33-65436), filed with the Securities Exchange Commission on
October 28, 1996 pursuant to Rule 485(b) under the Securities Act of 1993, are
hereby incorporated by reference as if set forth full herein.
v
<PAGE>
MARQUIS FUNDS (R)
Investment Adviser:
FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS
. GOVERNMENT SECURITIES FUND
. LOUISIANA TAX-FREE INCOME FUND
. INVESTMENT GRADE INCOME FUND
. BALANCED FUND
. VALUE EQUITY FUND
. GROWTH EQUITY FUND
. SMALL CAP EQUITY FUND
. INTERNATIONAL EQUITY FUND
MARQUIS FUNDS (R) (the "Trust") is a mutual fund that offers a convenient and
economical means of investing in one or more professionally managed portfolios
of securities. This Prospectus offers Class A and Class B shares of the above
funds (the "Funds" and each a "Fund"), each of which is a separate series of
the Trust.
Class A shares are sold with a front-end sales load that will be reduced or
waived in certain circumstances. Class B shares are sold subject to annual
distribution and service fees and a contingent deferred sales charge that is
eliminated five years after purchase, at which point the Class B shares
automatically convert into Class A shares.
The Small Cap Equity Fund currently seeks to achieve its objective of capital
appreciation by investing up to 100% of its assets in the Small Cap Growth
Portfolio, a separate series of SEI Institutional Managed Trust ("SIMT"), an
open-end management investment company advised by SEI Financial Management
Corporation ("SFM"), with an investment objective, investment policies and
restrictions identical to those of the Small Cap Equity Fund. The performance
of the Small Cap Equity Fund, therefore, will be directly related to the
performance of the Small Cap Growth Portfolio.
The International Equity Fund currently seeks to achieve its objective of
long-term capital appreciation by investing up to 100% of its assets in the
International Equity Portfolio, a separate series of SEI International Trust
("SIT"), an open-end management investment company advised by SFM, with an
investment objective, investment policies and restrictions identical to those
of the International Equity Fund. The performance of the International Equity
Fund, therefore, will be directly related to the performance of the
International Equity Portfolio.
This Prospectus sets forth concisely the information about the Funds and the
Trust that a prospective investor should know before investing in any of the
Funds. Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated 1997 has been
filed with the Securities and Exchange Commission (the "SEC") and is available
without charge by calling 1-800-471-1144. The Statement of Additional
Information is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, INCLUDING FIRST NATIONAL BANK OF COMMERCE IN NEW
ORLEANS OR ANY OF ITS AFFILIATES OR CORRESPONDENTS, INCLUDING FIRST COMMERCE
CORPORATION. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
, 1997
<PAGE>
2
SUMMARY
MARQUIS FUNDS (R) (the "Trust") is an open-end, management investment
company providing a convenient way to invest in professionally managed
portfolios of securities. This summary provides basic information about the
Class A and the Class B shares of the Trust's Government Securities Fund,
Louisiana Tax-Free Income Fund, Investment Grade Income Fund (these three,
collectively, the "Fixed Income Funds"), Balanced Fund (formerly the Growth
and Income Fund), Value Equity Fund, Growth Equity Fund, Small Cap Equity Fund
and International Equity Fund (these five, collectively, the "Equity Funds").
Each Fund is a separate series of the Trust.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF EACH FUND? The GOVERNMENT
SECURITIES FUND seeks to provide current income consistent with relative
stability of capital by investing primarily in U.S. Government securities. The
LOUISIANA TAX-FREE INCOME FUND seeks to provide a level of current income
consistent with relative stability of capital by investing primarily in
investment grade securities, the interest on which is exempt from federal
income tax and Louisiana personal income taxes and is not a preference item
for purposes of the alternative minimum tax. The INVESTMENT GRADE INCOME FUND
seeks to provide current income by investing primarily in investment grade
fixed income securities. The BALANCED FUND seeks to provide capital
appreciation and current income through the regular payment of dividends and
interest by investing in a combination of equity, fixed income and money
market instruments. The VALUE EQUITY FUND seeks to provide long-term capital
appreciation by investing primarily in equity securities of established
companies that have a market capitalization in excess of $500 million and have
the potential for capital appreciation. The GROWTH EQUITY FUND seeks to
provide long-term capital appreciation by investing primarily in equity
securities of established companies with market capitalization in excess of
$300 million that have the potential for long-term capital appreciation and
growth potential. The SMALL CAP EQUITY FUND seeks to provide long-term capital
appreciation by investing up to 100% of its assets in shares of the Small Cap
Growth Portfolio of SIMT, which in turn invests primarily in equity securities
of smaller growth companies (i.e., companies with market capitalizations of
less than $1 billion at the time of purchase). The INTERNATIONAL EQUITY FUND
seeks to provide long-term capital appreciation by investing up to 100% of its
assets in shares of the International Equity Portfolio of SIT, which in turn
invests primarily in a diversified portfolio of equity securities of non-U.S.
issuers. There can be no assurance that any Fund will achieve its investment
objective.
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUNDS? The investment
policies of each Fund entail certain risks and considerations of which an
investor should be aware. Values of fixed income securities and,
correspondingly, share prices of Funds invested in such securities, tend to
vary inversely with interest rates and may be affected by other market and
economic factors as well. The Louisiana Tax-Free Income Fund, which is a non-
diversified fund, will invest primarily in Louisiana municipal securities.
Both Fixed Income Funds and the Balanced Fund may also invest in securities
that have speculative characteristics. The Balanced, Value Equity and Growth
Equity Funds may purchase equity securities that are volatile and may
fluctuate in value more than other types of investments. The Small Cap Equity
Fund and the International Equity Fund (together, the "Feeder Funds") are
currently "feeder" funds in separate Corporate Master-Feeder(TM) structures.
That is, the Small Cap Equity Fund and International Equity Fund each invest
in another open-end management investment company and hold as their only
investment securities, shares of a single "master" fund, in this case, the
Small Cap Growth Portfolio and the International Equity Portfolio (together,
the "Portfolios"), respectively.
ARE MY INVESTMENTS INSURED? Any guaranty by the U.S. Government, its
agencies or instrumentalities of the securities in which any Fund invests
guarantees only the payment of principal and interest on the guaranteed
security and does not guarantee the yield or value of the security or the
yield or value of shares of that Fund. The Trust's shares are not federally
insured by the FDIC or any other government agency.
For more information about each Fund, see "Investment Objectives and
Policies," "General Investment Policies," and "Description of Permitted
Investments and Risk Factors."
HOW DO I PURCHASE SHARES? The Funds offer two classes of shares to the
general public: Class A shares and Class B shares.
<PAGE>
3
Class A shares are offered at net asset value per share plus a maximum
initial sales charge of 3.50%. Certain purchases of Class A shares qualify for
waived or reduced initial sales charges. Class A shares of the Funds are not
subject to sales charges at the time of redemption and are not assessed any
annual distribution fees.
Class B shares are offered at net asset value per share and are subject to a
maximum contingent deferred sales charge of 3.50% of redemption proceeds
during the first year, declining each year thereafter to 0% after the fifth
year. Class B shares of the Funds pay annual distribution and service fees of
.75% of their average daily net assets. Class B shares convert automatically
to Class A shares five years after the beginning of the calendar month in
which the shareholder's purchase order was accepted. For more information on
Class A and Class B shares, see "How to Purchase Shares," "Alternative Sales
Charge Options" and "The Distributor."
WHO IS THE ADVISER? The Trust Group of First National Bank of Commerce in
New Orleans (the "Adviser") serves as the Adviser to each Fund. With respect
to the Small Cap Equity Fund and the International Equity Fund, the Adviser
invests in cash and other non-investment securities and monitors the
performance of SFM as the manager of the Small Cap Growth Portfolio and the
International Equity Portfolio. See "Expense Summary" and "The Adviser."
WHO IS THE ADMINISTRATOR? SEI Fund Resources serves as the Administrator of
the Trust. See "Expense Summary" and "The Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as transfer agent,
dividend disbursing agent and shareholder servicing agent for the Trust. See
"The Shareholder Servicing Agent and Transfer Agent."
WHO IS THE DISTRIBUTOR? SEI Financial Services Company serves as distributor
of the Trust's shares. See "The Distributor."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of each Fund is distributed in the form of
periodic dividends. Any net realized capital gain is distributed at least
annually. Distributions are paid in additional shares unless the shareholder
elects to take the payment in cash. See "Dividends."
<PAGE>
4
EXPENSE SUMMARY
<TABLE>
<CAPTION>
ALL FUNDS
SHAREHOLDER TRANSACTION EXPENSES CLASS A
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price) 3.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price) None
*Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Wire Redemption Fee $25
Exchange Fee None
</TABLE>
* Effective March 1, 1996, a redemption charge of 1.00% will be assessed
against the proceeds of any redemption request relating to Class A shares
of the Funds that were purchased without a sales charge in reliance upon
the waiver accorded to purchases in the amount of $1 million or more, but
only where such redemption request is made within 1 year of the date the
shares were purchased. See "Alternative Sales Charge Options--Class A
Shares."
ANNUAL OPERATING EXPENSES--CLASS A
(as a percentage of average net assets)
<TABLE>
<CAPTION>
INVESTMENT
LOUISIANA GRADE
GOVERNMENT TAX-FREE INCOME
SECURITIES INCOME FUND BALANCED VALUE EQUITY GROWTH EQUITY
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after
fee waivers) (1) .46% .22% .55% .65% .72% .64%
Administration Fees .15% .15% .15% .15% .15% .15%
12b-1 Fees .00% .00% .00% .00% .00% .00%
Other Expenses (1)(2) .09% .28% .20% .10% .13% .21%
- ---------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers) (3) .70% .65% .90% .90% 1.00% 1.00%
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) The Adviser has voluntarily agreed to waive its fee, and the Administrator
has voluntarily agreed to reimburse Other Expenses, to the extent
necessary to keep "Total Operating Expenses" from exceeding .70% for the
Government Securities Fund, .65% for the Louisiana Tax-Free Income Fund,
.90% for the Investment Grade Income Fund, .90% for the Balanced Fund,
1.00% for the Value Equity Fund and 1.00% for the Growth Equity Fund. The
Adviser and Administrator each reserves the right to terminate its waiver
or reimbursement, respectively, at any time in its sole discretion. Absent
such waivers, management fees would be as follows: Government Securities
Fund--.55%; Louisiana Tax-Free Income Fund--.35%; Investment Grade Income
Fund--.74%; Balanced Fund--.74%, Value Equity Fund--.74% and Growth Equity
Fund--.74%. Presently, reimbursements of the Administrator have less than
.01% impact on Other Expenses.
(2) Other Expenses for the Growth Equity Fund and Investment Grade Income Fund
are based on estimated amounts for the current fiscal year. Other Expenses
for the Balanced Fund and Value Equity Fund have been restated to reflect
current fees.
(3) Absent the Adviser's voluntary fee waiver and the Administrator's
voluntary fee reimbursement, Total Operating Expenses for Class A shares
would be as follows: Government Securities Fund--.79%; Louisiana Tax-Free
Income Fund--.78%; Investment Grade Income Fund--1.09%; Balanced Fund--
.99%; Value Equity Fund--1.02%; and Growth Equity Fund--1.10%.
<PAGE>
ANNUAL OPERATING EXPENSES--CLASS A (as a percentage of average net assets)
<TABLE>
<CAPTION>
SMALL CAP EQUITY INTERNATIONAL
FUND EQUITY FUND
- --------------------------------------------------------
<S> <C> <C>
Management Fees (after
fee waivers) (1) .185% .185%
Administration Fees (after
fee waivers) (2) .000% .070%
12b-1 Fees .000% .000%
Other Expenses (after
fee reimbursements)
(1)(3) .015% .015%
- --------------------------------------------------------
Total Operating Expenses
(after fee waivers) (4) .200% .270%
- --------------------------------------------------------
- --------------------------------------------------------
</TABLE>
(1) The Adviser has voluntarily agreed to waive its fee, and the Administrator
has voluntarily agreed to reimburse Other Expenses, to the extent
necessary to keep "Total Operating Expenses" from exceeding .20% for the
Small Cap Equity Fund and .27% for the International Equity Fund. The
Adviser and the Administrator each reserves the right to terminate its
waiver or reimbursement, respectively, at any time in its sole discretion.
Absent such waiver, management fees would be .40% for the Small Cap Equity
Fund and .40% for the International Equity Fund. Absent such
reimbursements, Other Expenses for the Small Cap Equity Fund and the
International Equity Fund are estimated to be .601% and .671%,
respectively, for the current fiscal year.
(2) The Administrator has voluntarily agreed to waive its fee for the Small
Cap Equity Fund and a portion of its fee for the International Equity
Fund. Absent such waivers, Administration Fees would be 0.15% for each
Fund.
(3) Other Expenses for the Small Cap Equity and International Equity Funds
does not include each Fund's pro rata portion of the Total Operating
Expenses of the Small Cap Growth Portfolio and International Equity
Portfolio, respectively. The Total Operating Expenses for the Small Cap
Growth Portfolio of SIMT and International Equity Portfolio of SIT are
1.10% and 1.25%, respectively.
(4) Absent the Adviser's voluntary fee waivers and the Administrator's
voluntary fee waivers and reimbursements, Total Operating Expenses are
estimated to be as follows: Small Cap Equity Fund--1.151%; and
International Equity Fund--1.151%.
This summary does not include (i) the Small Cap Growth Portfolio's operational
expenses and (ii) the International Equity Portfolio's operational expenses. A
more detailed discussion of each Portfolio's expenses is contained in its
respective prospectus. The Trustees believe that, because of the resultant
economies of scale and associated decreased expenses, the aggregate per share
expenses of each of the Small Cap Equity Fund and International Equity Fund
and the corresponding Portfolio will be approximately equal to the expenses
the respective Fund would incur if it invested directly in securities in which
the corresponding Portfolio invests.
EXAMPLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment in Class A
shares assuming (1) imposition of the
maximum sales load; (2) 5% annual re-
turn and (3) redemption at the end of
each time period:
Government Securities Fund $42 $57 $73 $119
Louisiana Tax-Free Income Fund $41 $55 $70 $113
Investment Grade Income Fund $44 $63
Balanced Fund $44 $63 $83 $142
Value Equity Fund $45 $66 $88 $153
Growth Equity Fund $45 $66
Small Cap Equity Fund $37 $41
International Equity Fund $38 $43
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the foregoing table and example is to assist the investor in
understanding the various costs and expenses that may be directly or
indirectly borne by investors in Class A shares of the Funds. Shareholders
purchasing shares through a financial institution may be charged additional
account fees by that institution. The information set forth in the foregoing
table and example relates only to Class A shares. Additional information may
be found under "The Adviser," "The Administrator," and "The Distributor."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Alternative Sales Charge Options-Class
A Shares."
<PAGE>
6
<TABLE>
<CAPTION>
ALL FUNDS
SHAREHOLDER TRANSACTION EXPENSES CLASS B
- -------------------------------------------------------------------------------
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds,
as applicable) 3.50%
Wire Redemption Fee $25
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES--CLASS B
(as a percentage of average net assets)
<TABLE>
<CAPTION>
LOUISIANA INVESTMENT
GOVERNMENT TAX-FREE GRADE
SECURITIES INCOME INCOME FUND BALANCED VALUE EQUITY GROWTH EQUITY
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees
(after fee waivers) (1) .46% .22% .55% .65% .72% .64%
Administration Fees .15% .15% .15% .15% .15% .15%
12b-1 Fees .75% .75% .75% .75% .75% .75%
Other Expenses (1)(2) .09% .28% .20% .10% .13% .21%
- ----------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers) (3) 1.45% 1.40% 1.65% 1.65% 1.75% 1.75%
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) The Adviser has voluntarily agreed to waive its fee, and the Administrator
has voluntarily agreed to reimburse Other Expenses, to the extent
necessary to keep "Total Operating Expenses" from exceeding 1.45% for the
Government Securities Fund, 1.40% for the Louisiana Tax-Free Income Fund,
1.65% for the Investment Grade Income Fund and 1.65% for the Balanced
Fund, 1.75% for the Value Equity Fund, and 1.75% for the Growth Equity
Fund. The Adviser and Administrator each reserves the right to terminate
its waiver or reimbursement, respectively, at any time in its sole
discretion. Absent such waivers, advisory fees would be as follows:
Government Securities Fund--.55%; Louisiana Tax-Free Income Fund--.35%;
Investment Grade Income Fund--.74%; Balanced Fund--.74%, Value Equity
Fund--.74% and Growth Equity Fund--.74%. Presently, reimbursements of the
Administrator have less than .01% impact on Other Expenses.
(2) Other Expenses for the Growth Equity Fund and Investment Grade Income Fund
are based on estimated amounts for the current fiscal year. Other Expenses
for the Balanced Fund and Value Equity Fund have been restated to reflect
current fees.
(3) Absent the Adviser's voluntary fee waiver and the Administrator's
voluntary fee reimbursement, Total Operating Expenses for Class B shares
would be as follows: Government Securities Fund--1.54%; Louisiana Tax-Free
Income Fund--1.53%; Investment Grade Income Fund--1.84%; Balanced Fund--
1.74%; Value Equity Fund--1.77%; and Growth Equity Fund--1.85%.
<TABLE>
<CAPTION>
SMALL CAP INTERNATIONAL
EQUITY FUND EQUITY FUND
- ---------------------------------------------------------------------------
<S> <C> <C>
Advisory Fees (after fee waivers) (1) .185% .185%
Administration Fees (after fee waivers)(2) .000% .070%
12b-1 Fees .750% .750%
Other Expenses (after fee reimbursements)(1)(3) .015% .015%
- ---------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (4) .950% 1.020%
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
(1) The Adviser has voluntarily agreed to waive its fee, and the Administrator
has voluntarily agreed to reimburse Other Expenses to the extent necessary
to keep "Total Operating Expenses" from exceeding .95% for the Small Cap
Equity Fund and 1.02% for the International Equity Fund. The Adviser and
Administrator each reserves the right to terminate its waiver or
reimbursement, respectively, at any time in its sole discretion. Absent
such waivers, advisory fees would be as follows: .40% for the Small Cap
Equity Fund; and .40% for the International Equity Fund. Absent such
reimbursements, Other Expenses for the Small Cap Equity Fund and
International Equity Fund are estimated to be .601% and .671%,
respectively, for the current fiscal year.
(2) The Administrator has voluntarily agreed to waive its fee for the Small
Cap Equity Fund and a portion of its fee for the International Equity
Fund. Absent such waivers, Administration Fees would be 0.15% for each
Fund.
(3) Other Expenses for the Small Cap Equity and International Equity Funds
does not include each Fund's pro rata portion of the Total Operating
Expenses of the Small Cap Growth Portfolio and International Equity
Portfolio, respectively. The Total Operating Expenses for the Small Cap
Growth Portfolio of SIMT and International Equity Portfolio of SIT are
1.10% and 1.25% respectively.
(4) Absent the Adviser's fee waivers and Administrator's fee waivers and
reimbursements, Total Operating Expenses for Class B shares are expected
to be as follows: 1.901% for the Small Cap Equity Fund; and 1.901% for the
International Equity Fund.
This summary does not include (i) the Small Cap Growth Portfolio's
operational expenses and (ii) the International Equity Portfolio's operational
expenses. A more detailed discussion of each Portfolio's expenses is contained
in its respective prospectus. The Trustees believe that, because of the
resultant economies of scale and associated decreased expenses, the aggregate
per share expenses of each of the Small Cap Equity Fund and International
Equity Fund and the corresponding Portfolio will be approximately equal to the
expenses the respective Fund would incur if it invested directly in securities
in which the corresponding Portfolio invests.
<PAGE>
7
EXAMPLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment in Class B shares assuming
(1) deduction of the maximum contingent
deferred sales charge applicable and (2) 5%
annual return:
Government Securities Fund
Assuming a complete redemption at end
of period $50 $66 $ 84 $125*
Assuming no redemptions $15 $46 $ 79 $125*
Louisiana Tax-Free Income Fund
Assuming a complete redemption at end
of period $49 $64 $ 82 $119*
Assuming no redemptions $14 $44 $ 77 $119*
Investment Grade Income Fund
Assuming a complete redemption at end
of period $52 $72
Assuming no redemptions $17 $52
Balanced Fund
Assuming a complete redemption at end
of period $52 $72 $ 95 $147*
Assuming no redemptions $17 $52 $ 90 $147*
Value Equity Fund
Assuming a complete redemption at end
of period $53 $75 $100 $159*
Assuming no redemptions $18 $55 $ 95 $159*
Growth Equity Fund
Assuming a complete redemption at end
of period $53 $75
Assuming no redemptions $18 $55
Small Cap Equity Fund
Assuming a complete redemption at end
of period $45 $50
Assuming no redemptions $10 $30
International Equity Fund
Assuming a complete redemption at end
of period $45 $52
Assuming no redemptions $10 $32
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
* Class B shares automatically convert to Class A shares after 5 years.
The purpose of the foregoing table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class B shares of the Funds. The information set forth in
the foregoing table and example relates only to Class B shares.
Additional information may be found under "The Adviser," "The Administrator,"
and "The Distributor."
Long-term Class B shareholders may eventually pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by
National Association of Securities Dealers, Inc.'s Conduct Rules.
<PAGE>
8
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout the year,
insofar as they relate to the fiscal year ended September 30, 1995, have been
audited by Arthur Andersen LLP, independent public accountants, whose report
thereon was unqualified. This information should be read in conjunction with
the Trust's financial statements and notes thereto which are included in the
Statement of Additional Information under the heading "Financial Information."
Additional performance information is set forth in the Trust's 1996 Annual
Report to Shareholders and is available upon request and without charge by
calling 1-800-471-1144. The Investment Grade Income, Growth Equity, Small Cap
Equity and International Equity Funds had not commenced operations as of
September 30, 1995.
For a Class A Share Outstanding Throughout the Period ended September 30,
<TABLE>
<CAPTION>
REALIZED RATIO OF RATIO OF
AND EXPENSES NET INCOME
NET ASSET UNREALIZED DISTRIBUTIONS NET ASSET NET ASSETS RATIO OF RATIO OF TO AVERAGE TO AVERAGE
VALUE NET GAINS OR FROM NET VALUE END OF EXPENSES NET INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT END OF TOTAL PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INVESTMENTS INCOME PERIOD RETURN+ (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ----------- ------------- --------- ------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT SECURITIES FUND CLASS A
1995 $ 9.41 $0.54 $ 0.46 $(0.54) $ 9.87 10.84 % $124,404 0.70% 5.63% 0.84% 5.49%
1994 10.00 0.43 (0.59) (0.43) 9.41 (1.66) 97,562 0.70 4.43 0.90 4.23
LOUISIANA TAX-FREE INCOME FUND CLASS A
1995 $ 9.38 $0.42 $ 0.41 $(0.42) $ 9.79 9.01 % $ 11,705 0.65% 4.51% 0.95% 4.21%
1994 10.00 0.36 (0.62) (0.36) 9.38 (2.68) 6,971 0.65 4.10 1.72 3.03
BALANCED FUND CLASS A
1995 $ 9.59 $0.37 $ 1.28 $(0.37) $10.87 17.58 % $ 87,076 0.85% 3.70% 1.04% 3.51%
1994 10.00 0.31 (0.41) (0.31) 9.59 (1.02) 71,379 0.85 3.18 1.14 2.89
VALUE EQUITY FUND CLASS A
1995 $ 9.65 $0.24 $ 2.16 $(0.24) $11.81 25.13 % $ 58,854 0.90% 2.40% 1.07% 2.23%
1994 10.00 0.18 (0.35) (0.18) 9.65 (1.64) 41,922 0.90 1.95 1.17 1.68
<CAPTION>
PORTFOLIO
TURNOVER
RATE
---------
<S> <C>
GOVERNMENT SECURITIES FUND CLASS A
1995 18.33%
1994 37.80
LOUISIANA TAX-FREE INCOME FUND CLASS A
1995 2.31%
1994 30.31
BALANCED FUND CLASS A
1995 55.06%
1994 64.09
VALUE EQUITY FUND CLASS A
1995 97.88%
1994 161.42
</TABLE>
- --------
+ Total Return does not reflect sales load on Class A shares.
<PAGE>
9
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout the year,
insofar as they relate to the fiscal year ended September 30, 1995, have been
audited by Arthur Andersen LLP, independent public accountants, whose report
thereon was unqualified. This information should be read in conjunction with
the Trust's financial statements and notes thereto which are included in the
Statement of Additional Information under the heading "Financial Information."
Additional performance information is set forth in the Trust's 1996 Annual
Report to Shareholders and is available upon request and without charge by
calling 1-800-471-1144. The Investment Grade Income, Growth Equity, Small Cap
Equity and International Equity Funds had not commenced operations as of
September 30, 1995.
For a Class B Share Outstanding Throughout the Period ended September 30,
<TABLE>
<CAPTION>
REALIZED RATIO OF
AND EXPENSES
NET ASSET UNREALIZED DISTRIBUTIONS NET ASSET NET ASSETS RATIO OF RATIO OF TO AVERAGE
VALUE NET GAINS OR FROM NET VALUE END OF EXPENSES NET INCOME NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT END OF TOTAL PERIOD TO AVERAGE TO AVERAGE (EXCLUDING
OF PERIOD INCOME INVESTMENTS INCOME PERIOD RETURN+ (000) NET ASSETS NET ASSETS WAIVERS)
--------- ---------- ----------- ------------- --------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT SECURITIES FUND CLASS B
1995 $ 9.46 $0.46 $ 0.47 $(0.47) $ 9.92 10.10% $ 244 1.45% 4.86% 1.59%
1994(1) 10.04 0.31 (0.58) (0.31) 9.46 (2.84)* 147 1.45* 3.88* 1.69*
LOUISIANA TAX-FREE INCOME FUND CLASS B
1995 $ 9.39 $0.35 $ 0.40 $(0.35) $ 9.79 8.21% $ 567 1.40% 3.77% 1.70%
1994(2) 9.87 0.27 (0.48) (0.27) 9.39 (2.58)* 601 1.40* 3.35* 2.47*
BALANCED FUND CLASS B
1995 $ 9.64 $0.30 $ 1.29 $(0.30) $10.93 16.75% $1,137 1.60% 2.95% 1.79%
1994(1) 10.03 0.18 (0.39) (0.18) 9.64 (2.24)* 868 1.60* 2.55* 1.94*
VALUE EQUITY FUND CLASS B
1995 $ 9.70 $0.15 $ 2.17 $(0.16) $11.86 24.17% $1,288 1.65% 1.62% 1.82%
1994(1) 9.95 0.08 (0.25) (0.08) 9.70 (1.82)* 389 1.65* 1.30* 1.93*
<CAPTION>
RATIO OF
NET INCOME
TO AVERAGE
NET ASSETS PORTFOLIO
(EXCLUDING TURNOVER
WAIVERS) RATE
---------- ---------
<S> <C> <C>
GOVERNMENT SECURITIES FUND CLASS B
1995 4.72% 18.33%
1994(1) 3.64* 37.80
LOUISIANA TAX-FREE INCOME FUND CLASS B
1995 3.47% 2.31%
1994(2) 2.28* 30.31
BALANCED FUND CLASS B
1995 2.76% 55.06%
1994(1) 2.21* 64.09
VALUE EQUITY FUND CLASS B
1995 1.45% 97.88%
1994(1) 1.02* 161.42
</TABLE>
- --------
+ Total return does not reflect contingent deferred sales charge on Class B
shares.
* Annualized.
(1) Commenced operations on October 22, 1993.
(2) Commenced operations on November 22, 1993.
<PAGE>
10
FINANCIAL HIGHLIGHTS
The following financial highlights of the Small Cap Growth Portfolio of SIMT for
a share outstanding throughout the periods indicated. This information should be
read in conjunction with SIMT's 1) unaudited financial statements as of, and for
the period ended, March 31, 1996 and notes thereto which are incorporated by
reference into the Statement of Additional Information and 2) financial
statements as of, and for the fiscal year ended, September 30, 1995 and notes
thereto which have been audited by Price Waterhouse LLP, independent
accountants, which are incorporated by reference into this Statement of
Additional Information. Additional performance information is set forth in
SIMT's 1996 Semi-Annual Report to Shareholders and is available upon request and
without charge by calling 1-800-342-5734.
For a Class A Share Outstanding Throughout the Period ended September 30,
<TABLE>
<CAPTION>
RATIO OF
NET RATIO RATIO OF EXPENSES
REALIZED NET OF NET TO
AND DISTRIBUTIONS DISTRIBUTIONS ASSET NET EXPENSES INVESTMENT AVERAGE
NET ASSET NET UNREALIZED FROM FROM VALUE ASSETS TO INCOME (LOSS) NET
VALUE INVESTMENT GAINS NET REALIZED END END OF AVERAGE TO AVERAGE ASSETS
BEGINNING INCOME (LOSSES ON INVESTMENT CAPITAL OF TOTAL PERIOD NET NET (EXCLUDING
OF PERIOD (LOSS) SECURITIES) INCOME GAINS PERIOD RETURN* (000) ASSETS ASSETS WAIVERS)
--------- ---------- ----------- ------------- ------------- ------ ------ -------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SMALL CAP GROWTH PORTFOLIO CLASS A
1996** $19.88 $(0.03) $1.25 $ -- $(3.66) $17.44 15.24% $309,958 1.10% (0.61)% 1.11%
1995 14.04 (0.14) 5.98 -- -- 19.88 41.65% 310,238 1.10% (0.60)% 1.13%
1994 14.67 (0.05) 0.07 -- (0.65) 14.04 0.23% 300,296 1.01% (0.51)% 1.11%
1993 10.65 (0.02) 4.05 (0.01) -- 14.67 37.81% 193,816 0.97% (0.25)% 1.14%
1992(1) 10.00 0.02 0.65 (0.02) -- 10.65 15.07% 36,191 0.97% 0.49% 1.29%
<CAPTION>
RATIO OF
NET
INVESTMENT
INCOME
(LOSS)
TO AVERAGE
NET
ASSETS PORTFOLIO
(EXCLUDING TURNOVER
WAIVERS) RATE
---------- ---------
<S> <C> <C>
SMALL CAP GROWTH PORTFOLIO CLASS A
1996** (0.62)% 80%
1995 (0.63)% 113%
1994 (0.61)% 97%
1993 (0.42)% 85%
1992(1) 0.17% 33%
</TABLE>
- --------
* Sales load is not reflected in total return.
** For the six month period ended March 31, 1996 (unaudited). All ratios
including total return for that period have been annualized.
(1) Small Cap Growth Class A shares were offered beginning April 20, 1992. All
ratios including total return for that period have been annualized.
The following financial highlights of the International Equity Portfolio of SIT
for a share outstanding throughout the periods indicated. This information
should be read in conjunction with SIT's 1) unaudited financial statements as
of, and for the period ended, August 31, 1996 and notes thereto which are
incorporated by reference into the Statement of Additional Information and 2)
financial statements as of, and for the fiscal year ended, February 29, 1996
and notes thereto which have been audited by Price Waterhouse LLP, independent
accountants, which are incorporated by reference into this Statement of
Additional Information. Additional performance information is set forth in SIT's
1996 Semi-Annual Report to Shareholders and is available upon request and
without charge by calling 1-800-342-5734.
For a Class A Share Outstanding Throughout each Period ended February 28 or
29,
<TABLE>
<CAPTION>
RATIO RATIO OF
NET NET OF NET
REALIZED DISTRIBUTIONS DISTRIBUTIONS ASSET NET EXPENSES INVESTMENT
NET ASSET NET AND FROM FROM VALUE ASSETS TO INCOME (LOSS)
VALUE INVESTMENT UNREALIZED NET REALIZED RETURN END END OF AVERAGE TO AVERAGE
BEGINNING INCOME GAINS INVESTMENT CAPITAL OF OF TOTAL PERIOD NET NET
OF PERIOD (LOSS) (LOSSES) INCOME(A) GAINS CAPITAL PERIOD RETURN (000) ASSETS ASSETS
--------- ---------- ---------- ------------- ------------- ------- ------ ------ -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO CLASS A
1996* $10.00 $0.09 $ 0.12 $ -- $ -- $ -- $10.21 2.10% $449,655 1.27% 1.78%
1996 9.59 0.14 1.45 (0.19) (0.99) -- 10.00 17.30 347,646 1.25 1.29
1995 11.00 0.15 (0.97) -- (0.59) -- 9.59 (7.67) 328,503 1.19 1.30
1994 8.93 0.13 2.05 (0.11) -- -- 11.00 24.44 503,498 1.10 1.46
1993 9.09 0.16 0.04 (0.36) -- -- 8.93 2.17 178,287 1.10 1.80
1992 9.56 0.19 (0.36) (0.30) -- -- 9.09 (1.63) 92,456 1.10 2.07
1991 9.62 0.18 (0.14) -- (0.01) (0.09) 9.65 0.36 35,829 1.10 3.52
1990(1) 10.00 0.04 (0.42) -- -- -- 9.62 (3.70) 8,661 1.10 3.13
<CAPTION>
RATIO OF
NET
RATIO OF INVESTMENT
EXPENSES INCOME
TO (LOSS)
AVERAGE TO AVERAGE
NET NET
ASSETS ASSETS PORTFOLIO
(EXCLUDING (EXCLUDING TURNOVER
WAIVERS) WAIVERS) RATE
---------- ---------- ---------
<S> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO CLASS A
1996* 1.31% 1.74% 54%
1996 1.29 1.25 102
1995 1.21 1.28 64
1994 1.24 1.32 19
1993 1.53 1.37 23
1992 1.52 1.63 79
1991 1.64 2.98 14
1990(1) 5.67 (1.44) --
</TABLE>
- --------
* For the six month period ended August 31, 1996 (unaudited). All ratios,
excluding total return, for that period have been annualized. Amounts
designated as "----" are either $0 or have been rounded to $0.
(1) International Equity (formerly the Core International Equity Portfolio)
Class A shares were offered beginning December 20, 1989. All ratios for
that period have been annualized.
(A) Distributions from net investment income include distributions of certain
foreign currency gains and losses.
<PAGE>
11
THE TRUST
MARQUIS FUNDS(R) (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in the Funds through two
separate classes, Class A and Class B, which provide for variations in sales
charges, distribution costs, voting rights and dividends. Except for these
differences between classes, each share of each Fund represents an undivided,
proportionate interest in that Fund. Each Fund and each Portfolio is a
diversified mutual fund, except for the Louisiana Tax-Free Income Fund, which
is non-diversified. Information regarding shares of the Trust's Treasury
Securities Money Market Fund, Institutional Money Market Fund and Tax Exempt
Money Market Fund (the "Money Market Funds") is contained in separate
prospectuses that may be obtained by calling 1-800-471-1144.
INVESTMENT OBJECTIVES AND POLICIES
THE GOVERNMENT SECURITIES FUND seeks to provide current income consistent with
relative stability of capital.
Under normal conditions, the Fund will invest at least 65% of its total assets
in obligations issued or guaranteed as to principal and interest by the U.S.
Government or its agencies and instrumentalities ("U.S. Government
securities"). The Fund may also invest in the following securities if, at the
time of purchase, the security either has the requisite rating from a
nationally recognized statistical rating organization (an "NRSRO") or is of
comparable quality as determined by First National Bank of Commerce in New
Orleans (the "Adviser"): (i) corporate bonds and debentures rated in one of the
four highest rating categories by an NRSRO; (ii) privately issued mortgage-
backed securities rated in the highest rating category by an NRSRO; (iii)
asset-backed securities rated in the highest rating category by an NRSRO; (iv)
repurchase agreements involving any of the foregoing securities (including U.S.
Government securities); and (v) money market securities (as defined in the
"Description of Permitted Investments and Risk Factors"). For a description of
ratings, see "Appendix."
Normally, the Fund will maintain a dollar-weighted average portfolio maturity
of three to ten years; however, under certain circumstances this average
weighted maturity may fall below three years. In determining the maturity of
mortgage-backed securities, the Adviser will use the estimated average life of
such securities. There are no restrictions on the maturity of any single
instrument.
THE LOUISIANA TAX-FREE INCOME FUND (the "Louisiana Fund") seeks to provide a
level of current income consistent with relative stability of capital.
The Fund will invest at least 80% of its net assets in fixed income securities
the interest on which, in the opinion of bond counsel for the issuer, is exempt
from federal income tax ("Municipal Securities") and is not a preference item
for purposes of the alternative minimum tax. Under normal conditions, at least
65% of the Louisiana's Fund's total assets will be invested in Municipal
Securities the interest on which is exempt from personal income taxes imposed
by the State of Louisiana ("Louisiana Municipal Securities"). The Fund may
invest up to 20% of its net assets in (i) Municipal Securities the interest on
which is a preference item for purposes of the alternative minimum tax and (ii)
taxable investments, including Money Market Securities.
The Louisiana Fund may purchase the following types of Municipal Securities
(including Louisiana Municipal Securities) only if such securities, at the time
of purchase, either have the requisite rating from an NRSRO or are of
comparable quality as determined by the Adviser: (i) bonds and debentures rated
in one of the four highest rating categories by an NRSRO; (ii) notes and
certificates of participation rated in one of the three highest rating
categories; and (iii) commercial paper rated in one of the two highest rating
categories.
Normally, the Fund will maintain a dollar-weighted average portfolio maturity
of seven to fifteen years; however, under certain circumstances this average
weighted maturity may fall below seven years. There are no restrictions on the
maturity of any single instrument.
<PAGE>
12
LOUISIANA RISK FACTORS--The Louisiana Fund is more susceptible to factors
adversely affecting issuers of Louisiana Municipal Securities than is a
comparable municipal bond fund that does not focus its investments in Louisiana
Municipal Securities. Although its economy has improved somewhat in recent
years, Louisiana experienced severe financial difficulties in the late 1980s
and continues to face the risks associated with a non-diversified economy. In
particular, the significance of the oil and gas industry in Louisiana's economy
has resulted in financial difficulties during unfavorable markets for oil and
gas products and in financial benefits during favorable markets. Further
difficulties may result from the uncertain state of the land-based casino
industry in New Orleans.
Louisiana is working to expand economic development activities that will take
advantage of its replenishable natural resources such as timber, water for
aquaculture, fish and seafood related products and related industrial uses of
such resources. The state is also pursuing further development of its
transportation capabilities by expanding port-related activities and improving
its highways and airports.
General obligations of Louisiana are currently rated A- and Baa1, by Standard &
Poor's Corporation ("S&P") and Moody's Investor Services, Inc. ("Moody's"),
respectively. There can be no assurance that the economic conditions on which
these ratings are based will continue or that particular bond issues may not be
adversely affected by changes in economic, political or other conditions. If
either Louisiana or any of its local governmental entities is unable to meet
its financial obligations, the income derived by the Fund, the Fund's net asset
value, the ability to preserve or realize appreciation of the Fund's capital or
the Fund's liquidity could be adversely affected.
NON-DIVERSIFICATION--Investment in the Louisiana Fund, a non-diversified mutual
fund, may entail greater risk than would investment in a diversified mutual
fund. The Fund's ability to focus its investments on a fewer number of issuers
means that any economic, political or regulatory developments affecting the
value of the securities in the Fund's portfolio could have a greater impact on
the total value of the portfolio than would be the case if the portfolio were
diversified among more issuers.
The Fund intends to comply with the diversification requirements of Subchapter
M of the Internal Revenue Code of 1986, as amended.
THE INVESTMENT GRADE INCOME FUND seeks to provide current income.
Under normal conditions, the Fund will invest at least 65% of its net assets in
fixed income securities that are rated investment grade or higher, i.e., rated
in one of the four highest rating categories by an NRSRO, at the time of
purchase, or, if not rated, determined to be of comparable quality by the
Adviser. Emphasis in the Fund will generally be in U.S. Government securities
and investment grade corporate obligations of U.S. issuers. Additional fixed
income securities in which the Fund may invest consist of: (i) mortgage-backed
securities, (ii) obligations issued by the Canadian government, (iii) asset-
backed securities, (iv) guaranteed investment contracts ("GICs"), (v) bank
investment contracts ("BICs"), (vi) zero coupon obligations, (vii) floating or
variable rate instruments, (viii) money market securities; (ix) convertible
securities, (x) restricted securities, and (xi) other investment companies. The
Fund may enter into repurchase agreements with respect to any of the foregoing
and purchase securities subject to swaps, caps, floors and collars.
Normally, the Fund will maintain a dollar-weighted average portfolio maturity
of greater than 10 years; however, under certain circumstances, this average
weighted maturity may fall below 10 years. There are no restrictions on the
maturity of any single instrument.
Shareholders should understand that the Adviser, with the approval of the
Trust's Board of Trustees, may elect to invest up to 100% of the Fund's assets
in another investment company with the same or similar investment objective and
policies.
THE BALANCED FUND seeks to provide capital appreciation and current income
through regular payments of dividends and interest.
Under normal conditions, the Fund will invest between 30% and 75% of its total
assets in
<PAGE>
13
common stocks, warrants, rights to purchase common stocks, debt securities
convertible into common stocks and preferred stocks of established companies
with market capitalizations in excess of $500 million (together, "equity
securities"). The Fund may also invest in equity securities of foreign issuers
traded in the United States, including American Depositary Receipts ("ADRs").
The Fund will purchase only those common stocks that are traded on registered
exchanges or actively traded in the over-the-counter market.
Under normal conditions, the Fund will invest between 25% and 70% of its total
assets in fixed income securities (other than money market securities)
consisting of the following, but only if, at the time of purchase, such
securities either have the requisite rating from an NRSRO or are of comparable
quality as determined by the Adviser: (i) U.S. Government securities; (ii)
privately issued mortgage-backed securities rated in the highest rating
category; (iii) asset-backed securities rated in the highest rating category;
or (iv) corporate bonds and notes and bank obligations rated in one of the four
highest rating categories. The Fund will maintain at least 25% of its assets in
fixed income senior securities. The Fund is not subject to any maturity
restrictions on its investments in non-money market securities.
The Fund may also invest in money market securities.
In making allocation decisions, the Adviser will evaluate projections of risk,
market and economic conditions, volatility, yields and expected return. Because
the Fund in part seeks capital appreciation, the Adviser does not intend to
make frequent changes in asset allocation.
THE VALUE EQUITY FUND seeks to provide long-term capital appreciation.
The Fund will be as fully invested as practicable (at least 65% of its total
assets under normal conditions) in common stocks, warrants, rights to purchase
common stocks, debt securities convertible to common stocks and preferred
stocks (together, "equity securities"). The Fund will invest primarily in
equity securities of established companies with equity-market capitalizations
in excess of $500 million that the Adviser believes to have potential for
capital appreciation based on the soundness of the issuer and the company's
relative value based on an analysis of various fundamental financial
characteristics, including earnings yield, book value, cash flow, anticipated
future growth of dividends and earnings estimates. Although capital
appreciation is the primary purpose for investing in a security, the Fund will
focus on companies that pay current dividends. The Fund may invest in equity
securities of foreign issuers traded in the United States, including ADRs. The
Fund may also invest in money market Securities for cash management purposes.
THE GROWTH EQUITY FUND seeks to provide long-term capital appreciation.
The Fund will be as fully invested as practicable (at least 65% of its total
assets under normal conditions) in common stocks, warrants, rights to purchase
common stocks, debt securities convertible to common stocks and preferred
stocks (together, "equity securities"). The Fund will primarily invest in
equity securities of established companies with equity market capitalizations
in excess of $300 million that the Adviser believes to have potential for
capital appreciation and growth potential. The Adviser initiates purchase and
sale decisions based on such growth and profitability measures as return on
equity, earnings growth, sales growth and expected return. Capital appreciation
is the primary purpose of the Fund. Current dividend income is a secondary
consideration. The Fund may invest in equity securities of foreign issuers
traded in the United States, including ADRs. The Fund may also invest in money
market securities for cash management purposes.
THE SMALL CAP EQUITY FUND seeks to provide long-term capital appreciation. It
currently pursues this objective by investing up to 100% of its assets in the
Small Cap Growth Portfolio of SIMT, which has an identical objective.
Under normal market conditions, the Portfolio will invest at least 65% of its
total assets in the equity securities of smaller growth companies (i.e.,
companies with market capitalizations less than $1 billion) which, in the
opinion of the Portfolio's
<PAGE>
14
sub-advisors (the "Money Managers"), are in an early stage or transitional
point in their development and have demonstrated or have the potential for
above average capital growth. The Money Managers will select companies that
have the potential to gain market share in their industry, achieve and maintain
high and consistent profitability or produce increases in earnings. The Money
Managers also seek companies with strong company management and superior
fundamental strength. Small capitalization companies have the potential to show
earnings growth over time that is well above the growth rate of the overall
economy. Any remaining assets may be invested in the equity securities of more
established companies that the Money Managers believe may offer strong capital
appreciation potential due to their relative market position, anticipated
earnings growth, changes in management or other similar opportunities. Equity
securities include common stock, preferred stock, warrants and rights to
subscribe to common stock and, in general, any security that is convertible
into or exchangeable for common stock. The Portfolio may also invest in equity
securities of foreign issuers traded in the United States, including ADRs.
In order to meet liquidity needs, or for temporary defensive purposes, the
Portfolio may invest all or a portion of its assets in common stocks of larger,
more established companies, fixed income securities, cash or money market
securities. Fixed income securities will only be purchased if they are rated
investment grade or better.
The Portfolio's annual turnover rate may exceed 100%. Such a turnover rate may
result in higher transaction costs and may result in additional taxes for
shareholders. See "Taxes."
THE INTERNATIONAL EQUITY FUND seeks to provide long-term capital appreciation.
It currently pursues this objective by investing up to 100% of its assets in
the International Equity Portfolio of SIT, which has an identical objective.
Securities of non-U.S. issuers purchased by the International Equity Portfolio
will typically be listed on recognized foreign exchanges but also may be
purchased in foreign markets, on U.S. registered exchanges, in the over-the-
counter market or in the form of sponsored or unsponsored ADRs traded on
registered exchanges or NASDAQ, or sponsored or unsponsored European Depositary
Receipts ("EDRs"), Continental Depositary Receipts ("CDRs") or Global
Depositary Receipts ("GDRs"). The Portfolio expects its investments to
emphasize both large and intermediate capitalization companies.
The International Equity Portfolio may enter into forward foreign currency
contracts as a hedge against possible variations in foreign exchange rates. A
forward foreign currency contract is a commitment to purchase or sell a
specified currency, at a specified future date, at a specified price. The
Portfolio may enter into forward foreign currency contracts to hedge a specific
security transaction or to hedge a portfolio position. These contracts may be
bought or sold to protect the Portfolio, to some degree, against a possible
loss resulting from an adverse change in the relationship between foreign
currencies and the U.S. dollar. The Portfolio also may invest in options on
currencies.
The Portfolio expects to be fully invested in its primary investments,
described above, but may invest up to 35% of its total assets in U.S. or non-
U.S. cash reserves: money market instruments; swaps; options on securities,
non-U.S. Indices and currencies; futures contracts, including stock index
futures contracts; and options on futures contracts.
The Portfolio may invest in money market securities. The Portfolio is also
permitted to acquire floating and variable rate securities, purchase securities
on a when-issued or delayed delivery basis, and invest up to 10% of its total
assets in illiquid securities. The Portfolio may sell securities short "against
the box." Although permitted to do so, the Portfolio does not currently intend
to invest in securities issued by passive foreign investment companies or to
engage in securities lending. For a more detailed description of the
International Equity Portfolio's investment objective and policies, see the
Portfolio's prospectus.
GENERAL INVESTMENT POLICIES
For temporary defensive purposes when the Adviser or, with respect to the Small
Cap Growth Portfolio, SFM or the Money Managers determines
<PAGE>
15
that market conditions warrant, each Fund and the Small Cap Growth Portfolio
may invest up to 100% of its assets in money market securities and cash. For
temporary defensive purposes, when SFM and the Money Managers determine that
market conditions warrant, the International Equity Portfolio may invest up to
50% of its assets in money market securites and in other U.S. and non-U.S.
long- and short-term debt instruments which are rated BBB or higher by S&P or
Baa or higher by Moody's at the time of purchase, or which are determined by
the Money Managers to be of comparable quality; invest a portion of such assets
in cash; and invest such assets in securities of supranational entities which
are rated A or higher by S&P or Moody's at the time of purchase or which are
determined by the Money Managers to be of comparable quality. Additionally,
with respect to the Small Cap Equity Fund or International Equity Fund, for
temporary defensive purposes or to maintain the respective Fund's status as a
regulated investment company under the Internal Revenue Code, the Adviser may
invest up to 100% of such Fund's assets in cash and other non-investment
securities.To the extent a Fund or Portfolio is investing for temporary
defensive purposes, the Fund or Portfolio will not be pursuing its investment
objective. Each Fund except the Value Equity Fund and Growth Equity Fund, and
the International Equity Portfolio, may purchase securities on a when-issued or
delayed delivery basis.
In order to generate additional income, each Fund or Portfolio may lend the
securities which it owns. The International Equity Portfolio does not currently
intend to engage in securities lending. All Funds and Portfolios may invest in
repurchase agreements.
Debt rated in the fourth highest ratings category such as BBB by S&P or Baa by
Moody's is regarded as having an adequate capacity to pay interest and repay
principal. Such securities are considered to have speculative characteristics.
For additional information regarding risks and permitted investments,
investment practices and risks, see "Description of Permitted Investments and
Risk Factors."
INVESTMENT LIMITATIONS
The following investment limitations are fundamental policies of the Funds.
Fundamental policies cannot be changed with respect to the Funds without the
consent of the holders of a majority of the Fund's outstanding shares. The
Portfolios have adopted fundamental policies that are similar to these
policies.
A Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if, as a result, more than 5% of the total assets of
the Fund would be invested in the securities of such issuer or more than 10% of
the outstanding voting securities of such issuer would be owned by the Fund.
This restriction applies to 75% of the Fund's assets. This restriction does not
apply to the Louisiana Fund.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to (i) investments in the obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities, and
repurchase agreements involving such securities; and (ii) tax-exempt securities
issued by governments or political subdivisions of governments. For purposes of
this limitation (i) utility companies will be divided according to their
services, for example, gas, gas transmission, electric and telephone will each
be considered a separate industry; (ii) financial service companies will be
classified according to the end users of their services, for example,
automobile finance, bank finance and diversified finance will each be
considered a separate industry; (iii) supranational entities will be considered
to be a separate industry; and (iv) asset-backed securities secured by distinct
types of assets, such as truck and auto loan leases, credit card receivables
and home equity loans, will each be considered a separate industry.
3. Make loans except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objectives and policies; (ii)
<PAGE>
16
enter into repurchase agreements; and (iii) engage in securities lending as
described in this Prospectus and in the Statement of Additional Information.
For purposes of the industry concentration limitations discussed above, these
definitions apply to the International Equity Portfolio, and for purposes of
the International Equity Portfolio, these limitations form part of the
fundamental limitation: (i) utility companies will be divided according to
their services, for example, gas, gas transmission, electric and telephone will
each be considered a separate industry; (ii) financial service companies will
be classified according to end users of their services, for example, automobile
finance, bank finance and diversified finance will each be considered a
separate industry; (iii) supranational agencies will be deemed to be issuers
conducting their principal business activities in the same industry; and
(iv) governmental issuers within a particular country will be deemed to be
conducting their principal business in the same industry.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
HOW TO PURCHASE SHARES
Class A shares and Class B shares of the Funds may be purchased directly from
the shareholder servicing and transfer agent, DST Systems, Inc. ("DST"), by
mail, by wire or through an automatic investment plan ("AIP"). Shares may also
be purchased through broker-dealers, including Marquis Investments, LLC, that
have established a dealer agreement with SEI Financial Services Company, the
Trust's distributor ("SFS" or the "Distributor"). Shares of the Fund are sold
on a continuous basis.
HOW TO PURCHASE BY MAIL
You may purchase Class A or Class B shares of a Fund by completing and signing
an Account Application form and mailing it, along with a check (or other
negotiable bank instrument or money order) payable to "Marquis Funds (Fund
Name)", to DST at 1004 Baltimore Street, Kansas City, MO 64105. Third party
checks, credit cards, credit card checks and cash will not be accepted. When
purchases are made by check, redemption will not be allowed until the
investment being redeemed has been in the account for 15 days. You may purchase
additional shares at any time by mailing payment to DST. Orders placed by mail
will be executed on receipt of your payment. If your check does not clear, your
purchase will be cancelled and you could be liable for any losses or fees
incurred.
You may obtain Account Application forms by calling 1-800-471-1144.
HOW TO PURCHASE BY WIRE
You may purchase shares by wiring Federal funds, provided that your Account
Application has been previously received. You must wire funds to DST and the
wire instructions must include your account number. You must call 1-800-471-
1144 before wiring any funds. An order to purchase shares by Federal funds wire
will be deemed to have been received by the Fund on the Business Day (defined
below) of the wire; provided that the shareholder notifies DST prior to 3:00
p.m., Central time. If DST does not receive notice by 3:00 p.m., Central time,
on the Business Day of the wire, the order will be executed on the next
Business Day.
HOW TO PURCHASE THROUGH AN AUTOMATIC INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Funds through
automatic deductions by Automated Clearing House ("ACH") from a checking
account by completing an AIP Application Form. The minimum pre-authorized
investment amount is $50 per month. An AIP Application Form may be obtained by
calling 1-800-471-1144. The AIP is available only for additional investments
for an existing account.
GENERAL INFORMATION
You may purchase Class A shares and Class B shares of the Funds on any day the
New York Stock Exchange is open for business ("Business Days"). However, shares
of the Funds cannot be purchased by Federal Reserve wire on Federal holidays
restricting wire transfers. The minimum initial investment in either class of
any Fund is $2,500 ($500 minimum for individual retirement accounts and
employees of First National Bank of Commerce in New Orleans, the Funds'
investment adviser (the "Adviser") or its affiliates); however,
<PAGE>
17
the Distributor may waive the minimum investment at its discretion. Subsequent
purchases of shares must be at least $100 except for purchases through the AIP
and payroll deductions, which must be at least $50.
A purchase order for shares will be effective as of the Business Day received
by the Distributor if the Distributor receives the order and payment before
3:00 p.m., Central Time. The purchase price of Class A shares of a Fund is the
net asset value next determined after the purchase order is effective plus the
applicable sales load, if any. The purchase price of Class B shares is the net
asset value next determined after the purchase order is effective.
The net asset value per share of any Fund is determined as of the close of
trading on the New York Stock Exchange (currently, 3:00 p.m., Central time) on
each Business Day by dividing the total market value of that Fund's investments
and other assets, less any liabilities, by the total outstanding shares of the
Fund. Purchases will be made in full and fractional shares calculated to three
decimal places. Pursuant to guidelines adopted and monitored by the Trustees of
the Trust, each Fund may use a pricing service to provide market quotations or
fair market valuations. A pricing service may derive such valuations through
the use of a matrix system to value fixed income securities which considers
factors such as securities prices, yield features, ratings, and developments
related to a specific security. Although the methodology and procedures for
determining net asset value are identical for both classes of a Fund, the net
asset value per share of such classes may differ because of the distribution
expenses charged to Class B shares.
The Trust reserves the right to reject a purchase order for shares when the
Distributor determines that it is not in the best interest of the Trust and/or
its shareholders to accept such order.
Shareholders who own their shares of record and who desire to transfer
registration of their shares should call 1-800-471-1144.
HOW TO PURCHASE THROUGH FINANCIAL INSTITUTIONS
Shares may also be purchased through financial institutions, including the
Adviser, that provide distribution assistance or shareholder services to the
Trust. Shares purchased by persons ("Customers") through financial institutions
may be held of record by the financial institution. Financial institutions may
impose an earlier cut-off time for receipt of purchase orders directed through
them to allow for processing and transmittal of these orders to the Distributor
for effectiveness the same day. Customers should contact their financial
institution for information as to that institution's procedures for
transmitting purchase, exchange or redemption orders to the Trust.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution. Certain of these financial institutions may be required under
state law to register as broker/dealers.
ALTERNATIVE SALES CHARGE OPTIONS
THE TWO ALTERNATIVES: OVERVIEW
You may purchase shares of the Funds at a price equal to their net asset value
per share plus a sales charge which, at your election, may be imposed either
(i) at the time of the purchase (Class A "initial sales charge alternative"),
or (ii) on a contingent deferred basis (the Class B "deferred sales charge
alternative"). Each class represents a Fund's interest in the portfolio of
investments. The classes have the same rights and are identical in all respects
except that (i) Class B shares bear the expenses of the deferred sales
arrangement and distribution and service fees resulting from such sales
arrangement, (ii) each class has exclusive voting rights with respect to
approvals of any Rule 12b-1 distribution plan related to that specific class
(although Class B shareholders may vote on any distribution fees imposed on
Class A shares so long as Class B shares convert into Class A shares) and (iii)
only Class B shares carry a conversion feature. Each class has different
exchange privileges. See "Exchanges." Sales personnel of broker-dealers
distributing the Funds' shares, and other persons entitled to receive
<PAGE>
18
compensation for selling such shares, may receive differing compensation for
selling Class A or Class B shares.
The alternative purchase arrangement permits you to choose the method of
purchasing shares that is more beneficial to you. The amount of your purchase,
the length of time you expect to hold the shares, and whether you wish to
receive dividends in cash or in additional shares will all be factors in
determining which sales charge option is best for you. You should consider
whether, over the time you expect to maintain your investment, the accumulated
distribution and service fees and contingent deferred sales charges on Class B
shares prior to conversion would be less than the initial sales charge on Class
A shares, and to what extent such differential would be offset by the expected
higher yield of Class A shares. Class A shares will normally be more beneficial
to you if you qualify for reduced sales charges as described below.
The Trustees of the Trust have determined that currently no conflict of
interest exists between the Class A and Class B shares. On an ongoing basis,
the Trustees of the Trust, pursuant to their fiduciary duties under the
Investment Company Act of 1940, as amended (the "1940 Act") and state laws,
will seek to ensure that no such conflict arises.
CLASS A SHARES
Sales Load The following table shows the regular sales charge on Class A shares
to a "single purchaser" (defined below) together with the sales charge that is
reallowed to certain financial intermediaries (the "reallowance").
<TABLE>
<CAPTION>
SALES SALES REALLOWANCE
CHARGE AS CHARGE AS AS
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF OFFERING OF NET OF OFFERING
OF PRICE PER AMOUNT PRICE PER
PURCHASE SHARE INVESTED SHARE
-------- ----------- ---------- -----------
<S> <C> <C> <C>
Less than $100,000 3.50% 3.63% 3.15%
$100,000 but less than $250,000 2.50% 2.56% 2.25%
$250,000 but less than $500,000 2.00% 2.04% 1.80%
$500,000 but less than $1,000,000 1.50% 1.52% 1.35%
*$1,000,000 and above none none none
</TABLE>
* Effective March 1, 1996, a redemption charge of 1.00% will be assessed
against the proceeds of any redemption request relating to Class A shares of
the Funds that were purchased without a sales charge in reliance upon the
waiver accorded to purchases in the amount of $1 million or more, but only
where such redemption request is made within 1 year of the date the shares
were purchased. The charge will be based on the lesser of: (i) the net asset
value of your redeemed Class A shares at the time of redemption, or (ii) the
net asset value of your redeemed shares at the time of purchase. The
redemption charge does not apply to shares acquired through the reinvestment
of dividends. This charge is payable to the Distributor.
The sales charge shown in the table is the maximum sales charge that applies to
sales through financial intermediaries. With respect to purchases of Class A
shares of $1,000,000 or more, payment equal to as much as 1.00% of the purchase
price may be paid to financial intermediaries through which sales are made. The
Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs, which will be paid by the Distributor from
the sales charge it receives or from any other source available to it. Under
any such program, the Distributor will provide promotional incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to all dealers selling shares of the Funds. Such
promotional incentives will be offered uniformly to all dealers and predicated
upon the amount of shares of the Funds sold by the dealer. Under certain
circumstances, reallowances of up to the amount of the entire sales charge may
be paid to certain financial institutions, who might then be deemed to be
"underwriters" under the Securities Act of 1933. Commission rates may vary
among the Funds.
Reduced Sales Charge:
Rights of Accumulation
In calculating the sales charge rates applicable to current purchases of Class
A shares, a "single purchaser" is entitled to cumulate current purchases with
the current market value of previously purchased Class A shares of the Funds
sold subject to a comparable sales charge.
<PAGE>
19
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Funds for their own account or for trust or
custodial accounts for their minor children, and (iii) a fiduciary purchasing
for any one trust, estate or fiduciary account, including employee benefit
plans created under Sections 401 or 457 of the Internal Revenue Code of 1986,
as amended (the "Code") including related plans of the same employer.
To exercise your right of accumulation based upon shares you already own, you
must ask the Distributor for this reduced sales charge at the time of your
additional purchase and provide the account number(s) of the investor, as
applicable, the investor and spouse, and their minor children. The Funds may
amend or terminate this right of accumulation at any time as to subsequent
purchases.
Reduced Sales Charge: Letter of Intent
By submitting a Letter of Intent (the "Letter") to the Distributor, a "single
purchaser" may purchase shares of the Funds during a 13-month period at the
reduced sales charge rates applying to the aggregate amount of the intended
purchases stated in the Letter. The Letter may apply to purchases made up to 90
days before the date of the Letter. To receive credit for such prior purchases
and later purchases benefitting from the Letter, you must notify the Transfer
Agent at the time the Letter is submitted that there are prior purchases that
may apply, and notify the Transfer Agent again at the time of later purchases
that such purchases are applicable under the Letter.
Waiver of Sales Load
No sales charge is imposed on shares of the Funds: (i) issued as dividends and
capital gain distributions; (ii) acquired through the exercise of exchange
privileges described below; (iii) sold to officers, directors or trustees,
employees and retirees (and their spouses and immediate family members) of the
Trust, First Commerce Corporation and its subsidiaries, affiliates, and
correspondents, and the Distributor and its subsidiaries and affiliates; (iv)
sold to certain accounts for which the Adviser or subsidiaries, affiliates and
correspondents of First Commerce Corporation serve in a fiduciary, agency or
custodial capacity; (v) issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Trust is a party; (vi)
purchased with the proceeds of employee benefit plan distributions for which
the Adviser and its affiliates act in a fiduciary capacity; (vii) purchased
within thirty days of a redemption of Class A shares of such Funds (only to the
amount of such redemption); (viii) sold to purchasers of Class A shares of the
Value Equity Fund that are sponsors of other investment companies which are
unit investment trusts for deposit by such sponsors into such unit investment
trusts, and purchasers of Class A shares of the Value Equity Fund that are
holders of such unit investment trusts that invest distributions from such unit
investment trusts in Class A shares of the Value Equity Fund; (ix) purchased
within thirty days of a redemption of Class B shares of such Funds for which
the contingent deferred sales charge was paid (only to the amount of such
redemption); or (x) sold to clients who have enrolled in asset allocation
programs sponsored or operated by the Adviser or subsidiaries, affiliates and
correspondents of First Commerce Corporation. In addition, if you acquire Class
A shares of a Fund through an exchange of shares of a Money Market Fund, you
will not be charged a sales load on any portion of your investment on which you
were previously subject to the Funds' sales charges. You must notify the
Distributor at the time of your purchase if you are eligible for a waiver of
the sales load.
CLASS B SHARES
Contingent Deferred Sales Charge
If you redeem your Class B shares within five years of purchase, you will pay a
contingent deferred sales charge at the rates set forth below. You will not be
required to pay the contingent deferred sales charge on exchange of your Class
B shares of any Fund for Class B shares of any other Fund. See "Exchanges." The
charge is assessed on an amount equal to the lesser of the then-current market
value or the cost of the shares being redeemed. Accordingly, no sales charge is
imposed on increases in net asset value above the
<PAGE>
20
initial purchase price. In addition, no charge is assessed on shares derived
from reinvestment of dividends or capital gain distributions.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEAR SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
---------- -------------------------
<S> <C>
First 3.50%
Second 2.75%
Third 2.00%
Fourth 1.25%
Fifth 0.50%
Sixth None
</TABLE>
In determining whether a particular redemption is subject to a contingent
deferred sales charge, it is assumed that the redemption is first of any Class
A shares in the shareholder's Fund account, second of Class B shares held for
over five years or Class B shares acquired pursuant to reinvestment of
dividends or other distributions and third of Class B shares held longest
during the five-year period. This method should result in the lowest possible
sales charge.
The contingent deferred sales charge is waived on redemption of shares (i)
following the death or disability (as defined in the Code) of a shareholder, or
(ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to
a shareholder who has attained the age of 70 1/2. A shareholder, or his or her
representative, must notify the Transfer Agent prior to the time of redemption
if such circumstances exist and the shareholder is eligible for this waiver.
CONVERSION FEATURE. At the end of the period ending five years after the
beginning of the month in which the shares were issued, Class B shares will
automatically convert to Class A shares and will no longer be subject to the
distribution and service fees. Such conversion will be on the basis of the
relative net asset values of the two classes.
EXCHANGES
Exchanges are generally made at net asset value. You may exchange Class A or
Class B shares of any Fund for Class A or Class B shares, respectively, of any
other Fund without paying any additional sales charge. You may exchange an
investment in Class A shares of any Fund for shares of the Money Market Fund,
and move your investment back into Class A shares of any Fund, without paying
any additional sales charge.
For purposes of calculating the Class B shares' five year conversion period or
contingent deferred sales charge payable upon redemption, the holding period of
Class B shares of the "old" Fund and the holding period for Class B shares of
the "new" Fund are aggregated.
You must have received a current prospectus of the Fund into which you wish to
move your investment before the exchange will be effected. Exchanges will be
made only after instructions in writing or by telephone (an "Exchange Request")
are received by DST. If an Exchange Request in good order is received by DST by
3:00 p.m. Central time, on any Business Day, the exchange will occur on that
day. The exchange privilege may be exercised only in those states where the
class or shares of the "new" fund may legally be sold.
Customers who beneficially own shares held of record by a financial institution
should contact that institution if they wish to exchange shares. The
institution will contact DST and effect the exchange on behalf of the Customer.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $25 charge for wiring redemption proceeds. Shares may be redeemed by
mail, by telephone or through a systematic withdrawal plan. Investors who own
shares held of record by a financial institution should contact that
institution for information on how to redeem shares.
BY MAIL
A written request for redemption must be received by DST in order to constitute
a valid redemption request.
<PAGE>
21
If the redemption request exceeds $5,000, or if the request directs the
proceeds to be sent or wired to a shareholder or an address different from that
on record, DST may require that the signature on the written redemption request
be guaranteed. You should be able to obtain a signature guarantee from a bank,
broker, dealer, credit union, securities exchange or association, clearing
agency or savings association. Notaries public cannot guarantee signatures.
BY TELEPHONE
You may redeem your shares by telephone if you have elected that option on the
Account Application. Under most circumstances, payments will be transmitted on
the next Business Day following receipt of a valid request for redemption. You
may have the proceeds mailed to your address or wired to a commercial bank
account previously designated on your Account Application. There is no charge
for having redemption proceeds mailed to you, but there is a $25 charge for
wiring redemption proceeds.
You may request a wire redemption for redemptions in excess of $500 by calling
1-800-471-1144, however a wire charge of $25 will be deducted from the amount
of the wire redemption. Shares cannot be redeemed by Federal Reserve wire on
Federal holidays restricting wire transfers.
Neither DST nor the Trust will be responsible for any loss, liability, cost or
expense for acting upon wire or telephone instructions that it reasonably
believes to be genuine. The Trust and DST will each employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
including requiring a form of personal identification prior to acting upon
instructions received by telephone and recording telephone instructions. When
market conditions are extremely busy, it is possible that you may experience
difficulties placing redemption orders by telephone, and may wish to place them
by mail.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Funds offer a Systematic Withdrawal Plan ("SWP"), which you may use to
receive regular distributions from your account. Upon commencement of the SWP,
your account must have a current value of $5,000 or more. You may elect to
receive automatic payments via check or ACH of $100 or more on a monthly,
quarterly, semi-annual or annual basis. You may obtain an SWP Application Form
by calling 1-800-471-1144.
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could
be exhausted entirely. You may change or cancel the SWP at any time on written
notice to DST.
It is generally not in your best interest to be participating in the SWP at the
same time that you are purchasing additional shares if you have to pay a sales
load in connection with such purchases. Because automatic withdrawals of Class
B shares will be subject to the contingent deferred sales charge, it may not be
in the best interest of Class B shareholders to participate in the SWP.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption, reduced by any
applicable contingent deferred sales charge for Class B shares. Net asset value
per share is determined as of 3:00 p.m., Central time, on each Business Day.
Payment to shareholders for shares redeemed will be made within seven days
after DST receives the valid redemption request. At various times, however, a
Fund may be requested to redeem shares for which it has not yet received good
payment; collection of payment may take ten or more days. In such
circumstances, redemption proceeds will be held pending clearance of the check.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to
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22
redeem your shares at net asset value, less any applicable contingent deferred
sales charge, if, because of redemptions, your account in any Fund has a value
of less than the minimum initial purchase amount (normally $2,500; $500 for
individual retirement accounts and employees of the Adviser or its affiliates).
Accordingly, if you purchase shares of any Fund in only the minimum investment
amount, you may be subject to involuntary redemption if you redeem any shares.
Before any Fund exercises its right to redeem such shares, you will be given
notice that the value of the shares in your account is less than the minimum
amount and will be allowed 60 days to make an additional investment in such
Fund in an amount which will increase the value of the account to at least the
minimum amount.
THE ADVISER
First National Bank of Commerce in New Orleans (the "Adviser"), 210 Baronne
Street, New Orleans, Louisiana 70112, serves as each Fund's investment adviser
under an advisory agreement (the "Advisory Agreement") with the Trust. The
Adviser, through its Trust Group, makes the investment decisions for the assets
of the Funds and continuously reviews, supervises and administers the
investment programs of the Funds, subject to the supervision of, and policies
established by, the Trustees of the Trust. With respect to the Small Cap Equity
Fund and International Equity Fund, the Adviser invests in cash and other non-
investment securities and monitors the performance of SFM, the manager of both
the Small Cap Growth Portfolio and the International Equity Portfolio, and has
authority to recommend to the Trustees changes in the underlying master fund.
The Adviser may manage the assets of the Small Cap Equity Fund and
International Equity Fund directly as it deems appropriate after consultation
with the Trustees of the Trust. See "Small Cap Growth and International Equity
Portfolios" below.
As of September 30, 1996, the Adviser's Trust Group managed approximately $2.3
billion in discretionary investment management accounts for individuals,
corporations and institutions with widely varying investment needs and
objectives. The Trust Group has managed assets with similar investment
objectives and policies to those of the Funds for the past seven years. The
Adviser has provided investment management services since 1933. The Adviser is
a wholly-owned subsidiary of First Commerce Corporation.
The Glass-Steagall Act restricts the securities activities of national banks
such as First National Bank of Commerce in New Orleans but the Comptroller of
the Currency permits national banks to provide investment advisory and other
services to mutual funds. Should the Comptroller's position be challenged
successfully in court or reversed by legislation, the Trust might have to make
other investment advisory arrangements.
The Trust's shares are not sponsored, endorsed or guaranteed by, and do not
constitute obligations or deposits of, the Adviser or First Commerce
Corporation and are not insured by the FDIC or issued or guaranteed by the U.S.
Government or any of its agencies.
The Adviser is entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of .55% of the average daily net assets of the Government
Securities Fund, .74% of the average daily net assets of each of the Balanced
Fund and Value Equity Fund and .35% of the average daily net assets of the
Louisiana Fund, .74% of the average daily net assets of the Investment Grade
Income Fund, .74% of the average daily net assets of the Growth Equity Fund,
.40% for the Small Cap Equity Fund and .40% for the International Equity Fund.
Each Feeder Fund's shareholders will bear their pro rata portion of the
respective Portfolio's advisory fees. The Adviser may voluntarily waive a
portion of its fees in order to limit the total operating expenses of the
Funds. The Adviser reserves the right, in its sole discretion, to terminate
these voluntary fee waivers at any time. Should the Adviser determine that the
Small Cap Equity Fund and/or the International Equity Fund should no longer
remain in a Corporate Master-Feeder(TM) structure, the Adviser will manage all
of the investments for such Fund(s). At that time, the Adviser would be
entitled to a fee, calculated daily and paid monthly, at an annual rate of .90%
of the average daily net assets of the Small Cap Equity
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23
Fund and/or 1.10% of the average daily net assets of the International Equity
Fund.
For the fiscal year ended September 30, 1995, the Adviser was paid an advisory
fee of .41% of the Government Securities Fund, .06% of the Louisiana Tax-Free
Income Fund, .55% of the Balanced Fund, and .57% of the Value Equity Fund,
based on each Fund's average net assets. The Investment Grade Income Fund,
Growth Equity, Small Cap Equity and International Equity Funds had not
commenced operations as of September 30, 1995.
John C. Portwood, CFA, Senior Vice President of the Adviser, has had oversight
responsibility of the portfolio managers of all the Funds since the Funds'
inception. He serves as portfolio manager of the Growth Equity Fund and the
Value Equity Fund. Mr. Portwood also serves as co-manager of the Value Equity
Fund. Mr. Portwood is the Chief Investment Strategist of the Adviser's Trust
Group, with over 28 years of investment management experience and the past
eight with the Adviser.
Kevin P. Reed, Senior Vice President of the Adviser and Manager of the Trust
Investment Division, has oversight responsibility of the portfolio managers of
all the Funds, and is the portfolio manager for the Government Securities Fund,
the Louisiana Tax-Free Income Fund, and co-manager of the Balanced Fund since
their inception. For the past twelve years, Mr. Reed has been a portfolio
manager with the Adviser's Trust Investment Division.
Gerald S. Dugal, Vice President and a senior portfolio manager of the Adviser,
has served as the portfolio manager of the Marquis Treasury Securities Money
Market Fund, the Institutional Money Market Fund, and the Tax-Exempt Money
Market Fund since their inception. During the past five years, Mr. Dugal is a
senior portfolio manager and institutional fixed income trader with the
Adviser. Mr. Dugal has 11 years of experience in portfolio management,
investment trading, brokerage, and research. He is licensed as a series 7
securities principal and a series 53 municipal principal.
Greg Hodlewsky, Vice President of the Adviser, serves as co-manager of the
Value Equity Fund, and the Balanced Fund. Mr. Hodlewsky is a senior portfolio
manager and Manager of Equities and Quantitative Research with the Adviser. Mr.
Hodlewsky has 10 years of experience in portfolio management, investment
trading, and research.
SMALL CAP GROWTH AND INTERNATIONAL EQUITY PORTFOLIOS
SFM serves as the Manager of the Small Cap Growth Portfolio and International
Equity Portfolio. SFM is a wholly-owned subsidiary of SEI Investments Co.
("SEI"), a financial services company located in Wayne, Pennsylvania. The
principal business address of SFM is 530 East Swedesford Road, Wayne,
Pennsylvania, 19087. SEI was founded in 1968, and is a leading provider of
investment solutions to banks, institutional investors, investment advisers and
insurance companies. Affiliates of SFM have provided consulting advice to
institutional investors for more than 20 years, including advice regarding
selection and evaluation of money managers. SFM currently serves as manager or
administrator to more than 29 investment companies, including more than 273
funds, with more than $59 billion in assets as of March 31, 1996.
SFM operates as a "manager of managers" with respect to the Small Cap Growth
Portfolio, a separate series of SIMT, and the International Equity Portfolio, a
separate series of SIT, and SFM oversees the investment advisory services
provided to each Portfolio and manages the cash portion of each Portfolio's
assets. Pursuant to separate sub-advisory agreements with SFM, and under the
supervision of SFM and the respective Board of Trustees, the Money Managers are
responsible for the day-to-day investment management of all or a discrete
portion of the respective assets of the Small Cap Growth Portfolio and the
International Equity Portfolio. Money Managers are selected based primarily
upon the research and recommendations of SFM, which evaluates quantitatively
and qualitatively a Money Manager's skills and investment results in managing
assets for specific asset classes, investment styles and strategies.
<PAGE>
24
SIMT's Board of Trustees is responsible for overseeing the operation of SIMT,
including reviewing and approving SIMT's contracts with SFM and the Money
Managers. Likewise, SIT's Board of Trustees is responsible for overseeing the
operation of SIT, including reviewing and approving SIT's contracts with SFM
and the Money Managers. The same individuals currently serve as the Trustees of
SIMT and SIT. Subject to review by the appropriate Board, SFM allocates and,
when appropriate, reallocates a Portfolio's assets among Money Managers,
monitors and evaluates Money Manager performance, and oversees Money Manager
compliance with the Funds' investment objectives, policies and restrictions.
SFM HAS ULTIMATE RESPONSIBILITY FOR THE INVESTMENT PERFORMANCE OF THE
PORTFOLIOS DUE TO ITS RESPONSIBILITY TO OVERSEE MONEY MANAGERS AND RECOMMEND
THEIR HIRING, TERMINATION AND REPLACEMENT. The Securities and Exchange
Commission has issued an exemptive order (the "Order") that permits both SIMT
and SIT to retain Money Managers unaffiliated with SFM without submitting the
Money Manager's contract with SFM to a vote of shareholders. The Order also
permits the non-disclosure of amounts payable by SFM under all such contracts.
For its management services, SFM is entitled to a fee, which is calculated
daily and paid monthly, at the rates (shown as a percentage of the average
daily net assets) of .65% for the Small Cap Growth Portfolio and .505% for the
International Equity Portfolio. SFM pays each Money Manager for its services
from the management fees SFM receives from the Portfolios.
As of the date of this prospectus, the assets of the Small Cap Growth Portfolio
are being managed by the following Money Managers: First of America Investment
Corporation; Nicholas-Applegate Capital Management; and Wall Street Associates.
As of the date of this prospectus, the assets of the International Equity
Portfolio are being managed by the following Money Managers: Acadian Asset
Management, Inc.; Farrell Wako Global Investment Management, Inc.; Morgan
Grenfell Investment Services Limited; Seligman Henderson Co.; and jointly,
Yamaichi Capital Management Inc. and Yamaichi Capital Management (Singapore)
Limited.
SFS serves as the distributor pursuant to distribution agreements with both
SIMT and SIT. No compensation is paid to the distributor for distribution
services for the shares of the Portfolios. The principal business address for
SFS is 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658. DST serves as
SIMT's transfer agent and CoreStates Bank, N.A. has custody of the Small Cap
Growth Portfolio's assets. State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, acts as custodian for the assets of the
International Equity Portfolio and Corestates Bank, N.A., Broad and Chestnut
Streets, P.O. Box 7618, Philadelphia, Pennsylvania 19101, acts as wire agent of
SIT's assets.
THE ADMINISTRATOR
SEI Fund Resources, a Delaware business trust (the "Administrator"), has its
principal business offices at 680 East Swedesford Road, Wayne, Pennsylvania,
19087. The Administrator and the Trust are parties to an Administration
Agreement (the "Administration Agreement"). Under the terms of the
Administration Agreement, the Administrator provides the Trust with
administrative services, other than investment advisory services, including all
regulatory reporting, necessary office space, equipment, personnel, and
facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .15% of the average daily net assets of the
Funds. The Administrator has voluntarily agreed to waive all or a portion of
its fees and/or reimburse other expenses for the Small Cap Equity Fund and the
International Equity Fund in order to limit total operating expenses of each
Fund. The Administrator reserves the right to terminate its waivers or
reimbursements, respectively, at any time in its sole discretion.
THE SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
DST Systems, Inc., 1004 Baltimore Street, Kansas City, MO 64105, serves as the
dividend disbursing agent and shareholder servicing agent for the Trust. DST
also acts as transfer agent for the Trust under a transfer agent agreement.
<PAGE>
25
THE DISTRIBUTOR
Class A shares of the Funds are sold with a front-end sales load. Class B
shares of the Funds have a Rule 12b-1 distribution plan (the "Class B Plan").
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, PA 19087, a wholly-owned subsidiary of SEI, and the Trust are parties to
a distribution agreement ("Distribution Agreement"). As provided in the
Distribution Agreement and the Class B Plan, the Trust pays the Distributor a
fee at an annual rate of up to .75% of the average daily net assets of the
Class B shares of the Funds. This fee will be calculated and paid each month
based on average daily net assets for that month. Out of this fee, the
Distributor pays .25% of the average daily net assets of the Class B shares to
financial institutions and intermediaries such as banks (including the Adviser
and its affiliates), savings and loan associations, insurance companies, and
investment counselors, broker-dealers, and the Distributor's affiliates
(collectively, "financial intermediaries") as compensation for providing
shareholder services. The Distributor may use the balance of the fee received
from the Funds to make payments to financial intermediaries as compensation for
services or as reimbursement of distribution assistance or shareholder service
expenses incurred by the Distributor. The Class B Plan is characterized as a
compensation plan since the distribution fee is paid to the Distributor without
regard to the distribution assistance or shareholder service expenses incurred
by the Distributor or the amount of payments made to financial intermediaries.
If the Distributor's expenses are less than its fees, the Trust will still pay
the full fee and the Distributor will realize a profit, but the Trust will not
be obligated to pay in excess of the full fee, even if the Distributor's actual
expenses are higher.
The Funds may also execute brokerage or other agency transactions through an
affiliate of the Adviser or through the Distributor for which the affiliate or
the Distributor may receive "usual and customary" compensation. For further
information, see the Statement of Additional Information.
PERFORMANCE
From time to time, the Funds may advertise yield and total return. These
figures will be based on historical earnings and are not intended to indicate
future performance. The yield of a Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The
yield is calculated by assuming that the same amount of income generated by the
investment during that period is generated in each 30-day period over one year
and is shown as a percentage of the investment. The Louisiana Fund may also
advertise a "tax-equivalent yield," which is calculated by determining the rate
of return that would have to be achieved on a fully taxable investment to
produce the after-tax equivalent of this Fund's yield, assuming certain tax
brackets for the shareholder.
Each Feeder Fund may advertise the performance of its corresponding Portfolio
adjusted to reflect applicable sales loads and operating expenses, other than
Rule 12b-1 fees. The data for the Small Cap Growth Portfolio and the
International Equity Portfolio will be adjusted to reflect Fund operating
expenses of .20% and .27%, respectively, and (i) with respect to the Class A
Shares, to take into account a 3.50% sales load; and (ii) with respect to Class
B Shares, to take into account the applicable contingent deferred sales charge.
Investment performance reflects voluntary fee waivers and reimbursements
currently in effect and, with respect to Class B Shares, does not reflect each
Fund's 12b-1 fees. In the absence or reduction of current fee waivers or
reimbursements, or if current Rule 12b-1 fees applicable to Class B Shares were
reflected, Total Return would be reduced.
The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment, net of any sales charge imposed on Class A shares or
including the contingent deferred sales charge imposed on Class B shares
redeemed at the end of the specified period covered by the total return figure,
for designated time periods (including but not limited to, the period from
which the Fund commenced operations through the specified date), assuming that
the entire investment is redeemed at the end of each period and assuming the
reinvestment of
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26
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of a Fund or its shareholders.
Accordingly, shareholders are urged to consult their tax advisers regarding
specific questions as to federal, state, and local income taxes. State and
local tax consequences on an investment in a Fund may differ from the federal
income tax consequences described below. Additional information concerning
taxes is set forth in the Statement of Additional Information.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for federal income tax purposes and
is not combined with the Trust's other Funds. Each Fund intends to qualify for
the special tax treatment afforded regulated investment companies as defined
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), so as to be relieved of federal income tax on investment company
taxable income and net capital gain (the excess of net long-term capital gains
over net short-term capital losses) distributed to shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute all of its net investment income (including net
short-term capital gain) to shareholders. Dividends from a Fund's net
investment company taxable income will be taxable to shareholders as ordinary
income whether received in cash or in additional shares, to the extent of the
Fund's earnings and profits. Dividends paid by a Fund to corporate shareholders
will qualify for the dividends-received deduction to the extent attributable to
dividends received by the Fund from domestic corporations (including, with
respect to the Feeder Funds, a pro rata portion of such dividends received by
the corresponding Portfolio). It can be expected that only certain dividends of
the Equity Funds, and none of the Fixed Income Funds, will qualify for that
deduction. A portion of such dividends received may be subject to the
alternative minimum tax. Capital gains will be distributed at least annually
and will be taxed to shareholders as long-term capital gains, regardless of how
long the shareholder has held shares and regardless of whether the
distributions are received in cash or in
all dividend and capital gain distributions. The total return of a Fund may
also be quoted as a dollar amount or on an aggregate basis, an actual basis,
without inclusion of any front-end or contingent sales charges, or with a
reduced sales charge in advertisements distributed to investors entitled to a
reduced sales charge.
A Fund may periodically compare its performance to that of other mutual funds
tracked by mutual fund rating services (such as Lipper Analytical), financial
and business publications and periodicals, of broad groups of comparable mutual
funds, unmanaged indices which may assume investment of dividends but generally
do not reflect deductions for administrative and management costs or to other
investment alternatives. The Fund may quote Morningstar, Inc., a service that
ranks mutual funds on the basis of risk-adjusted performance. The Fund may
quote Ibbotson Associates of Chicago, Illinois, which provides historical
returns of the capital markets in the U.S. The Fund may use long term
performance of these capital markets to demonstrate general long-term risk
versus reward scenarios and could include the value of a hypothetical
investment in any of the capital markets. The Fund may also quote financial and
business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques.
The Fund may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
The performance of Class A and Class B shares of a Fund will differ because of
the different sales charge structures of the classes and because of the
distribution fees charged to Class B shares.
TAXES
The following summary of federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial, or
administrative action.
<PAGE>
27
additional shares. Distributions from net capital gains do not qualify for the
dividends-received deduction. Each Fund will provide annual reports to
shareholders of the federal income tax status of all distributions, including
the amount of dividends eligible for the dividends-received deduction.
Certain securities purchased by a Fund (such as STRIPS, TRs, TIGRs and CATS,
defined in "Description of Permitted Investments and Risk Factors") are sold
with original issue discount and thus do not make periodic cash interest
payments. Each Fund will be required to include as part of its current income
the imputed interest on such obligations even though the Fund has not received
any interest payments on such obligations during that period. Because each Fund
distributes all of its net investment income to its shareholders, a Fund may
have to sell portfolio securities to distribute such imputed income, which may
occur at a time when the Adviser would not have chosen to sell such securities
and which may result in a taxable gain or loss.
Dividends declared by a Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of the year declared, if paid by the Fund at any time during the
following January.
Investment income received directly by a Fund on direct U.S. government
obligations is exempt from income tax at the state level and may be exempt,
depending on the state, when received by a shareholder as income dividends
provided certain state-specific conditions are satisfied. Each Fund will inform
shareholders annually of the percentage of income and distributions derived
from direct U.S. obligations. Shareholders should consult their tax advisers to
determine whether any portion of the income dividends received from a Fund is
considered tax exempt in their particular state.
Each Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for the federal excise tax applicable to
regulated investment companies.
A sale, exchange, or redemption of a Fund's shares is a taxable event to the
shareholder.
The Louisiana Tax-Free Income Fund will distribute all of its net investment
income (including net short-term capital gain) to shareholders. If, at the
close of each quarter of its taxable year, at least 50% of the value of the
Fund's assets consist of obligations the interest on which is excludable from
gross income for federal tax purposes, the Fund may pay "exempt-interest
dividends" to its shareholders. Those dividends constitute the portion of the
aggregate dividends as designated by the fund equal to the excess of the
excludable interest over certain amounts disallowed as deductions. Exempt-
interest dividends are excludable from a shareholder's gross income for regular
federal income tax purposes, but may have certain collateral federal income tax
consequences, including alternative minimum tax. See the Statement of
Additional Information.
Current federal law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Louisiana Tax-Free Income Fund to purchase sufficient amounts of
tax-exempt securities to satisfy the Code's requirements for the payment of
"exempt-interest dividends."
STATE TAXES
The Trust has obtained a ruling from the Louisiana Department of Revenue and
Taxation to the effect the distributions to shareholders of the Louisiana Fund
who are Louisiana residents, which are derived from interest on tax-exempt
obligations of the State of Louisiana or its political subdivisions and certain
obligations of the United States or its territories, will not be subject to
Louisiana income tax. Distributions derived from long-term or short-term
capital gains on such obligations, or from dividends on capital gains on other
types of obligations will be subject to Louisiana individual and corporate
income taxes. A Louisiana resident will also be required to take into account
for Louisiana individual and corporate income tax purposes capital gains or
losses realized from a redemption, sale or exchange of shares of the Louisiana
Fund. To the extent distributions from the Louisiana Fund are included in the
capital of
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28
corporate shareholders otherwise subject to the Louisiana corporate franchise
tax, such investments or distributions will be subject to Louisiana franchise
tax. Shareholders should consult their own tax advisers with respect to the
state, local and foreign tax consequences of investing in the Funds.
GENERAL INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under a Declaration
of Trust dated June 29, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares or "funds" and different classes of each fund.
In addition to the Funds, the Trust offers a Treasury Securities Money Market
Fund, Institutional Money Market Fund, and a Tax Exempt Money Market Fund. All
consideration received by the Trust for shares of any fund and all assets of
such fund belong to that fund and would be subject to liabilities related
thereto. The Trust reserves the right to create and issue shares of additional
funds.
The Trust pays its operating expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy
solicitation material and reports to shareholders, costs of custodial services
and registering the shares under Federal and state securities laws, pricing and
insurance expenses, and pays additional expenses including litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under
the laws of the Commonwealth of Massachusetts. The Trustees have approved
contracts under which, as described above, certain companies provide essential
management, administrative and shareholder services to the Trust. A discussion
of SIMT's Trustees and officers appears in SIMT's Statement of Additional
Information. A discussion of SIT's Trustees and officers appears in SIT's
Statement of Additional Information.
VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to that fund or class
(although Class B shareholders may vote on any distribution fees imposed on
Class A shares so long as Class B shares convert into Class A shares). As a
Massachusetts business trust, the Trust is not required to hold annual meetings
of shareholders but meetings of shareholders will be held from time to time to
seek approval for certain changes in the operation of the Trust and for the
election of Trustees under certain circumstances. In addition, a Trustee may be
removed by the remaining Trustees or by shareholders at a special meeting
called upon written request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a meeting is requested,
the Trust will provide appropriate assistance and information to the
shareholders requesting the meeting.
In the case of the Small Cap Equity Fund or International Equity Fund, whenever
a vote is requested on matters pertaining to the Small Cap Growth Portfolio or
International Equity Portfolio, respectively, the Trust will either (a) seek
instructions from the appropriate Fund's shareholders with regard to the voting
of the proxies and vote such proxies only in accordance with such instructions;
or (b) vote the shares held by it in the same proportion as the vote of all the
other shareholders of the particular Portfolio.
In the second alternative, other investors in a Portfolio could control the
results of voting at the Portfolio level.
SIMT, SIT AND THE PORTFOLIOS
Both SIMT and SIT are organized as Massachusetts business trusts. Each such
Trust's declaration of trust provides that shareholders will be liable for all
obligations of each series thereof. The Trustees believe that neither the Small
Cap Equity Fund or the International Equity Fund will be adversely affected by
reason of investing in the corresponding Portfolio.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements
<PAGE>
29
annually. The Trust furnishes periodic reports to shareholders of record, and,
as necessary, proxy statements for shareholder meetings.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to DST Systems, Inc., P.O. Box 419240,
Kansas City, MO 64141-6240, or by calling 1-800-471-1144.
DIVIDENDS
Substantially all net investment income (not including capital gains) is
declared and paid monthly for each Fixed Income Fund and declared and paid
quarterly for each Equity Fund and the Balanced Fund. Shareholders who own
shares at the close of business on the record date will be entitled to receive
the dividend. Each Fund intends to pay such dividends on the first business day
of the month following the month the dividend was declared. Currently, capital
gains of the Funds, if any, will be distributed at least annually.
Shareholders automatically receive all income dividends and capital gain
distributions in additional shares at the net asset value next determined
following the record date, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by providing written
notice to the Administrator at least 15 days prior to the distribution.
Dividends and other distributions of the Funds are paid on a per-share basis.
The value of each share will be reduced by the amount of the payment. If shares
are purchased shortly before the record date for a dividend or the distribution
of capital gains, a shareholder will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or other
distribution. The amount of dividends payable on Class A shares will be more
than the dividends payable on the Class B shares because of the distribution
and service fees paid by Class B shares.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
CUSTODIAN
First National Bank of Commerce in New Orleans acts as Custodian of the Trust.
The Custodian holds cash, securities and other assets of the Trust as required
by the 1940 Act.
RISK FACTORS RELATING TO THE FEEDER FUNDS AND THE PORTFOLIOS
Unlike other mutual funds which directly acquire and manage their own portfolio
securities, each Feeder Fund seeks to achieve its investment objective by
investing up to 100% of its assets in the corresponding Portfolio, which is a
separate registered investment company with identical investment objectives.
The investment objective of a Feeder Fund or a Portfolio may not be changed
without shareholder approval. In addition to selling beneficial interests to
the Feeder Funds, the Portfolios may sell beneficial interests to other mutual
funds or institutional investors. Such investors will invest in the Portfolios
on the same terms and conditions and will pay a proportionate share of the
respective Portfolio's expenses. However, other investors investing in the
Portfolios are not required to buy their shares at the same public offering
prices as the Feeder Funds. Investors in the Feeder Funds should be aware that
because of these differences other investors, in the other funds that invest in
the Portfolios, may obtain different returns. Such differences in returns are
also present in other mutual fund structures.
Certain changes in a Portfolio's investment objective, policies or restrictions
may require the corresponding Feeder Fund to redeem its investment. Any such
withdrawal could result in a distribution-in-kind of portfolio securities (as
opposed to a cash distribution from the Portfolio). The Feeder Fund could incur
brokerage fees or other transaction costs in converting such securities to
cash. The distribution-in-kind may also result in a less diversified portfolio
of investments or adversely affect the liquidity of the Feeder Fund. In
addition, the investment of a Feeder Fund may be withdrawn from the
corresponding Portfolio at any time if the Adviser determines that it is in the
best interest of that Feeder Fund to do so.
Upon any such withdrawal, the Adviser and Trustees of the Trust would consider
what action
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30
might be taken, including the investment of all of the assets of such Feeder
Fund in another pooled investment entity having the same investment objective
as the Feeder Fund or retaining an investment adviser to manage the Feeder
Fund's assets in accordance with its investment policies. The performance of a
Feeder Fund might be adversely impacted under such circumstances and such
Feeder Fund may not be able to achieve its objective.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments and investment
practices for the various Funds (and the Portfolios), and associated risk
factors. Unless otherwise indicated, policies that relate to "a Fund," "all
Funds," or "Equity Funds" also relate to the Portfolios. Further discussion is
contained in the Statement of Additional Information.
AMERICAN DEPOSITARY RECEIPTS, CONTINENTAL DEPOSITARY RECEIPTS, EUROPEAN
DEPOSITARY RECEIPTS AND GLOBAL DEPOSITARY RECEIPTS--ADRs are securities
typically issued by a U.S. financial institution. ADRs evidence ownership
interests in a pool of securities issued by a foreign issuer and deposited with
the depositary. EDRs, which are sometimes referred to as CDRs are securities,
typically issued by a non-U.S. financial institution, that evidence ownership
interests in a security or a pool of securities issued by either a U.S. or
foreign issuer. GDRs are issued globally and evidence a similar ownership
arrangement. Generally, ADRs are designed for trading in the U.S. securities
market. EDRs are designed for trading in European Securities Markets and GDRs
are designed for trading in non-U.S. Securities Markets. ADRs, EDRs, CDRs and
GDRs may be available for investment through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
security underlying the receipt and a depositary, whereas an unsponsored
facility may be established by a depositary without participation by the issuer
of the underlying security. Holders of unsponsored depositary receipts
generally bear all the costs of the unsponsored facility. The depositary of an
unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited security
or to pass through, to the holders of the receipts, voting rights with respect
to the deposited securities. The Equity Funds may invest in sponsored and
unsponsored ADRs.
ASSET-BACKED SECURITIES--Asset-backed securities are securities secured by non-
mortgage assets such as company receivables, truck and auto loans, leases, and
credit card receivables. Such securities are generally issued as pass-through
certificates, which represent undivided fractional ownership interests in the
underlying pools of assets. Such securities also may be debt instruments, which
are also known as collateralized obligations and are generally issued as the
debt of a special purpose entity, such as a trust, organized solely for 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 period by a letter of credit issued by a financial institution (such as
a bank or insurance company) unaffiliated with the issuers of such securities.
The purchase of asset-backed securities raises risk considerations peculiar to
the financing of the instruments underlying such securities. For example, there
is a risk that another party could acquire an interest in the obligations
superior to that of the holders of the asset-backed securities. There also is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on those securities. Asset-backed
securities entail prepayment risk, which may vary depending on the type of
asset, but is generally less than the prepayment risk associated with mortgage-
backed securities. In addition, credit card receivables are unsecured
obligations of the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
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securities. The Government Securities Fund, the Balanced Fund and Investment
Grade Income Fund may invest in these and in other asset-backed securities that
may be created in the future if the Adviser determines they are suitable.
BANKERS' ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods and to furnish dollar
exchange. Maturities are generally six months or less. All Funds are permitted
to invest in bankers' acceptances.
BANK INVESTMENT CONTRACTS ("BICs")--BICs are contracts issued by U.S. banks and
savings and loan institutions. Pursuant to such contracts, a Fund makes cash
contributions to a deposit fund of the general account of the bank or savings
and loan institution. The bank or savings and loan institution then credits to
the Fund on a monthly basis guaranteed interest at either a fixed, variable or
floating rate. A BIC provides that this guaranteed interest will not be less
than a certain minimum rate. A BIC is a general obligation of the issuing bank
or savings and loan institution and not a separate account. The purchase price
paid for a BIC becomes part of the general assets of the issuer, and the
contract is paid at maturity from the general assets of the issuer.
BICs are generally not assignable or transferable without the permission of the
issuing bank or savings and loan institution. For this reason, an active
secondary market in BICs currently does not exist. Therefore, BICs are
considered to be illiquid investments.
CERTIFICATES OF DEPOSIT--Certificates of deposit are interest bearing
instruments with a specific short-term maturity. They are issued by banks and
savings and loan institutions in exchange for the deposit of funds and normally
can be traded in the secondary market prior to maturity. Certificates of
deposit with penalties for early withdrawal will be considered illiquid. All
Funds are permitted to invest in certificates of deposit.
COMMERCIAL PAPER--Commercial paper is a term used to describe unsecured short-
term promissory notes issued by corporations and other entities. Maturities on
these issues vary from a few to 270 days. All Funds are permitted to invest in
commercial paper.
CONVERTIBLE SECURITIES--Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move together with the market value of
the underlying stock. The value of convertible securities is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions. The Equity Funds are permitted to invest in convertible securities.
EQUITY SECURITIES--Equity securities include common stocks, preferred stocks,
warrants to acquire common stock, and securities convertible into common stock.
Investments in equity securities are subject to market risks that may cause
their prices to fluctuate over time. Changes in the value of portfolio
securities will not necessarily affect cash income derived from these
securities but will affect a Fund's net asset value.
FIXED INCOME SECURITIES--Fixed income securities include bonds, notes,
debentures and other interest-bearing securities that represent indebtedness.
The market value of the fixed income investments in which the Funds invest will
change in response to interest rate changes and other factors. During periods
of falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods of rising interest rates, the values
of such securities generally decline. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the rating of any
fixed income security and in the ability of an issuer to make payments of
interest and principal also affect the value of these investments.
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Changes in the value of these securities will not necessarily affect cash
income derived from these securities but will affect a Fund's net asset value.
FUTURES AND OPTIONS ON FUTURES--Each of the Funds may invest in futures and
options on futures to a limited extent. Specifically, a Fund may enter into
futures contracts and options on futures contracts traded on an exchange
regulated by the Commodities Futures Trading Commission ("CFTC") if, to the
extent that such futures and options are not for "bona fide hedging purposes"
(as defined by the CFTC), the aggregate initial margin and premiums on such
positions (excluding the amount by which options are in the money) do not
exceed 5% of that Fund's net assets. In addition, a Fund may enter into futures
contracts and options on futures only to the extent that obligations under such
contracts or transactions, together with options on securities, represent not
more than 25% of the Fund's assets. The foregoing 25% limitation does not apply
to the International Equity Fund or the International Equity Portfolio.
The Funds may buy and sell futures contracts and related options to manage
their exposure to changing interest rates and security prices. Some futures
strategies, including selling futures, buying puts and writing calls, reduce a
Fund's exposure to price fluctuations. Other strategies, including buying
futures, writing puts and buying calls, tend to increase market exposure.
Futures and options may be combined with each other in order to adjust the risk
and return characteristics of the overall portfolio. The Funds may invest in
futures and related options based on any type of security or index traded on
U.S. or foreign exchanges or over-the-counter, as long as the underlying
security, or securities represented by an index, are permitted investments of
the Funds.
Options and futures can be volatile instruments, and involve certain risks. If
the Adviser applies a hedge at an inappropriate time or judges interest rates
incorrectly, options and futures strategies may lower a Fund's return. A Fund
could also experience losses if the prices of its options and futures positions
were poorly correlated with its other instruments, or if it could not close out
its positions because of an illiquid secondary market.
In order to cover any obligations it may have under options or futures
contracts, the Fund will either own the underlying asset, have a contract to
acquire such an asset without additional cost or set aside, in a segregated
account, high quality liquid assets in an amount at least equal in value to
such obligations.
GUARANTEED INVESTMENT CONTRACTS ("GICs")--GICs are contracts issued by U.S.
insurance companies. Pursuant to such contracts, a Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the Fund on a monthly basis guaranteed
interest at either a fixed, variable or floating rate. A GIC provides that this
guaranteed interest will not be less than a certain minimum rate. A GIC is a
general obligation of the issuing insurance company and not a separate account.
The purchase price paid for a GIC becomes part of the general assets of the
issuer, and the contract is paid at maturity from the general assets of the
issuer.
Generally, GICs are not assignable or transferable without the permission of
the issuing insurance company. For this reason, an active secondary market in
GICs does not currently exist and GICs are considered to be illiquid
investments.
ILLIQUID SECURITIES--Illiquid securities are securities which cannot be
disposed of within seven business days at approximately the price at which they
are being carried on a Fund's books. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, if there is no
secondary market for such security and repurchase agreements of over 7 days in
length. Each Fund will not invest more than 15% (10% with respect to the
International Equity Portfolio) of its net assets in such instruments.
INVESTMENT COMPANIES--Because of restrictions on direct investment by U.S.
entities in certain countries, investment in other investment companies may be
the most practical or only manner in which an international and global fund can
invest in the securities markets of those countries. The International Equity
Portfolio does not intend to invest in other investment companies
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33
unless, in the judgment of its Money Managers, the potential benefits of such
investments exceed the associated costs relative to the benefits and costs
associated with direct investments in the underlying securities.
Investments in closed-end investment companies may involve the payment of
substantial premiums above the net asset value of such issuer's portfolio
securities and are subject to limitations under the 1940 Act. The International
Equity Portfolio also may incur tax liability to the extent it invests in the
stock of a foreign issuer that constitutes a "passive foreign investment
company."
As a shareholder in an investment company, the International Equity Portfolio
would bear its ratable share of that investment company's expenses, including
its advisory and administration fees. In accordance with applicable state
regulatory provisions, the Portfolio's advisers have agreed to waive their
management fee with respect to the portion of this Portfolio's assets invested
in shares of other open-ended investment companies. The Portfolio continues to
pay its own management fees and other expenses with respect to their
investments in shares of closed-end investment companies.
MONEY MARKET SECURITIES--Money market securities are high-quality, dollar-
denominated, short-term debt instruments. They consist of: (i) bankers'
acceptances, certificates of deposits, notes and time deposits of highly-rated
U.S. banks and U.S. branches of foreign banks; (ii) U.S. Treasury obligations
and obligations issued or guaranteed by the agencies and instrumentalities of
the U.S. Government; (iii) high quality commercial paper issued by U.S. and
foreign corporations; (iv) debt obligations with a maturity of one year or less
issued by corporations with outstanding high-quality commercial paper; and (v)
repurchase agreements involving any of the foregoing obligations entered into
with highly-rated banks and broker-dealers.
With respect to the International Equity Portfolio, money market securities are
considered to include securities issued or guaranteed by the United States
Government, its agencies or instrumentalities; securities issued or guaranteed
by non-U.S. governments, which are rated at time of purchase A or higher by S&P
or Moody's, or are determined by the advisers to be of comparable quality;
repurchase agreements, certificates of deposit and bankers' acceptances issued
by banks or savings and loan associations having net assets of at least $500
million as of the end of their most recent fiscal year; high-grade commercial
paper, and other long- and short-term debt instruments which are rated at the
time of purchase A or higher by S&P or Moody's, and which, with respect to such
long-term debt instruments, are within 397 days of their maturity.
MORTGAGE-BACKED SECURITIES--Mortgage-backed securities are instruments which
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
Government Pass-Through Securities: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and FHLMC. FNMA and FHLMC obligations are not backed
by the full faith and credit of the U.S. Government as GNMA certificates are,
but FNMA and FHLMC securities are supported by the instrumentalities' right to
borrow from the United States Treasury. Each of GNMA, FNMA and FHLMC guarantees
timely distributions of interest to certificate holders. Each of GNMA and FNMA
also guarantees timely distributions of scheduled principal. FHLMC has in the
past guaranteed only the ultimate collection of
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principal of the underlying mortgage loan; however, FHLMC now issues Mortgage-
Backed Securities (FHLMC Gold PCs) which also guarantees timely payment of
monthly principal reduction. Government and private guarantees do not extend
to the securities' value, which is likely to vary inversely with fluctuations
in interest rates.
Private Pass-Through Securities: These are mortgage-backed securities issued
by a non-governmental entity such as a trust, which securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conditions ("REMICs"), that are rated in one of the top two rating
categories. While they are generally structured with one or more types of
credit enhancement, Private Pass-Through Securities typically lack a guarantee
by an entity having the credit status of a governmental agency or
instrumentality.
CMOs: CMOs are debt obligations or multiclass pass-through certificates issued
by agencies or instrumentalities of the U.S. Government or by private
originators or investors in mortgage loans. In a CMO, series of bonds or
certificates are annually issued in multiple classes. Principal and interest
paid on the underlying mortgage assets may be allocated among the several
classes of a series of a CMO in a variety of ways. Each class of a CMO, often
referred to as a "tranche" is issued with a specific fixed or floating coupon
rate and has a stated maturity or final distribution date. Principal payments
on the underlying mortgage assets may cause CMOs to be retired substantially
earlier than their stated maturities or final distribution dates, resulting in
a loss of all or part of any premium paid.
REMICs: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by
FNMA or FHLMC represent beneficial ownership interests in a REMIC trust
consisting principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed
mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC
guarantees the timely payment of interest, and also guarantees the payment of
principal as payments are required to be made on the underlying mortgage
participation certificates. FNMA REMIC Certificates are issued and guaranteed
as to timely distribution of principal and interest by FNMA.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive
all of the interest payments and is thus termed an interest-only class ("IO"),
while the other class may receive all of the principal payments and is thus
termed the principal-only class ("PO"). The value of IOs tends to increase as
rates rise and decrease as rates fall; the opposite is true of POs. SMBs are
extremely sensitive to changes in interest rates because of the impact thereon
of prepayment of principal on the underlying mortgage securities. The market
for SMBs is not as fully developed as other markets; SMBs therefore may be
illiquid.
Risk Factors: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known
maturity. In the absence of a known maturity, market participants generally
refer to an estimated average life. An average life estimate is a function of
an assumption regarding anticipated prepayment patterns, based upon current
interest rates, current conditions in the relevant housing markets and other
factors. The assumption is necessarily subjective, and thus different market
participants can produce different average life estimates with regard to the
same security. There can be no assurance that estimated average life will be a
security's actual average life.
MUNICIPAL SECURITIES--Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating
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35
expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair, or improvement of privately operated
facilities. General obligation bonds are backed by the taxing power of the
issuing municipality. Revenue bonds are backed by the revenues of a project or
facility; tolls from a toll bridge for example. Certificates of participation
represent an interest in an underlying obligation or commitment such as an
obligation issued in connection with a leasing arrangement. The payment of
principal and interest on private activity and industrial development bonds
generally is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Municipal securities include general obligation notes, tax anticipation notes,
revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes, and construction loan notes. Municipal bonds
include general obligation bonds, revenue or special obligation bonds, private
activity and industrial development bonds.
The Louisiana Fund currently contemplates that it will not invest more than 25%
of its total assets (at market value at the time of purchase) in: (a)
securities, the interest of which is paid from revenues of projects with
similar characteristics; or (b) industrial development bonds.
OBLIGATIONS OF SUPRANATIONAL ENTITIES--Supranational entities are entities
established through the joint participation of several governments, including
the Asian Development Bank, the Inter-American Development Bank, International
Bank for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and the Nordic Investment
Bank. The governmental members, or "stock holders," usually make initial
capital contributions to the supranational entity and, in many cases, are
committed to make additional capital contributions if the supranational entity
is unable to repay its borrowings.
OPTIONS--Put and call options for various securities and indices are traded on
national securities exchanges. Options may be used by a Fund from time to time
as the Adviser deems to be appropriate. Options will generally be used for
hedging purposes.
A put option gives the purchase of the option the right to sell, and the writer
the obligation to buy, the underlying security at any time during the option
period. A call option gives the purchaser of the option the right to buy, and
the writer of the option the obligation to sell, the underlying security at any
time during the option period. The premium paid to the writer is the
consideration for undertaking the obligations under the option contract. The
initial purchase (sale) of an option contract is an "opening transaction." In
order to close out an option position, a Fund may enter into a "closing
transaction"--the sale (purchase) of an option contract on the same security
with the same exercise price and expiration date as the option contract
originally opened.
Although a Fund will engage in option transactions as hedging transactions,
there are risks associated with such investments including the following: (i)
the success of a hedging strategy may depend on the ability of the Adviser to
predict movements in the prices of the individual securities, fluctuations in
markets and movements in interest rates; (ii) there may be an imperfect or no
correlation between the changes in market value of the securities held by a
Fund and the prices of options; (iii) there may not be a liquid secondary
market for options; and (iv) while a Fund will receive a premium when it writes
covered call options, it may not participate fully in a rise in the market
value of the underlying security. Each Fund is permitted to engage in option
transactions with respect to securities that are permitted investments and
related indices. Any Fund that writes call options will write only covered call
options.
The aggregate value of option positions may not exceed 10% of a Fund's net
assets as of the time such options are entered into by a Fund.
PRIVATIZATIONS--Privatizations are foreign government programs for selling all
or part of the
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36
interests in government owned or controlled enterprises. The ability of a U.S.
entity to participate in privatizations in certain foreign countries may be
limited by local law, or the terms on which a Fund may be permitted to
participate may be less advantageous than those applicable for local investors.
There can be no assurance that foreign governments will continue to sell their
interests in companies currently owned or controlled by them or that
privatization programs will be successful.
RECEIPTS--TRs, TIGRs and CATS--interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury obligations into
a special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
"Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts" ("TIGRs"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). Each Fund other
than the Louisiana Fund is permitted to invest in receipts.
STRIPS, TRs, TIGRs and CATS are sold as zero coupon securities which means that
they are sold at a substantial discount and redeemed at face value at their
maturity date without interim cash payments of interest or principal. The
amount of this discount is accrued over the life of the security and
constitutes the income earned on the security for both accounting and tax
purposes. Because of these features, receipts may be subject to greater price
volatility than interest paying U.S. Treasury Obligations. See also "Taxes".
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. Repurchase agreements must be fully collateralized
at all times. A Fund bears a risk of loss in the event the other party defaults
on its obligations and the Fund is delayed or prevented from its right to
dispose of the collateral. A Fund will enter into repurchase agreements only
with financial institutions deemed to present minimal risk of bankruptcy during
the term of the agreement based on established guidelines. Repurchase
agreements are considered loans under the 1940 Act.
RESTRICTED SECURITIES--Restricted securities are securities that may not be
sold freely to the public absent registration under the Securities Act of 1933
or an exemption from registration.
SECURITIES LENDING--All Funds are permitted to engage in securities lending,
under which securities are loaned pursuant to agreements requiring that the
loan be continuously secured by collateral consisting of cash or securities of
the U.S. Government equal to at least 100% of the market value of the
securities lent. A Fund will continue to receive interest on the securities
lent while simultaneously earning interest on the investment of cash
collateral. Collateral is marked to market daily to provide a level of
collateral at least equal to the value of the securities lent. There may be
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially or become
insolvent.
SECURITIES OF FOREIGN ISSUERS--There are certain risks connected with investing
in foreign securities. These include risks of adverse political and economic
developments (including possible governmental seizure or nationalization of
assets), the possible imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting requirements, the
possibility that there will be less information on such securities and their
issuers available to the public, the difficulty of obtaining or enforcing court
judgments abroad, restrictions on foreign investments in other jurisdictions,
difficulties in effecting repatriation of capital invested abroad and
difficulties in transaction settlements and the effect of delay on shareholder
equity. Foreign securities may be subject to foreign taxes, and may be less
marketable than comparable U.S. securities. The value of a Fund's investments
denominated in foreign currencies will depend on
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37
the relative strengths of those currencies and the U.S. dollars, and a Fund may
be affected favorably or unfavorably by changes in the exchange rates or
exchange control regulations between foreign currencies and the U.S. dollar.
Changes in foreign currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains if any, to be distributed to
shareholders by a Fund. Furthermore, emerging market countries may have less
stable political environments than more developed countries. Also it may be
more difficult to obtain a judgement in a court outside the United States.
SHORT SALES-- A short sale is "against the box" if at all times during which
the short position is open, a Fund owns at least an equal amount of the
securities or securities convertible into, or exchangeable without further
consideration for, securities of the same issue as the securities that are sold
short.
SWAPS, CAPS, FLOORS AND COLLARS--Interest rate swaps, mortgage swaps, currency
swaps and other types of swap agreements such as caps, floors and collars are
designed to permit the purchaser to preserve a return or spread on a particular
investment or portion of its portfolio, and to protect against any increase in
the price of securities, a Fund anticipates purchasing at a later date. In a
typical interest rate swap, one party agrees to make regular payments equal to
a floating interest rate times a "notional principal amount" in return for
payments equal to a fixed rate times the same amount for a specific period of
time. Swaps may also depend on other prices or rates such as the value of an
index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party.
Swap agreements will tend to shift a Fund's investment exposure from one type
of investment to another. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a Fund's investment and its
share price and yield.
TIME DEPOSITS--Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market. Time deposits are considered to be illiquid
securities. All Funds are permitted to invest in time deposits.
U.S. GOVERNMENT AGENCY OBLIGATIONS--Obligations issued or guaranteed by
agencies of the United States Government, including, among others, the Federal
Farm Credit Bank, the Federal Housing Administration and the Small Business
Administration, and obligations issued or guaranteed by instrumentalities of
the United States Government, including, among others, the Federal Home Loan
Mortgage Corporation, the Federal Land Banks and the United States Postal
Service. Some of these securities are supported by the full faith and credit of
the United States Treasury (e.g., Government National Mortgage Association),
others are supported by the right of the issuer to borrow from the Treasury
(e.g., Federal Farm Credit Bank), while still others are supported only by the
credit of the instrumentality (e.g., Federal National Mortgage Association).
Guarantees of principal by agencies or instrumentalities of the United States
Government may be a guarantee of payment at the maturity of the obligation so
that in the event of a default prior to maturity there might not be a market
and thus no means of realizing on the obligation prior to maturity. Guarantees
as to the timely payment of principal and interest do not extend to the value
or yield of these securities nor to the value of the Fund's shares.
U.S. GOVERNMENT SECURITIES--Any guaranty by the U.S. Government of the
securities in which any Fund invests guarantees only the payment of principal
and interest on the guaranteed security and does not guarantee the yield or
value of that security or the yield or value of shares of that Fund.
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes
and bonds issued
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by the U.S. Treasury and separately traded interest and principal component
parts of such obligations that are transferable through the Federal book-entry
system known as Separately Traded Registered Interest and Principal Securities
("STRIPS"). All Funds are permitted to invest in U.S. Treasury Obligations.
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain of the obligations purchased by
the Funds may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices. The
interest rates on these securities may be reset daily, weekly, quarterly or
some other reset period, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates. A demand instrument with
a demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such securities. All Funds are permitted to invest in
variable and floating rate instruments.
WARRANTS--instruments giving holders the right, but not the obligation, to buy
shares of a company at a given price during a specified period. The Equity
Funds are permitted to invest in warrants.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES--When-issued or delayed delivery
basis transactions involve the purchase of instrument with payment and delivery
taking place in the future. Delivery of and payment for these securities may
occur a month or more after the date of the purchase commitment. To the extent
required by the 1940 Act, a Fund will maintain with the custodian a separate
account with liquid high grade debt securities or cash in an amount at least
equal to these commitments. The interest rate realized on these securities is
fixed as of the purchase date and no interest accrues to the Fund before
settlement. These securities are subject to market fluctuation due to changes
in market interest rates and it is possible that the market value at the time
of settlement could be higher or lower than the purchase price if the general
level of interest rates has changed. Although a Fund generally purchases
securities on a when-issued or forward commitment basis with the intention of
actually acquiring securities for its portfolio, a Fund may dispose of a when-
issued security or forward commitment prior to settlement if deems it
appropriate.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Summary..................................................................... 2
Expense Summary............................................................. 4
Financial Highlights........................................................ 8
The Trust................................................................... 12
Investment Objectives and Policies.......................................... 12
General Investment Policies................................................. 15
Investment Limitations...................................................... 16
How to Purchase Shares...................................................... 17
Alternative Sales Charge Options............................................ 18
Exchanges................................................................... 21
Redemption of Shares........................................................ 21
</TABLE>
<TABLE>
<S> <C>
The Adviser................................................................. 23
Small Cap Growth and International Equity Portfolios........................ 24
The Administrator........................................................... 25
The Shareholder Servicing Agent and Transfer Agent.......................... 25
The Distributor............................................................. 25
Performance................................................................. 26
Taxes....................................................................... 27
General Information......................................................... 28
Risk Factors Relating to the Feeder Funds and the Portfolios................ 30
Description of Permitted Investments and Risk Factors....................... 30
</TABLE>
<PAGE>
MARQUIS FUNDS(R): Statement of Additional Information
Investment Adviser: First National Bank of Commerce in New Orleans
This Statement of Additional Information is not a prospectus. It provides
information about the activities and operations of Marquis Funds (the "Trust")
in addition to the information provided in the Trust's prospectuses dated
____________________ , 1997 and supplemented (the "Prospectuses") and should be
read in conjunction with a Prospectus. Prospectuses may be obtained through the
Trust's shareholder servicing and transfer agent, DST Systems, Inc., 1004
Baltimore Street, Kansas City, Missouri 64105 (1-800-471-1144).
TABLE OF CONTENTS
The Trust.......................................................................
Additional Description of Permitted Investments.................................
Investment Limitations..........................................................
Non-Fundamental Policies........................................................
The Adviser.....................................................................
The Administrator...............................................................
The Distributor.................................................................
Trustees and Officers of the Trust..............................................
Computation of Yield............................................................
Calculation of Total Return.....................................................
Purchase and Redemption of Shares...............................................
Conversion Feature..............................................................
Letter of Intent................................................................
Determination of Net Asset Value................................................
Taxes...........................................................................
Fund Transactions...............................................................
Trading Practices and Brokerage.................................................
Description of Shares...........................................................
Shareholder Liability...........................................................
Limitation of Trustees' Liability...............................................
5% Shareholders.................................................................
Financial Information...........................................................
__________________________, 1997
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<PAGE>
THE TRUST
Marquis Funds(R) is an open-end management investment company established under
Massachusetts law as a "Massachusetts business trust" under an Agreement and
Declaration of Trust dated as of June 29, 1993 (the "Declaration of Trust").
The Declaration of Trust permits the Trust to offer separate series of units of
beneficial interest ("shares") and different classes of shares of each series.
The Trust consists of eleven series: the Government Securities Fund, the
Louisiana Tax-Free Income Fund (the "Louisiana Fund"), the Investment Grade
Income Fund, the Balanced Fund (formerly the "Growth and Income Fund"), the
Value Equity Fund, the Growth Equity Fund, the Small Cap Equity Fund, the
International Equity Fund; and the Treasury Securities Money Market Fund, the
Institutional Money Market Fund, and the Tax Exempt Money Market Fund (the
"Money Market Funds") (collectively, the "Funds"). Each Fund is a diversified
mutual fund, except the Louisiana Fund, which is non-diversified. Except for
differences between the Class A and Class B shares of the Government Securities
Fund, the Louisiana Fund, the Investment Grade Income Fund (together, the "Fixed
Income Funds"), the Balanced Fund, the Value Equity Fund, the Growth Equity
Fund, the Small Cap Equity Fund and the International Equity Fund (together, the
"Equity Funds"), pertaining to sales loads, service fees, dividends, voting
rights and distribution plans, and differences between the Trust Class, Retail
Class and Cash Sweep Class shares of the Treasury Securities Money Market Fund
pertaining to distribution costs, distribution plans, dividends and voting
rights, each share of each Fund represents an equal proportionate interest in
that Fund. See "Description of Shares." Capitalized terms not defined herein
are defined in the Prospectuses. No investment in shares of a Fund should be
made without first reading that Fund's Prospectus carefully.
The Small Cap Equity Fund expects to invest up to 100% of its assets in the
Small Cap Growth Portfolio, a separate series of SEI Institutional Managed Trust
("SIMT"). The International Equity Fund expects to invest up to 100% of its
assets in the International Equity Portfolio, a separate series of SEI
International Trust ("SIT"). The Small Cap Growth Portfolio and the
International Equity Portfolio are referred to herein as the "Portfolios."
The investment policies of the Small Cap Equity Fund and the International
Equity Fund will be substantially similar to those of the Small Cap Growth
Portfolio and International Equity Portfolio, respectively, should the Funds
withdraw from the Corporate Master-Feeder(TM) structure and the Adviser manage
their assets directly.
Unless otherwise indicated, policies with respect to "a Fund," "all Funds" or
"Equity Funds" includes the Portfolios.
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<PAGE>
ADDITIONAL DESCRIPTION OF PERMITTED INVESTMENTS
Variable and Floating Rate Notes
All Funds may invest in variable rate notes and floating rate notes (together,
"adjustable interest rate notes"). The Fixed Income Funds may invest in
adjustable interest rate notes issued by or on behalf of states (including the
District of Columbia), territories and possessions of the United States and
their respective authorities, agencies, instrumentalities and political
subdivisions; such notes constitute a form of Municipal Securities. A variable
--------
rate note is a note whose terms provide for the adjustment of its interest rate
- ---------
on set dates and which, upon such adjustment, can reasonably be expected to have
a market value that approximates its par value; the degree to which a variable
rate note's market value approximates its par value will depend on the frequency
of the readjustment of the note's interest rate and the length of time that must
elapse before the next readjustment. A floating rate note is a note whose terms
------------------
provide for the adjustment of its interest rate whenever a specified interest
rate changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by a Fund, the Fund may seek to resell the note at any time to a third
party. The absence of an active secondary market, however, could make it
difficult for the Fund to dispose of a variable or floating rate note in the
event the issuer of the note defaulted on its payment obligations, and the Fund
could, as a result or for other reasons, suffer a loss to the extent of the
default. In addition, a variable or floating rate demand note with a demand
notice exceeding seven days may be considered illiquid if there is no secondary
market for such securities. Variable or floating rate notes may be secured by
bank letters of credit.
For the Money Market Funds only, variable and floating rate notes will be deemed
to have maturities as follows:
1. A variable rate note, the principal amount of which is scheduled on the
face of the instrument to be paid in thirteen months or less, will be deemed by
a Fund to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
2. A variable rate note that is subject to a demand feature will be deemed
by a Fund to have a maturity equal to the longer of the period remaining until
the next readjustment of the interest rate or the period remaining until the
principal amount can be recovered through demand.
3. A floating rate note that is subject to a demand feature will be deemed
by a Fund to have a maturity equal to the period remaining until the principal
amount can be recovered through demand.
B-3
<PAGE>
As used above, a note is "subject to a demand feature" where the Fund is
entitled to receive the principal amount of the note either at any time on no
more than thirty days' notice or at specified intervals not exceeding thirteen
months and upon no more than thirty days' notice.
The Fixed Income Funds and the Equity Funds may invest in variable amount master
demand notes, which may or may not be backed by bank letters of credit. These
variable rate notes permit the investment of fluctuating amounts at varying
market rates of interest pursuant to direct arrangements between the Trust, as
lender, and the borrower. Such notes provide that the interest rate on the
amount outstanding varies on a daily, weekly or monthly basis depending upon a
stated short-term interest rate index. Both the lender and the borrower have
the right to reduce the amount of outstanding indebtedness at any time. There
is no secondary market for the notes. It is not generally contemplated that
such instruments will be traded.
Bank Obligations
The Funds are not prohibited from investing in obligations of banks that are
clients of SEI Corporation ("SEI"). However, the purchase of shares of the
Funds by such banks or by their customers will not be a consideration in
determining which bank obligations the Funds will purchase. The Funds will not
purchase obligations of the Adviser.
Forward Foreign Currency Contracts
The International Equity Portfolio may invest in forward foreign currency
contracts. Forward foreign currency contracts involve an obligation to purchase
or sell a specified currency at a future date at a price set at the time of the
contract. Forward currency contracts do not eliminate fluctuations in the values
of portfolio securities but rather allow the Portfolio to establish a rate of
exchange for a future point in time.
When entering into a contract for the purchase or sale of a security in a
foreign currency, the Portfolio may enter into a foreign forward currency
contract for the amount of the purchase or sale price to protect against
variations, between the date the security is purchased or sold and the date on
which payment is made or received, in the value of the foreign currency relative
to the United States dollar or other foreign currency.
Also, when a Money Manager anticipates that a particular foreign currency may
decline substantially relative to the United States dollar or other leading
currencies, in order to reduce risk, the Portfolio may enter into a forward
contract to sell, for a fixed amount, the amount of foreign currency
approximating the value of its securities denominated in such foreign currency.
With respect to any such forward foreign currency contract, it will not
generally be possible to match precisely the amount covered by that contract and
the value of the securities involved due to changes in the values of such
securities resulting
B-4
<PAGE>
from market movements between the date the forward contract is entered into and
the date it matures. In addition, while forward currency contracts may offer
protection from losses resulting from declines in value of a particular foreign
currency, they also limit potential gains which might result from increases in
the value of such currency. The Portfolio will also incur costs in connection
with forward foreign currency contracts and conversions of foreign currencies
into United States dollars.
Government National Mortgage Association ("GNMA") Certificates
The Fixed Income Funds and the Equity Funds may invest in securities issued by
GNMA, a wholly-owned U.S. Government corporation which guarantees the timely
payment of principal and interest. The market value and interest yield of these
instruments can vary due to market interest rate fluctuations and early
prepayments of underlying mortgages. These securities represent ownership in a
pool of federally insured mortgage loans. GNMA certificates consist of
underlying mortgages with a maximum maturity of 30 years. However, due to
scheduled and unscheduled principal payments, GNMA certificates have a shorter
average maturity and, therefore, less principal volatility than a comparable 30-
year bond. Since prepayment rates vary widely, it is not possible to predict
accurately the average maturity of a particular GNMA pool. The scheduled
monthly interest and principal payments relating to mortgages in the pool will
be "passed through" to investors. GNMA securities differ from conventional
bonds in that principal is paid back to the certificate holders over the life of
the loan rather than at maturity. As a result, there will be monthly scheduled
payments of principal and interest. In addition, there may be unscheduled
principal payments representing prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available from
other types of U.S. Government securities, GNMA certificates may be less
effective than other types of securities as a means of "locking in" attractive
long-term rates because of the prepayment feature. For instance, when interest
rates decline, the value of a GNMA certificate likely will not rise as much as
comparable debt securities due to the prepayment feature. In addition, these
prepayments can cause the price of a GNMA certificate originally purchased at a
premium to decline in price to its par value, which may result in a loss.
Swap, Caps, Floors and Collars
The International Equity Portfolio may enter into swap, cap, floor and collar
arrangements. In a typical cap or floor agreement, one party agrees to make
payments only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specific interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate falls
below an agreed-upon level. An interest rate collar combines elements of buying
a cap and selling a floor.
B-5
<PAGE>
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a
result, swaps can be highly volatile and have a considerable impact on the
Portfolio's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. The Portfolio may also suffer
losses if it is unable to terminate outstanding swap agreements or reduce its
exposure through offsetting transactions. Any obligation the Portfolio may have
under these types of arrangements will covered by setting aside liquid high
grade securities in a segregated account. The Portfolio will enter into swaps
only with counterparties believed to be creditworthy.
Mortgage-Backed Securities
The Government Securities Fund, the Balanced Fund and Investment Grade Income
Fund may, in addition to investing in GNMA securities, invest in other mortgage-
backed securities, principally collateralized mortgage obligations ("CMOs") and
real estate mortgage investment conduits ("REMICs"). CMOs are securities
collateralized by mortgages, mortgage pass-throughs, mortgage pay-through bonds
(bonds representing an interest in a pool of mortgages where the cash flow
generated from the mortgage collateral pool is dedicated to bond repayment), and
mortgage-backed bonds (general obligations of the issuers payable out of the
issuers' general funds and additionally secured by a first lien on a pool of
single-family detached properties).
Many CMOs are issued with a number of classes or series that have different
maturities and are retired in sequence. Investors purchasing such CMOs in the
shortest maturities receive or are credited with their pro rata portion of the
scheduled payments of interest and principal on the underlying mortgages plus
all unscheduled prepayments of principal up to a predetermined portion of the
total CMO obligation. Until that portion of such CMO obligation is repaid,
investors in the longer maturities receive interest only. Accordingly, the CMOs
in the longer maturity series are less likely than other mortgage pass-throughs
to be prepaid prior to their stated maturity. Although some of the mortgages
underlying CMOs may be supported by various types of insurance, and some CMOs
may be backed by GNMA certificates or other mortgage pass-throughs issued or
guaranteed by U.S. Government agencies or instrumentalities, the CMOs themselves
generally are not guaranteed.
REMICs, which were authorized under the Internal Revenue Code of 1986, as
amended (the "Code"), are private entities formed for the purpose of holding a
fixed pool of mortgages secured by an interest in real property. REMICs are a
form of CMO, and issue multiple classes of securities.
B-6
<PAGE>
Asset-Backed Securities
The Government Securities, Balanced and Investment Grade Income Funds may invest
in asset-backed securities including company receivables, truck and auto loans,
leases, and credit card receivables. Asset-backed securities, like mortgage-
backed securities, represent ownership of a pool of obligations. The payment of
principal and interest on non-mortgage asset-backed securities may be guaranteed
up to certain amounts and for a certain time period by a letter of credit issued
by a financial institution (such as a bank or insurance company) unaffiliated
with the issuers of such securities. In addition, these issues typically have a
short-intermediate maturity structure depending on the paydown characteristics
of the underlying financial assets which are passed through to the security
holder. The purchase of non-mortgage asset-backed securities raises risk
considerations peculiar to the financing of the instruments underlying such
securities. For example, due to the manner in which the issuing organizations
may perfect their interests in their respective obligations, there is a risk
that another party could acquire an interest in the obligations superior to that
of the holders of the asset-backed securities. Also, in most states the
security interest in a motor vehicle must be noted on the certificate of title
to perfect a security interest against competing claims of other parties. Due
to the large number of vehicles involved, however, the certificate of title to
each vehicle financed, pursuant to the obligations underlying the asset-backed
securities, usually is not amended to reflect the assignment of the seller's
security interest for the benefit of the holders of the asset-backed securities.
Therefore, the possibility exists that recoveries on repossessed collateral may
not, in some cases, be available to support payments on those securities. In
addition, various state and Federal laws give the motor vehicle owner the right
to assert against the holder of the owner's obligation certain defenses such
owner would have against the seller of the motor vehicle. The assertion of such
defenses could reduce payments on the related asset-backed securities. Insofar
as credit card receivables are concerned, credit card holders are entitled to
the protection of a number of state and Federal consumer credit laws, many of
which give such holders the right to set off certain amounts against balances
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 card holder. Asset-backed securities entail
prepayment risk, which may vary depending on the type of asset but is generally
less than the prepayment risk associated with mortgage-backed securities.
The development of non-mortgage asset-backed securities is at an early stage
compared to mortgage-backed securities. While the market for asset-backed
securities is becoming increasingly liquid, the market for non-mortgage asset-
backed securities is not as well developed as that for mortgage-backed
securities guaranteed by government agencies or instrumentalities. The Adviser
intends to limit its purchases of non-mortgage asset-backed securities to
securities that are readily marketable at the time of purchase.
B-7
<PAGE>
Separately Traded Interest and Principal Securities ("STRIPS")
Each Fund may invest in STRIPS which are component parts of U.S. Treasury
Securities traded through the Federal Book-Entry System. The Adviser will only
purchase STRIPS that it determines are liquid or, if illiquid, do not violate
the Fund's investment policy concerning investments in illiquid securities.
Consistent with Rule 2a-7 of the Investment Company Act of 1940 (the "1940
Act"), the Adviser will purchase for the Money Market Funds only those STRIPS
that have a remaining maturity of 397 days or less; therefore, the Money Market
Funds currently may only purchase interest component parts of U.S. Treasury
Securities. While there is no limitation on the percentage of a Fund's assets
that may be comprised of STRIPS, the Adviser will monitor the level of such
holdings to avoid the risk of impairing shareholders' redemption rights and of
deviations in the value of shares of the Money Market Funds.
Repurchase Agreements
Each Fund may enter into repurchase agreements with primary securities dealers
recognized by the Federal Reserve Bank of New York or with national member banks
as defined in Section 3(d)(1) of the Federal Deposit Insurance Act, as amended.
The repurchase agreement will have an agreed-upon price (including principal and
interest) and an agreed-upon repurchase date within a number of days (usually
not more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which is unrelated to
the coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
The repurchase agreements entered into by the Funds will provide that the
underlying security at all times shall have a value at least equal to 100% of
the resale price stated in the agreement; the Adviser monitors compliance with
this requirement. Under all repurchase agreements entered into by a Fund, the
Custodian or its agent must take possession of the underlying collateral.
However, if the seller defaults, the Fund could realize a loss on the sale of
the underlying security to the extent that the proceeds of sale including
accrued interest are less than the resale price provided in the agreement
including interest. In addition, even though the Federal Bankruptcy Code
provides protection for proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal and interest
if the Fund is treated as an unsecured creditor and required to return the
underlying security to the seller's estate.
Municipal Securities
Municipal Securities -- The two principal classifications of Municipal
- --------------------
Securities are
B-8
<PAGE>
"general obligation" and "revenue" issues. General obligation issues are issues
involving the credit of an issuer possessing taxing power and are payable from
the issuer's general unrestricted revenues, although the characteristics and
method of enforcement of general obligation issues may vary according to the law
applicable to the particular issuer. Revenue issues are payable only from the
revenues derived from a particular facility or class of facilities or other
specific revenue source. The Louisiana Fund may also invest in "moral
obligation" issues, which are normally issued by special purpose authorities.
Moral obligation issues are not backed by the full faith and credit of the state
and are generally backed by the agreement of the issuing authority to request
appropriations from the state legislative body. Municipal Securities include
debt obligations issued by governmental entities to obtain funds for various
public purposes, such as the construction of a wide range of public facilities,
the refunding of outstanding obligations, the payment of general operating
expenses, and the extension of loans to other public institutions and
facilities. Certain private activity bonds that are issued by or on behalf of
public authorities to finance various privately-owned or operated facilities are
included within the term "Municipal Securities." Private activity bonds and
industrial development bonds are generally revenue bonds, the credit and quality
of which are directly related to the credit of the private user of the
facilities.
Municipal Securities may also include general obligation notes, tax anticipation
notes, bond anticipation notes, revenue anticipation notes, project notes,
certificates of indebtedness, demand notes, tax-exempt commercial paper,
construction loan notes and other forms of short-term, tax-exempt loans. Such
instruments are issued with a short-term maturity in anticipation of the receipt
of tax funds, the proceeds of bond placements or other revenues. Project notes
are issued by a state or local housing agency and are sold by the Department of
Housing and Urban Development. While the issuing agency has the primary
obligation with respect to its project notes, they are also secured by the full
faith and credit of the United States through agreements with the issuing
authority which provide that, if required, the Federal government will lend the
issuer an amount equal to the principal of and interest on the project notes.
The quality of Municipal Securities, both within a particular classification and
between classifications, will vary, and the yields on Municipal Securities
depend upon a variety of factors, including general money market conditions, the
financial condition of the issuer (or other entity whose financial resources are
supporting the securities), general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating(s)
of the issue. In this regard, it should be emphasized that the ratings of any
NRSRO are general and are not absolute standards of quality. Municipal
Securities with the same maturity, interest rate and rating(s) may have
different yields, while Municipal Securities of the same maturity and interest
rate with different rating(s) may have the same yield.
An issuer's obligations under its Municipal Securities are subject to the
provisions of
B-9
<PAGE>
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon the
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the payment
of interest on and principal of its Municipal Securities may be materially
adversely affected by litigation or other conditions.
Municipal Leases -- The Louisiana Fund and Tax Exempt Money Market Fund may
- ----------------
invest in instruments, or participations in instruments, issued in connection
with lease obligations or installment purchase contract obligations of
municipalities ("municipal lease obligations"). Although municipal lease
obligations do not constitute general obligations of the issuing municipality, a
lease obligation is ordinarily backed by the municipality's covenant to budget
for, appropriate funds for, and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses, which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose in the relevant years. Municipal lease obligations are a
relatively new form of financing, and the market for such obligations is still
developing. Municipal leases will be treated as liquid only if they satisfy
criteria set forth in guidelines established by the Board of Trustees, and there
can be no assurance that a market will exist or continue to exist for any
municipal lease obligation.
Puts on Municipal Securities -- The Louisiana Fund and Tax Exempt Money Market
- ----------------------------
Fund may acquire "puts" with respect to its acquisition of Municipal Securities.
A put is a right to sell a specified security (or securities) within a specified
period of time at a specified exercise price. The Fund may sell, transfer, or
assign the put only in conjunction with the sale, transfer, or assignment of the
underlying security or securities.
The amount payable upon the exercise of a put is normally (i) the Fund's
acquisition cost of the Municipal Securities (excluding any accrued interest
which the Fund paid on the acquisition), less any amortized market premium or
plus any amortized market or original issue discount during the period the Fund
owned the securities, plus (ii) all interest accrued on the securities since the
last interest payment date during that period.
Puts on Municipal Securities may be acquired to facilitate the liquidity of
portfolio assets and the reinvestment of assets at a rate of return more
favorable than that of the underlying security. A Fund will generally acquire
puts only where the puts are available without the payment of any direct or
indirect consideration. However, if necessary or advisable, the Fund may pay
for puts either separately in cash or by paying a higher price for portfolio
securities which are acquired subject to the puts (thus reducing the yield to
maturity otherwise available for the same securities).
B-10
<PAGE>
Taxable Municipal Securities -- The Louisiana Fund and Tax Exempt Money Market
- ----------------------------
Fund may invest up to 20% of their net assets in Municipal Securities, such as
certain private activity or industrial revenue bonds, the interest on which is
not tax-exempt for Federal income tax purposes but which otherwise meet the
Fund's investment criteria.
Special Considerations Regarding Louisiana Municipal Securities -- The
- ---------------------------------------------------------------
concentration of investments in Louisiana Municipal Securities by the Louisiana
Fund raises special investment considerations. In particular, changes in the
economic condition and governmental policies of the State of Louisiana or its
municipalities could adversely affect the value of the Louisiana Fund and the
portfolio securities held by it. This section briefly describes current
economic trends in Louisiana.
Louisiana's economy, traditionally dependent on energy, remains mired in slow
growth as domestic oil production has slowed in recent years. As the State's
energy sector has shrunk, services have replaced energy as the leading
employment sector since the mid-1980's, with employment increasing 20% from 1988
to July 1992. Some manufacturing growth continues to take place, with jobs up
13% over the same period. Manufacturing remains concentrated in chemicals,
transportation equipment, and food products, reflecting the petrochemical
industry, shipbuilding at the Port of New Orleans, and the State's seafood
industry. Louisiana population reached its peak of 4.5 million in 1986, after
which it began to decline, reaching 4.2 million only four years later. While
the labor force experienced a similar decline, it grew at a 2.1% rate in 1991
and is projected to continue to grow slowly through the rest of the decade.
Tourism also remains a major sector of economic activity, with the New Orleans
Convention Center a major attraction. The unemployment rate for Louisiana was
7.6% as of November 1992 (versus 6.7% for November 1991), while the U.S.
experienced an unemployment rate of 7.2% for the same period.
Louisiana is the twenty-first largest state in terms of population. It is rich
in natural resources. Overall, Louisiana is the nation's third largest producer
of chemical products. It ranks second in the production of the industrial
inorganic chemicals and the manufacture of agricultural chemicals. Oil and gas
extraction, petroleum refining, chemicals and allied products combined employ
approximately 92,800 people, or 6% of the total non-agricultural employment in
Louisiana. These industries provide approximately 12% of the net wages paid to
non-agricultural employees in the State.
Louisiana has five major deepwater ports: New Orleans, Baton Rouge, Lake
Charles, the Port of South Louisiana and the Port of Plaquemine. The Port of
South Louisiana is a conglomerate of public and private facilities, handling
more waterbottom annual tonnage than any other port in the country. The Port of
New Orleans is the world's largest grain exporter and generates more than $3
billion a year in wages and taxes. The Port of Baton Rouge ranks fifth in the
nation, handling over 78 million tons per year. The Port of Baton
B-11
<PAGE>
Rouge's largest commodity is petroleum coke, and the port is one of the nation's
largest rice exporters. The Port of Lake Charles ranks 16th in the nation in
total tonnage handled. In addition to these three major ports, there are
numerous inland ports located within the State which service barge and boat
traffic. The nation's first offshore oil port (commonly referred to as the
"Superport") started full-time operations on January 1, 1982. The State,
involved in the development of the Superport since 1972, was instrumental in
promoting and financing private industry's efforts to construct deepwater port
facilities. Approximately $764 million of revenue bonds have been issued for
construction of the port complex. The Superport consists of three major
elements: (i) a marine terminal; (ii) an underground storage facility; and (iii)
a large diameter pipeline for transporting oil between the offshore and onshore
facilities. The Superport allows deep draft tankers that are unable to navigate
the Mississippi River to dock and unload crude oil for distribution to the
United States.
The agricultural sector of Louisiana's economy is comprised of the agricultural
producers and the agribusinesses which support the production, storage,
transportation, processing and marketing of agricultural products. In 1991,
13,400 identifiable Louisiana agribusiness firms employed 230,500 workers with a
total annual payroll of approximately $3.0 billion. The agricultural sector
accounted for over 19% of employment in the State and over 13% of payrolls.
Total investment in forestry and farm capital and lands is approximately $16
billion and exceeds the total asset value of the manufacturing sector.
During the period from the Fiscal Year 1981 through Fiscal Year 1987, the State
experienced operating budget deficits in six of the seven fiscal years.
Exacerbating the operating deficit problem was the highly dependent nature of
the State's budget on mineral revenues and in particular, the dramatic
fluctuations in oil prices over the past decade. At the height of the oil boom
in the early 1980's, the State derived more than 40% of its operating revenues
directly from sources related to the mineral extraction process. Today, the
percentage has dropped to about 13%, or almost a 70% reduction.
Fiscal Year 1987 ended with a deficit in the General Fund of $512 million
accumulated during the previous three fiscal years. This deficit was eliminated
through the creation of the Louisiana Recovery District in 1988 and its issuance
of $979,125,000 of bonds secured by a statewide 1% sales tax levied by the
District. Most of the bond issue proceeds were transferred to the General Fund
for the purposes of eliminating the accumulated deficit ($512 million) and
assisting the State's cash flow ($271 million).
Since 1988, the gap between General Fund expenditures and revenues has widened
for a variety of reasons: (i) new expenditures have been phased in; (ii) new tax
exemptions have been implemented; (iii) the Federal government has issued costly
mandates, most significantly in the Medicaid program; and (iv) revenues once
available to the General Fund have in recent years been dedicated for specific
purposes. Furthermore, the State's tax base -- which is comprised in part of
mineral revenues and volume-based taxes, such as those on tobacco, beer, and
liquor -- is inherently inelastic; i.e., its growth rate does not
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match or exceed the growth rate of the economy.
The State began Fiscal Year 1988 with a balance of $271 million and ended the
year with an operating surplus which, when combined with prior year adjustments
of $384 million, provided the State with an ending General Fund balance of $655
million. In Fiscal Year 1989, the State budget anticipated the use of $126
million of the surplus for the operating budget. Revenues, however, were
greater than anticipated and none of the surplus was used. In fact, Fiscal Year
1989 ended with a small operating surplus of $47 million which included $13
million of adjustments. This $47 million, when added to the $655 million
balance from the prior fiscal year, brought the accumulated surplus to $702
million as of June 30, 1990.
Approximately $284 million of the Fiscal Year 1989 surplus was used to fund the
Fiscal Year 1990 budget. As a result, the State ended Fiscal Year 1990 with an
accumulated General Fund surplus of $418 million.
The 1992 budget depleted remaining reserves and required two mid-year
expenditure adjustments totalling $115 million. A potential deficit for Fiscal
Year 1992 has been addressed by additional revenue enhancements totaling $1.159
billion. A majority of these enhancements are one time items totaling $489
million and will not be available for future years. The Office of Fiscal
Affairs and Policy Development has projected a budget gap of approximately $600
million for Fiscal Year 1994. The State is operating at a deficit and in order
for it to continue providing for current services, additional and dependable
revenues streams must be developed.
In August 1992, a state constitutional convention was convened which made
numerous proposals to limit state indebtedness and resolve other revenue and
finance issues. However, all the proposals were voted down by a statewide
referendum held on November 3, 1992.
Currently, the State is working to expand economic development activities that
will take advantage of Louisiana's replenishable resources such as timber, water
for aquaculture, fish and seafood related products and related industrial uses
of such resources. The State is also pursuing further development of its
transportation capabilities by expanding port related activities and improving
its highways and airports.
Positive results have been achieved by establishing research programs with
considerable job creation potential. The $26 million Pennington Biomedical
Research Center at Louisiana State University, in Baton Rouge, concentrates on
nutrition and preventative medicine. Since opening, the center has received a
$9.4 million grant from the United States Department of Agriculture, a $3.5
million Army contract to study nutrition and a $1.5 million donation from the
National Heart, Lung and Blood Institute. Louisiana State University is
constructing the Center for Advanced Microstructures and Devices that will
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provide hands-on experience for young scientists and engineers and improve
research capabilities in materials science by furnishing the most advanced
scientific instrumentation available. In addition, the University of
Southwestern Louisiana has devised a "factory of the future" where a product can
be developed, industry can obtain applied research for a product, existing
technology can be transferred to Louisiana industry and university students can
gain practical experience with state-of-the-art technology.
In 1990, the Louisiana Constitution was amended by the electorate to provide for
the creation and operation of a State lottery. The net proceeds from the
lottery are deposited in a special fund in the State Treasury entitled the
Lottery Proceeds Fund (the "Lottery Fund"). Although the Legislature may make
appropriations from the Lottery Fund for any purpose, amounts deposited in the
Lottery Fund cannot be appropriated for expenditure in the same calendar year in
which they are received.
The lottery began with scratch card game operations in September, 1991 and full
lottery operation on January 22, 1992. The State Lottery Commission estimated
$286 million of lottery proceeds would be raised during the 1992 calendar year.
State law provides that, after the first year of operations, the lottery
proceeds will be divided as follows: 50% to lottery winners, 35% to the State,
10% to the Commission and 5% to vendors of lottery tickets. As of December 31,
1992, for the 1992 calendar year, the State received $166,500,000 as its share
of the lottery proceeds. The Revenue Estimating Conference estimates that the
State will receive as its share of lottery proceeds $140,000,000 in the 1993
calendar year.
In 1991, the Louisiana Legislature enacted the Video Draw Poker Devices Control
Law (the "Act") for the purpose of regulating and licensing the use and
operation of video draw poker devices through the video gaming division (the
"Video Division") of the gaming enforcement section of the office of the State
police. The Act imposes annual license fees on manufacturers, distributors,
service entities, device operation device owners and licensed establishments.
In addition, each device owner must remit to the Video Division a franchise
payment equal to 22-1/2% of the net device revenue derived from the operation of
each device. All franchise payments, license fees, fines and penalties received
by the Video Division must be forwarded to the State Treasurer for immediate
deposit. The funds are first credited to the Bond Security and Redemption Fund
and then credited to the Video Draw Poker Device Fund. Monies in the Video Draw
Poker Device Fund may only be withdrawn pursuant to appropriation by the
Legislature and distributed as follows: (a) 25% to be distributed in the
following priority: (i) not exceeding $5,400,000 for district attorneys and
assistant district attorneys; (ii) remainder to municipalities and parishes in
which devices are operated to pay for enforcement of Act 1062; (b) A legislative
allocation to the Department of Public Safety & Corrections to pay for
enforcement of Act 1062; (c) Any funds remaining after payments pursuant to (a)
and (b) are deposited in the State general fund.
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As of January 4, 1993, the Treasurer's office reports that total revenues since
July 1, 1992 were $13,897,084 of which $6,632,166 is available for general fund
purposes.
In 1991, the Louisiana Legislature also enacted the Louisiana Riverboat Economic
Development and Gaming Control Act ("Act 753") to assist the growth of tourism
by the development of a riverboat industry in the State authorized to operate
regulated gaming activities. Act 753 designates certain rivers and waterways in
the State upon which riverboat gaming may be conducted and provides for the
creation within the Department of Public Safety and Corrections, a gaming
commission known as the Riverboat Gaming Commission (the "Riverboat
Commission"). The Riverboat Commission has the responsibility of licensing,
regulating and inspecting riverboat gaming facilities and enforcing Act 753 and
regulations promulgated thereunder. Act 753 allows the issuance of up to
fifteen licenses to conduct gaming activities on riverboats of new construction
(built after January 1, 1992); provided that, no more than six licenses may be
granted for the operation of riverboat gaming from any one parish.
The Louisiana Economic Development and Gaming Corporation (the "Gaming
Corporation") was created by the Louisiana Legislature in the 1992 Regular
Session ("Act 384") for the purpose of contracting with a casino operator to
provide for or furnish an official gaming establishment and to conduct casino
gaming operations at the official gaming establishment (casino). Act 384
directs that the casino be located on the site of the Rivergate Convention
Center in New Orleans. The Gaming Corporation has recently been formed, its
members confirmed by the State Senate and the Gaming Corporation is proceeding
with its organizational plans and structure. Under the casino contract, the
operator must pay a minimum of 18-1/2% of gross revenues, or $100 million
annually, whichever is higher, to the Gaming Corporation. Each quarter, the
Gaming Corporation must transfer to the State Treasury for deposit in the Casino
Gaming Proceeds Fund net revenues which are surplus to its needs. Such revenues
will be first credited to the Bond Security and Redemption Fund before credit to
the Casino Gaming Proceeds Fund. Monies in the Casino Gaming Proceeds Fund may
be allotted or expended only pursuant to legislative appropriation. Full
operation of a permanent casino is not expected to commence until the 1995-96
Fiscal Year; however, it is anticipated that a temporary casino can be
operational in the 1993-94 Fiscal Year and that a portion of the annual minimum
gaming revenues would be received on or after July 1, 1993.
In June 1992 the State also approved a five-year capital improvement plan
totalling $1.9 billion. The State also approved two bills that would establish
major new debt-issuing authorities in the State. One bill would set up the
Louisiana Airport Authority, giving it the power to sell bonds for a proposed
international airport between Baton Rouge and New Orleans. The other would
permit establishment of the Louisiana Maritime Development Authority to fund
shipyard improvements in Louisiana's cities.
The foregoing information as to certain Louisiana risk factors has been provided
in view
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of the Louisiana Fund's policy of investing in Louisiana Municipal
Securities. This information constitutes only a brief summary, does not purport
to be a complete description of Louisiana risk factors and is principally drawn
from official statements related to securities offerings of the State of
Louisiana that have come to the Fund's attention and were available as of the
date of this Statement of Additional Information.
Options on Securities and Indices
Options -- The Fixed Income Funds and the Equity Funds may trade put and call
- -------
options on permitted investments and related indices to a limited extent. Among
the strategies the Adviser may use for a Fund are: buying protective puts on
securities owned by the Fund, buying fiduciary calls on securities the Fund is
attempting to buy, and writing covered calls on securities the Fund owns.
A Fund may buy protective put options. The Fund may benefit from buying the
protective put if the price of the security already held by the Fund falls
during the option period, because the Fund may exercise the put and receive the
higher exercise price for its security. However, if the security rises in
value, the Fund will have paid a premium for the put which will expire
unexercised.
A Fund may buy fiduciary call options on securities that the Fund is trying to
buy. The Fund may benefit from buying the fiduciary call if the price of the
underlying security rises during the option period, because the Fund may
exercise the call and buy the security for the lower exercise price. If,
however, the security falls in value, the Fund will have paid a premium for the
call which will expire worthless, but will be able to buy the security at a
lower price.
A Fund may write covered call options. The advantage to the Fund of writing
covered call options is that the Fund receives additional income in the form of
the premium. However, if the security rises in value, the Fund may not fully
participate in that market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing
transaction. A closing transaction cannot be effected with respect to an option
once the option writer has received an exercise notice for such option.
The market value of an option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the pricing volatility of the underlying
security and the time remaining until the expiration date.
B-16
<PAGE>
Risk Factors in Options Transactions -- The successful use of a Fund's options
- ------------------------------------
strategies depends on, among other things, the Adviser's ability to forecast
interest rate and market movements correctly.
When it purchases an option, a Fund runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the Fund
exercises the option or enters into a closing transaction with respect to the
option during the life of the option. If the price of the underlying security
does not rise (in the case of a call) or fall (in the case of a put) to an
extent sufficient to cover the option premium and transaction costs, a Fund will
lose part or all of its investment in the option. This risk differs from the
risk involved with an investment by a Fund in the underlying securities, since
the Fund may continue to hold its investment in those securities notwithstanding
the lack of a change in price of those securities.
The effective use of options also depends on a Fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so.
Although a Fund will take an option position only if the Adviser believes a
liquid secondary market exists for the option, there is no assurance that such a
market does or will continue to exist. If a secondary trading market in options
were to become unavailable, a Fund could no longer engage in closing
transactions; even when a liquid secondary market does generally exist, there
can be no assurance that a Fund will be able to effect a closing transactions on
a given option at any particular time or at an acceptable price. Lack of
investor interest might adversely affect the liquidity of the market for
particular options or series of options. A marketplace may discontinue trading
of a particular option or options generally. In addition, a market could become
temporarily unavailable if unusual events, such as volume in excess of trading
or clearing capability, were to interrupt normal market operations. A
marketplace may at times find it necessary to impose restrictions on particular
types of options transactions, which may limit a Fund's ability to realize its
profits or limit its losses.
Disruptions in the markets for the securities underlying options purchased or
sold by a Fund could result in losses on the options. If trading is interrupted
in an underlying security, the trading of options on that security is normally
halted as well. As a result, a Fund as purchaser or writer of an option will be
unable to close out its position until options trading resumes, and it may be
faced with losses if trading in the security reopens at a substantially
different price. In addition, the Options Clearing Corporation (OCC) or other
options markets may impose exercise restrictions. If a prohibition on exercise
is imposed at the time when trading in the option has also been halted, a Fund
as purchaser or writer of an option will be locked into its position until one
of the two restrictions has been lifted. If a prohibition on exercise remains
in effect until an option owned by a Fund has expired, the Fund could lose the
entire value of its option.
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<PAGE>
Special risks are presented by internationally-traded options. Because of time
differences between the United States and the various foreign countries, and
because different holidays are observed in different countries, foreign options
markets may be open for trading during hours or on days when U.S. markets are
closed. As a result, option premiums may not reflect the current prices of the
underlying interest in the United States.
Futures Contracts on Securities; Options on Futures
Securities Futures Contracts -- Each Fixed Income Fund and Equity Fund may enter
- ----------------------------
into futures contracts on securities. A futures contract sale creates an
obligation by the seller to deliver the type of instrument called for in the
contract in a specified delivery month for a stated price. A futures contract
purchase creates an obligation by the purchaser to take delivery of the type of
instrument called for in the contract in a specified delivery month at a stated
price. Futures contracts are traded in the United States only on commodities
exchanges or boards of trade, known as "contract markets," approved for such
trading by the Commodity Futures Trading Commission, and must be executed
through a futures commission merchant, or brokerage firm, that is a member of
the relevant contract market.
Although futures contracts by their terms call for actual delivery or acceptance
of securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. A Fund may elect to close some or all
of its futures positions at any time prior to their expiration. The purpose of
making such a move would be to reduce or eliminate the hedge position then
currently held by the Fund. Closing out a futures contract sale (purchase) is
effected by purchasing (selling) a futures contract for the same aggregate
amount of the specific type of financial instrument with the same delivery date.
If the price of the initial sale of the futures contract exceeds the price of
the offsetting purchase, the seller is paid the difference and realizes a gain;
if the offsetting purchase price exceeds the initial sale price, the seller
realizes a loss. If the offsetting sale price exceeds the purchase price, the
purchaser realizes a gain; if the purchase price exceeds the offsetting sale
price, the purchaser realizes a loss.
When a Fund purchases or sells a futures contract, it does not pay or receive
the purchase price; instead, the Fund is required to deposit an "initial margin"
in the form of cash and/or U.S. Government securities with its custodian in a
segregated account in the name of the futures broker. The nature of initial
margin in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the Fund to finance the transactions. Rather, initial margin is in the
nature of a performance bond or good faith deposit on the contract that is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Futures contracts also involve
brokerage costs, and closing transactions involve additional commission costs.
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<PAGE>
Subsequent payments, called "variation margin," to and from the broker are made
on a daily basis as the price of the underlying security fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as "marking to market." Final determinations of variation margin
are made when a Fund enters into a closing transaction.
Options on Securities Futures Contracts -- Each Fixed Income Fund and Equity
- ---------------------------------------
Fund may enter into written options on securities futures contracts. A Fund may
purchase and write call and put options on the futures contracts it may buy or
sell, and may enter into closing transactions with respect to such options to
terminate existing positions. A Fund may use such options on futures contracts
in lieu of writing options directly on the underlying securities or purchasing
and selling the underlying futures contracts. Such options generally operate in
the same manner as options purchased or written directly on the underlying
investments. See the section titled "Options on Securities," above.
The Fund holding or writing an option on futures may terminate its position by
selling or purchasing an offsetting option. There can be no guarantee that such
closing transactions will be available.
A Fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts pursuant to brokers'
requirements similar to those described above.
Cover for Options and Futures Contract Positions -- Transactions using futures
- ------------------------------------------------
contracts and options (other than options that a Fund has purchased) expose a
Fund to an obligation to another party. A Fund will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities or other options or futures contracts or (2) cash, receivables and
short-term debt securities with a value sufficient at all times to cover its
potential obligations not covered as provided in (1) above. Each Fund will
comply with Securities and Exchange Commission guidelines regarding cover for
these instruments and, if the guidelines so require, set aside cash, U.S.
Government securities or other liquid, high-grade debt securities in a
segregated account with its Custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding futures contract or option is open, unless they
are replaced with similar assets. As a result, the commitment of a large
portion of a Fund's assets to cover or to segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
Risks of Futures Contracts and Options Transactions -- Successful use of
- ---------------------------------------------------
securities futures contracts by a Fund is subject to the Adviser's ability to
correctly predict movements in the direction of interest rates and other
factors affecting securities markets.
B-19
<PAGE>
The purchase of options on futures contracts involves less risk to a Fund than
does the purchase or sale of futures contracts, because the maximum amount at
risk is the premium paid for the options (plus transaction costs). However,
there may be circumstances when the purchase of an option on a futures contract
would result in a loss to a Fund when the purchase or sale of the futures
contract would not, such as when there is no movement in the price of the hedged
investments. The writing of an option on a futures contract involves risks
similar to the risks, described above under "Options on Securities," involved in
the writing of options on securities.
There can be no assurance that higher-than-anticipated trading activity or other
unforeseen events will not, at times, render certain market clearing facilities
inadequate, and thereby result in the institution by exchanges of special
procedures which may interfere with the timely execution of customer orders.
Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a future contract or option thereon can vary from the
previous day's settlement price; once that limit is reached, no trades may be
made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing the liquidation
of unfavorable positions.
If a Fund were unable to liquidate a futures contract or option thereon due to
the absence of a liquid secondary market or the imposition of price limits, it
could incur substantial losses. The Fund would continue to be subject to market
risk with respect to the position. In addition, except in the case of purchased
options, the Fund would be required to make daily variation margin payments and
might be required to maintain the position being hedged by the futures contract
or option or to maintain cash or securities in a segregated account.
To reduce or eliminate a hedge position it holds, a Fund may seek to close out
that position. The ability to establish and close out positions will be subject
to the development and maintenance of a liquid secondary market. There can be
no assurance that such a market does or will continue to exist for a particular
futures contract or option. Reasons for the absence of a liquid secondary
market on an exchange include the following: (i) there may be insufficient
trading interest in certain contracts or options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of contracts or options, or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current trading volume;
or (vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of contracts or options
(or a particular class or series of contracts or options), in which event
B-20
<PAGE>
the secondary market on that exchange (or in the class or series of contracts or
options) would cease to exist, although outstanding contracts or options on the
exchange that had been issued by a clearing corporation as a result of trades on
that exchange would continue to be exercisable in accordance with their terms.
Foreign Securities
The Equity Funds may invest in U.S. dollar denominated obligations or securities
of foreign issuers. Permissible investments may consist of obligations of
foreign branches of U.S. banks and of foreign banks, including European
certificates of deposit, European time deposits, Canadian time deposits and
Yankee certificates of deposit, and investments in Canadian commercial paper,
foreign securities and Europaper.
In addition, the Equity Funds may invest in the securities of foreign issuers in
the form of American Depositary Receipts ("ADRs"). ADRs are receipts, typically
issued by a U.S. bank or trust company, that evidence ownership of underlying
securities issued by a foreign corporation. ADRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs may be available for investment through sponsored or
unsponsored facilities. A sponsored facility is established jointly by the
issuer of the ADR and the issuer of the security underlying the ADR, whereas a
depository may establish an unsponsored facility without the participation of
the issuer of the underlying security. Depositaries establishing unsponsored
facilities may not be obliged to pass on to ADR holders either voting rights on
the underlying securities or shareholder communications received from the issuer
of the underlying securities, and holders of unsponsored ADRs generally bear all
costs of the unsponsored facility.
Foreign securities may subject a Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
the possible imposition of withholding taxes on interest or other income,
possible seizure, nationalization, or expropriation of foreign deposits, the
possible establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. banks.
When-Issued Securities
Each Fund except the Value Equity, Growth Equity and Treasury Securities Money
Market
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<PAGE>
Funds may purchase debt obligations on a when-issued basis, in which case
delivery and payment normally take place on a future date. The Funds will make
commitments to purchase obligations on a when-issued basis only with the
intention of actually acquiring the securities, but may sell them before the
settlement date. During the period prior to the settlement date, the securities
are subject to market fluctuation, and no interest accrues on the securities to
the purchaser. The payment obligation and the interest rate that will be
received on the securities at settlement are each fixed at the time the
purchaser enters into the commitment. Purchasing obligations on a when-issued
basis may be used as a form of leveraging because the purchaser may accept the
market risk prior to payment for the securities. The Funds, however, will not
use such purchases for leveraging; instead, as disclosed in the Prospectus, a
Fund will set aside assets to cover its commitments. If the value of these
assets declines, the Fund will place additional liquid assets aside on a daily
basis so that the value of the assets set aside is equal to the amount of the
commitment.
Securities Lending
Each Fund may lend securities pursuant to agreements requiring that the loans be
continuously secured by cash, U.S. Government securities, or any combination of
cash and such securities, as collateral equal to 100% of the market value at all
times of the securities lent. Such loans will not be made if, as a result, the
aggregate amount of all outstanding securities loans for the Fund exceed one-
third of the value of a Fund's total assets taken at fair market value. A Fund
will continue to receive interest on the securities lent while simultaneously
earning interest on the investment of the cash collateral in U.S. Government
securities. However, a Fund will normally pay lending fees to such broker-
dealers and related expenses from the interest earned on invested collateral.
Investments made with this collateral are considered to be assets of the Fund
and must comply with the Fund's investment limitations. There may be risks of
delay in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans are made only to borrowers deemed
by the Adviser to be of good standing and when, in the judgment of the Adviser,
the consideration which can be earned currently from such securities loans
justifies the attendant risk. Any loan may be terminated by either party upon
reasonable notice to the other party. The Funds may use the Distributor or a
broker-dealer affiliate of the Adviser as a broker in these transactions.
Investment Company Shares
Each Fund may invest in shares of other investment companies, to the extent
permitted by applicable law and subject to certain restrictions. These
investment companies typically incur fees that are separate from those fees
incurred directly by the Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that shareholders would
indirectly bear a proportionate share of the operating expenses
B-22
<PAGE>
of such investment companies, including advisory fees, in addition to paying
Fund expenses. Under applicable regulations, a Fund, other than a Feeder Fund,
is prohibited from acquiring the securities of another investment company if, as
a result of such acquisition: (1) the Fund owns more than 3% of the total voting
stock of the other company; (2) securities issued by any one investment company
represent more than 5% of the Fund's total assets; or (3) securities (other than
treasury stock) issued by all investment companies represent more than 10% of
the total assets of the Fund. See also "Investment Limitations."
INVESTMENT LIMITATIONS
I. Investment Limitations of the Funds
Each Fund is subject to a number of fundamental investment restrictions that may
be changed only by a vote of a majority of the outstanding shares of that Fund.
A "majority of the outstanding shares" of the Trust or a particular Fund means
the affirmative vote, at a meeting of shareholders duly called, of the lesser of
(a) 67% or more of the votes of shareholders of the Trust or such Fund present
at a meeting at which the holders of more than 50% of the votes attributable to
shareholders of record of the Trust or such Fund are represented in person or by
proxy, or (b) the holders of more than 50% of the outstanding votes of
shareholders of the Trust or such Fund. The fundamental investment limitations
for each Portfolio are described separately.
Pursuant to these investment restrictions, no Fund will:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities
and repurchase agreements involving such securities, if, immediately
after such purchase, more than 5% of the value of its total assets would
be invested in any one issuer, or more than 10% of the outstanding voting
securities of such issuer; provided that (1) this restriction does not
--------
apply to the Louisiana Fund, (2) for the Government Securities Fund and
the Equity Funds, this restriction applies to only 75% of such Fund's
assets, and (3) the Money Market Funds may invest up to 25% of its total
assets without regard to this restriction only as permitted by applicable
laws and regulations. For purposes of this limitation, a security is
considered to be issued by the government entity (or entities) whose
assets and revenues back the security; with respect to a private activity
bond that is backed only by the assets and revenues of a non-governmental
user, a security is considered to be issued by such non-governmental
user. For purposes of this limitation, all debt securities are each
considered as one class.
2. Invest in companies for the purpose of exercising control.
B-23
<PAGE>
3. Borrow money except for temporary or emergency purposes and then only in
an amount not exceeding one-third of the value of total assets. Any
borrowing will be done from a bank and to the extent that such borrowing
exceeds 5% of the value of the Fund's assets, asset coverage of at least
300% is required. In the event that such asset coverage shall at any
time fall below 300%, the Fund shall, within three days thereafter or
such longer period as the Securities and Exchange Commission may
prescribe by rules and regulations, reduce the amount of its borrowings
to such an extent that the asset coverage of such borrowings shall be at
least 300%. This borrowing provision is included solely to facilitate
the orderly sale of portfolio securities to accommodate heavy redemption
requests if they should occur and is not for investment purposes. All
borrowings will be repaid before making additional investments and any
interest paid on such borrowings will reduce income.
4. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (3) above in aggregate amounts not to exceed 10%
of total assets taken at current value at the time of the incurrence of
such loan, except as permitted with respect to securities lending.
5. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts (except that the Fixed Income and
Equity Funds may invest in futures contracts and options on futures
contracts as disclosed in the Prospectuses) and interests in a pool of
securities that are secured by interests in real estate (except that the
Fixed Income Funds may invest in mortgage-backed securities, including
collateralized mortgage obligations, as disclosed in the Prospectus).
However, subject to their permitted investments, any Fund may invest in
companies which invest in real estate commodities or commodities
contracts.
6. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits
as necessary for the clearance of security transactions; this limitation
shall not prohibit short sales "against the box."
7. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter under Federal securities laws in selling a Fund
security.
8. Purchase securities of other investment companies except as permitted by
the 1940 Act, and the rules and regulations thereunder.
9. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the Securities and Exchange Commission.
B-24
<PAGE>
NON-FUNDAMENTAL POLICIES
No Fund may invest in warrants, except that the Equity Funds may invest in
warrants in an amount not exceeding 5% of the Fund's net assets as valued at the
lower of cost or market value. Included in that amount, but not to exceed 2% of
the Fund's net assets, may be warrants not listed on the New York Stock Exchange
or the American Stock Exchange.
No Fixed Income Fund or Equity Fund may invest in illiquid securities in an
amount exceeding, in the aggregate, 15% of that Fund's net assets, and the Money
Market Funds may not invest in illiquid securities in an amount exceeding, in
the aggregate, 10% of each Funds' net assets. An illiquid security is a
security which cannot be disposed of promptly (within seven days) and in the
usual course of business without a loss, and includes repurchase agreements
maturing in excess of seven days, time deposits with a withdrawal penalty, non-
negotiable instruments and instruments for which no market exists.
No Fund may purchase or retain securities of an issuer if, to the knowledge of
the Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of 1% of the
shares or securities of such issuer and all such officers, trustees, partners
and directors owning more than 1/2 of 1% of such shares or securities together
own more than 5% of such shares or securities.
No Fund may invest in interests in oil, gas or other mineral exploration or
development programs or oil, gas or mineral leases.
No Fund may purchase securities of any company which has (with its predecessors)
a record of less than three years continuing operations if, as a result more
than 5% of total assets (taken at fair market value) of the Fund would be
invested in such securities, except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or municipal securities which are
rated by at least two nationally recognized bond rating services. This
restriction shall not apply to investments a Fund may make in asset-backed
securities and in other investment companies, as described in the appropriate
Prospectus.
With the exception of the limitations that apply to illiquid securities, the
foregoing percentages will apply at the time of the purchase of a security and
shall not be considered violated unless an excess occurs or exists immediately
after and as a result of a purchase of such security.
II. Investment Limitations of the Small Cap Growth Portfolio
The investment limitations of Small Cap Growth Portfolio, the Portfolio in which
the Small Cap Equity Fund expects to invest up to 100% of its assets, are
separate from those of the Small Cap Equity Fund.
B-25
<PAGE>
The Small Cap Growth Portfolio may not:
1. Borrow money in an amount exceeding 33 1/3% of the value of its total assets,
provided that, for purposes of this limitation, investment strategies which
either obligate the Portfolio to purchase securities or require the Portfolio
to segregate assets are not considered to be borrowings. To the extent that
its borrowings exceed 5% of its assets, (i) all borrowings will be repaid
before making additional investments and any interest paid on such borrowings
will reduce income; and (ii) asset coverage of at least 300% is required.
2. Make loans if, as a result, more than 33 1/3% of its total assets would be
loaned to other parties, except that the Portfolio may (i) purchase or hold
debt instruments in accordance with its investment objective and policies;
(ii) enter into repurchase agreements; and (iii) lend its securities.
3. Purchase or sell real estate, physical commodities, or commodities contracts,
except that the Portfolio may purchase (i) marketable securities issued by
companies which own or invest in real estate (including real estate
investment trusts), commodities, or commodities contracts; and (ii)
commodities contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.
4. Issue senior securities (as defined in the 1940 Act) except as permitted by
rule, regulation or order of the Securities and Exchange Commission (the
"SEC").
5. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
6. Invest in interests in oil, gas, or other mineral exploration or development
programs and oil, gas or mineral leases.
The foregoing percentages will apply at the time of the purchase of a security
and shall not be considered violated unless an excess or deficiency occurs
immediately after or as a result of a purchase of such security. These
investment limitations and the investment limitations in each of the Portfolio's
Prospectus are fundamental policies of SIMT Trust and may not be changed without
shareholder approval.
NON-FUNDAMENTAL POLICIES
The following investment limitations are non-fundamental policies of SIMT and
may be changed without shareholder approval.
The Small Cap Growth Portfolio may not:
B-26
<PAGE>
1. Pledge, mortgage or hypothecate assets except to secure borrowings permitted
by the Portfolio's fundamental limitation on borrowing.
2. Invest in companies for the purpose of exercising control.
3. Purchase securities on margin or effect short sales, except that the
Portfolio may (i) obtain short-term credits as necessary for the clearance of
security transactions; (ii) provide initial and variation margin payments in
connection with transactions involving futures contracts and options on such
contracts; and (iii) make short sales "against the box" or in compliance with
the SEC's position regarding the asset segregation requirements imposed by
Section 18 of the 1940 Act.
4. Invest its assets in securities of any investment company, except (i) by
purchase in the open market involving only customary brokers' commissions;
(ii) in connection with mergers, acquisitions of assets, or consolidations;
or (iii) as otherwise permitted by the 1940 Act.
5. Purchase or retain securities of an issuer if, to the knowledge of SIMT, an
officer, trustee, partner or director of the Trust or any investment adviser
of SIMT owns beneficially more than 1/2 of the 1% of the shares or
securities of such issuer and all such officers, trustees, partners and
directors owning more than 1/2 of 1% of such shares or securities together
own more than 5% of such shares or securities.
6. Purchase securities of any company which has (with predecessors) a record of
less than three years continuing operations if, as a result, more than 5% of
the total assets (taken at fair market value) would be invested in such
securities.
7. Purchase or hold illiquid securities, i.e., securities that cannot be
disposed of for their approximate carrying value in seven days or less (which
term includes repurchase agreements and time deposits maturing in more than
seven days) if, in the aggregate, more than 15% of its net assets would be
invested in illiquid securities. Unregistered securities sold in reliance on
the exemption from registration in Section 4(2) of the 1933 Act and
securities exempt from registration on re-sale pursuant to Rule 144A of the
1933 Act may be treated as liquid securities under procedures adopted by the
Board of Trustees.
8. Purchase securities which must be registered under the 1933 Act, as amended,
before they may be sold in the public, if, in the aggregate, more than 15% of
its net assets would be invested in such restricted securities, unregistered
securities issued in reliance and the exemption from registration in Section
4(2) of the 1933 Act and securities exempted from registration upon re-sale
by Rule 144A under the 1933 Act are not deemed to be restricted securities
for purposes of this limitation.
B-27
<PAGE>
Under rules and regulations, established by the SEC, the Portfolio is prohibited
from acquiring the securities of other investment companies if, as a result of
such acquisition, the Portfolio owns more than 3% of the total voting stock of
the company; securities issued by any one investment company represent more than
5% of the total Portfolio's assets; or securities (other than treasury stock)
issued by all investment companies represent more than 10% of the total assets
of the Portfolio. The Portfolio's purchase of such investment company
securities results in the bearing of expenses such that shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees.
III. Investment Limitations of the International Equity Portfolio
The investment limitations of the International Equity Portfolio, the Portfolio
in which the International Equity Fund expects to invest up to 100% of its
assets, are separate from those of the International Equity Fund.
The International Equity Portfolio may not:
1. Make loans if, as a result, more than 33 1/3% of its total assets would be
lent to other parties, except that the Portfolio may (i) purchase or hold
debt instruments in accordance with its investment objective and policies;
(ii) enter into repurchase agreements; and (iii) lend its securities.
2. Purchase or sell real estate, physical commodities, or commodities contracts,
except that the Portfolio may purchase (i) marketable securities issued by
companies which own or invest in real estate (including real estate
investment trusts), commodities, or commodities contracts, and (ii)
commodities contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.
3. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
4. Issue senior securities (as defined in the 1940 Act), except as permitted by
rule, regulation or order of the SEC.
5. Invest in interests in oil, gas or other mineral exploration or development
programs and oil, gas or mineral leases.
Except with regard to the limitation on investing in illiquid securities, the
foregoing percentages will apply at the time of the purchase of a security and
shall not be violated unless an excess or deficiency occurs, immediately after
or as a result of a purchase of such security.
B-28
<PAGE>
These investment limitations and the investment limitations in the Prospectuses
are fundamental policies of SIT and may not be changed without shareholder
approval.
NON-FUNDAMENTAL POLICIES
The following investment limitations are non-fundamental policies of SIT and may
be changed without shareholder approval.
The International Equity Portfolio may not:
1. Pledge, mortgage or hypothecate assets except to secure borrowings permitted
by the Portfolio's fundamental limitation on borrowing.
2. Invest in companies for the purpose of exercising control.
3. Purchase securities on margin or effect short sales, except that the
Portfolio may (i) obtain short-term credits as necessary for the clearance of
security transactions, (ii) provide initial and variation margin payments in
connection with transactions involving futures contracts and options on such
contracts, and (iii) make short sales "against the box" or in compliance with
the SEC's position regarding the asset segregation requirements of Section 18
of the 1940 Act.
4. Purchase securities which must be registered under the 1933 Act, as amended,
before they may be sold to the public, if, in the aggregate, more than 15% of
its total assets would be invested in such restricted securities. Securities
exempted from registration upon resale by Rule 144A under the 1933 Act are
not deemed to be restricted securities for purposes of this limitation.
5. Purchase illiquid securities, i.e., securities that cannot be disposed of for
----
their approximate carrying value in seven days or less (which term includes
repurchase agreements and time deposits maturing in more than seven days) if,
in the aggregate, more than 15% of its total assets would be invested in
illiquid securities. Notwithstanding the foregoing, securities eligible to
be re-sold under Rule 144A of the 1933 Act may be treated as liquid
securities under procedures adopted by the SIT Board of Trustees.
6. Invest its assets in securities of any investment company, except (i) by
purchase in the open market involving only customary brokers' commissions,
(ii) in connection with mergers, acquisitions of assets, or consolidations,
or (iii) as otherwise permitted by the 1940 Act.
7. Purchase or retain securities of an issuer if, to the knowledge of SIT, an
officer, trustee, partner or director of SIT or any investment adviser of SIT
owns beneficially more than
B-29
<PAGE>
1/2 of the 1% of the shares or securities of such issuer and all such
officers, trustees, partners and directors owning more than 1/2 of 1% of such
shares or securities together own more than 5% of such shares or securities.
8. Purchase securities of any company which has (with predecessors) a record of
less than three years continuing operations if, as a result, more than 5% of
the total assets (taken at current value) would be invested in such
securities.
Except with regard to the limitation on investing in illiquid securities, the
foregoing percentages will apply at the time of the purchase of a security and
shall not be violated unless an excess or deficiency occurs, immediately after
or as a result of a purchase of such security.
THE ADVISERS AND SUB-ADVISERS
The Trust and First National Bank of Commerce in New Orleans (the "Adviser")
have entered into three separate advisory agreements (the "Advisory Agreements")
dated as of: May 13, 1996, with respect to the Tax Exempt Money Market Fund;
November 1, 1996, with respect to the Investment Grade Income Fund, Small Cap
Equity Fund and International Equity Fund; and August 17, 1993, with respect to
each of the Trust's remaining Funds. Each Advisory Agreement provides that the
Adviser shall not be protected against any liability to the Trust or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
Each Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Adviser but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by any State, the Adviser will bear the amount
of such excess.
The continuance of an Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to the
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. An Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Funds by a majority of the outstanding shares of the appropriate
Funds, on not less than 30 days' nor more than 60 days' written notice to the
Adviser, or by the Adviser on 90 days' written notice to the Trust.
For the fiscal years ended September 30, 1994 and 1995, the Funds paid the
following advisory fees:
B-30
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Advisory Fees Paid Advisory Fees Waived
----------------------------------------------
Fund 1994 1995 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury Securities Money $1,039,361 $1,460,920 N/A $478,529
Market Fund
- --------------------------------------------------------------------------------
Government Securities Fund $ 359,239 $ 433,013 N/A $148,818
- --------------------------------------------------------------------------------
Balanced Fund $ 298,645 $ 428,912 N/A $143,749
- --------------------------------------------------------------------------------
Louisiana Tax-Free Income
Fund $ 0.00 $ 6,316 $28,959 $ 27,116
- --------------------------------------------------------------------------------
Value Equity Fund $ 185,658 $ 284,586 N/A $ 83,575
- --------------------------------------------------------------------------------
Growth Equity Fund * * * *
- --------------------------------------------------------------------------------
Institutional Money * $0.00 N/A $ 5,924
Market Fund/1/
- --------------------------------------------------------------------------------
Tax Exempt Money Market * * * *
Fund
- --------------------------------------------------------------------------------
Investment Grade Income * * * *
Fund
- --------------------------------------------------------------------------------
Small Cap Equity Fund * * * *
- --------------------------------------------------------------------------------
International Equity Fund * * * *
================================================================================
</TABLE>
* Not in operation during the period.
/1/ In addition to waiving the full advisory fee for 1995, the Adviser
contributed $7,691.02.
SFM AND THE MONEY MANAGERS
SFM has received exemptive relief from the SEC that permits SFM, with the
approval of the respective SIT and SIMT Boards of Trustees, to retain Money
Managers (sub-advisers) for a Portfolio without submitting the sub-advisory
agreement to a vote of the Portfolio's shareholders. The relief permits the
non-disclosure of amounts payable by SFM under such sub-advisory agreements.
Small Cap Growth Portfolio
The SIMT advisory agreement and certain of the sub-advisory agreements provide
that SFM and each Money Manager shall not be protected against any liability to
SIMT or its shareholders by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties, or from reckless
disregard of its obligations or duties thereunder. In addition, certain of the
sub-advisory agreements provide that the Money Manager shall not be protected
against any liability to SIMT or its shareholders by reason of willful
misfeasance, bad faith or negligence on its part in the performance of its
duties, or from reckless disregard of its obligations or duties thereunder.
B-31
<PAGE>
SFM acts as the investment adviser to the Small Cap Growth Portfolio and
operates as a "manager of managers." As investment adviser, SFM oversees the
investment advisory services provided to the Small Cap Growth Portfolio and
manages the cash portion of the Portfolio's assets. Pursuant to separate sub-
advisory agreements with SFM, and under the supervision of SFM and SIMT's Board
of Trustees, the Money Managers are responsible for the day-to-day investment
management of all or a discrete portion of the assets of the Small Cap
Portfolio. The Money Managers are selected based primarily upon the research
and recommendations of SFM, which evaluates quantitatively and qualitatively
each sub-investment styles and strategies. Subject to the SIMT's Board review,
SFM allocates and, when appropriate, reallocates the Portfolio's assets among
Money Managers, monitors and evaluates Money Manager performance, and oversees
Money Managers compliance with the Portfolio's investment objective, policies
and restrictions. SFM has the ultimate responsibility for the investment
performance of the Small Cap Growth Portfolio due to its responsibility to
oversee Money Managers and recommend their hiring, termination and replacement.
For the fiscal years ended September 30, 1993, 1994 and 1995, the Portfolio paid
the following fees to SFM and the Money Managers:
<TABLE>
<CAPTION>
=====================================================================================
Advisory Fees Advisory Fees
Paid(000) Waived(000)
---------------------------------------------------
1993 1994 1995 1993 1994 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Growth Portfolio
SFM N/A N/A $269 N/A N/A $0
Investment Advisers, Inc. $469 $451 $404 $0 $0 $0
Nicholas-Applegate Capital
Management $47 $411 $406 $0 $0 $0
Pilgrim Baxter & Associates, Ltd. $47 $420 $414 $0 $0 $0
=====================================================================================
</TABLE>
International Equity Portfolio
The advisory agreement and each sub-advisory agreement with respect to the
International Equity Portfolio provides that SFM and each Money Manager shall
not be protected against any liability to SIT or its shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
SFM acts as the investment adviser to the International Equity Portfolio and
operates as a "manager of managers." As investment adviser, SFM oversees the
investment advisory services provided to the International Equity Portfolio and
manages the cash portion of the Portfolio's assets. Pursuant to separate sub-
advisory agreements with SFM, and under
B-32
<PAGE>
the supervision of SFM and the Board of Trustees, the Money Managers are
responsible for the day-to-day investment management of all or a discrete
portion of the assets of the International Equity Portfolio. The Money Managers
are selected based primarily upon the research and recommendations of SFM, which
evaluates quantitatively and qualitatively each sub-investment styles and
strategies. Subject to the SIT Board's review, SFM allocates and, when
appropriate, reallocates the Portfolio's assets among Money Managers, monitors
and evaluates Money Manager performance, and oversees Money Manager compliance
with the Portfolio's investment objective, policies and restrictions. SFM has
the ultimate responsibility for the investment performance of the International
Equity Portfolio due to its responsibility to oversee Money Managers and
recommend their hiring, termination and replacement.
For the fiscal years ended February 28, 1994, February 28, 1995, and February
29, 1996, the International Equity Portfolio paid the following fees to SFM:
<TABLE>
<CAPTION>
===================================================================================
Advisory Fees Advisory Fees
Paid (000) Waived (000)
--------------------------------------------------
1994 1995 1996 1994 1995 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
International Equity Portfolio $1,063 $1,516 $1,524 $0 $0 $0
===================================================================================
</TABLE>
THE ADMINISTRATOR
The Trust and SEI Fund Resources (the "Administrator") are parties to an
Administration Agreement dated May 13, 1996 (the "Administration Agreement").
The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Administrator in the performance of its duties or
from reckless disregard by it of its duties and obligations thereunder.
For the fiscal years ended September 30, 1994 and 1995, the Funds paid the
following administrative fees:
<TABLE>
<CAPTION>
================================================================================
Administrative Administrative
Fees Paid Fees Waived
----------------------------------------------
Fund 1994 1995 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury Securities Money $1,041,063 $1,293,016 N/A N/A
Market Fund
- --------------------------------------------------------------------------------
Government Securities Fund $ 204,922 $ 211,577 N/A N/A
- --------------------------------------------------------------------------------
Balanced Fund $ 132,490 $ 154,774 N/A N/A
================================================================================
</TABLE>
B-33
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Administrative Administrative
Fees Paid Fees Waived
----------------------------------------------
Fund 1994 1995 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Louisiana Tax-Free Income $0.00 $17,558 $11,151 $1,546
Fund
- --------------------------------------------------------------------------------
Value Equity Fund $79,890 $99,501 N/A N/A
- --------------------------------------------------------------------------------
Growth Equity Fund * * * *
- --------------------------------------------------------------------------------
Institutional Money Market * $3,949 N/A N/A
Fund
- --------------------------------------------------------------------------------
Tax Exempt Money Market * * * *
Fund
- --------------------------------------------------------------------------------
Investment Grade Income * * * *
Fund
- --------------------------------------------------------------------------------
Small Cap Equity Fund * * * *
- --------------------------------------------------------------------------------
International Equity Fund * * * *
================================================================================
</TABLE>
* Not in operation during the period.
The Administrator, a Delaware business trust, has its principal business offices
at 680 East Swedesford Road, Wayne, PA 19087-1658. SEI Financial Management
Corporation ("SFM"), a wholly-owned subsidiary of SEI Corporation ("SEI"), is
the owner of all beneficial interests in the Administrator. SEI and its
subsidiaries and affiliates, including the Administrator, are leading providers
of funds evaluation services, trust accounting systems, and brokerage and
information services to financial institutions, institutional investors and
money managers. The Administrator and its affiliates also serve as administrator
to the following other mutual funds: The Achievement Funds Trust, The Advisors'
Inner Circle Fund, The Arbor Fund, ARK Funds, Bishop Street Funds, CoreFunds,
Inc., CrestFunds, Inc., First American Funds, Inc., First American Investment
Funds, Inc., First American Strategy Funds, Inc., FMB Funds, Inc., Monitor
Funds, Morgan Grenfell Investment Trust, The PBHG Funds, Inc., The Pillar Funds,
Rembrandt Funds(R), 1784 Funds(R), SEI Asset Allocation Trust, SEI Daily Income
Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI Institutional
Managed Trust, SEI International Trust, SEI Liquid Asset Trust, SEI Tax Exempt
Trust, Stepstone Funds, STI Classic Funds, STI Classic Variable Trust and Turner
Funds.
THE DISTRIBUTOR
The Distributor -- SEI Financial Services Company serves as distributor (the
- ---------------
"Distributor") to the Trust pursuant to a Distribution Agreement dated as of
August 17, 1993, as amended and restated as of August 8, 1994, (the
"Distribution Agreement"), which will continue for successive one-year periods.
Notwithstanding the foregoing, the Distribution
B-34
<PAGE>
Agreement shall be reviewed and ratified at least annually (i) by the Trust's
Trustees or by the vote of a majority of the outstanding shares of the Trust,
and (ii) by the vote of a majority of the Trustees of the Trust who are not
parties to the Distribution Agreement or interested persons (as defined in the
1940 Act) of any party to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement will automatically terminate in the event of any assignment, as
defined in the 1940 Act, and is terminable with respect to a particular Fund on
not less than sixty days' notice by the (i) Trust's Trustees, (ii) vote of a
majority of the outstanding shares of such Fund or (iii) the Distributor.
Distribution -- As described in the Prospectuses, shares of the Trust's Funds
- ------------
are sold on a continuous basis by the Distributor. Each of the Class A shares
and the Trust Class shares are offered without distribution fees, although the
Class A shares are sold with a front-end sales load. However, neither the Class
A shares nor the Trust Class shares are subject to ongoing distribution or
service fees, or are subject to a sales charge when they are redeemed.
The Trust has adopted a distribution plan dated August 17, 1993 for the Class B
shares of each Fixed Income and Equity Fund (the "Class B Plan"), a distribution
plan dated August 17, 1993 for the Retail Class shares of the Treasury
Securities Money Market Fund (the "Retail Class Plan") and a distribution plan
dated as of August 8, 1994 for Cash Sweep Class shares of the Treasury
Securities Money Market Fund (the "Cash Sweep Class Plan"), in each case in
accordance with the provisions of Rule 12b-1 under the 1940 Act, which regulates
circumstances under which an investment company may directly or indirectly bear
expenses relating to the distribution of its shares. Each of the Class B,
Retail Class and Cash Sweep Class Plans was approved by a majority of the
Trustees, including a majority of the Trustees who are not "interested persons"
of the Trust or SEI Financial Services, as that term is defined in the 1940 Act
("Disinterested Trustees"). Continuance of each of the Class B, Retail Class
and Cash Sweep Class Plans must be approved annually by a majority of the
Trustees of the Trust and by a majority of the Disinterested Trustees. Each of
the Class B, Retail Class and Cash Sweep Class Plans requires that quarterly
written reports of amounts spent under that Plan and the purposes of such
expenditures be furnished to and reviewed by the Trustees. In accordance with
Rule 12b-1 under the 1940 Act, the Class B Plan, the Retail Class Plan or Cash
Sweep Class Plan, as applicable, may be terminated with respect to any Fund by a
vote of a majority of the Disinterested Trustees, or by a vote of a majority of
the outstanding shares of that Fund. Any of the Class B, Retail Class or Cash
Sweep Class Plans may be amended by vote of the Trust's Board of Trustees,
including a majority of the Disinterested Trustees, cast in person at a meeting
called for such purpose, except that any change that would effect a material
increase in any distribution fee with respect to a Fund requires the approval of
that Fund's shareholders.
B-35
<PAGE>
None of the Class B, Retail Class or Cash Sweep Class shares incur a sales
charge when they are purchased, but Class B shares are subject to a sales charge
if they are redeemed within five years of purchase. Pursuant to the
Distribution Agreement and the Class B Plan, Class B shares are subject to an
ongoing distribution and service fee calculated on each Fixed Income and Equity
Fund's aggregate average daily net assets attributable to its Class B shares.
Pursuant to the Distribution Agreement and the Retail Class Plan and Cash Sweep
Class Plans, shares of each class are subject to ongoing distribution and
service fees calculated on the Treasury Securities Money Market Fund's aggregate
average daily net assets attributable to shares of each such class,
respectively.
Class A shares are not subject to distribution or service fees and pay
correspondingly higher dividends per share. There can, of course, be no
guarantee that any Fund will have net income and pay dividends. However,
because initial sales charges are deducted at the time of purchase, investors in
Class A shares would not have all their funds invested initially and, therefore,
would initially own fewer shares. If you do not qualify for reduced initial
sales charges and you expect to maintain your investment for an extended period
of time, you should weigh the fact that accumulated distribution and service
fees on Class B shares may exceed the initial sales charge on Class A shares
during the life of your investment against the fact that, because of Class A's
initial sales charges, less of your initial purchase price is actually invested
in the Funds if you purchase Class A shares.
The distribution expenses incurred by the Distributor and other financial
intermediaries in connection with the sale of the shares will be paid, in the
case of Class A shares, from the proceeds of the initial sales charge and, in
the case of Class B shares, from the proceeds of the ongoing distribution and
service fees and the contingent deferred sales charge paid upon redemptions of
shares within five years of purchase.
For the fiscal year ended September 30, 1995, the Class B Government Securities,
Louisiana Tax-Free Income, Balanced, and Value Equity Funds paid $1,331.48,
$4,092.35, $7,096.91, and $5,042.52 in distribution fees, respectively. For the
fiscal year ended September 30, 1995, the Retail Class Treasury Securities Money
Market fund paid $462,751.65 in distribution fees. Excluding the fees paid for
the Retail Class Treasury Securities Money Market Fund, all of the distribution
fees paid relate exclusively to sales expenses. As of September 30, 1995, the
Growth Equity, Tax Exempt Money Market, Investment Grade Income Fund, Small Cap
Equity Fund and International Equity Fund had not commenced operations.
SFM AND SHAREHOLDER SERVICING AGENT
The Portfolios
SIT and SIMT have each entered into a Management Agreement (each, a "Management
Agreement") with SFM. Each Management Agreement provides that SFM shall not be
B-36
<PAGE>
liable for any error of judgment or mistake of law or for any loss suffered by
SIT or SIMT, respectively, in connection with the matters to which the such
Management Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of SFM in the performance of its
duties or from reckless disregard of its duties and obligations thereunder.
The continuance of each Management Agreement must be specifically approved at
least annually (i) by the vote of a majority of the SIT or SIMT Trustees or by
the vote of a majority of the outstanding voting securities of the Portfolio,
and (ii) by the vote of a majority of the Trustees of SIT or SIMT who are not
parties to the Management Agreement or an "interested person" (as that term is
defined in the 1940 Act) of any party thereto, cast in person at a meeting
called for the purpose of voting on such approval. Each Management Agreement is
terminable at any time as to a Portfolio without penalty by the Trustees of SIT
or SIMT by a vote of a majority of the outstanding shares of a Portfolio or by
SFM on not less than 30 days' nor more than 60 days' written notice.
For the fiscal years ended September 30, 1993, 1994 and 1995, the Small Cap
Growth Portfolio paid the following fees to SFM:
<TABLE>
<CAPTION>
==================================================================================
Management Fees Management Fees
Paid (000) Waived (000)
---------------------------------------------------
1993 1994 1995 1993 1994 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Growth Portfolio $377 $1,023 $1,267 $186 $259 $102
==================================================================================
</TABLE>
For the fiscal years ended February 28, 1994, February 28, 1995, and
February 29, 1996, the International Equity Portfolio paid the following fees
to SFM:
<TABLE>
<CAPTION>
==================================================================================
Management Fees Management Fees
Paid (000) Waived (000 )
----------------------------------------------------
1994 1995 1996 1994 1995 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
International Equity $1,586 $2,653 $1,312 $471 $77 $119
Portfolio
==================================================================================
</TABLE>
TRUSTEES AND OFFICERS
The Trust
The Trustees and executive officers of the Marquis Funds(R), their respective
dates of birth and their principal occupations for the last five years are set
forth below. Each may have held other positions with the named companies during
that period. Unless otherwise noted, the principal address of each Trustee and
executive officer is 680 East Swedesford Road,
B-37
<PAGE>
Wayne, Pennsylvania 19087-1658. Certain officers of the Fund also serve as
officers of The Achievement Funds Trust, Advisors' Inner Circle, The Arbor Fund,
ARK Funds, Bishop Street Funds, CoreFunds, Inc., CrestFunds, Inc., CUFUND, First
American Funds, Inc., First American Investment Funds, Inc., FMB Funds, Inc.,
Monitor Funds, Morgan Grenfell Investment Trust, The PBHG Funds, Inc., The
Pillar Funds, Rembrandt Funds(R), 1784 Funds(R), SEI Asset Allocation Trust, SEI
Daily Income Trust, SEI Institutional Managed Trust, SEI International Trust,
SEI Tax Exempt Trust, Stepstone Funds, STI Classic Funds, STI Classic Variable
Trust, SEI Liquid Asset Trust, SEI Index Funds, SEI Institutional Investments
Trust, Turner Funds, Profit Funds Investment Trust and Santa Barbara Group of
Mutual Funds, Inc., open-end management investment companies which are managed
by SEI Financial Management Corporation and with the exception of Rembrandt
Funds, are distributed by SEI Financial Services Company.
ROBERT A. NESHER (DOB 08/17/46) -- Chairman of the Board of Trustees* -- Retired
since 1994. Executive Vice President of SEI, 1986-1994. Director and Executive
Vice President of the Administrator and the Distributor, 1981-1994. Trustee of
the Arbor Fund, Marquis Funds(R), Advisors' Inner Circle Fund, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
Managed Trust, SEI International Trust, SEI Institutional Investments Trust, SEI
Liquid Asset Trust, SEI Tax Exempt Trust, Insurance Investment Products Trust,
1784 Funds(R), Pillar Funds, Rembrandt Funds, and Stepstone Funds.
JOHN T. COONEY (DOB 01/20/27) -- Trustee** -- 569 N. Post Oak Lane, Houston, TX
77024. Retired since 1992. Formerly Vice Chairman of Ameritrust Texas N.A.,
1989-1992, and MTrust Corp., 1985-1989. Trustee of the Arbor Fund, Marquis
Funds(R), and Advisors' Inner Circle Fund.
WILLIAM M. DORAN (DOB 05/26/40) - Trustee* - 2000 One Logan Square,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius (law firm), counsel to
the Trust, Administrator and Distributor, Director and Secretary of SEI [ ].
Trustee of the Arbor Fund, SEI Liquid Asset Trust, SEI Tax Exempt Trust, SEI
Daily Income Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI
International Trust, SEI Asset Allocation Trust, SEI Institutional Investments
Trust, Insurance Investment Products Trust, The Advisors' Inner Circle Fund, and
Marquis Funds(R).
FRANK E. MORRIS (DOB 12/30/23) -- Trustee** -- 105 Walpole Street, Dover, MA
02030. Retired since 1990. Peter Drucker Professor of Management, Boston
College, 1989-1990. President, Federal Reserve Bank of Boston, 1968-1988.
Trustee of The Arbor Fund, Marquis Funds(R), Advisors' Inner Circle Fund, SEI
Liquid Asset Trust, SEI Tax Exempt Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional Managed Trust, SEI International Trust, Insurance
Investment Products Trust, SEI Asset Allocation Trust and SEI Institutional
Investments Trust.
B-38
<PAGE>
ROBERT A. PATTERSON (DOB 11/05/27) -- Trustee** -- 208 Old Main, University
Park, PA 16802. Pennsylvania State University, Senior Vice President, Treasurer
(Emeritus). Financial and Investment Consultant, Professor of Transportation
(1984-present). Vice President-Investments, Treasurer, Senior Vice President
(Emeritus) (1982-1984). Director, Pennsylvania Research Corp.; Member and
Treasurer, Board of Trustees of Grove City College. Trustee of the Arbor Fund,
Marquis Funds(R) and Advisors' Inner Circle Fund.
GENE PETERS (DOB 06/03/29)--- Trustee** -- 943 Oblong Road, Williamstown, MA
01267. Private investor from 1987 to present. Vice President and Chief
Financial Officer, Western Company of North America (petroleum service company)
(1980-1986). President of Gene Peters and Associates (import company) (1978-
1980). President and Chief Executive Officer of Jos. Schlitz Brewing Company
before 1978. Trustee of the Arbor Fund, Marquis Funds(R) and Advisors' Inner
Circle Fund.
JAMES M. STOREY (DOB 04/12//31) -- Trustee -- Partner, Dechert Price & Rhoads,
from September 1987 - December 1993; Trustee of the Arbor Fund, Marquis
Funds(R), Advisors' Inner Circle Fund, SEI Liquid Asset Trust, SEI Tax Exempt
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional Managed Trust,
SEI International Trust, Insurance Investment Products Trust, SEI Asset
Allocation Trust, and SEI Institutional Investments Trust.
DAVID G. LEE (DOB 04/16/52) -- President and Chief Executive Officer -- Senior
Vice President of the Administrator and Distributor since 1993. Vice President
of the administrator and distributor, 1991-1993. President, GW Sierra Trust
Funds before 1991.
SANDRA K. ORLOW (DOB 10/18/53) -- Vice President and Assistant Secretary -- Vice
President and Assistant Secretary of the Administrator and Distributor since
1988.
KEVIN P. ROBINS (DOB 04/15/61) -- Vice President and Assistant Secretary --
Senior Vice President, General Counsel and Assistant Secretary of SEI, Senior
Vice President, General Counsel and Secretary of the Administrator and
Distributor since 1994. Vice President and Assistant Secretary of SEI, the
administrator and distributor, 1992-1994. Associate, Morgan, Lewis & Bockius
LLP (law firm), 1988-1992.
RICHARD W. GRANT (DOB 10/25/45) -- Secretary -- 2000 One Logan Square,
Philadelphia, PA 19103, Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, Administrator and Distributor.
KATHRYN L. STANTON (DOB 11/19/58) -- Vice President and Assistant Secretary,
Deputy General Counsel, Vice President and Assistant Secretary of SEI, Vice
President and Assistant Secretary of the Administrator and Distributor since
1994. Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994.
B-39
<PAGE>
JOSEPH P. LYDON (DOB 09/27/59)-- Vice President and Assistant Secretary --
Director, Business Administration of Fund Resources, April 1995. Vice
President, Fund Group, Dremen Value Management, LP, President Dremen Financial
Services, Inc. prior to 1995.
STEPHEN G. MEYER (DOB 07/12/65) -- Controller, Chief Financial Officer-Vice
President and Controller of SEI Fund Resources since 1995. Director, Internal
Audit and Risk Management, SEI Corporation, 1992-1995. Senior Associate,
Coopers and Lybrand, 1990-1992.
TODD B. CIPPERMAN (DOB 02/14/66) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of SEI, the Administrator and the
Distributor since 1995. Associate, Dewey Ballantine (law firm) (1994-1995).
Associate, Winston & Strawn (law firm) (1991-1994).
BARBARA A. NUGENT (DOB 06/18/56) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of SEI, the Administrator and Distributor
since 1996. Associate, Drinker Biddle & Reath (law firm) (1994-1996).
Assistant Vice President/Administration, Delaware Service Company, Inc. (1992-
1993); Assistant Vice President - Operations of Delaware Service Company, Inc.
(1988-1992).
MARC H. CAHN (DOB 06/19/57) -- Vice President and Assistant Secretary -- Vice
President and Assistant Secretary of SEI, the Administrator and Distributor
since 1996. Associate General Counsel, Barclays Bank PLC (1995-1996). ERISA
counsel, First Fidelity Bancorporation (1994-1995), Associate, Morgan, Lewis &
Bockius LLP (1989-1994).
- ----------------------------------------
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested"
persons of the Fund as that term is defined in the 1940 Act.
**Messrs. Cooney, Morris, Patterson, Peters and Storey serve as members of the
Audit Committee of the Fund.
B-40
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================
Total
Compensation
From Registrant
and Fund
Aggregate Pension or Complex* Paid
Compensation From Retirement Estimated to Trustees for
Registrant for the Benefits Accrued Annual the Fiscal Year
Name of Person, Fiscal Year Ended as Part of Fund Benefits Upon Ended October
Position October 31, 1995 Expenses Retirement 31, 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John T. Cooney $9,429.84 N/A N/A $9,429.84
for
services on
1 board
- -------------------------------------------------------------------------------------------------------
Frank E. Morris $9,429.84 N/A N/A $9,429.84
for
services on
1 board
- -------------------------------------------------------------------------------------------------------
Robert Patterson $9,429.84 N/A N/A $9,429.84
for
services on
1 board
- -------------------------------------------------------------------------------------------------------
Eugene B. Peters $9,429.84 N/A N/A $9,429.84
for
services on
1 board
- -------------------------------------------------------------------------------------------------------
James M. Storey, Esq. $9,429.84 N/A N/A $9,429.84
for
services on
1 board
- -------------------------------------------------------------------------------------------------------
William M. Doran, Esq. $0 N/A N/A $0 for
services on
1 board
- -------------------------------------------------------------------------------------------------------
Robert A. Nesher $0 N/A N/A $0 for
services on
1 board
=======================================================================================================
</TABLE>
SIMT AND SIT
The same individuals currently serve as the Trustees and Officers of SIMT and
SIT.
With the exception of the Trustees and executive officers of the Marquis
Funds(R), the Trustees and executive officers of SIMT and SIT, their respective
dates of birth and their principal occupations for the last five years are set
forth below. Each may have held other positions with the named companies during
that period. Unless otherwise noted, the principal address of each Trustee and
executive officer is 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658.
For those Trustees and officers who are also Trustees or executive officers of
the Trust, only the name and office of the Trustee or officer is set forth
below.
B-41
<PAGE>
ROBERT A. NESHER - Chairman of the Board of Trustees*
RICHARD F. BLANCHARD - Trustee** - P.O. Box 76, Canfield Road, Convent Station,
NJ 07961. Private Investor. Director of AEA Investors Inc. (acquisition and
investment firm) June 1981-86, Director of Baker Hughes Corp. (oil service
company) 1976-88. Director of Imperial Clevite Industries (transportation
equipment company) 1981-87. Executive Vice President of American Express
Company (financial services company), responsible for the investment function,
before June 1981.
WILLIAM M. DORAN - Trustee*
F. WENDELL GOOCH - Trustee** - P.O. Box 190, Paoli, IN 47454. President, Orange
County Publishing Co., Inc., since October 1981. Publisher of the Paoli News
and the Paoli Republican and Editor of the Paoli Republican since January 1981,
President, H & W Distribution, Inc. since July 1984. Trustee of STI Classic
Funds.
FRANK E. MORRIS - Trustee
JAMES M. STOREY - Trustee**
DAVID G. LEE - President, Chief Executive Officer
SANDRA K. ORLOW - Vice President, Assistant Secretary
KATHRYN L. STANTON - Vice President, Assistant Secretary
MARC H. CAHN - Vice President, Assistant Secretary
BARBARA A. NUGENT - Vice President, Assistant Secretary
JOSEPH M. LYDON - Vice President, Assistant Secretary
TODD CIPPERMAN - Vice President, Assistant Secretary
KEVIN P. ROBINS - Vice President, Assistant Secretary
RICHARD W. GRANT - Secretary
==============
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested
persons" of the SIT and SIMT Trust as the term is defined in the 1940 Act.
**Messrs. Blanchard, Gooch, Morris and Storey serve as members of the Audit
Committee of the Trust.
B-42
<PAGE>
For the fiscal year ended September 30, 1995, SIMT paid approximately $92,528.00
in fees to the unaffiliated Trustees.
<TABLE>
<CAPTION>
============================================================================================================================
Aggregate Pension or Retirement Estimated Total Compensation from
Compensation Benefits Accrued as Annual Registrant and Fund Complex
From SIMT Part of Fund Benefits Upon Paid to Directors for FYE
Name of Person and Trust for Expenses Retirement 9/30/95
Position FYE 9/30/95
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert A. Nesher, $0 $0 $0 $0 for services on 7 boards
Trustee
- ----------------------------------------------------------------------------------------------------------------------------
Richard F. Blanchard, $23,132 $0 $0 $86,250 for services on 7 boards
Trustee
- ----------------------------------------------------------------------------------------------------------------------------
William M. Doran, $0 $0 $0 $0 for services on 7 boards
Trustee
- ----------------------------------------------------------------------------------------------------------------------------
F. Wendell Gooch, $23,132 $0 $0 $86,250 for services on 7 boards
Trustee
- ----------------------------------------------------------------------------------------------------------------------------
Frank E. Morris, $23,132 $0 $0 $86,250 for services on 7 boards
Trustee
- ----------------------------------------------------------------------------------------------------------------------------
James M. Storey, Trustee $23,132 $0 $0 $86,250 for services on 7 boards
============================================================================================================================
</TABLE>
For the fiscal year ended February 29, 1996, SIT paid approximately $58,085.48
in fees to the Trustees who are not "interested persons" as defined in the 1940
Act.
<TABLE>
<CAPTION>
====================================================================================================================================
Name of Person, Aggregate Pension or Estimated Annual Total Compensation
Position Compensation From Retirement Benefits Befits Upon From Registrant and
SIT Trust for the FYE Accrues as Part of Retirement Fund Complex Paid
February 29, 1996 Fund Expenses to Directors for the
FYE February 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard Blanchard, $14,521.37 $0 $0 $90,000 for services of 7 Boards
Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
F. Wendell Gooch, Trustee $14,521.37 $0 $0 $90,000 for services of 7 Boards
- ------------------------------------------------------------------------------------------------------------------------------------
Frank Morris, $14,521.37 $0 $0 $90,000 for services of 7 Boards
Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
James Storey, Trustee $14,521.37 $0 $0 $90,000 for services of 7 Boards
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Nesher, $0 $0 $0 $0 for services of 7 Boards
Trustee*
- ------------------------------------------------------------------------------------------------------------------------------------
William M. Doran, $0 $0 $0 $0 for services of 7 Boards
Trustee*
====================================================================================================================================
</TABLE>
*Trustees who are "interested persons" as defined in the 1940 Act.
B-43
<PAGE>
COMPUTATION OF YIELD
Money Market Funds -- From time to time the Money Market Funds may advertise
- ------------------
"current yield" and "effective compound yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of a Fund refers to the income generated by an investment in a Fund over
a stated seven-day period. This income is then "annualized," that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The current yield of the Money Market Funds will be calculated daily based upon
the seven days ending on the date of calculation ("base period"). The yield is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing shareholder account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change by
the value of the account at the beginning of the some period to obtain the base
period return and multiplying the result by (365/7). Realized and unrealized
gains and losses are not included in the calculation of the yield. The
effective compound yield of the Funds is determined by computing the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return, according to the following formula:
Effective Yield = [(Base Period Return + 1)365/7] - 1. The current and the
effective yields reflect the reinvestment of net income earned daily on
portfolio assets.
For the 7-day period ended September 30, 1995, the Treasury Securities Money
Market Fund's 7-day yield and 7-day effective yields were 5.13% and 5.26%,
respectively, for the Retail Class shares and, 5.33% and 5.47%, respectively,
for the Trust Class shares.
For the 7-day period ended September 30, 1995, the Institutional Money Market
Fund's 7-day yield and 7-day effective yields were ____% and ___%, respectively.
The yields of the Money Market Funds fluctuate, and the annualization of a
week's dividend is not a representation by the Trust as to what an investment in
each Fund will actually yield in the future. Actual yields will depend on such
variables as asset quality, average asset maturity, the type of instruments each
Fund invests in, changes in interest rates on money market instruments, changes
in the expenses of each Fund and other factors.
B-44
<PAGE>
Yields are one basis upon which investors may compare the Money Market Funds
with other money market funds; however, yields of other money market funds and
other investment vehicles may not be comparable because of the factors set forth
above and differences in the methods used in valuing portfolio instruments.
Fixed Income and Balanced Funds -- The Fixed Income Funds and the Balanced Fund
- -------------------------------
may advertise a 30-day yield. These figures will be based on historical earnings
and are not intended to indicate future performance. The yield of these Funds
refers to the annualized income generated by an investment in the Funds over a
specified 30-day period. The yield is calculated by assuming that the income
generated by the investment during that 30-day period is generated over one year
and is shown as a percentage of the investment. In particular, yield will be
calculated according to the following formula:
Yield = 2([(a-b)/(cd) + 1]/6/ - 1) where a = dividends and interest earned
during the period; b = expenses accrued for the period (net of reimbursement);
c = the current daily number of shares outstanding during the period that were
entitled to receive dividends; and d = the maximum offering price per share on
the last day of the period.
The Louisiana Fund may also advertise a "tax-equivalent yield," which is
calculated by determining the rate of return that would have to be achieved on a
fully taxable investment to produce the after-tax equivalent of the Fund's
yield, assuming certain tax brackets for a shareholder. The tax-equivalent
yield of the Fund will be calculated by adding (a) the portion of the Fund's
yield that is not tax-exempt and (b) the result obtained by dividing the portion
of the Fund's yield that is tax-exempt by the difference of one minus a stated
income tax rate.
For the 30-day period ended September 30, 1995, the 30-day and 30-day tax-
equivalent yields (assuming a combined Federal and State income tax rate of __%)
on the Fixed Income Funds and the Balanced Fund were as follows:
B-45
<PAGE>
<TABLE>
<CAPTION>
=============================================================================
Fund 30-Day Yield 30-Day Tax Equivalent Yield
- -----------------------------------------------------------------------------
<S> <C>
Government Securities Fund
- -----------------------------------------------------------------------------
Class A 5.74% N/A
- -----------------------------------------------------------------------------
Class B 5.19% N/A
- -----------------------------------------------------------------------------
Balanced Fund
- -----------------------------------------------------------------------------
Class A 3.65% N/A
- -----------------------------------------------------------------------------
Class B 3.02% N/A
- -----------------------------------------------------------------------------
Louisiana Tax-Free Income Fund
- -----------------------------------------------------------------------------
Class A 4.32% 6.79%
- -----------------------------------------------------------------------------
Class B 3.72% 5.85%
- -----------------------------------------------------------------------------
Investment Grade Income Fund*
- -----------------------------------------------------------------------------
Class A N/A N/A
- -----------------------------------------------------------------------------
Class B N/A N/A
=============================================================================
</TABLE>
*The Investment Grade Income Fund had not commenced operations as of September
30,1995.
CALCULATION OF TOTAL RETURN
From time to time, the Fixed Income Funds and the Equity Funds may advertise
total return. The total return of the Fund refers to the average compounded
rate of return to a hypothetical investment for designated time periods
(including but not limited to, the period from which the Funds commenced
operations through the specified date), assuming that the entire investment is
redeemed at the end of each period. In particular, total return will be
calculated according to the following formula: P (1 + T)/n/ = ERV, where P = a
hypothetical initial payment of $1,000; T = average annual total return: n
number of years; and ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the designated time period as of the end of
such period.
Based on the foregoing, the average annual total returns for the Funds from
inception through September 30, 1995 and for the one year period ended September
30, 1995 were as follows:
B-46
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
-----------------------------
Class/With Load Since
Fund Without Load One Year Inception*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Securities Class A with Load/1/ 6.98 2.58
- --------------------------------------------------------------------------------
Government Securities Class A without Load 10.84 4.42
- --------------------------------------------------------------------------------
Louisiana Tax-Free Income Class A with Load/1/ 5.20 1.20
- --------------------------------------------------------------------------------
Louisiana Tax-Free Income Class A without Load 9.01 3.01
- --------------------------------------------------------------------------------
Balanced Class A with Load/1/ 13.44 6.00
- --------------------------------------------------------------------------------
Balanced Class A without Load 17.58 7.90
- --------------------------------------------------------------------------------
Value Equity Class A with Load/1/ 20.75 9.01
- --------------------------------------------------------------------------------
Value Equity Class A without Load 25.13 10.96
- --------------------------------------------------------------------------------
Government Securities Class B with CDSC/2/ 7.35 2.27
- --------------------------------------------------------------------------------
Government Securities Class B without CDSC 10.10 3.63
- --------------------------------------------------------------------------------
Louisiana Tax-Free Income Class B with CDSC/3/ 5.46 1.66
- --------------------------------------------------------------------------------
Louisiana Tax-Free Income Class B without CDSC 8.21 3.10
- --------------------------------------------------------------------------------
Balanced Class B with CDSC/2/ 14.00 5.79
- --------------------------------------------------------------------------------
Balanced Class B without CDSC 16.75 7.13
- --------------------------------------------------------------------------------
Value Equity Class B with CDSC/2/ 21.42 9.52
- --------------------------------------------------------------------------------
Value Equity Class B without CDSC 24.17 10.82
================================================================================
</TABLE>
The Growth Equity, Investment Grade Income, Small Cap Equity and International
Equity Funds had not commenced operations as of September 30, 1995.
*Returns have been annualized.
_______________
/1/ Commenced operations on October 1, 1993.
/2/ Commenced operations on October 22, 1993.
/3/ Commenced operations on November 22, 1993.
Each Feeder Fund may advertise the performance of its corresponding Portfolio
adjusted to reflect applicable sales loads and operating expenses, other than
Rule 12b-1 fees. The data for the Small Cap Growth Portfolio and the
International Equity Portfolio set forth below is adjusted to reflect operating
expenses of .20% and .27%, respectively, and (i) with respect to the Class A
Shares, to take into account a 3.50% sales load; and (ii) with respect to Class
B Shares, to take into account the applicable contingent deferred sales charge.
Investment performance reflects voluntary fee waivers and reimbursements
currently in effect and, with respect to Class B Shares, does not reflect each
Fund's Rule 12b-1 fees. In the absence or reduction of current fee waivers or
reimbursements, or if current Rule 12b-1 fees applicable to Class B Shares were
reflected, Total Return would
B-47
<PAGE>
be reduced.
The following table shows total returns for the Class A Shares of the Small Cap
Growth Portfolio and the Class A Shares of the International Equity Portfolio.
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
---------------------------------
Class/With Load One Three Since
Portfolio Without Load Year Years Inception*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Small Cap Growth Class A with Load
(commenced operations on
April 20, 1992)
- --------------------------------------------------------------------------------
Small Cap Growth Class A without
Load
- --------------------------------------------------------------------------------
Small Cap Growth Class B with CDSC
- --------------------------------------------------------------------------------
Small Cap Growth Class B without
CDSC
- --------------------------------------------------------------------------------
International Equity Class A with Load
(commenced operations on
December 20, 1989)
- --------------------------------------------------------------------------------
International Equity Class A without
Load
- --------------------------------------------------------------------------------
International Equity Class B with CDSC
- --------------------------------------------------------------------------------
International Equity Class B without
CDSC
================================================================================
</TABLE>
Past performance of a Portfolio is no guarantee of the future performance of the
corresponding Feeder Fund.
*Returns have been annualized.
PURCHASE AND REDEMPTION OF SHARES
Each Fund intends to pay cash for all shares redeemed, but under abnormal
conditions which make payment in cash unwise, payment may be made wholly or
partly in portfolio securities with a market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
It is currently the policy of each of the Trust, SIMT and SIT (collectively, the
"Trusts") to pay for all redemptions in cash. Each Trust retains the right,
however, to alter this policy to provide for redemptions in whole or in part by
a distribution in-kind of securities held by its Funds or Portfolios in lieu of
cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions. However, a shareholder will at
all times be entitled to aggregate cash redemptions from all Funds or Portfolios
of the appropriate Trust during any 90-day period of up to the lesser of
$250,000 or 1% of such Trust's net assets.
B-48
<PAGE>
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the Securities and Exchange Commission by rule or
regulation) as a result of disposal or valuation of the Fund's securities is not
reasonably practicable, or for such other periods as the Securities and Exchange
Commission has by order permitted. The Trust also reserves the right to suspend
sales of shares of the Fund for any period during which the New York Stock
Exchange, the Adviser, the Administrator and/or the Custodian are not open for
business. The New York Stock Exchange will not open in observance of the
following holidays: New Year's Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving; and Christmas. In addition, as it
relates to the Money Market Funds, the Federal Reserve observes the following
holidays: Martin Luther King, Jr., Day, Columbus Day and Veterans Day.
CONVERSION FEATURE
As described in the Prospectuses, Class B shares of the Fixed Income and Equity
Funds will automatically convert to Class A shares and will no longer be subject
to the distribution and service fees or the contingent deferred sales charge
after five years after the beginning of the month in which the shares were
issued. Such conversion will be on the basis of the relative net asset values
of the two classes, without the imposition of a sales load, fee or other charge.
Because the per share net asset value of the Class A shares may be higher than
that of the Class B shares at the time of conversion, a shareholder may receive
fewer Class A shares than the number of Class B shares converted, although the
dollar value will be the same.
LETTER OF INTENT
Reduced sales charges are applicable to the aggregate amount of purchases made
by any such purchaser previously enumerated within a 13-month period pursuant to
a written Letter of Intent (the "Letter") provided by the Distributor, which is
not legally binding on the signer or a Fund and which provides for the holding
in escrow by the Administrator of 5% of the total amount intended to be
purchased until such purchase is completed within the 13-month period. A Letter
may be dated to include shares purchased up to 90 days prior to the date the
Letter is signed. The 13-month period begins on the date of the earliest
purchase. If the intended investment is not completed, the purchaser will be
asked to pay an amount equal to the difference between the sales charge on the
shares purchased at the reduced rate and the sales charge otherwise applicable
to the total shares purchased. If such payment is not made within 20 days
following the expiration of the 13-month period, the Administrator will
surrender an appropriate number of the escrowed shares for redemption in order
to realize the difference. Such purchasers may include the value (at offering
price at the level designated in their Letter) of all their shares of the Fund
and of
B-49
<PAGE>
the Fixed Income Funds and the Equity Funds previously purchased and still held
as of the date of their Letter toward the completion of such Letter.
DETERMINATION OF NET ASSET VALUE
Money Market Funds -- The net asset value per share of the Money Market Funds is
- ------------------
calculated by adding the value of securities and other assets, subtracting
liabilities and dividing by the number of outstanding shares. Securities will be
valued by the amortized cost method which involves valuing a security at its
cost on the date of purchase and thereafter (absent unusual circumstances)
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuations in general market rates of interest on
the value of the instrument. While this method provides certainty in valuation,
it may result in periods during which a security's value, as determined by this
method, is higher or lower than the price each Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield of each
Fund may tend to be higher than a like computation made by a company with
identical investments utilizing a method of valuation based upon market prices
and estimates of market prices for all of its portfolio securities. Thus, if the
use of amortized cost by each Fund resulted in a lower aggregate portfolio value
on a particular day, a prospective investor in each Fund would be able to obtain
a somewhat higher yield than would result from investment in a company utilizing
solely market values, and existing investors in each Fund would experience a
lower yield. The converse would apply in a period of rising interest rates.
The Money Market Funds' use of amortized cost and the maintenance of each Funds
net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7
under the 1940 Act, provided that certain conditions are met. The regulations
also require the Trustees to establish procedures which are reasonably designed
to stabilize the net asset value per share at $1.00 for each Fund. Such
procedures include the determination of the extent of deviation, if any, of each
Fund's current net asset value per share calculated using available market
quotations from each Fund's amortized cost price per share at such intervals as
the Trustees deem appropriate and reasonable in light of market conditions and
periodic reviews of the amount of the deviation and the methods used to
calculate such deviation. In the event that such deviation exceeds 1/2 of 1%,
the Trustees are required to consider promptly what action, if any, should be
initiated, and, if the Trustees believe that the extent of any deviation may
result in material dilution or other unfair results to shareholders, the
Trustees are required to take such corrective action as they deem appropriate to
eliminate or reduce such dilution or unfair results to the extent reasonably
practicable. Such actions may include: the sale of portfolio instruments prior
to maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends; redeeming shares in kind; or establishing a net
asset value per share by using available market quotations. In addition, if each
Fund incurs a significant loss or liability, the Trustees have the authority to
reduce pro rata the number of shares of each Fund in each shareholder's account
and to offset each shareholder's pro rata portion of such loss
B-50
<PAGE>
or liability from shareholder's accrued but unpaid dividends or from future
dividends while each other Fund must annually distribute at least 90% of its
investment company taxable income.
Fixed Income and Equity Funds -- The securities of the Fixed Income Funds and
- -----------------------------
Equity Funds are valued by the Administrator pursuant to valuations provided by
an independent pricing service. The pricing service relies primarily on prices
of actual market transactions as well as trader quotations. However, the service
may also use a matrix system to determine valuations of fixed income securities,
which system considers such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at valuations. The procedures of the pricing service and its valuations are
reviewed by the officers of the Trust under the general supervision of the
Trustees.
The Small Cap Growth Portfolio's securities are valued by SFM pursuant to
valuations provided by an independent pricing service (generally the last quoted
sale price). Portfolio securities listed on a securities exchange for which
market quotations are available are valued at the last quoted sale price on each
Business Day (defined as days on which the New York Stock Exchange is open for
business ("Business Day")) or, if there is no such reported sale, at the most
recently quoted bid price. Unlisted securities for which market quotations are
readily available are valued at the most recently quoted bid price. The pricing
service may also use a matrix system to determine valuations. This system
considers such factors as security prices, yields, maturities, call features,
ratings and developments relating to specific securities in arriving at
valuations. The procedures of the pricing service and its valuations are
reviewed by the officers of SIMT under the general supervision of the SIMT
Trustees.
The market value of each portfolio security of the International Equity
Portfolio us obtained by SFM from an independent pricing service. Securities
having maturities of 60 days or less at the time of purchase will be valued
using the amortized cost method, which approximates the securities' market
value. The pricing service may use a matrix system to determine valuations of
equity and fixed income securities. This system considers such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities in arriving at valuations. The pricing service
may also provide market quotations. The procedures used by the pricing service
and its valuations are reviewed by the officers of SIT under the general
supervision of the SIT Trustees. Portfolio securities for which market
quotations are available are valued at the last quoted sale price on each
Business Day or, if there is no such reported sale, at the most recently quoted
bid price.
B-51
<PAGE>
TAXES
The following is only a summary of certain tax considerations generally
affecting a Fund and its shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisers with
specific reference to their own tax situations, including their state and local
tax liabilities.
All Funds -- The following discussion of certain Federal income tax consequences
is based on the Internal Revenue Code of 1986 (the "Code"), and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, certain administrative changes, or court decisions
may significantly change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated herein.
Please note that for purposes of satisfying certain of the requirements for
taxation as a regulated investment company described below the Small Cap Equity
Fund and International Equity Fund will treat themselves as owning a
proportionate share of the assets and gross income of the Small Cap Growth
Portfolio and International Equity Portfolio, respectively, in which the Funds
invest up to 100% of their assets. Although the Funds possess neither an
opinion of counsel nor a private letter ruling to this effect, they believe that
this treatment is appropriate, as numerous private letter rulings (applicable to
other taxpayers) conclude.
It is the policy of each of the Trust's Funds to qualify for the favorable tax
treatment accorded regulated investment companies under Subchapter M of the
Code. By following such policy, each of the Trust's Funds expects to be relieved
of the Federal income taxes on net investment company taxable income and net
capital gain (the excess of long-term capital gain over net short-term capital
loss) distributed to shareholders.
In order to qualify as a regulated investment company each Fund must, among
other things, (1) derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in stock,
B-52
<PAGE>
securities or currencies; (2) derive less than 30% of its gross income each
taxable year from the sale or other disposition of certain assets held for less
than three months ("Short-Short Limitation"), including stock and securities;
options, futures or forward contracts (other than on foreign currencies); or
foreign currencies (including options, futures or forward contracts) if not
directly related to the Fund's principal business of investing in stocks and
securities; and (3) diversify its holdings so that at the end of each quarter of
each taxable year (i) at least 50% of the market value of the Fund's total
assets is represented by cash or cash items, U.S. Government securities,
securities of other regulated investment companies, and other securities
limited, in respect of any one issuer, to a value not greater than 5% of the
value of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its assets is invested
in the securities of any one issuer (other than U.S. Government securities or
securities of any other regulated investment company) or of two or more issuers
that the Fund controls and that are engaged in the same, similar, or related
trades or businesses. These requirements may restrict the degree to which the
Funds may engage in short-term trading and in certain hedging transactions and
may limit the range of the Fund's investments. If a Fund qualifies as a
regulated investment company, it will not be subject to Federal income tax on
the part of its net investment income and net realized capital gains, if any,
which it distributes each year to shareholders, provided the Fund distributes at
least (a) 90% of its "investment company taxable income" (generally, net
investment income plus net short-term capital gain) and (b) 90% of its net
exempt interest income (the excess of (i) its tax-exempt interest income over
(ii) certain deductions attributable to that income).
If for any taxable year, a Fund does not qualify as a regulated investment
Company under Subchapter M of the Code, all of its taxable income will be
subject to tax at regular corporate tax rates without any deduction for
distributions to shareholders and all such distribution will be taxable to
shareholders as ordinary dividends to the extent of the Fund's current or
accumulated earnings and profits, such distributions will generally qualify for
the corporate dividends received deduction for corporate shareholders.
If a Fund fails to distribute in a calendar year at least the sum of 98% of its
ordinary income for the year and 98% of its capital gain net income (the excess
of short and long term gain over short and long term losses) for the one-year
period ending October 31 of the year (and any retained amount from the prior
calendar year), the Fund will be subject to a nondeductible 4% Federal excise
tax on the undistributed amounts. The Fund intends to make sufficient
distributions to avoid imposition of this tax.
Distributions declared in October, November, or December to shareholders of
record during those months and paid during the following January are treated as
if they were received by each shareholder on December 31 of the prior year for
tax purposes.
In certain cases, a Fund will be required to withhold and remit to the U.S.
Treasury 31% of any taxable dividends, capital gain distributions and redemption
proceeds (other than from redemption of shares of the Money Market Funds) paid
to an individual or certain other non-corporate shareholder (1) who has failed
to provide a correct taxpayer identification number, (2) who is subject to
backup withholding by the Internal Revenue Service, or (3) who has not certified
to the Fund that such shareholder is not subject to backup withholding. This
backup withholding is not an additional tax, and any amounts withheld may be
credited against the shareholder's ultimate U.S. tax liability.
B-53
<PAGE>
A Fund's transactions in certain futures contracts, options, forward contracts,
foreign currencies, foreign debt securities, and certain other investment and
hedging activities will be subject to special tax rules. In a given case, these
rules may accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's assets, convert short-term
capital losses into long-term capital losses, or otherwise affect the character
of the Fund's income. These rules could therefore affect the amount, timing, and
character of distributions to shareholders. Each Fund will endeavor to make any
available elections pertaining to such transactions in a manner believed to be
in the best interest of the Fund.
Income from the disposition of options and futures contracts will be subject to
the Short-Short Limitation if they were held for less than three months. If a
Fund satisfies certain requirements, then any increase in value of a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether the Fund satisfies the Short-
Short Limitation. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of that limitation. To the extent
this treatment is not available, the Fund may be forced to defer the closing out
of certain options and futures contracts beyond the time when it otherwise would
be advantageous to do so.
Shareholders will be advised annually as to the Federal income tax consequences
of distributions made during the year. However, information set forth in the
Prospectuses and this Statement of Additional Information which relates to
taxation is only a summary of some of the important tax considerations generally
affecting purchasers of shares of the Trust's Funds. Further tax information
regarding the Funds is included in the immediately following sections of this
Statement of Additional Information. No attempt has been made to present a
detailed explanation of the income tax treatment of a Fund or its shareholders,
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of shares of a Fund are urged to consult their
tax advisers with specific reference to their own tax situation.
The following tax information relates specifically to certain of the Trust's
Funds.
Additional Tax Information Concerning the Louisiana Fund and Tax Exempt Money
Market Fund -- As indicated in the Prospectuses of the Louisiana Fund and Tax
Exempt Money Market Fund, these Funds are designed to provide shareholders with
current tax-exempt interest income and is not intended to constitute a balanced
investment program. Certain recipients of Social Security and railroad
retirement benefits may be required to take into account income from the Funds
in determining the taxability of their benefits. In addition, the Funds may not
be an appropriate investment for shareholders that are "substantial users" or
persons related to such users of facilities financed by private activity bonds
or industrial revenue bonds. A "substantial user" is defined generally to
include
B-54
<PAGE>
certain persons who regularly use a facility in their trade or business.
Shareholders should consult their tax advisers to determine the potential
effect, if any, on their tax liability of investing in these Funds.
If, at the close of each quarter of its taxable year, at least 50% of the value
of a Fund's total assets consists of securities the interest on which is
excludable from gross income, the Fund may pay "exempt-interest dividends" to
its shareholders. The policy of the Funds is to pay each year as dividends
substantially all of its interest income, net of certain deductions. An exempt-
interest dividend is any dividend or part thereof (other than a capital gain
dividend) paid by a Fund, and designated by the Fund as an exempt-interest
dividend in a written notice mailed to shareholders within 60 days after the
close of such Fund's taxable year. However, aggregate exempt-interest dividends
for the taxable year may not exceed the net interest from Municipal Securities
and other securities exempt from the regular Federal income tax received by the
Fund during the taxable year. The percentage of the total dividends paid for any
taxable year which qualifies as Federal exempt-interest dividends will be the
same for all shareholders receiving dividends from the Fund during such year,
regardless of the period for which the shares were held.
Exempt-interest dividends may nevertheless be subject to the alternative minimum
tax (the "Alternative Minimum Tax") imposed by section 55 of the Code or the
environmental tax (the "Environmental Tax") imposed by Section 59A of the Code.
The Environmental Tax is imposed at the rate of 0.12% and applies only to
corporate taxpayers. The Alternative Minimum Tax and the Environmental Tax may
be imposed in two circumstances. First, exempt-interest dividends derived from
certain "private activity bonds" issued after August 7, 1986, will generally be
an item of tax preference (and therefore potentially subject to the Alternative
Minimum Tax and the Environmental Tax) for both corporate and non-corporate
taxpayers. Second, in the case of exempt-interest dividends received by
corporate shareholders, all exempt-interest dividends, regardless of when the
bonds from which they are derived were issued or whether they were derived from
private activity bonds, will be included in the corporation's "adjusted current
earnings," as defined in section 56(g) of the Code, in calculating the
corporation's alternative minimum taxable income for purposes of determining the
Alternative Minimum Tax and the Environmental Tax.
The deduction otherwise allowable to property and casualty insurance companies
for "losses incurred" will be reduced by an amount equal to a portion of exempt-
interest dividends received or accrued during the taxable year. Foreign
corporations engaged in a trade or business in the United States will be subject
to a "branch profits tax" on their "dividend equivalent amount" for the taxable
year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends.
Issuers of bonds purchased by the Funds (or the beneficiary of such bonds) may
have made certain representations or covenants in connection with the issuance
of such bonds
B-55
<PAGE>
to satisfy certain requirements of the Code that must be satisfied subsequent to
the issuance of such bonds. Investors should be aware that exempt-interest
dividends derived from such bonds may become subject to Federal income taxation
retroactively to the date thereof if such representations are determined to have
been inaccurate or if the issuer of such bonds (or the beneficiary of such
bonds) fails to comply with the covenants.
Under the Code, if a shareholder receives an exempt-interest dividend with
respect to any share and such share is held for six months or less, any loss on
the sale or exchange of such share will be disallowed to the extent of the
amount of such exempt-interest dividend.
Any net realized long-term capital gains of a Fund will be distributed at least
annually. The Fund will have no tax liability with respect to such gains and the
distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held the Fund's shares. Such
distributions will be designated as a capital gains dividend in a written notice
mailed to shareholders after the close of the Fund's taxable year. If a
shareholder disposes of shares in the Fund at a loss before having held those
shares for more than six months, such loss will be treated as a long-term
capital loss to the extent the shareholder has received a long-term capital gain
distribution on the shares.
Although the Fund does not expect to earn any investment company taxable income
(as defined by the Code), any income earned on taxable investments will be
distributed and will be taxable to shareholders as ordinary income. In general,
"investment company taxable income" comprises taxable net investment income and
net short-term capital gains. The Fund would be taxed on any undistributed
investment company taxable income. Since any such income will be distributed, it
is anticipated that no such tax will be paid by the Fund.
As indicated in the Prospectuses of the Louisiana Fund and Tax Exempt Money
Fund, these Funds may acquire puts with respect to Municipal Securities held in
its portfolio. See "Additional Description Of Permitted Investments --Puts on
Municipal Securities" in this Statement of Additional Information. The policy of
the Funds is to limit acquisitions of puts to those under which an acquiring
Fund will be treated for Federal income tax purposes as the owner of the
Municipal Securities acquired subject to the put and the interest on the
Municipal Securities will be tax-exempt to such Fund. Although the Internal
Revenue Service has issued a published ruling that provides some guidance
regarding the tax consequences of the purchase of puts, there is currently no
guidance available from the Internal Revenue Service that definitively
establishes the tax consequences of many of the types of puts that these Funds
could acquire under the 1940 Act. Therefore, although the Louisiana Fund will
only acquire a put after concluding that it will have the tax consequences
described above, the Internal Revenue Service could reach a different
conclusion. If the Louisiana Fund or Tax Exempt Money Market Fund were not
treated as the owner of the Municipal Securities, income from such securities
would probably not be tax-exempt.
B-56
<PAGE>
Although each Fund expects to qualify as a "regulated investment company" and to
be relieved of all or substantially all Federal income taxes, depending upon the
extent of its activities in states and localities in which its offices are
maintained, in which its agents or independent contractors are located, or in
which it is otherwise deemed to be conducting business, the Fund may be subject
to the tax laws of such states or localities. In addition, in those states and
localities which have income tax laws, the treatment of these Funds and their
shareholders under such laws may differ from its treatment under Federal income
tax laws. Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes.
If for any taxable year a Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to Federal tax at regular corporate rates (without any deduction for
distributions to its shareholders). Moreover, upon distribution to shareholders,
the Fund's income, including Municipal Securities interest income, will be
taxable to shareholders to the extent of the Fund's current and/or accumulated
earnings and profits.
State Taxes -- A Fund is not liable for any income or franchise tax in
Massachusetts if it qualifies as a regulated investment company for Federal
income tax purposes. Distributions by the Funds to shareholders and the
ownership of shares may be subject to state and local taxes. Therefore,
shareholders are urged to consult with their tax advisors concerning the
application of state and local taxes to investments in the Funds, which may
differ from the Federal income tax consequences. For example, under certain
specified circumstances, state income tax laws may exempt from taxation
---
distributions of a regulated investment company to the extent that such
distributions are derived from interest on Federal obligations. Shareholders
------------
are urged to consult with their tax advisors regarding whether, and under what
- ------------------------------------------------------------------------------
conditions, such exemption is available.
- ---------------------------------------
FUND TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Adviser is responsible for placing the orders
to execute transactions for the Fund. In placing orders, it is the policy of the
Trust to seek to obtain the best net results taking into account such factors as
price (including the applicable dealer spread), the size, type and difficulty of
the transaction involved, the firm's general execution and operational
facilities, and the firm's risk in positioning the securities involved. While
the Adviser generally seeks reasonably competitive spreads or commissions, the
Trust will not necessarily be paying the lowest spread or commission available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded over-the-
counter, but may be traded on an exchange. Where possible, the Adviser will deal
directly with the dealers
B-57
<PAGE>
who make a market in the securities involved except in those circumstances where
better prices and execution are available elsewhere. Such dealers usually are
acting as principal for their own account. On occasion, securities may be
purchased directly from the issuer. Money market securities are generally traded
on a net basis and do not normally involve either brokerage commissions or
transfer taxes. The cost of executing portfolio securities transactions of the
Trust will primarily consist of dealer spreads and underwriting commissions.
TRADING PRACTICES AND BROKERAGE
THE TRUST
The Adviser selects brokers or dealers to execute transactions for the purchase
or sale of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary consideration is to
have brokers or dealers execute transactions at best price and execution. Best
price and execution refers to many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. The Trust's determination of what are reasonably competitive rates
is based upon the professional knowledge of its trading department as to rates
paid and charged for similar transactions throughout the securities industry. In
some instances, the Trust pays a minimal share transaction cost when the
transaction presents no difficulty. Some trades are made on a net basis where
the Trust either buys securities directly from the dealer or sells them to the
dealer. In these instances, there is no direct commission charged but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission.
The Trust may allocate out of all commission business generated by all of the
funds and accounts under management by the Adviser, brokerage business to
brokers or dealers who provide brokerage and research services. These research
services include (i) advice, either directly or through publications or
writings, as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; (ii) furnishing of analyses and reports
concerning issuers, securities or industries; (iii) providing information on
economic factors and trends, assisting in determining portfolio strategy,
providing computer software used in security analyses, and providing portfolio
performance evaluation and technical market analyses. Such services are used by
the Adviser in connection with its investment decision-making process with
respect to one or more funds and accounts managed by it, and may not be used
exclusively with respect to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934, as amended, higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-
B-58
<PAGE>
dealers who do not provide such services if such higher commissions are deemed
reasonable in relation to the value of the brokerage and research services
provided. Although transactions are directed to broker-dealers who provide such
brokerage and research services, the Trust believes that the commissions paid to
such broker-dealers are not, in general, higher than commissions that would be
paid to broker-dealers not providing such services and that such commissions are
reasonable in relation to the value of the brokerage and research services
provided. In addition, portfolio transactions which generate commissions or
their equivalent are directed to broker-dealers who provide daily portfolio
pricing services to the Trust. Subject to best price and execution, commissions
used for pricing may or may not be generated by the funds receiving the pricing
service.
The Adviser may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. It is believed that the ability
of the accounts to participate in volume transactions will generally be
beneficial to the accounts and funds. Although it is recognized that, in some
cases, the joint execution of orders could adversely affect the price or volume
of the security that a particular account or trust may obtain, it is the opinion
of the Adviser and the Trust's Board of Trustees that the advantages of combined
orders outweigh the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Fund may
place orders with broker-dealers which have agreed to defray certain Trust
expenses such as custodian fees, and may, at the request of the Distributor,
give consideration to sales of shares of the Trust as a factor in the selection
of brokers and dealers to execute Trust portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or an affiliate of the Adviser, both of which are
registered broker-dealers, for a commission in conformity with the 1940 Act, the
Securities Exchange Act of 1934 and rules promulgated by the Securities and
Exchange Commission (the "SEC"). Under these provisions, the Distributor or an
affiliate of the Adviser is permitted to receive and retain compensation for
effecting portfolio transactions for the Trust on an exchange if a written
contract is in effect between the Distributor and the Trust expressly permitting
the Distributor or an affiliate of the Adviser to receive and retain such
compensation. These rules further require that commissions paid to the
Distributor or affiliate of the Adviser by the Trust for exchange transactions
not exceed "usual and customary" brokerage commissions. The rules define "usual
and customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other renumeration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." In addition, the Trust may direct commission business to one
B-59
<PAGE>
or more designated broker-dealers in connection with such broker-dealer's
provision of services to the Trust or payment of certain Trust expenses (e.g.,
custody, pricing and professional fees). The Trustees, including those who are
not "interested persons" of the Trust, have adopted procedures for evaluating
the reasonableness of commissions paid to the Distributor and will review these
procedures periodically.
For the fiscal year ended September 30, 1995, the Funds paid the following
brokerage commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
===================================================================================================================================
Total
% of % of Total Brokerage
Total Total Brokerage Commissions
Total $ Amount of Brokerage Transactions Paid to SFS Total
$ Amount Brokerage Commissions Effected in Connection $ Amount
of Brokerage Commissions Paid to Through With of Brokerage
Fund Commissions Paid to Affiliated Affiliated Repurchase Commissions Paid
Paid Affiliates Brokers Brokers Agreement for
in Last Year in Last Year for Last Year For Last Year Transactions Research
For Last Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Government Securities -- N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Louisiana Tax-Free Income -- N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced 127,294 14,688 .12% .15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Value Equity 161,492 24,648 .15% .62% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury Securities Money Market -- N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Money Market -- N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Growth Equity * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Exempt Money Market * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Grade Income Fund * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Equity Fund * * * * * *
====================================================================================================================================
</TABLE>
B-60
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
Total
% of % of Total Brokerage
Total Total Brokerage Commissions
Total $ Amount of Brokerage Transactions Paid to SFS Total
$ Amount Brokerage Commissions Effected in Connection $ Amount
of Brokerage Commissions Paid to Through With of Brokerage
Fund Commissions Paid to Affiliated Affiliated Repurchase Commissions Paid
Paid Affiliates Brokers Brokers Agreement for
in Last Year in Last Year for Last Year For Last Year Transactions Research
For Last Year
<S> <C> <C> <C> <C> <C> <C>
International * * * * * *
Equity Fund
==================================================================================================================================
</TABLE>
* As of September 30, 1995, had not commenced operations.
For the fiscal year ended September 30, 1994, the Funds paid the following
brokerage commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
======================================================================================
Total $ Amount of Total $ Amount of
Brokerage Commissions Brokerage Commissions
Fund Paid Paid to Affiliates
1994 1994
<S> <C> <C>
--------------------------------------------------------------------------------------
Government Securities N/A N/A
--------------------------------------------------------------------------------------
Louisiana Tax-Free Income N/A N/A
--------------------------------------------------------------------------------------
Balanced 158,661 N/A
--------------------------------------------------------------------------------------
Value Equity 257,648 N/A
======================================================================================
</TABLE>
B-61
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Total $ Amount of Total $ Amount of Brokerage
Fund Brokerage Commissions Commissions Paid to Affiliates
Paid
1994 1994
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Treasury Securities Money Market N/A
- -------------------------------------------------------------------------------------------------
Institutional Money Market N/A N/A
- -------------------------------------------------------------------------------------------------
Growth Equity * *
- -------------------------------------------------------------------------------------------------
Tax Exempt Money Market * *
- -------------------------------------------------------------------------------------------------
Investment Grade Income Fund * *
- -------------------------------------------------------------------------------------------------
Small Cap Equity Fund * *
- -------------------------------------------------------------------------------------------------
International Equity Fund * *
=================================================================================================
</TABLE>
*As of September 30, 1995, had not commenced operations.
SIMT
SIMT has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the advisers are responsible for placing orders to
execute Portfolio transactions. In placing orders, it is SIMT's policy to seek
to obtain the best net results taking into account such factors as price
(including the applicable dealer spread), size, type and difficulty of the
transaction involved, the firm's general execution and operational facilities,
and the firm's risk in positioning the securities involved. While the Money
Managers generally seek reasonably competitive spreads or commissions, SIMT will
not necessarily be paying the lowest spread or commission available. SIMT will
not purchase portfolio securities from any affiliated person acting as principal
except in conformity with the regulations of the SEC.
It is expected that the Small Cap Growth Portfolio may execute brokerage or
other agency transactions through the Distributor, a registered broker-dealer,
for a commission in conformity with the 1940 Act, the Securities Exchange Act of
1934, as amended, and rules and regulations of the SEC. Under these provisions,
the Distributor is permitted to receive and retain compensation for effecting
portfolio transactions for a Portfolio on an exchange if a written contract is
in effect between the Distributor and the Trust expressly permitting the
Distributor to receive and retain such compensation. These provisions further
require that commissions paid to the Distributor by SIMT for exchange
transactions not exceed "usual and customary" brokerage commissions. The rules
define "usual and customary" commissions to include amounts which are
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in
B-62
<PAGE>
connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time."
In addition, the Portfolio may direct commission business to one or more
designated broker-dealers, including the Distributor, in connection with such
broker-dealer's payment of certain of the Portfolios' expenses. The Trustees,
including those who are not "interested persons" of SIMT, have adopted
procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically. In addition, SFM has
adopted a policy respecting the receipt of research and related products and
services in connection with transactions effected for Portfolios operating
within the "Manager of Managers" structure. Under this policy, SFM and the
various firms that serve as Money Managers to certain Portfolios of SIMT, in the
exercise of joint investment discretion over the assets of the Portfolio, will
direct a substantial portion of a Portfolio's brokerage to the Distributor in
consideration of the Distributor's provision of research and related products to
SFM for use in performing its advisory responsibilities. All such transactions
directed to the Distributor must be accomplished in a manner that is consistent
with the SIMT's policy to achieve best net results, and must comply with SIMT's
procedures regarding the execution of transactions through affiliated brokers.
For the fiscal year ended September 30, 1995, the Portfolio paid no brokerage
fees. For the fiscal years ended September 30, 1993 and 1994, the Small Cap
Growth Portfolio paid the following brokerage fees:
<TABLE>
<CAPTION>
================================================================================
Total $ Amount of Total $ Amount of
Brokerage Commissions Brokerage Commissions
Paid Paid to Affiliates
Portfolio
1993 1994 1993 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Small Cap Growth $178,375 $447,356 $0 $47,550
Portfolio
================================================================================
</TABLE>
SIT
SIT has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, SFM is responsible for placing orders to execute
Portfolio transactions. In placing orders, it is the SIT's policy to seek to
obtain the best net results taking into account such factors as price (including
the applicable dealer spread), size, type and difficulty of the transaction
involved, the firm's general execution and operational facilities, and the
firm's risk in positioning the securities involved. While the SFM generally
seeks reasonably competitive spreads or commissions, the Trust will not
necessarily be
B-63
<PAGE>
paying the lowest spread or commission available. SIT will not purchase
portfolio securities from any affiliated person acting as principal except in
conformity with the regulations of the SEC.
SIT does not expect to use one particular dealer, but, subject to SIT's policy
of seeking the best net results, dealers who provide supplemental investment
research to SFM or the Money Managers may receive orders for transactions by
SIT. Information so received will be in addition to and not in lieu of the
services required to be performed by SFM or the Money Managers under the
Portfolio's advisory agreement and sub-advisory agreement, and the expenses of
the SFM and the Money Managers will not necessarily be reduced as a result of
the receipt of such supplemental information. These research services include
advice, either directly or through publications or writings, as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities;
furnishing of analyses and reports concerning issuers, securities or industries;
providing information on economic factors and trends, assisting in determining
portfolio performance evaluation and technical market analyses. Such services
are used by the SFM or the Money Managers in connection with their investment
decision-making process with respect to one or more funds and accounts managed
by them, and may not be used exclusively with respect to the fund or account
generating the brokerage.
The money market securities in which the International Equity Portfolio invests
are traded primarily in the over-the-counter market. Bonds and debentures are
usually traded over-the-counter, but may be traded on an exchange. Where
possible, each Money Manager will deal directly with the dealers who make a
market in the securities involved except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting
as principal for their own account. On occasion, securities may be purchased
directly from the issuer. Money market securities are generally traded on a net
basis and do not normally involve either brokerage commissions or transfer
taxes. The cost of executing portfolio securities transactions of the Portfolio
will primarily consist of dealer spreads and underwriting commissions.
It is expected that the Portfolio may execute brokerage or other agency
transactions through the Distributor, a registered broker-dealer, for a
commission, in conformity with the 1940 Act, the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder. Under these
provisions, the Distributor is permitted to receive and retain compensation for
effecting portfolio transactions for the Portfolio on an exchange if a written
contract is in effect between the Distributor and SIT expressly permitting the
Distributor to receive and retain such compensation. These provisions further
require that commissions paid to the Distributor by SIT for exchange
transactions not exceed "usual and customary" brokerage commissions. The rules
define "usual and customary" commissions to include amounts which are
"reasonable
B-64
<PAGE>
and fair compared to the commission, fee or other renumeration received or to be
received by other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time." The Trustees, including those who are not
"interested persons" of SIT, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor and will review these
procedures periodically.
In addition, SFM has adopted a policy respecting the receipt of research and
related products and services in connection with transactions effected for
Portfolios operating within the "Manager of Managers" structure. Under this
policy, SFM and the various firms that serve as Money Managers to the Portfolio,
in the exercise of joint investment discretion over the assets of the Portfolio,
will direct a substantial portion of the Portfolio's brokerage to the
Distributor in consideration of the Distributor's provision of research and
related products to SFM for use in performing its advisory responsibilities.
All such transactions directed to the Distributor must be accomplished in a
manner that is consistent with SIT's policy to achieve best net results, and
must comply with SIT's procedures regarding the execution of transactions
through affiliated brokers.
For the fiscal year ended February 29, 1996, the Portfolio paid the following
brokerage fees:
<TABLE>
<CAPTION>
====================================================================================================================================
Portfolio Total $ Amount of Total $ Amount of % of Total Total $ Amount of Total $ Amount of
Brokerage Brokerage Brokerage Brokered Brokerage
Commission Paid Commissions paid Commissions Paid Transactions for Commissions Paid
(000) to Affiliates to Affiliates Research for Research in
(000)
1996 1996 1996 1996 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International Equity $1,604 $577 36% $219,268,833 $210,670
Portfolio
====================================================================================================================================
</TABLE>
For the fiscal years ended February 28, 1994 and February 28, 1995, the
Portfolio paid the following brokerage fees:
B-65
<PAGE>
<TABLE>
==========================================================================================
Portfolio Total $ Total $ Total $ Total $
Amount of Amount of Amount of Amount of
Brokerage Brokerage Brokerage Brokerage
Commission Commission Commissions Commissions
Paid Paid Paid to Paid to
(000) (000) Affiliates Affiliates
(000) (000)
1994 1995 1994 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Internationl Equity $783 $1,482 $49 $171
Portfolio
==========================================================================================
</TABLE>
The principal reason for the increase in brokerage commissions paid by the
International Equity Portfolio in the last three fiscal years was the growth of
the assets in the International Equity Portfolio.
SIT is required to identify any securities of its "regular brokers or dealers"
(as such term is defined in the 1940 Act) which the SIT has acquired during its
most recent fiscal year. As of February 29, 1996, the International Equity
Portfolio had entered into a repurchase agreement in the amount of approximately
$12,620,407 with J.P. Morgan Securities Inc. ("J.P. Securities"), a wholly owned
subsidiary of J.P. Morgan Co. Incorporated. J.P. Securities is considered a
"regular broker or dealer" of SIT.
Since SIT does not market its shares through intermediary brokers or dealers, it
is not the SIT's practice to allocate brokerage or principal business on the
basis of sales of its shares which may be made through such firms. However, the
SFM may place Portfolio orders with qualified broker-dealers who recommend the
SIT to clients, and may, when a number of brokers and dealers can provide best
price and execution on a particular transaction, consider such recommendations
by a broker or dealer in selecting among broker-dealers.
PORTFOLIO TURNOVER
For the fiscal years ended September 30, 1994 and 1995, the portfolio turnover
rate for each of the Funds was as follows:
B-66
<PAGE>
<TABLE>
<CAPTION>
===============================================================================
Turnover Rate
-----------------------------------------
Fund 1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Government Securities Fund 37.80% 18.33%
- -------------------------------------------------------------------------------
Balanced Fund 64.09% 55.06%
- -------------------------------------------------------------------------------
Value Equity Fund 161.42% 97.882%
- -------------------------------------------------------------------------------
Louisiana Tax-Free Income Fund 30.31% 2.312%
- -------------------------------------------------------------------------------
Growth Equity Fund * *
- -------------------------------------------------------------------------------
Investment Grade Income Fund * *
- -------------------------------------------------------------------------------
Small Cap Equity Fund * *
- -------------------------------------------------------------------------------
International Equity Fund * *
===============================================================================
</TABLE>
*As of September 30, 1995, had not commenced operations.
The portfolio turnover rate for the Small Cap Growth Portfolio for the fiscal
years ending September 30, 1994 and 1995 was 97% and 113%, respectively.
The portfolio turnover rate for the International Equity Portfolio for the
fiscal years ended February 29, 1996 and February 29, 1995 was 102% and 64%,
respectively.
DESCRIPTION OF SHARES
The Trust is a Massachusetts business trust and was organized pursuant to a
Declaration of Trust. The Declaration of Trust authorizes the Board of Trustees
to issue an unlimited number of shares, which are units of beneficial interest.
The Trust presently has series of shares which represent interests in the
following Funds: the Government Securities Fund, the Louisiana Fund, the
Investment Grade Income Fund, the Balanced Fund, the Value Equity Fund, the
Growth Equity Fund, the Small Cap Equity Fund, the International Equity Fund,
the Treasury Securities Money Market Fund, the Institutional Money Market Fund
and the Tax Exempt Money Market Fund, respectively. The Trust's Declaration of
Trust authorizes the Board of Trustees to divide or redivide any unissued shares
of the Trust into one or more additional series.
Shares have no subscription or preemptive rights and only such conversion or
exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectuses and this Statement of
Additional Information, the Trust's shares will be fully paid and non-
assessable, subject only to the possibility of shareholder liability described
in the following section. All consideration
B-67
<PAGE>
received by the Trust for shares of any additional series and all assets in
which such consideration is invested would belong to that series and would be
subject to the liabilities related thereto. In the event of a liquidation or
dissolution of the Trust, shareholders of a Fund are entitled to receive the
assets available for distribution belonging to that Fund, and a proportionate
distribution, based upon the relative asset values of the respective Funds, of
any general assets not belonging to any particular Fund which are available for
distribution. Share certificates representing shares will not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if the Trust were held to be a partnership, however, the
possibility of the shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any shareholder held personally liable for the
obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisers, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
5% SHAREHOLDERS
The names and addresses of the holders of 5% or more of the outstanding shares
of any Fund as of January 3, 1996 and the percentage of outstanding shares of
such Fund held by such shareholders as of such date are, to Trust management's
knowledge, as follows/(1)/:
B-68
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Name and Address Number
of Record of % of
Name of Fund or Beneficial Holder Shares Ownership
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Treasury Securities Money ENBECEE Company 542,396,597.5900 99.98%
Market Fund - Trust Class 925 Common Street
New Orleans, LA
70160
- --------------------------------------------------------------------------------
Treasury Securities Money National Financial 178,234,658.8400 52.30%
Market Fund - Retail Class Services Corp. for
the Exclusive
Benefit of Our
Customers
Attn: Mike
McLaughlin
200 Liberty Street
New York, NY 10281
- --------------------------------------------------------------------------------
Treasury Securities ENBECEE Company 162,463,324.9500 47.67%
Money Market Fund - Cash 925 Common Street
Sweep Class New Orleans, LA
70160
- --------------------------------------------------------------------------------
Government Securities Fund ENBECEE 6,592,774.1440 45.89%
- Class A 925 Common Street
New Orleans, LA
70160
- --------------------------------------------------------------------------------
ENBECEE 7,640,309.7040 53.18%
925 Common Street
New Orleans, LA
70112
- --------------------------------------------------------------------------------
Government Securities Fund NFSC FEBO 8,242.2070 31.49%
- Class B Noelie M. Gatipon
8241 Birch Street
New Orleans, LA
70118
- --------------------------------------------------------------------------------
NFSC FEBO 2,025.3370 7.74%
Rapides Bank
Customer
FBO Marilyn L.
Adler IRA
4807 Westgarden
Alexandria, LA
71303
- --------------------------------------------------------------------------------
NFSC FEBO 2,025.3370 7.74%
RBT Customer
FBO Homer H. Adler
IRA
4807 W. Garden
Boulevard
Alexandria, LA
71303
- --------------------------------------------------------------------------------
NFSC FEBO 3,408.1560 13.02%
Jacqueline A.
Maroney
Rige E. Maroney
2011 Illinois Avenue
Kenner, LA 70062
- --------------------------------------------------------------------------------
</TABLE>
B-69
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Name and Address Number
of Record of % of
Name of Fund or Beneficial Holder Shares Ownership
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
NFSC FEBO 1,475.3280 5.64%
Lori L. Reeves
701 Redwood Drive
Lake Charles, LA
70611
- --------------------------------------------------------------------------------
NFSC FEBO 3,149.9040 12.04%
Don S. Carlos
629 Verret
Houma, LA 70360
- --------------------------------------------------------------------------------
Louisiana Tax-Free Income ENBECEE Company 679,880.0710 53.52%
Fund - Class A 925 Common Street
New Orleans, LA
70160-0030
- --------------------------------------------------------------------------------
NFSC FEBO 74,841.2430 5.89%
Pierre Jules Maraist
Helen B. Maraist
503 E Second St.
Crowley, LA 70526
- --------------------------------------------------------------------------------
Louisiana Tax-Free Income NFSC FEBO 12,868.1080 19.30%
Fund - Class B Mr. Jack F. Worthy
1340 Chevelle Drive
Baton Rouge, LA
70806
- --------------------------------------------------------------------------------
NFSC FEBO 10,130.8720 15.20%
Irma Lee Dorrill
29885 Joe Stafford
Street
Walker, LA 70785
- --------------------------------------------------------------------------------
NFSC FEBO 5,096.4790 7.65%
Paul Boudreaux
Danielle Boudreaux
P.O. Box 384
Reserve, LA
70084-0384
- --------------------------------------------------------------------------------
NFSC FEBO 4,441.9400 6.66%
Ruth Manes
3851 33rd Street
Metairie, LA 70001
- --------------------------------------------------------------------------------
NFSC FEBO 4,128.0870 6.19%
Harrison L.
Cavalier &
Sybil H. Cavalier
12513 E. Sheraton
Baton Rouge, LA
70815
- --------------------------------------------------------------------------------
Balanced Fund - Class A ENBECEE Company 7,807,364.0090 92.77%
925 Common Street
New Orleans, LA
70160-0030
- --------------------------------------------------------------------------------
</TABLE>
B-70
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Name and Address Number
of Record of % of
Name of Fund or Beneficial Holder Shares Ownership
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
ENBECEE Company 431,441.4850 5.13%
925 Common Street
New Orleans, LA
70160-0030
- --------------------------------------------------------------------------------
Balanced Fund - Class B NFSC FEBO 6,078.8920 5.43%
First NBC
IRA of Henry John
Fell
321 Willowbrook
Drive
Gretna, LA 70056
- --------------------------------------------------------------------------------
Value Equity Fund - ENBECEE Company 2,397,720.7530 43.40%
Class A 925 Common Street
New Orleans, LA
70160-0030
- --------------------------------------------------------------------------------
ENBECEE Company 2,799,208.9280 50.67%
925 Common Street
New Orleans, LA
70160-0030
- --------------------------------------------------------------------------------
Institutional Money Market ENBECEE Company 27,118,448.0800 100.00%
Fund 925 Common Street
New Orleans, LA
70160-0030
================================================================================
</TABLE>
/(1)/ The Trust believes that most of the shares referred to above were held by
the above persons in accounts for their fiduciary, agency or custodial
customers. The Trust's Treasury Securities Money Market Fund Cash Sweep Class
has not yet commenced operations.
FINANCIAL STATEMENTS
THE TRUST
The financial statements of the Trust incorporated by reference into this
Statement of Additional Information have been audited by Arthur Andersen LLP,
independent accountants to the Trust, as indicated in their report with respect
thereto, and are incorporated herein by reference in reliance upon the authority
of said firm as experts in accounting and auditing.
SIMT AND SIT
SIMT's financial statements (as of, and for the fiscal year ended September 30,
1995) with respect to the Small Cap Growth Portfolio only and SIT's financial
statements (as of, and for the fiscal year ended February 29, 1996) with respect
to the International Equity Portfolio only, are incorporated by reference into
this Statement of Additional Information have been audited by Price Waterhouse
LLP, independent accountants to SIMT and SIT, as indicated in their reports with
respect thereto, and are incorporated herein by reference in reliance upon the
authority of said firm as experts in accounting and auditing.
B-71
<PAGE>
APPENDIX
Description of Commercial Paper Ratings
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Services, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc.
("Duff") and IBCA Limited and IBCA, Inc. (together "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1, 1+ and 2, to indicate the relative degree of safety. Issues rated A-
1+ are those with an "overwhelming degree" of credit protection. Those rated A-
1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a degree of safety regarding timely payment but not as high a
degree as A-1.
Commercial paper rated Prime-1 or Prime-2 by Moody's are judged by Moody's to be
of the "highest" and "higher" quality, respectively, on the basis of relative
repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Commercial paper rated Fitch-1 is regarded as having the
strongest degree of assurance for timely payment. The rating Fitch-2 (Very Good
Grade) is the second highest commercial paper rating assigned by Fitch which
reflects an assurance of timely payment only slightly less in degree than the
strongest issues.
Commercial paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors which are supported by good
fundamental protection factors. Risk factors are minor. Ratings of Duff-1 are
further refined by the gradations of "1+" and "1-". Issues rated Duff-1+ have
the highest certainty of timely payment, outstanding short term liquidity, and
safety just below risk-free U.S. Treasury short-term obligations. Issues rated
Duff-1 have high certainty of timely payment, strong liquidity factors supported
by good fundamental protection factors, and small risk factors. Commercial
paper rated Duff-2 is regarded as having good certainty of timely payment, good
access to capital markets and sound liquidity factors and company fundamentals.
Risk factors are small.
Description of Corporate Bond Ratings
The following descriptions of corporate bond ratings have been published by S&P,
Moody's, Fitch, Duff and IBCA.
A-1
<PAGE>
Bonds rated AAA have the highest rating that S&P assigns to a debt obligation.
Such a rating indicates an extremely strong capacity to pay principal and
interest. Bonds rated AA by S&P also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances bonds rated AA differ from AAA issues only to a small degree. Debt
rated A by S&P has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds which are rated BBB by S&P are considered medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged" bonds. Interest payments are protected by a large, or an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes are unlikely to impair
the fundamentally strong position of such issues. Bonds rated Aa by Moody's are
judged by Moody's to be of high quality. Together with bonds rated Aaa, they
comprise what are generally known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities, fluctuation of protective elements may be of greater amplitude, or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
Bonds which are rated A by Moody's possess many favorable investment attributes
and are considered 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. Debt rated
Baa by Moody's is regarded as having an adequate capacity to pay principal and
interest and repay principal. Whereas debt in this category normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay principal
and interest and repay principal for debt in this category than in higher rated
categories.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions, and
liable to but only slight market fluctuation other than market fluctuation
caused by changes in the money rate. The prime feature of an AAA bond is a
showing of earnings several times or many times interest requirements, with such
stability of applicable earnings
A-2
<PAGE>
that safety is beyond reasonable question whatever changes occur in conditions.
Bonds rated AA by Fitch are judged by Fitch to be of safety virtually beyond
question and are readily salable. The merits of bonds in this category are not
unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type market. Bonds rated A by Fitch are considered to be investment grade
and of high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with higher ratings.
Bonds rated BBB by Fitch are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic condition
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
Bonds rated AAA by Duff are judged by Duff to be of the highest credit quality,
with negligible risk factors being only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA by Duff are judged by Duff to be of high credit
quality with strong protection factors and risk that is modest but that may vary
slightly from time to time because of economic conditions. Bonds rated A by
Duff are judged by Duff to have average but adequate protection factors.
However, risk factors are more variable and greater in periods of economic
stress. bonds rated BBB by Duff are judged by Duff as having below average
protection factors but still considerable variability in risk during economic
cycles.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a
very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly. Obligations for which there is a low expectation of
investment risk are rated A by IBCA. Capacity for timely repayment of principal
and interest is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk. Obligations for
which there is currently a low expectation of investment risk are rated BBB by
IBCA. Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in higher
categories.
A-3
<PAGE>
PART C
Item 24. Financial Statements and Exhibits
Financial statements and exhibits filed as part of the Registration
Statement:
(a) Part A - Prospectus
(i) Financial Highlights for the Government Securities,
Louisiana Tax-Free Income, Balanced, Value Equity and Growth
Equity Funds, for the fiscal year ended September 30, 1995;
(ii) Financial Highlights for the Small Cap Growth Portfolio for
the fiscal period ended March 31, 1996; and
(iii) Financial Highlights for the International Equity Portfolio
for the fiscal period ended August 31, 1996.
(b) Part B - Statement of Additional Information
(i) The Registrant's audited Financial Statements for the
Government Securities, Louisiana Tax-Free Income, Balanced and
Value Equity Funds for the fiscal year ended September 30, 1995
including the report of Arthur Andersen LLP thereon are
incorporated by reference to Post-Effective Amendment No. 5,
filed with the Securities and Exchange Commission on January 29,
1996. The Financial Statements incorporated by reference are:
Statement of Net Assets as of September 30, 1995
Statement of Operations for the year ended September 30,
1995
Statement of Changes in Net Assets for the period ended
September 30, 1995
Financial Statements for the year ended September 30,
1995
Notes to Financial Statements as of September 30, 1995
Report of Independent Public Accountants dated
November 6, 1995
(ii) SEI Institutional Managed Trust's unaudited Financial
Statements, with respect to the Small Cap Growth Portfolio only,
for the fiscal period ended March 31, 1996 as filed with the
Securities and Exchange Commission via Edgar on May 29, 1996
are incorporated by reference.
The Unaudited Financial Statements incorporated by reference
are:
Statement of Net Assets as of March 31, 1996
Statement of Operations for the period ended March 31, 1996
Statement of Changes in Net Assets for the period ended
March 31, 1996
Notes to Financial Statements
SEI Institutional Managed Trust's audited Financial Statements,
with respect to the Small Cap Growth Portfolio only, for the
fiscal year ended September 30, 1995, including the report
of Price Waterhouse LLP thereon as filed with the Securities and
Exchange Commission via EDGAR on November 22, 1995 are
incorporated be referenced. The Financial Statements incorporated
by reference are:
Statement of Net Assets as of September 30, 1995
Statement of Operations for the year ended September 30,
1995
Statement of Changes in Net Assets for the period
ended September 30, 1995
Financial Statements for the year ended September 30, 1995
Notes to Financial Statements as of September 30, 1995
Report of Independent Accountants dated
November 10, 1995.
(iii) SEI International Trust's unaudited Financial Statements,
with respect to the International Equity Portfolio only, for the
fiscal period ended August 31, 1996 as filed with the Securities
and Exchange Commission via Edgar on October 29,1996 are
incorporated by reference.
The Unaudited Financial Statements incorporated by reference are:
Statement of Net Assets as of August 31, 1996
Statement of Operations for the period ended
August 31, 1996
Statement of Changes in Net Assets for the period ended
August 31, 1996
Notes to Financial Statements
SEI International Trust's audited Financial Statements,
with respect to the International Equity Portfolio only, for the
fiscal year ended February 29, 1996, including the report
of Price Waterhouse LLP thereon as filed with the Securities and
Exchange Commission via EDGAR on April 24, 1996 are incorporated
by referenced. The Financial Statements incorporated by reference
are:
Statement of Net Assets as of February 29, 1996
Statement of operations for the year ended February 29,
1996
Statement of Changes in Net Assets for the period
ended February 29, 1996
Financial Statements for the year ended February 29, 1996
Notes to Financial Statements as of February 29, 1996
Report of Independent Accountants dated
April 10, 1996.
(c) Exhibits:
(1) Registrant's Agreement and Declaration of Trust dated
June 29, 1993 as originally filed with Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on
Form N-1A, filed with the Securities and Exchange
Commission on August 25, 1993 is incorporated by
reference to Post-Effective Amendment No. 5, as filed on
January 29, 1996.
(2) Registrant's By-Laws adopted on June 29, 1993 as
originally filed with Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, filed
with the Securities and Exchange Commission on August 25,
1993 are incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 199 6.
(5) Investment Advisory Agreement between the Registrant and
First National Bank of Commerce in New Orleans dated
August 17, 1993 as originally filed with Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on
Form N-1A, filed with the Securities and Exchange
Commission on August 25, 1993 is incorporated by
reference to Post-Effective Amendment No. 5, as filed on
January 29, 1996.
(5)(a) Form of Investment Advisory Agreement between Registrant
and First National Bank of Commerce in New Orleans with
respect to the Investment Grade Income Fund, Small Cap
Equity Fund and International Equity Fund is filed
herewith.
(6)(a) Distribution Agreement between the Registrant and SEI
Financial Services Company dated August 17, 1993 as
originally filed with Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, filed
with the Securities and Exchange Commission on August 25,
1993 is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
(6)(b) Distribution Agreement between the Registrant and SEI
Financial Services Company dated August 8, 1994 is
incorporated by reference to Post-Effective Amendment No.
5, as filed on January 29, 1996.
(8) Custodian Agreement between the Registrant and First
National Bank of Commerce in New Orleans dated August 17,
1993 as originally filed with Pre-Effective Amendment No.
1 to Registrant's Registration Statement on Form N-1A,
filed with the Securities and Exchange Commission on
August 25, 1993 is incorporated by reference to Post-
Effective Amendment No. 5, as filed on January 29, 1996.
(9)(a) Administration Agreement between the Registrant and SEI
Financial Management Corporation dated August 17, 1993 as
originally filed with Pre-Effective Amendment No. 1 to
Registrant's Registration
<PAGE>
Statement on Form N-1A, filed with the Securities and
Exchange Commission on August 25, 1993 is incorporated by
reference to Post-Effective Amendment No. 5, as filed on
January 29, 1996.
(9)(b) Transfer Agent Agreement between the Registrant and
Supervised Service Company dated October 1, 1993 as
originally filed with Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A, filed
with the Securities and Exchange Commission on November
29, 1994 is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
(10) Opinion and Consent of Counsel dated August 20, 1993 as
originally filed with Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, filed
with the Securities and Exchange Commission on August 25,
1993 is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
(11) Opinion and Consent of Arthur Andersen LLP is filed
herewith.
(11)(a) Opinion and Consent of Price Waterhouse LLP with respect
to SEI Institutional Managed Trust is filed herewith.
(11)(b) Opinion and Consent of Price Waterhouse LLP with respect
to SEI International Trust is filed herewith.
(15)(a) herewith. (15)(a) 12b-1 Plan with respect to the Retail
Class Shares of the Treasury Securities Money Market Fund
dated August 17, 1993 as originally filed with Pre-
Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A, filed with the Securities and
Exchange Commission on August 25, 1993 is incorporated by
reference to Post-Effective Amendment No. 5, as filed on
January 29, 1996.
(15)(b) 12b-1 Plan with respect to the Class B Shares of the
Government Securities, Louisiana Tax-Free, Balanced
(formerly the "Growth and Income Fund") and Value Equity
Funds dated August 17, 1993 as originally filed with Pre-
Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A, filed with the Securities and
Exchange Commission on August 25, 1993 is incorporated by
reference to Post-Effective Amendment No. 5, as filed on
January 29, 1996.
(15)(c) Distribution Plan with respect to the Class C Shares of
the Treasury Securities Money Market Fund dated August 8,
1994 as originally filed with Post-Effective Amendment
No. 2 to Registrant's Registration Statement on Form N-
1A, filed with the Securities and Exchange Commission on
November 29, 1994 is incorporated by reference to Post-
Effective Amendment No. 5, as filed on January 29,
1996.
(16) Performance Calculations for the Treasury Securities
Money Market Fund for fiscal year ended September 30,
1994 as originally filed with Post-Effective Amendment
No. 2 to Registrant's Registration Statement on Form N-1A
filed with the Securities and Exchange Commission on
November 29, 1994 is incorporated by reference to Post-
Effective Amendment No. 5, as filed on January 29,
1996.
(17) Financial Data Schedules are filed herewith.
(18) Rule 18f-3 plan dated May 15, 1995 as originally filed
with Post-Effective Amendment No. 3 to Registrant's
Registration Statement filed with the Securities and
Exchange Commission on May 26, 1995 is incorporated by
reference to Post-Effective Amendment No. 5, as filed on
January 29, 1996.
(24) Powers of Attorney for John T. Cooney, William M. Doran,
David G. Lee, Frank E. Morris, Barry M. Mulroy, Robert A.
Patterson, Gene Peters, Robert A. Nesher, Carmen V. Romeo
and James M. Storey are incorporated by reference to
Post-Effective Amendment No. 5, as filed on January 29,
1996.
- -----------------------
Item 25. Persons Controlled by or under Common Control with Registrant
Persons directly or indirectly controlled by or under common control
with the Registrant, the percentage of voting securities owned by such control
persons and, if a company, the state under whose laws it was organized:
See the Prospectuses and the Statement of Additional Information
regarding the Trust's control relationships. SEI Financial Management
Corporation, a wholly-owned subsidiary of SEI Corporation ("SEI"), is the owner
of all beneficial interest in SEI Fund Resources ("the Administrator"). SEI and
its subsidiaries and affiliates,
<PAGE>
including the Administrator, are leading providers of funds evaluation services,
trust accounting systems, and brokerage and information services to financial
institutions, institutional investors, and money managers.
Item 26. Number of Holders of Securities
The number of record holders of each class as of September 30, 1996:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Units of beneficial interest, without par value-
Treasury Securities Money Market Fund-Trust Class..................... 5
Treasury Securities Money Market Fund-Retail Class.................. 142
Treasury Securities Money Market Fund-Cash Sweep Class................ 0
Government Securities Fund-Class A.................................. 477
Government Securities Fund-Class B................................... 51
Louisiana Tax-Free Income Fund-Class A.............................. 725
Louisiana Tax-Free Income Fund-Class B............................... 44
Balanced Fund-Class A............................................... 581
Balanced Fund-Class B............................................... 213
Value Equity Fund-Class A........................................... 755
Value Equity Fund-Class B........................................... 462
Growth Equity Fund-Class A........................................... 48
Growth Equity Fund-Class B........................................... 21
Institutional Money Market Fund....................................... 6
Tax Exempt Money Market Fund.......................................... 3
Investment Grade Income Fund.......................................... 0
Small Cap Equity Fund................................................. 0
International Equity Fund............................................. 0
</TABLE>
Item 27. Indemnification
Article VIII of the Agreement and Declaration of Trust filed as Exhibit
1 to the Registration Statement in incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and therefore, is unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, officers or
controlling persons in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 28. Business and Other Connections of Investment Adviser
Business and other connections of a substantial nature in which each
investment adviser and each director, officer or partner of such investment
adviser is or has been involved at any time during the past two fiscal years in
the capacity of director, officer, employee, partner or trustee are as follows:
<PAGE>
First National Bank of Commerce in New Orleans ("First National Bank")
offers a wide variety of financial services to customers. First National Bank
currently manages assets of approximately $2.3 billion. First National Bank's
principal place of business is 210 Baronne Street, New Orleans, Louisiana 70112.
Other business, profession, vocation, or employment of a substantial
nature in which each director or principal officer of First National Bank is or
has been, at any time during the last two fiscal years, engaged for his or her
own account or in the capacity of director, officer, employee, partner or
trustee are as follows:
<TABLE>
<CAPTION>
Name and Position Name of Connection with
with Investment Adviser Other Company Other Company
----------------------- ------------- -------------
<S> <C> <C>
Edward M. Simmons McIlhenny Company President & CEO
Director
H. Leighton Steward The LL&E Company Chairman, President & CEO
Director
Joseph B. Storey Oil & Gas Consultant Consultant
Director
Norman C. Francis Xavier University President
Director
Patrick F. Taylor Taylor Energy Company Chairman and CEO
Director
Charles C. Teamer Dillard University Vice President, Fiscal Affairs
Director
Lloyd F. Gaubert L.F. Gaubert & Co. Inc. President
Director
John J. Gelpi, Jr. Industrial Metals of the South, President
Director Inc.
Erik F. Johnsen Central Gulf Lines, Inc. President
Director
J. Merrick Jones, Jr. Canal Barge Co., Inc. President
Director
Edwin Lupberger Energy Corporation Chairman and President
Director
Robert W. Merrick Latter & Blum, Inc. President
Director
G. Frank Purvis, Jr. Pan-American Life Insurance Co. Chairman of the Board
Director
Ashton J. Ryan, Jr. -- --
Director, President & COO
Margaret Moss Allums -- --
Director
Ian Arnof First Commerce Corporation President & CEO
Director
William G. Barry Audubon Computer Rentals, Inc. Chairman of the Board
Director
Sydney Besthoff, III K&B, Incorporated --
Director
John D. Charbonnet Charbonnet Construction President
Director
Laurance Eustis, Jr. Eustis Insurance, Inc. Chairman of the Board
Director
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Connection with
with Investment Adviser Other Company Other Company
----------------------- ------------- -------------
<S> <C> <C>
Howard C. Gaines -- --
Director, President & CEO
Gerard W. Barrousse -- --
Executive Vice President
Glenn W. Hayes -- --
Executive Vice President
Suzanne T. Mestayer -- --
Executive Vice President
David T. Spell, Jr. -- --
Executive Vice President
</TABLE>
Item 29. Principal Underwriters:
(a) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the securities of
the Registrant also acts as a principal underwriter, distributor or
investment adviser.
Registrant's distributor, SEI Financial Services Company ("SFS"), acts as
distributor for:
<TABLE>
<S> <C>
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
Stepstone Funds January 30, 1991
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
1784 Funds(R) June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Marquis Funds(R) August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
FMB Funds, Inc. March 1, 1996
SEI Asset Allocation Trust April 1, 1996
Turner Funds April 30, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
</TABLE>
<PAGE>
SFS provides numerous financial services to investment managers, pension
plan sponsors, and bank trust departments. These services include
portfolio evaluation, performance measurement and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named in
the answer to Item 21 of Part B. Unless otherwise noted, the business
address of each director or officer is 530 East Swedesford Road, Wayne, PA
19087.
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- --------------------------------------------- ----------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer --
Henry H. Greer Director, President & Chief Operating Officer --
Carmen V. Romeo Director, Executive Vice President & Treasurer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, President-Investment Services Division --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
Larry Hutchison Senior Vice President --
Steven Kramer Senior Vice President --
David G. Lee Senior Vice President President & Chief
Executive Officer
William Madden Senior Vice President --
Jack May Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
Kevin P. Robins Senior Vice President, General Counsel & Vice President &
Secretary Assistant Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kenneth Zimmer Senior Vice President --
Robert Aller Vice President --
Marc H. Cahn Vice President & Assistant Secretary Vice President &
Assistant Secretary
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President &
Assistant Secretary
Robert Crudup Vice President & Managing Director --
Ed Daly Vice President --
Jeff Drennen Vice President --
Mick Duncan Vice President and Team Leader Assistant Secretary
Vic Galef Vice President & Managing Director --
Kathy Heilig Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Kim Kirk Vice President & Managing Director --
Donald H. Korytowski Vice President --
John Krzeminski Vice President & Managing Director --
Robert S. Ludwig Vice President and Team Leader Assistant Secretary
Vicki Malloy Vice President and Team Leader Assistant Secretary
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Barbara A. Nugent Vice President & Assistant Secretary Vice President &
Assistant Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President &
Assistant Secretary
Donald Pepin Vice President & Managing Director --
Larry Pokora Vice President --
Kim Rainey Vice President --
Paul Sachs Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
William Zawaski Vice President --
James Dougherty Director of Brokerage Services --
</TABLE>
Item 30. Location of Accounts and Records
The names and addresses of each person maintaining physical possession
of any account, book or other document required to be maintained under Rule
31(a) of the 1940 Act are as follows:
With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records are maintained at the
offices of Registrant's custodian:
First National Bank of Commerce in New Orleans
210 Baronne Street
New Orleans, Louisiana 70112
With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and records are
maintained at the offices of Registrant's administrator:
SEI Fund Resources
530 East Swedesford Road
Wayne, Pennsylvania 19087
With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's investment adviser and sub-adviser:
First National Bank of Commerce in New Orleans
210 Baronne Street
New Orleans, Louisiana 70112
xii
<PAGE>
Weiss, Peck & Greer L.L.C.
One New York Plaza
New York, N.Y. 10004
Item 31. Management Services
Not Applicable
Item 32. Undertakings
Registrant hereby undertakes that whenever shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940
inform the Board of Trustees of their desire to communicate with
shareholders of the Trust, the Trustees will inform such shareholders
as to the approximate number of shareholders of record and the
approximate costs of mailing or afford said shareholders access to a
list of shareholders.
Registrant undertakes to hold a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee(s) when
requested in writing to do so by the holders of at least 10% of
Registrant's outstanding shares and in connection with such meetings
to comply with the provisions of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder communications.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
Registrant hereby undertakes to file a Post-Effective Amendment using
financial statements with respect to the Investment Grade Income Fund
which need not be certified within four to six months from the
effective date of this Post-Effective Amendment No. 7.
Registrant hereby undertakes to file a Post-Effective Amendment using
financial statements with respect to the Small Cap Equity Fund
which need not be certified within four to six months from the
effective date of this Post-Effective Amendment No. 7.
Registrant hereby undertakes to file a Post-Effective Amendment using
financial statements with respect to the International Equity Fund
which need not be certified within four to six months from the
effective date of this Post-Effective Amendment No. 7.
xiii
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust of Marquis Funds is on
file with the Secretary of State of The Commonwealth of Massachusetts and notice
is hereby given that this Registration Statement has been executed on behalf of
the Trust by an officer of the Trust as an officer and by its Trustees as
trustees and not individually and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees, officers, or
shareholders individually but are binding only upon the assets and property of
the Trust.
xiv
<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 has duly caused this
Post Effective Amendment No. 7 to Registration Statement No. 33-65436 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Wayne, Commonwealth of Pennsylvania on the 13th day of November, 1996.
Marquis Funds
By: /s/ David G. Lee
------------------------------
David G. Lee
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment has
been signed below by the following persons in the capacity and on the dates
indicated.
<TABLE>
<S> <C> <C>
* Trustee November 13, 1996
- ------------------------------
John T. Cooney
* Trustee November 13, 1996
- ------------------------------
William M. Doran
* Trustee November 13, 1996
- ------------------------------
Frank E. Morris
* Trustee November 13, 1996
- ------------------------------
Barry Mulroy
* Trustee November 13, 1996
- ------------------------------
Robert A. Nesher
* Trustee November 13, 1996
- ------------------------------
Robert A. Patterson
* Trustee November 13, 1996
- ------------------------------
Gene Peters
* Trustee November 13, 1996
- ------------------------------
James M. Storey
/s/ David G. Lee President & Chief November 13, 1996
- ------------------------------ Executive Officer
David G. Lee
/s/ Stephen G. Meyer Controller & Chief November 13, 1996
- ------------------------------ Financial Officer
Stephen G. Meyer
*By /s/ David G. Lee
-----------------------------------
David G. Lee
Attorney in Fact
</TABLE>
xv
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
EX-99.B1 Registrant's Agreement and Declaration of Trust
dated June 29, 1993 as originally filed with
Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A, filed with the
Securities and Exchange Commission on August 25,
1993 is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
EX-99.B2 Registrant's By-Laws adopted on June 29, 1993 as
originally filed with Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form
N-1A, filed with the Securities and Exchange
Commission on August 25, 1993 are incorporated by
reference to Post-Effective Amendment No. 5, as
filed on January 29, 1996.
EX-99.B5 Investment Advisory Agreement between the
Registrant and First National Bank of Commerce in
New Orleans dated August 17, 1993 as originally
filed with Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A,
filed with the Securities and Exchange Commission
on August 25, 1993 is incorporated by reference to
Post-Effective Amendment No. 5, as filed on
January 29, 1996.
EX-99.B5(a) Form of Investment Advisory Agreement between
Registrant and First National Bank of Commerce in
New Orleans with respect to the Investment Grade
Income Fund, Small Cap Equity Fund and
International Equity Fund is filed herewith.
EX-99.B6(a) Distribution Agreement between the Registrant and
SEI Financial Services Company dated August 17,
1993 as originally filed with Pre-Effective
Amendment No. 1 to Registrant's Registration
Statement on Form N-1A, filed with the Securities
and Exchange Commission on August 25, 1993 is
incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
EX-99.B6(b) Distribution Agreement between the Registrant and
SEI Financial Services Company dated August 8, 1994
is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
EX-99.B8 Custodian Agreement between the Registrant and
First National Bank of Commerce in New Orleans
dated August 17, 1993 as originally filed with
Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A, filed with the
Securities and Exchange Commission on August 25,
1993 is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
EX-99.B9(a) Administration Agreement between the Registrant
and SEI Financial Management Corporation dated
August 17, 1993 as originally filed with
Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A, filed with the
Securities and Exchange Commission on August 25,
1993 is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
EX-99.B9(b) Transfer Agent Agreement between the Registrant
and Supervised Service Company dated October 1,
1993 as originally filed with Post-Effective
Amendment No. 2 to Registrant's Registration
Statement on Form N-1A, filed with the Securities
and Exchange Commission on November 29, 1994 is
incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
</TABLE>
xvi
<PAGE>
<TABLE>
<C> <S>
EX-99.B10 Opinion and Consent of Counsel dated August 20,
1993 as originally filed with Pre-Effective
Amendment No. 1 to Registrant's Registration
Statement on Form N-1A, filed with the Securities
and Exchange Commission on August 25, 1993 is
incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
EX-99.B11 Opinion and Consent of Arthur Andersen LLP is filed
herewith.
EX-99.B11(a) Opinion and Consent of Price Waterhouse LLP with
respect to SEI Institutional Managed Trust is filed
herewith.
EX-99.B11(b) Opinion and Consent of Price Waterhouse LLP with
respect to SEI International Trust is filed
herewith.
EX-99.B15(a) 12b-1 Plan with respect to the Retail Class Shares
of the Treasury Securities Money Market Fund dated
August 17, 1993 as originally filed with
Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A, filed with the
Securities and Exchange Commission on August 25,
1993 is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
EX-99.B15(b) 12b-1 Plan with respect to the Class B Shares of
the Government Securities, Louisiana Tax-Free,
Balanced (formerly the "Growth and Income Fund")
and Value Equity Funds dated August 17, 1993 as
originally filed with Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form
N-1A, filed with the Securities and Exchange
Commission on August 25, 1993 is incorporated by
reference to Post-Effective Amendment No. 5, as
filed on January 29, 1996.
EX-99.B15(c) Distribution Plan with respect to the Class C
Shares of the Treasury Securities Money Market Fund
dated August 8, 1994 as originally filed with
Post-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A, filed with the
Securities and Exchange Commission on November 29,
1994 is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
EX-99.B16 Performance Calculations for the Treasury
Securities Money Market Fund for fiscal year ended
September 30, 1994 as originally filed with
Post-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A filed with the
Securities and Exchange Commission on November 29,
1994 is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
EX-99.B18 Rule 18f-3 plan dated May 15, 1995 as originally
filed with Post-Effective Amendment No. 3 to
Registrant's Registration Statement filed with the
Securities and Exchange Commission on May 26, 1995
is incorporated by reference to Post-Effective
Amendment No. 5, as filed on January 29, 1996.
EX-99.B24 Powers of Attorney for John T. Cooney,
William M. Doran, David G. Lee, Frank E. Morris,
Barry M. Mulroy, Robert A. Patterson, Gene Peters,
Robert A. Nesher, Carmen V. Romeo and James M.
Storey are incorporated by reference to
Post-Effective Amendment No. 5, as filed on
January 29, 1996.
EX-27 Financial Data Schedules are filed herewith.
</TABLE>
xvii
<PAGE>
INVESTMENT ADVISORY AGREEMENT
MARQUIS FUNDS
AGREEMENT made this day of November, 1996, by and between
Marquis Funds, a Massachusetts business trust (the "Trust"), and First National
Bank of Commerce in New Orleans, (the "Adviser").
WHEREAS, the Trust is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series of shares, each having its own investment
policies; and
WHEREAS, the Trust has retained SEI Financial Management Corporation
(the "Administrator") to provide administration of the Trust's operations,
subject to the supervision of the Board of Trustees;
WHEREAS, the Trust has retained the Adviser to render investment
management services with respect to certain of its portfolios, but wishes this
agreement to govern the provision by the Adviser of services to its Investment
Grade Income Fund, Small Cap Equity Fund, and International Equity Fund and such
other portfolios as the Trust and the Adviser may agree upon from time to time
and listed on Schedule A (the "Portfolios"), and the Adviser is willing to
render such services;
WHEREAS, the Adviser is authorized to invest the assets of the Small
Cap Equity Fund or International Equity Fund in another registered investment
company ("Master Fund") or manage the assets directly as it deems appropriate
after consultation with the Trust's Board of Trustees; and
WHEREAS, the Adviser, with the approval of the Board of Trustees, may
appoint one or more sub-advisers for the Portfolios.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. Duties of the Adviser. The Trust employs the Adviser to manage
the investment and reinvestment of the assets, to supervise and
monitor the investment activities of any sub-advisers appointed by the
Advisor and approved by the Board of Trustees and each affected
Portfolio's shareholders, to supervise and monitor the investment
activities of any Master Fund in which the assets of any Portfolio are
invested, and to continuously review, supervise, and administer the
investment program of the Portfolios, to determine in its discretion
the securities to be purchased or sold, to provide the Administrator
and the Trust with records concerning the Adviser's activities which
the Trust is required to maintain, and to render regular reports to
the Administrator and to the Trust's Officers and Trustees concerning
the Adviser's discharge of the foregoing responsibilities. The Adviser
shall discharge the foregoing responsibilities subject to the control
of the Board of
<PAGE>
Trustees of the Trust and in compliance with such policies as the
Trustees may from time to time establish, and in compliance with the
objectives, policies, and limitations for each such Portfolio set
forth in the Trust's prospectus and statement of additional
information as amended from time to time, and applicable laws and
regulations.
The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and
equipment and the personnel required by it to perform the services on
the terms and for the compensation provided herein.
2. Portfolio Transactions. The Adviser is authorized to select the
brokers or dealers that will execute the purchases and sales of
portfolio securities for the Portfolios and is directed to use its
best efforts to obtain the best net results as described in the
Trust's prospectus and statement of additional information from time
to time. The Adviser will promptly communicate to the Administrator
and to the officers and the Trustees of the Trust such information
relating to portfolio transactions as they may reasonably request.
It is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or be in
breach of any obligation owing to the Trust under this Agreement, or
otherwise, solely by reason of its having directed a securities
transaction on behalf of the Trust to a broker-dealer in compliance
with the provisions of Section 28(e) of the Securities Exchange Act of
1934, as amended.
3. Subject to the approval of the Trust's Board of Trustees, including a
majority of the disinterested trustees of the Trust, the Adviser may
invest all or substantially all of the assets of a Portfolio in shares
of a Master Fund, or may retain one or more sub-advisers to perform
any or all of the services and assume any of the responsibilities
described in Sections 1 and 2 of this Agreement. The investment of a
Portfolio's assets in shares of a Master Fund shall not relieve the
Adviser of its responsibilities under this Agreement to supervise and
monitor the investment activities of the Portfolio, further, the
retention of a sub-adviser by the Adviser shall not relieve the
Adviser of its responsibilities under this Agreement to supervise and
monitor the investment activities of any such sub-adviser.
4. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Sections 1 and 2 of this Agreement, the Trust
shall pay to the Adviser compensation at the rate specified in the
Schedule(s) which are attached hereto and made a part of this
Agreement. Such compensation shall be paid to the Adviser at the end
of each month, and calculated by applying a daily rate, based on the
annual percentage rates as specified in the attached Schedule(s), to
the assets. The fee shall be based on the average daily net assets
for the month involved.
<PAGE>
All rights of compensation under this Agreement for services performed
as of the termination date shall survive the termination of this
Agreement.
5. Other Expenses. The Adviser shall pay all compensation, if any, of
officers or trustees of the Trust who are affiliated persons of the
Adviser or any affiliated corporation of the Adviser, all expenses of
preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, and sales
literature to prospective clients to the extent these expenses are not
borne by the Trust under a distribution plan adopted pursuant to Rule
12b-1.
6. Excess Expenses. If the expenses for any Portfolio for any fiscal
year (including fees and other amounts payable to the Adviser, but
excluding interest, taxes, brokerage costs, litigation, and other
extraordinary costs) as calculated every business day would exceed the
expense limitations imposed on investment companies by any applicable
statute or regulatory authority of any jurisdiction in which Shares
are qualified for offer and sale, the Adviser shall bear such excess
cost.
However, the Adviser will not bear expenses of the Trust or any
Portfolio which would result in the a Portfolio's inability to
qualify as a regulated investment company under provisions of the
Internal Revenue Code. Payment of expenses by the Adviser pursuant to
this Section 6 shall be settled on a monthly basis (subject to fiscal
year end reconciliation) by a reduction in the fee payable to the
Adviser for such month pursuant to Section 4 and, if such reduction
shall be insufficient to offset such expenses, by reimbursing the
Trust.
7. Reports. The Trust and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of financial statements, and such other
information with regard to their affairs as each may reasonably
request.
8. Status of the Adviser. The services of the Adviser to the Portfolios
are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others so long as its services to the
Portfolios are not impaired thereby. The Adviser shall be deemed to
be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the
Trust in any way or otherwise be deemed an agent of the Trust.
9. Certain Records. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated
under the 1940 Act which are prepared or maintained by the Adviser on
behalf of the Trust are the property of the Trust and will be
surrendered promptly to the Trust on request.
Limitation of Liability of the Adviser. The duties of the Adviser
shall be confined to those expressly set forth herein, and no implied
duties are assumed by or may be
<PAGE>
asserted against the Adviser hereunder. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in carrying out its duties
hereunder, except a loss resulting from willful misfeasance, bad faith
or gross negligence in the performance of its duties or the duties of
any sub-advisers, or by reason of reckless disregard of its or any sub-
adviser's obligations and duties hereunder , except as may otherwise be
provided under provisions of applicable state law which cannot be waived
or modified hereby. (As used in this Paragraph 9, the term "Adviser"
shall include directors, officers, employees and other corporate agents
of the Adviser as well as that corporation itself).
So long as the Adviser acts in good faith and with due diligence and
without gross negligence or willful misconduct, the Trust assumes full
responsibility and agrees to and hereby does indemnify the Adviser and
hold it harmless from and against any and all actions, suits and
claims, whether groundless or otherwise, and from and against any and
all losses, damages, costs, charges, reasonable counsel fees and
disbursements, payments, expenses and liabilities (including
reasonable investigation expenses) arising directly or indirectly out
of said advisory relationship to the Trust or any other service
rendered to the Trust hereunder. The indemnity and defense provisions
set forth herein shall indefinitely survive the termination of this
Agreement.
The Adviser's rights hereunder shall include the right to reasonable
advances of defense expenses in the event of any pending or threatened
litigation with respect to which indemnification hereunder may
ultimately be merited if a majority of the disinterested Trustees or
independent legal counsel determines that there is a reasonable belief
that indemnification ultimately will be permissible. However, if it
is ultimately determined that the Adviser is not entitled to
indemnification, all funds advanced must be returned to the Trust.
In order that the indemnification provision contained herein shall
apply, however, it is understood that if in any case the Trust may be
asked to indemnify or hold the Adviser harmless, a determination must
be made either by a vote of a majority of the disinterested Trustees
or by opinion of independent legal counsel that indemnification is
available. In addition, the Trust shall be fully and promptly advised
of all pertinent facts concerning the situation in question, and it is
further understood that the Adviser will use all reasonable care to
identify and notify the Trust promptly concerning any situation which
presents or appears likely to present the probability of such a claim
for indemnification against the Trust, but failure to do so in good
faith shall not affect the Adviser's rights hereunder.
11. Permissible Interests. Trustees, agents, and shareholders of the
Trust are or may be interested in the Adviser (or any successor
thereof) as directors, partners, officers, or shareholders, or
otherwise; directors, partners, officers, agents, and shareholders of
the Adviser are or may be interested in the Trust as Trustees,
<PAGE>
shareholders or otherwise; and the Adviser (or any successor) is or
may be interested in the Trust as a shareholder or otherwise. In
addition, brokerage transactions for the Trust may be effected through
affiliates of the Adviser or any sub-adviser, subject to the rules
and regulations of the Securities and Exchange Commission.
12. Duration and Termination. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until two years from date of
execution, and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a)
by the vote of a majority of those Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Trustees of the Trust or by vote of a
majority of the outstanding voting securities of each Portfolio;
provided, however, that if the shareholders of any Portfolio fail to
approve the Agreement as provided herein, the Adviser may continue to
serve hereunder in the manner and to the extent permitted by the 1940
Act and rules and regulations thereunder. The foregoing requirement
that continuance of this Agreement be "specifically approved at least
annually" shall be construed in a manner consistent with the 1940 Act
and the rules and regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time,
without the payment of any penalty, by vote of a majority of the
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Portfolio on 60 days written notice to the
Adviser, or by the Adviser at any time without the payment of any
penalty, on 90 days written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its
assignment.
As used in this Section 12, the terms "assignment", "interested
persons", and a "vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in the 1940
Act and the rules and regulations thereunder; subject to such
exemptions as may be granted by the Securities and Exchange Commission
under said Act.
13. Notice. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice
to the other party at the last address furnished by the other party to
the party giving notice: if to the Trust, at 680 East Swedesford
Road, Wayne, Pennsylvania 19087, and if to the Adviser at 210 Baronne
Street, New Orleans, Louisiana 70112.
14. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
<PAGE>
A copy of the Agreement and Declaration of Trust of the Trust is on file with
the Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees, and are not binding upon any of the Trustees, officers, or
shareholders of the Trust individually but binding only upon the assets and
property of the Trust.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.
Marquis Funds First National Bank of Commerce in
New Orleans
By: By:
Attest: Attest:
<PAGE>
Schedule A
to the
Investment Advisory Agreement
between
Marquis Funds
and
First National Bank of Commerce in New Orleans
Dated: November , 1996
Pursuant to Section 4, the Trust shall pay the Adviser compensation for
advisory services rendered to the following Portfolios at an annual rate as
follows:
During any term of this Agreement while the Portfolio's "investment securities"
are 100% invested in a Master Fund:
Portfolio Fee
--------- ---
Small Cap Equity Fund 40 bps
International Equity Fund 40 bps
During any term of this Agreement while the Portfolio's assets are managed by
the Adviser (either directly or through a sub-adviser):
Portfolio Fee
--------- ---
Investment Grade Income Fund 74 bps
Small Cap Equity Fund 90 bps
International Equity Fund 110 bps
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated November 6, 1995,
on the September 30, 1995 financial statements of Marquis Funds, included in the
Post-Effective Amendment No. 7 to the Registration Statement on Form N-1A of
Marquis Funds (No. 33-65436), and to all references to our Firm included in or
made part of Post-Effective Amendment No. 7 to Registration Statement File No.
33-65436.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.
November 14, 1996
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 7 to the registration statement on Form N-1A of Marquis Funds'
(File 33-65436)(the "Registration Statement") of our report dated November 10,
1995, relating to the financial statements and financial highlights of the Small
Cap Growth Portfolio appearing in the September 30, 1995 Annual Report to
Shareholders of the SEI Institutional Managed Trust, which are also incorporated
by reference into the Registration Statement. We also consent to the references
to us under the heading "Financial Highlights" in the Prospectus and under the
heading "Financial Statements" in the Statement of Additional Information.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
November 15, 1996
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 7 to the registration statement on Form N-1A of Marquis Funds'
(File Number 33-65436)(the "Registration Statement") of our report dated April
10, 1996, relating to the financial statements and financial highlights of the
International Equity Portfolio appearing in the February 29, 1996 Annual Report
to Shareholders of the SEI International Trust, which are also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and under the
heading "Financial Statements" in the Statement of Additional Information.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
November 15, 1996
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<OVERDISTRIBUTION-GAINS> 0
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<NAME> THE MARQUIS FUNDS
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<NAME> THE MARQUIS FUNDS
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<NUMBER-OF-SHARES-REDEEMED> (13,117)
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<EXPENSE-RATIO> .25
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</TABLE>
