AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1997
File No. 333-00641
File No. 811-07527
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 5
------------------------------
and
REGISTRATION STATEMENT UNDER
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 6
TIP FUNDS
(formerly Turner Funds)
(Exact Name of Registrant as Specified in Charter)
c/o The CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, including Area Code (610) 251-0268
(Name and Address of Agent for Service)
STEPHEN KNEELEY
TURNER INVESTMENT PARTNERS, INC.
1235 WESTLAKES DR., SUITE 350
BERWYN, PENNSYLVANIA 19312-2414
Copies to:
JAMES W. JENNINGS, ESQUIRE JOHN H. GRADY, JR., ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
2000 ONE LOGAN SQUARE 1800 M STREET, NW
PHILADELPHIA, PENNSYLVANIA 19103 WASHINGTON, DC 20036
- --------------------------------------------------------------------------------
It is proposed that this filing become effective (check appropriate box):
_____ immediately upon filing pursuant to paragraph (b)
_____ on [date] pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)
_____ on [date] pursuant to paragraph (a) of Rule 485
X 75 days after filing pursuant to paragraph (a)(2)
- -----
DECLARATION PURSUANT TO RULE 24F-2: Pursuant to Rule 24f-2 under the Investment
Company Act of 1940 the Registrant has registered an indefinite number or amount
of its shares of beneficial interest under the Securities Act of 1933. The Rule
24f-2 Notice for the Registrant's fiscal year ended September 30, 1996 was filed
on November 27, 1996.
- --------------------------------------------------------------------------------
<PAGE>
TURNER FUNDS
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ------------- --------
PART A -
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary; Expense Summary
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant The Trust and the Funds; Investment Objectives; Invest-
ment Policies; Risk Factors; Investment Limitations;
General Information - The Trust
Item 5. Management of the Fund General Information-Trustees of the Trust; The Adviser;
The Administrator; The Transfer Agent; The Distributor;
Portfolio Transactions; Expense Summary
Item 5A. Management's Discussion of Fund *
Performance
Item 6. Capital Stock and Other Securities General Information-Voting Rights; General Infor-
mation-Shareholder Inquiries; General Information-Divi-
dends and Distributions; Taxes
Item 7. Purchase of Securities Being Offered Purchase and Redemption of Shares
Item 8. Redemption or Repurchase Purchase and Redemption of Shares
Item 9. Pending Legal Proceedings *
PART B -
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 Investment Objectives (Prospectus); Investment Poli-
cies (Prospectus); Investment Limitations
Item 14. Management of the Registrant General Information - Trustees of the Trust (Prospec-
tus); Trustees and Officers of the Trust; The Admin-
istrator
Item 15. Control Persons and Principal Trustees and Officers of the Trust;
Holders of Securities 5% Shareholders
Item 16. Investment Advisory and Other The Adviser (Prospectus and Statement of Additional
Services Information); The Administrator (Prospectus and
Statement of Additional Information); The
Distributor (Prospectus and Statement of Additional
Information); The Transfer Agent (Prospectus);
General Information - Counsel and Independent Public
Accountants (Prospectus); Experts; General
Information - Custodian (Prospectus)
Item 17. Brokerage Allocation Portfolio Transactions (Prospectus); Portfolio Trans-
actions
Item 18. Capital Stock and Other Securities Description of Shares
Item 19. Purchase, Redemption, and Pricing Purchase and Redemption of Shares
of Securities Being Offered (Prospectus); Purchase and Redemption of Shares; Deter-
mination of Net Asset Value;
Item 20. Tax Status Taxes (Prospectus); Taxes
Item 21. Underwriters The Distributor
Item 22. Calculation of Performance Data Computation of Yield and Total Return
Item 23. Financial Statements Financial Information
</TABLE>
<PAGE>
Part C -
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration
Statement.
* Included in Registrant's Annual Report to Shareholders
iii
<PAGE>
TIP FUNDS
Investment Adviser:
CLOVER CAPITAL MANAGEMENT, INC.
TIP Funds (the "Trust") provides a convenient and economical means of investing
in professionally managed portfolios of securities. This Prospectus offers
shares of the following mutual funds (each a "Fund" and, together, the "Funds"),
each of which is a separate series of the Trust:
CLOVER EQUITY VALUE FUND
CLOVER SMALL CAP VALUE FUND
CLOVER FIXED INCOME FUND
This Prospectus concisely sets forth the information about the Trust and the
Funds that a prospective investor should know before investing. Investors are
advised to read this Prospectus and retain it for future reference. A Statement
of Additional Information dated June 20, 1997 has been filed with the
Securities and Exchange Commission, and is available without charge by calling
1-800-224-6312. The Statement of Additional Information is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
June 20, 1997
-1-
<PAGE>
TABLE OF CONTENTS
Summary ................................................................... 3
Expense Summary............................................................. 5
Financial Highlights........................................................ 7
The Trust and the Funds..................................................... 10
Investment Objectives....................................................... 10
Investment Policies......................................................... 10
Risk Factors................................................................ 13
Investment Limitations...................................................... 15
The Adviser................................................................. 15
The Administrator........................................................... 16
The Transfer Agent.......................................................... 17
The Distributor............................................................. 17
Portfolio Transactions...................................................... 17
Purchase and Redemption of Shares........................................... 18
Performance................................................................. 21
Taxes ................................................................... 22
General Information......................................................... 24
Description of Permitted Investments and Risk Factors....................... 26
-2-
<PAGE>
SUMMARY
The following provides basic information about the Clover Equity Value Fund (the
"Equity Value Fund"), Clover Small Cap Value Fund (the "Small Cap Value Fund")
and Clover Fixed Income Fund (the "Fixed Income Fund") (each a "Fund" and,
collectively, the "Funds"). The Funds are three of eight mutual funds comprising
the TIP Funds (the "Trust"). The five other portfolios of the TIP Funds are
described in a separate prospectus, which is available by calling
1-800-224-6312. This summary is qualified in its entirety by reference to the
more detailed information provided elsewhere in this Prospectus and in the
Statement of Additional Information.
What is each Fund's investment objective and primary policies?
The Equity Value Fund seeks long-term total return. It invests primarily in a
diversified portfolio of equity securities that, in the Adviser's opinion, are
undervalued relative to the market or the historic valuation of such securities.
The Small Cap Value Fund seeks long-term total return. It invests primarily in a
diversified portfolio of equity securities of domestic issuers with market
capitalizations of $750 million or less that the Adviser believes are
undervalued relative to the market or the historic valuations of such
securities.
The Fixed Income Fund seeks a high level of income consistent with reasonable
risk to capital. It invests primarily in a diversified portfolio of fixed income
securities.
What are the risks involved with investing in the Funds? The investment policies
of each Fund entail certain risks and considerations of which investors should
be aware. Each Fund invests in securities that fluctuate in value, and investors
should expect each Fund's net asset value per share to fluctuate in value. The
value of equity securities may be affected by the financial markets as well as
by developments impacting specific issuers. The values of fixed income
securities tend to vary inversely with interest rates and may be affected by
market and economic factors as well as by developments impacting specific
issuers. In addition, the Equity Value Fund may invest up to 25% of its net
assets in non-convertible debt securities, which also may include securities of
less than investment grade ("junk bonds"); these high risk securities carry
increased risks of, among other things, default and market price volatility. The
Fixed Income Fund may invest in investment grade fixed income securities that
have speculative characteristics and may also invest up to 15% of its net assets
in fixed income securities that are junk bonds; these high risk securities carry
increased risks of, among other things, default and market price volatility. The
Small Cap Value Fund invests in equity securities of smaller companies, which
involves greater risk than is customarily associated with equity investments in
larger, more established companies. The Funds may enter into futures and options
transactions, although they have no present intention to do so, and may purchase
zero coupon securities. Certain of the Funds may purchase securities of foreign
issuers and asset- or mortgage-backed securities. Investments in these
securities involve certain other risks.
-3-
<PAGE>
For more information about each Fund, see "Investment Objectives," "Investment
Policies," "Risk Factors," and "Description of Permitted Investments and Risk
Factors."
Who is the Adviser? Clover Capital Management, Inc. (the "Adviser") serves as
the investment adviser to each Fund. See "Expense Summary" and "The Adviser."
Who is the Administrator? SEI Fund Resources (the "Administrator") serves as the
administrator and shareholder servicing agent for the Funds. See "Expense
Summary" and "The Administrator."
Who is the Distributor? CCM Securities, Inc. (the "Distributor") serves as the
distributor of the Funds' shares. See "The Distributor."
Who is the Transfer Agent? DST Systems, Inc. serves as the transfer agent and
dividend disbursing agent for the Trust. See "The Transfer Agent."
Is there a sales load? No, shares of each Fund are offered on a no-load basis.
Is there a minimum investment? The Funds require a minimum initial investment of
$2,000, which the Distributor may waive at its discretion.
How do I purchase and redeem shares? Purchases and redemptions may be made
through the Transfer Agent on each day that the New York Stock Exchange is open
for business (a "Business Day"). A purchase order will be effective as of the
Business Day received by the Transfer Agent if the Transfer Agent (or its
authorized agent) receives the order and payment, by check or in readily
available funds, prior to 4:00 p.m. Eastern time. Redemption orders received by
the Transfer Agent prior to 4:00 p.m. Eastern time on any Business Day will be
effective that day. The purchase and redemption price for shares is the net
asset value per share determined as of the end of the day the order is
effective. See "Purchase and Redemption of Shares."
How are distributions paid? Each Fund distributes substantially all of its net
investment income (exclusive of capital gains) in the form of periodic
dividends. Any 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 and Distributions."
-4-
<PAGE>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
Sales Load Imposed on Purchases.............................................None
Sales Load Imposed on Reinvested Dividends..................................None
Deferred Sales Load.........................................................None
Redemption Fees (1).........................................................None
Exchange Fees...............................................................None
- --------------------------------------------------------------------------------
(1) A wire redemption charge, currently $10.00, is deducted from the amount of
a Federal Reserve wire redemption payment made at the request of a
shareholder.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
- --------------------------------------------------------------------------------------------------------------
Equity Value Small Cap Fixed Income
Fund Value Fund Fund
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisory Fees (after fee waivers or
reimbursements if applicable)(1) .74% .00% .04%
12b-1 Fees None None None
Other Expenses .36% 1.40% .71%
- --------------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers or
reimbursements) (2) 1.10% 1.40% .75%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Adviser has, on a voluntary basis, waived a portion of its fee for
each Fund and agreed to reimburse certain Fund expenses in order to
limit total operating expenses of the Equity Value and Fixed Income
Funds to an annual rate of not more than 1.20% and .80%, respectively,
of average daily net assets when net assets are below $20 million and
to not more than 1.10% and .75%, respectively, when net assets are $20
million or more and to limit total operating expenses of the Small Cap
Value Fund to 1.40% of the Portfolio's average daily net assets. The
Adviser reserves the right, in its sole discretion, to terminate its
voluntary fee waiver and any reimbursement at any time. The advisory
fees shown reflect these voluntary waivers and reimbursements. Absent
such waivers and reimbursements, advisory fees for the Equity Value,
Small Cap Value and Fixed Income Funds would be .74%, .85% and .45%,
respectively. Absent reimbursement of expenses, Other Expenses for the
Small Cap Value Fund would be 1.96%. See "The Adviser." Advisory Fees
and other expenses have been restated to reflect current expenses.
(2) Absent fee waivers and expense reimbursements, "Total Operating
Expenses" for the Small Cap Value and Fixed Income Funds would be 2.81%
and 1.16%, respectively. The amounts for the Equity Value, Small Cap
Value and Fixed Income Funds have been restated to reflect current
expectations and assumptions.
EXAMPLE
- --------------------------------------------------------------------------------
Your would pay the following expenses on a $1,000 investment in a Fund assuming
(1) a 5% annual return and (2) redemption at the end of each time period.
1 year 3 years 5 years 10 years
------ ------- ------- --------
Equity Value Fund $11 $35 $61 $134
Small Cap Value Fund $14 $44 $77 $168
Fixed Income Fund $ 8 $24 $42 $93
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-5-
<PAGE>
The example is based upon total operating expenses of each Fund after waivers
and reimbursements, if any, as shown in the expense table. The example should
not be considered a representation of past or future expenses. Actual expenses
may be greater or less than those shown. The purpose of the expense table and
example is to assist the investor in understanding the various costs and
expenses that may be directly or indirectly borne by shareholders of the Funds.
Additional information may be found under "The Adviser" and "The Administrator."
-6-
<PAGE>
FINANCIAL HIGHLIGHTS
On June 20, 1997, the Equity Value Fund acquired all of the assets and
liabilities of the Clover Capital Equity Value Portfolio of The Advisors' Inner
Circle Fund. The information prior to that date relates to the Clover Capital
Equity Value Portfolio. The financial statements of the Clover Capital Equity
Value Portfolio of The Advisors' Inner Circle Fund were audited by Arthur
Andersen LLP, as indicated in their report dated December 6, 1996 on The
Advisors' Inner Circle Fund's financial statements as of October 31, 1996. This
table should be read in conjunction with the Fund's financial statements and
notes thereto. The Clover Capital Equity Value Portfolio's financial statements
and additional performance information are contained in The Advisors' Inner
Circle Fund's Annual Report to Shareholders, which is available without charge
by calling 1-800-224-6312. All references herein to the Equity Value Fund shall
be deemed to include the Clover Capital Equity Value Portfolio.
For a Share Outstanding Throughout the Period:
<TABLE>
<CAPTION>
Clover Capital
Equity Value Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
11/01/95 11/01/94 11/01/93 11/01/92 12/06/91(1)
to to to to to
10/31/96 10/31/95 10/31/94 10/31/93 10/31/92
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................. $15.29 $13.74 $11.94 $10.45 $10.00
- ----------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net Investment Income......................... 0.19 0.24 0.08 0.10 0.10
Realized and Unrealized Gains
on Securities....................... 2.15 2.46 2.01 1.54 0.44
- ----------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations.............. 2.34 2.70 2.09 1.64 0.54
- ----------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions From Net Investment
Income................................ (0.22) (0.22) (0.08) (0.10) (0.09)
Distributions From Capital Gains.............. (1.21) (0.93) (0.21) (0.05) 0.00
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions........................... (1.43) (1.15) (0.29) (0.15) (0.09)
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period....................... $16.20 $15.29 $13.74 $11.94 $10.45
- ----------------------------------------------------------------------------------------------------------------------------
Total Return......................................... 16.47% 21.25% 17.80% 15.83% 5.94%*
- ----------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
Net Assets, End Of Period (000)...................... $85,050 $51,647 $25,249 $15,070 $9,005
Ratios Of Expenses To Average Net Assets............. 1.10% 1.10% 1.14% 1.18% 1.20%*
Ratio Of Expenses To Average Net Assets
(Excluding Fee Waiver and Contributions)...... 1.21% 1.20% 1.30% 1.51% 2.09%*
Ratio Of Net Income To Average Net Assets............ 1.32% 1.82% 0.71% 0.89% 1.15%*
Ratio Of Net Income To Average Net Assets
(Excluding Fee Waiver and Contributions)...... 1.21% 1.72% 0.55% 0.56% 0.26%*
Portfolio Turnover Rate.............................. 51.36% 84.76% 58.44% 82.51% 31.00%
Average Commission Rate (2).......................... $0.0577 N/A N/A N/A N/A
============================================================================================================================
(1) The Clover Capital Equity Value Portfolio commenced operations on December 6, 1991.
(2) Average Commission rate paid per share for the security purchases and sales made during the period.
*Annualized
</TABLE>
-7-
<PAGE>
FINANCIAL HIGHLIGHTS
On June 20, 1997, the Small Cap Value Fund acquired all of the assets and
liabilities of the Clover Capital Small Cap Value Portfolio of The Advisors'
Inner Circle Fund. The information prior to that date relates to the Clover
Capital Small Cap Value Portfolio. The financial statements of the Clover
Capital Small Cap Value Portfolio of The Advisors' Inner Circle Fund were
audited by Arthur Andersen LLP, as indicated in their report dated December 6,
1996 on The Advisors' Inner Circle Fund's financial statements as of October 31,
1996. This table should be read in conjunction with the Fund's financial
statements and notes thereto. The Clover Capital Small Cap Value Portfolio's
financial statements and additional performance information are contained in The
Advisors' Inner Circle Fund's Annual Report to Shareholders, which is available
without charge by calling 1-800-224-6312. All references herein to the Small Cap
Value Fund shall be deemed to include the Clover Capital Small Cap Value
Portfolio.
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Clover Capital
Small Cap Value
Portfolio
- -----------------------------------------------------------------------------------------------
2/28/96(1)
to
10/31/96
- -----------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period.......................................... $10.00
- -----------------------------------------------------------------------------------------------
Income From Investment Operations:
Net Investment Income.................................................. 0.02
Realized and Unrealized Gains on Securities............................ 0.88
- -----------------------------------------------------------------------------------------------
Total From Investment Operations....................................... 0.90
- -----------------------------------------------------------------------------------------------
Less Distributions:
Distributions From Net Investment Income............................... (0.03)
Distributions From Capital Gains....................................... --
- -----------------------------------------------------------------------------------------------
Total Distributions.................................................... (0.03)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End Of Period................................................ $10.87
- -----------------------------------------------------------------------------------------------
Total Return.................................................................. 8.97%
- --------------------------------------------------------------------------------
Ratios and Supplemental Data
Net Assets, End Of Period (000)............................................... $4,495
Ratio Of Expenses To Average Net Assets....................................... 1.40%*
Ratio Of Expenses To Average Net Assets (Excluding Fee Waivers and
Contributions).............................................................. 5.29%*
Ratio Of Net Income To Average Net Assets..................................... (0.03)%*
Ratio Of Net Income (Loss) To Average Net Assets (Excluding Fee
Waivers and Contributions).................................................. (3.92)%*
Portfolio Turnover Rate....................................................... 14.17%
Average Commission Rate(2).................................................... $0.0470
===============================================================================================
(1) The Clover Capital Small Cap Value Portfolio commenced operations on February 28, 1996.
(2) Average commission rate paid per share for the security purchases and sales made during
the period.
* Annualized
</TABLE>
-8-
<PAGE>
FINANCIAL HIGHLIGHTS
On June 20, 1997, the Fixed Income Fund acquired all of the assets and
liabilities of the Clover Capital Fixed Income Portfolio of The Advisors' Inner
Circle Fund. The information prior to that date relates to the Clover Capital
Fixed Income Portfolio. The financial statements of the Clover Capital Fixed
Income Portfolio of The Advisors' Inner Circle Fund were audited by Arthur
Andersen LLP, as indicated in their report dated December 6, 1996 on The
Advisors' Inner Circle Fund's financial statements as of October 31, 1996. This
table should be read in conjunction with the Fund's financial statements and
notes thereto. The Clover Capital Fixed Income Portfolio's financial statements
and additional performance information are contained in The Advisors' Inner
Circle Fund's Annual Report to Shareholders, which is available without charge
by calling 1-800-224-6312. All references herein to the Fixed Income Fund shall
be deemed to include the Clover Capital Fixed Income Portfolio.
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Clover Capital
Fixed Income Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
11/01/95 11/01/94 11/01/93 11/01/92 12/06/91(1)
to to to to to
10/31/96 10/31/95 10/31/94 10/31/93 10/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $9.89 $9.14 $10.85 $10.23 $10.00
- -----------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net Investment Income................................... 0.59 0.58 0.57 0.61 0.56
Realized and Unrealized Gain (or Losses) on Securities.. 0.01 0.77 (0.92) 0.72 0.23
- -----------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations........................ 0.60 1.35 (0.35) 1.33 0.79
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions From Net Investment Income................ (0.59) (0.58) (0.57) (0.61) (0.56)
Distributions From Capital Gains........................ (0.05) (0.02) (0.79) (0.10) 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions..................................... (0.64) (0.60) (1.36) (0.71) (0.56)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End Of Period................................. $9.85 $9.89 $9.14 $10.85 $10.23
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return................................................... 6.26% 15.27% (3.54)% 13.40% 9.05%*
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
Net Assets, End Of Period (000)................................ $19,731 $14,685 $9,762 $7,966 $8,982
Ratio Of Expenses To Average Net Assets........................ 0.80% 0.80% 0.80% 0.78% 0.80%*
Ratio Of Expenses To Average Net Assets (Excluding Fee
Waivers and Contributions)................................. 1.11% 1.40% 1.46% 1.29% 1.76%*
Ratio Of Net Income To Average Net Assets...................... 6.00% 6.13% 5.88% 5.62% 6.28%*
Ratio Of Net Income To Average Net Assets
(Excluding Fee Waivers and Contributions)................... 5.69% 5.53% 5.22% 5.11% 5.32%*
Portfolio Turnover Rate........................................ 24.52% 35.84% 11.11% 68.61% 113.00%
==================================================================================================================================
(1) The Clover Capital Fixed Income Portfolio commenced operations on December 6, 1991.
* Annualized
</TABLE>
-9-
WA02A/8614.4
<PAGE>
THE TRUST AND THE FUNDS
TIP Funds (the "Trust") offers shares in eight separately-managed mutual funds,
each of which is a separate series of the Trust. Each share of each mutual fund
represents an undivided, proportionate interest in that mutual fund. This
Prospectus offers shares of the Trust's Clover Equity Value Fund (the "Equity
Value Fund"), Clover Small Cap Value Fund (the "Small Cap Value Fund"), and
Clover Fixed Income Fund (the "Fixed Income Fund") (each a "Fund" and, together,
the "Funds").
INVESTMENT OBJECTIVES
Equity Value Fund -- The Equity Value Fund seeks long-term total return.
Small Cap Value Fund -- The Small Cap Value Fund seeks long-term total return.
Fixed Income Fund -- The Fixed Income Fund seeks a high level of income
consistent with reasonable risk to capital.
There can be no assurance that any Fund will achieve its investment objective.
INVESTMENT POLICIES
Equity Value Fund
The Equity Value Fund will invest primarily in equity securities that Clover
Capital Management, Inc. (the "Adviser") believes to be undervalued relative to
the market or their historic valuation. The Adviser uses several valuation
criteria to determine if a security is undervalued, including price-to- earnings
ratios, price-to-cash flow ratios, price-to-sales ratios, and price-to-book
value ratios. In addition, the Adviser examines "hidden values" that are not
obvious in a company's financial reports, focusing on finding the current asset
values or current transfer values of assets held by the company.
Under normal market conditions, the Equity Value Fund invests at least 70% and
up to 100% of its net assets in a diversified portfolio of equity securities,
including common stocks, both debt securities and preferred stocks convertible
into common stocks, and American Depositary Receipts ("ADRs") (up to 20% of the
Equity Value Fund's net assets). In addition to these equity securities, the
Fund may also invest up to 5% of its net assets in each of warrants and rights
to purchase common stocks, and up to 10% of its net assets in real estate
investment trusts ("REITs"). Assets of the Fund not invested in the equity
securities described above may be invested in non-convertible fixed income
securities and money market instruments as described below.
All of the equity securities (including ADRs) in which the Fund invests are
traded on registered exchanges or the over-the-counter market in the United
States.
During periods when, or under circumstances where, the Adviser believes that the
return on such securities may equal or exceed the return on equity securities,
the Equity Value Fund may invest up
-10-
<PAGE>
to 25% of its net assets in non-convertible fixed income securities consisting
of corporate debt securities and obligations issued or guaranteed as to
principal and interest by the U.S. Government or its agencies or
instrumentalities. The Equity Value Fund may invest in such securities without
regard to their term or rating and may, from time to time, invest in corporate
debt securities rated below investment grade, i.e., rated lower than BBB by
Standard & Poor's Corporation ("S&P"), Baa by Moody's Investor Service, Inc.
("Moody's") or unrated securities of comparable quality as determined by the
Adviser.
Under normal circumstances up to 30% of the Equity Value Fund's assets may be
invested in the money market instruments described below in order to maintain
liquidity, or if the Adviser determines that securities meeting the Equity Value
Fund's investment objective and policies are not otherwise reasonably available
for purchase.
Small Cap Value Fund
Under normal market conditions, the Small Cap Value Fund invests at least 75%
and up to 100% of its total assets in a diversified portfolio of equity
securities of U.S. issuers that have market capitalizations of $750 million or
less at the time of purchase, including common stocks, warrants and rights to
subscribe to common stocks, equity interests issued by REITs and both debt
securities and preferred stocks convertible into common stocks. The Small Cap
Value Fund may invest in such convertible debt securities without regard to
their term or rating and may, from time to time, invest in corporate debt
securities rated below investment grade, i.e., rated lower than BBB by S&P, Baa
by Moody's or unrated securities of comparable quality as determined by the
Adviser.
The Adviser employs database screening techniques to search the universe of
domestic public companies for stocks trading in the bottom 20% of valuation
parameters such as stock price-to-book value, price-to-cash flow,
price-to-earnings and price-to-sales. From these stocks the Adviser selects a
diversified group of securities for investment by utilizing additional screening
and selection strategies to identify the companies that the Adviser believes are
more financially stable. In addition, the Fund may include holdings in issuers
that may not have been identified during the initial screening process but that
the Adviser has identified using its value oriented fundamental research
techniques. In addition, the Fund may invest up to 10% of its net assets in
ADRs.
All of the equity securities (including ADRs) in which the Fund invests are
traded on registered exchanges or the over-the-counter market in the United
States.
Any remaining assets may be invested in (i) the equity securities described
above of U.S. issuers that have market capitalizations exceeding $750 million at
the time of purchase, and (ii) Money Market Instruments. In addition, the Fund
may invest up to 15% of its net assets in illiquid securities, although it has
no present intention to do so.
-11-
<PAGE>
Fixed Income Fund
Under normal market conditions, the Fixed Income Fund invests at least 70% of
its net assets in the following fixed income securities: (i) obligations issued
or guaranteed as to principal and interest by the U.S. Government, its agencies
or instrumentalities ("U.S. Government securities"); (ii) corporate bonds and
debentures rated in one of the four highest rating categories; and (iii)
mortgage-backed securities that are collateralized mortgage obligations ("CMOs")
or real estate mortgage investment conduits ("REMICs") rated in one of the two
highest rating categories. The Fund will invest in such corporate bonds and
debentures, CMOs or REMICs only if, at the time of purchase, the security either
has the requisite rating from S&P or Moody's or is unrated but of comparable
quality as determined by the Adviser. Governmental private guarantees do not
extend to the securities' value, which is likely to vary inversely with
fluctuations in interest rates.
The Fund may invest its remaining assets in the following securities: (i) Money
Market Instruments, (ii) asset-backed securities rated A or higher by S&P or
Moody's; (iii) debt securities rated below investment grade, but not lower than
B- by S&P or B3 by Moody's, or if unrated, determined by the Adviser to be of
comparable quality at the time of purchase (up to 15% of the Fund's net assets
including downgraded securities); (iv) debt securities convertible into common
stocks (up to 10% of the Fund's net assets); (v) U.S. dollar denominated fixed
income securities issued by foreign corporations or issued or guaranteed by
foreign governments, their political subdivisions, agencies or
instrumentalities; and (vi) U.S. dollar denominated obligations of supranational
entities traded in the United States. For additional information on corporate
bond ratings, see the Appendix to the Statement of Additional Information.
The relative proportions of the Fund's net assets invested in the different
types of permissible investments will vary from time to time depending upon the
Adviser's assessment of the relative market value of the sectors in which the
Fund invests. In addition, the Fund may purchase securities that are trading at
a discount from par when the Adviser believes there is a potential for capital
appreciation. The Adviser does not seek to achieve the Fund's investment
objective by forecasting changes in the interest rate environment.
In the event any security owned by the Fund is downgraded below the rating
categories set forth above, the Adviser will review the security and determine
whether to retain or dispose of that security.
The Fund may enter into forward commitments or purchase securities on a
when-issued basis, and may invest in variable or floating rate obligations.
The Fund expects to maintain a dollar-weighted average portfolio maturity of
five to ten years.
-12-
<PAGE>
All Funds
Each Fund may purchase securities on a when-issued basis.
Each Fund may enter into futures and options transactions.
Each Fund may invest up to 15% of its net assets in illiquid securities.
Each Fund, may purchase convertible securities.
For temporary defensive purposes during periods when the Adviser determines that
market conditions warrant, each Fund may invest up to 100% of its assets in
money market instruments ("Money Market Instruments") and in cash.
For a further description of these types of instruments see "Description of
Permitted Investments and Risk Factors" in the Statement of Additional
Information.
RISK FACTORS
Equity Securities -- Investments in equity securities in general are subject to
market risks that may cause their prices to fluctuate over time. The value of
securities convertible into equity securities, such as warrants or convertible
debt, is also affected by prevailing interest rates, the credit quality of the
issuer and any call provision. Fluctuations in the value of equity securities in
which a fund invests will cause the net asset value of that fund to fluctuate.
An investment in such funds may be more suitable for long-term investors who can
bear the risk of short-term principal fluctuations.
The Small Cap Value Fund invests in equity securities of smaller companies. Any
investment in smaller capitalization companies involves greater risk than that
customarily associated with investments in larger, more established companies.
This increased risk may be due to the greater business risks of smaller size,
limited markets and financial resources, narrow product lines and lack of depth
of management. The securities of smaller companies are often traded in the
over-the-counter market and if listed on a national securities exchange may not
be traded in volumes typical for that exchange. Thus, the securities of
smaller-sized companies are likely to be less liquid, and subject to more abrupt
or erratic market movements than securities of larger, more established
companies.
Fixed Income Securities -- The market value of fixed income investments 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
-13-
<PAGE>
also affect the value of these investments. Changes in the value of these
securities will not necessarily affect cash income derived from these
securities, but will affect the investing Fund's net asset value.
Mortgage-backed and asset-backed securities purchased by the Fixed Income Fund
may be subject to prepayment, which may result in capital gains or losses, and
which make it difficult to determine such securities' average life and yield.
When the mortgage-backed securities held by a Fund are pre-paid, the Fund must
reinvest the proceeds in securities the yield of which reflects prevailing
interest rates, which may be lower than the yield of the pre-paid security.
Securities below investment grade are high risk, high yield securities and may
be labeled "junk bonds." Such securities involve greater risk of default or
price declines than investments in investment grade securities due to changes in
the issuer's creditworthiness and the outlook for economic growth. The market
for these securities may be thinner and less active, causing market price
volatility and limited liquidity in the secondary market. These factors may
limit a Portfolio's ability to sell such securities at their fair market value.
Credit quality in the junk bond market can change suddenly and unexpectedly, and
even recently issued credit ratings may not fully reflect the actual risks
imposed by a particular security. Bonds rated BBB lack outstanding investment
characteristics and in fact have speculative characteristics as well. Corporate
bonds rated B generally lack characteristics of desirable investment, and
assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Securities of Foreign Issuers -- Investments in the securities of foreign
issuers may subject a Fund to investment risks that differ in some respects from
those related to investments in securities of U.S. issuers. Such risks include
future adverse political and economic developments, possible imposition of
withholding taxes on income, possible seizure, nationalization or expropriation
of foreign deposits, possible establishment of exchange controls or taxation at
the source or greater fluctuation in value due to changes in exchange rates.
Foreign issuers of securities often engage in business practices different from
those of domestic issuers of similar securities, and there may be less
information publicly available about foreign issuers. In addition, foreign
issuers are, generally speaking, subject to less government supervision and
regulation than are those in the United States. Investments in securities of
foreign issuers are frequently denominated in foreign currencies and the value
of the Fund's assets measured in U.S. dollars may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and the Fund may incur costs in connection with conversions between various
currencies.
Mortgage-Backed Securities - The mortgage-backed securities ("MBSs") in which
the Fixed Income Fund may invest are subject to prepayment of the underlying
mortgages. During periods of declining interest rates, prepayment of mortgages
underlying MBSs can be expected to accelerate. When the MBSs held by the Fixed
Income Fund are prepaid, the Fixed Income Fund must reinvest the proceeds in
securities the yield of which reflects prevailing interest rates, which may be
lower than the yield on the prepaid MBS.
REITs - The value of interests in REITs may be affected by changes in (i) the
value of the property owned, (ii) the quality of the mortgages held by the
trust, and (iii) interest rates.
-14-
<PAGE>
Portfolio Turnover -- An annual portfolio turnover rate in excess of 100% may
result from the Adviser's investment strategy of focusing on earnings potential
and disposing of securities when the Adviser believes that their earnings
potential has diminished, or may result from the Adviser's maintenance of
appropriate issuer diversification. Portfolio turnover rates in excess of 100%
may result in higher transaction costs, including increased brokerage
commissions, and higher levels of taxable capital gain. For the annual portfolio
turnover rates for the predecessor portfolios to each of the Fund's, see
"Financial Highlights."
INVESTMENT LIMITATIONS
The investment objective of each Fund and certain of the investment limitations
set forth here and in the Statement of Additional Information are fundamental
policies of that Fund. Fundamental policies cannot be changed with respect to a
Fund without the consent of the holders of a majority of that Fund's outstanding
shares.
1. No Fund may (i) purchase securities of any issuer (except securities issued
or guaranteed by the United States Government, its agencies or instrumentalities
and repurchase agreements involving such securities) if, as a result, more than
5% of the total assets of the Fund would be invested in the securities of such
issuer; or (ii) acquire more than 10% of the outstanding voting securities of
any one issuer. This restriction applies to 75% of each Fund's total assets.
2. No Fund may purchase any securities which would cause 25% or more of the
total assets of the Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that this limitation does not apply to investments in obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities and
repurchase agreements involving such securities.
The foregoing percentages will apply at the time of the purchase of a security.
THE ADVISER
Clover Capital Management, Inc. (the "Adviser") is a professional investment
management firm founded in 1984 by Michael Edward Jones, CFA, and Geoffrey
Harold Rosenberger, CFA, who are Managing Directors of the Adviser and control
all of the Adviser's outstanding voting stock. As of March 31, 1997, the Adviser
had discretionary management authority with respect to approximately $1.914
billion of assets. In addition to advising the Funds, the Adviser provides
advisory services to pension plans, religious and educational endowments,
corporations, 401(k) plans, profit sharing plans, individual investors and
trusts and estates. The principal business address of the Adviser is 11 Tobey
Village Office Park, Pittsford, New York 14534.
The Adviser serves as each Fund's investment adviser under an investment
advisory agreement (the "Advisory Agreement") with the Fund. Under the Advisory
Agreement, the Adviser makes the
-15-
<PAGE>
investment decisions for the assets of each Fund and continuously reviews,
supervises and administers each Fund's investment program, subject to the
supervision of, and policies established by, the Trustees of the Fund.
The Clover Equity Value Fund (and it's predecessor fund) has, since its
inception, been managed by a committee led by Michael E. Jones, CFA, and Paul W.
Spindler, CFA. Mr. Jones is a co-founder of the Adviser and for the past five
years has been the Managing Director of the Adviser. For the past five years Mr.
Spindler has been a Vice President of Investments for the Adviser.
The Clover Small Cap Value Fund (and it's predecessor fund) has, since its
inception, been managed by a committee of research professionals led by Michael
E. Jones, CFA, and Lawrence Creatura. For the past two years Mr. Creatura has
been a Vice President for Investments for the Adviser. For the previous three
years he was a Laser Systems Engineer/Researcher for Laser Surge, Inc.
The Clover Fixed Income Fund (and it's predecessor fund) has, since its
inception, been managed by a committee led by Richard J. Huxley and Paul W.
Spindler, CFA. For the past five years Richard Huxley has been the Executive
Vice President and Fixed Income Manager for the Adviser.
For its services, the Adviser is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of .74%, .45% and .85% of the average daily
net assets of the Equity Value, Fixed Income and Small Cap Value Funds,
respectively. The Adviser has voluntarily agreed to waive all or a portion of
its fees and/or to reimburse Fund expenses in order to limit total operating
expenses of the Equity Value and Fixed Income Funds to an annual rate of not
more than 1.20% and .80%, respectively, of average daily net assets when net
assets are below $20 million and to not more than 1.10% and .75%, respectively,
when net assets are $20 million or more, and to limit total operating expenses
of the Small Cap Value Fund to 1.40% of the Fund's average daily net assets. The
Adviser reserves the right, in its sole discretion, to terminate its voluntary
fee waiver and any reimbursement at any time. For the fiscal year ended October
31, 1996, the Adviser performed advisory services to each of the Funds'
predecessor portfolios and received a fee equal to .63% and .14% of the Clover
Capital Equity Value Portfolio's and Clover Capital Fixed Income Portfolio's
average daily net assets and waived all fees due it from the Clover Capital
Small Cap Value Portfolio. The Adviser reimbursed expenses of the Clover Capital
Small Cap Value Portfolio totaling $51,578, which equals 3.03% of the
Portfolio's average daily net assets.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") provides the Trust with administrative
services, including regulatory reporting and all necessary office space,
equipment, personnel, and facilities.
For these administrative services, the Administrator is entitled to a fee from
each Fund, which is calculated daily and paid monthly, at an annual rate of .12%
of that Fund's average daily net assets up to $75 million, .10% on the next $75
million of such assets, .09% on the next $150 million of such assets, .08% of
the next $300 million of such assets, and .075% of such assets in excess of $600
million. Each Fund is subject to a minimum annual administration fee of $75,000.
Once the
-16-
<PAGE>
Small Cap Value Fund reaches $62.5 million in net assets, the Administrator will
receive asset-based fees in accordance with the schedule set forth above.
The Administrator also serves as shareholder servicing agent for the Trust under
a shareholder servicing agreement with the Trust.
THE TRANSFER AGENT
DST Systems, Inc., 1004 Baltimore Street, Kansas City, Missouri 64105 (the
"Transfer Agent") serves as the transfer agent and dividend disbursing agent for
the Trust under a transfer agency agreement with the Trust.
THE DISTRIBUTOR
CCM Securities, Inc. (the "Distributor"), a wholly-owned subsidiary of the
Adviser, acts as the Trust's distributor pursuant to a distribution agreement
(the "Distribution Agreement"). No compensation is paid to the Distributor for
its distribution services.
PORTFOLIO TRANSACTIONS
The Adviser may select brokers on the basis of the research, statistical and
pricing services they provide to a Fund. A commission paid to such brokers may
be higher than that which another qualified broker would have charged for
effecting the same transaction, provided that such commissions are in compliance
with the Securities Exchange Act of 1934, as amended, and that the Adviser
determines in good faith that the commission is reasonable in terms of either
the transaction or the overall responsibility of the Adviser to the Fund and the
Adviser's other clients.
Since shares of the Funds are not marketed through intermediary broker-dealers,
no Fund has a practice of allocating brokerage or effecting principal
transactions with broker-dealers on the basis of sales of shares which may be
made through such firms. However, the Adviser may place orders for any Fund with
qualified broker-dealers who refer clients to that Fund.
Some securities considered for investment by a Fund may also be appropriate for
other accounts and/or clients served by that Adviser. If the purchase or sale of
securities consistent with the investment policies of the Fund and another of
the Adviser's accounts and/or clients are considered at or about the same time,
transactions in such securities will be allocated among the Fund and the other
accounts and/or clients in a manner deemed equitable by the Adviser.
-17-
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through the Transfer Agent on each day
that the New York Stock Exchange is open for business (a "Business Day").
Investors may purchase and redeem shares of each Fund directly through the
Transfer Agent at: TIP Funds, P.O. Box 419805, Kansas City, Missouri 64141-6805,
by mail or wire transfer. All shareholders may place orders by telephone; when
market conditions are extremely busy, it is possible that investors may
experience difficulties placing orders by telephone and may wish to place orders
by mail. Purchases and redemptions of shares of the Fund may be made on any
Business Day. Shares of each Fund are offered only to residents of states in
which such shares are eligible for purchase. Certain brokers assist their
clients in the purchase or redemption of shares and charge a fee for this
service in addition to a Fund's public offering price.
The minimum initial investment in the Funds is $2,000, and subsequent purchases
must be at least $100. The Distributor may waive these minimums at its
discretion. No minimum applies to subsequent purchases effected by dividend
reinvestment.
Minimum Account Size - Due to the relatively high cost of maintaining smaller
accounts, the Fund reserves the right to redeem shares in any account if, as the
result of redemptions, the value of that account drops below $1,000. You will be
allowed at least 60 days, after notice by the Fund, to make an additional
investment to bring your account value up to at least $1,000 before the
redemption is processed.
Purchases by Mail
An account may be opened by mailing a check or other negotiable bank draft
(payable to the name of the appropriate Fund) for $2,000 or more, together with
a completed Account Application to: TIP Funds, P.O. Box 419805, Kansas City,
Missouri 64141-6805. Third-Party checks, credit cards, credit card checks and
cash will not be accepted. When purchases are made by check (including certified
or cashier's checks), redemption proceeds will not be forwarded until the
investment being redeemed has been in the account for 15 days. Subsequent
investments may also be mailed directly to the Transfer Agent.
Purchases by Wire Transfer
Shareholders having an account with a commercial bank that is a member of the
Federal Reserve System may purchase shares of the Fund by requesting their bank
to transmit funds by wire to: United Missouri Bank of Kansas, N.A.; ABA
#10-10-00695; for Account Number 98-7060-116-8; Further Credit: [___________
Fund]. The shareholder's name and account number must be specified in the wire.
Initial Purchases: Before making an initial investment by wire, an investor must
first telephone 1-800-224-6312 to be assigned an account number. The investor's
name, account number, taxpayer
-18-
<PAGE>
identification number or Social Security number, and address must be specified
in the wire. In addition, an Account Application should be promptly forwarded
to: TIP Funds, P.O. Box 419805, Kansas City, Missouri 64141-6805.
Subsequent Purchases: Additional investments may be made at any time through the
wire procedures described above, which must include a shareholder's name and
account number. The investor's bank may impose a fee for investments by wire.
Subsequent purchases may also be made by wire through the Automated Clearing
House ("ACH").
General Information Regarding Purchases
A purchase request will be effective as of the day received by the Transfer
Agent if the Transfer Agent (or its authorized agent) receives the purchase
request in good order and payment before 4:00 p.m., Eastern time. A purchase
request is in good order if it is complete and accompanied by the appropriate
documentation, including an Account Application and additional documentation
required. Purchase requests in good order received after 4:00 p.m., Eastern
time, will be effective the next Business Day. Payment may be made by check or
readily available funds. The purchase price of shares of any Fund is that Fund's
net asset value per share next determined after a purchase order is effective.
Purchases will be made in full and fractional shares of each Fund calculated to
three decimal places. The Trust will not issue certificates representing shares
of any Fund.
If a check received for the purchase of shares does not clear, the purchase will
be canceled, and the investor could be liable for any losses or fees incurred.
The Trust reserves the right to reject a purchase order when the Trust
determines that it is not in the best interest of the Trust or its shareholders
to accept such order.
Shares of each Fund may be purchased in exchange for securities to be included
in that Fund, subject to the Adviser's or Administrator's determination that
these securities are acceptable. Securities accepted in such an exchange will be
valued at their market value. All accrued interest and subscription or other
rights that are reflected in the market price of accepted securities at the time
of valuation become the property of that Fund and must be delivered by the
shareholder to that Fund upon receipt from the issuer.
The Adviser or Administrator will not accept securities in exchange for Fund
shares unless (1) such securities are appropriate for the Fund at the time of
the exchange; (2) the shareholder represents and agrees that all securities
offered to the Fund are not subject to any restrictions upon their sale by the
Fund under the Securities Act of 1933, as amended, or otherwise; and (3) prices
are available from an independent pricing service approved by the Trust's Board
of Trustees.
Systematic Investment Plan - A shareholder may also arrange for periodic
additional investments in a Portfolio through automatic deductions by Automated
Clearing House ("ACH") transactions from a checking or savings account by
completing the Systematic Investment Plan form. This Systematic Investment Plan
is subject to account minimum initial purchase amounts and a minimum
pre-
-19-
<PAGE>
authorized investment amount of $100 per month. An application form for the
Systematic Investment Plan may be obtained by calling 1-800-224-6312.
Exchanges
Shareholders of each Fund may exchange their shares for shares of the other
[TIP] Funds that are then offering their shares to the public. Exchanges are
made at net asset value. An exchange is considered a sale of shares and may
result in capital gain or loss for federal income tax purposes. The shareholder
must have received a current prospectus for the new Fund before any exchange
will be effected, and the exchange privilege may be exercised only in those
states where shares of the new Fund may legally be sold. If the Transfer Agent
(or its authorized agent) receives exchange instructions in writing or by
telephone (an "Exchange Request") in good order by 4:00 p.m., Eastern time, on
any Business Day, the exchange will be effected that day. The liability of the
Fund or the Transfer Agent for fraudulent or unauthorized telephone instructions
may be limited as described below. The Trust reserves the right to modify or
terminate this exchange offer on 60 days' notice.
Redemptions
Redemption requests in good order received by the Transfer Agent (or its
authorized agent) prior to 4:00 p.m., Eastern time on any Business Day will be
effective that day. To redeem shares of the Fund, shareholders must place their
redemption orders with the Transfer Agent (or its authorized agent) prior to
4:00 p.m., Eastern time, on any Business Day. The redemption price of shares of
any Fund is the net asset value per share of that Fund next determined after the
redemption order is effective. Payment of redemption proceeds will be made as
promptly as possible and, in any event, within seven days after the redemption
order is received, provided, however, that redemption proceeds for shares
purchased by check (including certified or cashier's checks) will be forwarded
only upon collection of payment for such shares; collection of payment may take
up to 15 days. Shareholders may not close their accounts by telephone.
Redemption requests from IRA accounts must be made in writing.
Shareholders may receive redemption payments in the form of a check or by
Federal Reserve or ACH wire transfer. There is no charge for having a check for
redemption proceeds mailed. The Custodian will deduct a wire charge, currently
$10.00, from the amount of a Federal Reserve wire redemption payment made at the
request of a shareholder. Shareholders cannot redeem shares of a Fund by Federal
Reserve wire on Federal holidays on which wire transfers are restricted. The
Fund does not charge for ACH wire transactions; however, such transactions will
not be posted to a shareholder's bank account until the second Business Day
following the transaction.
Neither the Trust nor the Transfer Agent will be responsible for the
authenticity of instructions received by telephone if they reasonably believe
those instructions to be genuine. The Trust and the Transfer Agent will each
employ reasonable procedures to confirm that telephone instructions are genuine.
Such procedures may include the taping of telephone conversations.
-20-
<PAGE>
The right of redemption may be suspended or the date of payment of redemption
proceeds postponed during certain periods as set forth more fully in the
Statement of Additional Information.
A signature guarantee is a widely accepted way to protect shareholders by
verifying the signature on certain redemption requests. The Trust requires
signature guarantees to be provided in the following circumstances: (1) written
requests for redemptions in excess of $50,000; (2) all written requests to wire
redemption proceeds; and (3) redemption requests that provide that the
redemption proceeds should be sent to an address other than the address of
record or to a person other than the registered shareholder(s) for the account.
Signature guarantees can be obtained from any of the following institutions: a
national or state bank, a trust company, a federal savings and loan association,
or a broker-dealer that is a member of a national securities exchange. The Trust
does not accept guarantees from notaries public or organizations that do not
provide reimbursement in the case of fraud.
Systematic Withdrawal Plan - Each Fund offers a Systematic Withdrawal Plan
("SWP") for shareholders who wish to receive regular distributions from their
account. Upon commencement of the SWP, the account must have a current value of
$2,000 or more. Shareholders may elect to receive automatic payments via ACH
wire transfers of $100 or more on a monthly, quarterly, semi-annual or annual
basis. An application form for SWP may be obtained by calling 1-800-224-6312.
Shareholders should realize that if withdrawals exceed income dividends, their
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, their original investment could be exhausted
entirely. To participate in the SWP, shareholders must have their dividends
automatically reinvested. Shareholders may change or cancel the SWP at any time,
upon written notice to the Transfer Agent.
Valuation of Shares
The net asset value per share of each Fund is determined by dividing the total
market value of that Fund's investments and other assets, less any liabilities,
by the total number of outstanding shares of that Fund. Net asset value per
share is determined daily as of the close of business of the New York Stock
Exchange (currently, 4:00 p.m., Eastern time) on any Business Day.
PERFORMANCE
From time to time, each Fund may advertise its yield and total return. These
figures will be based on historical earnings and are not intended to indicate
future performance. No representation can be made regarding actual future yields
or returns. 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.
-21-
<PAGE>
The total return of a Fund refers to the average compounded rate of return on a
hypothetical investment, for designated time periods (including but not limited
to the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each period
and assuming the reinvestment of all dividend and capital gain distributions.
A Fund may periodically compare its performance to that of other mutual funds
tracked by mutual fund rating services (such as Lipper Analytical Services,
Inc.), financial and business publications and periodicals, broad groups of
comparable mutual funds, unmanaged indices, which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs, or other investment alternatives. A Fund may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance, and Ibbotson Associates of Chicago, Illinois, which
provides historical returns of the capital markets in the U.S. A Fund may also
quote the Frank Russell Company or Wilshire Associates, consulting firms that
compile financial characteristics of common stocks and fixed income securities,
regarding non-performance-related attributes of a Fund's portfolio. A 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 market. A Fund may also quote
financial and business publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques.
A Fund may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its shareholders.
Shareholders are urged to consult their tax advisors regarding specific
questions as to federal, state and local income taxes. Further 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 portfolios. Each Fund intends to qualify or
to continue 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. So long as a Fund qualifies for this special tax treatment,
it will be relieved of federal income tax on that part of its net investment
income and net capital gain (the excess of net long-term capital gain over net
short-term capital loss) which it distributes to shareholders.
-22-
<PAGE>
Tax Status of Distributions:
Each Fund will distribute all of its net investment income (including, for this
purpose, net short-term capital gain) to shareholders. Dividends from net
investment income will be taxable to shareholders as ordinary income whether
received in cash or in additional shares. Distributions from net investment
income will qualify for the dividends-received deduction for corporate
shareholders only to the extent such distributions are derived from dividends
paid by domestic corporations; however, such distributions which do qualify for
the dividends-received deduction may be subject to the corporate alternative
minimum tax. It can be expected that none of the dividends paid by the Fixed
Income Fund will qualify for that deduction. Any net capital gains will be
distributed annually and will be taxed to shareholders as long-term capital
gains, regardless of how long the shareholder has held shares. Each Fund will
make 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 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 accrued discount 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 accrued 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.
The Funds may, in certain circumstances involving tax-free reorganizations,
accept securities that are appropriate investments as payment for Fund shares
(an "In-Kind Purchase"). An In-Kind Purchase may result in adverse tax
consequences under certain circumstances to either the investors transferring
securities for shares (an "In-Kind Investors") or to investors who acquire
shares of the Funds after a transfer ("new shareholders"). As a result of an
In-Kind Purchase, the Funds may acquire securities that have appreciated in
value or depreciated in value from the date they were acquired. If appreciated
securities were to be sold after an In-Kind Purchase, the amount of the gain
would be taxable to new shareholders as well as to In-Kind Investors. The effect
of this for new shareholders would be to tax them on a distribution that
represents a return of the purchase price of their shares rather than an
increase in the value of their investment. The effect on In-Kind Investors would
be to reduce their potential liability for tax on capital gains by spreading it
over a larger asset base. The opposite may occur if the Funds acquire securities
having an unrealized capital loss. In that case, In-Kind Investors will be
unable to utilize the loss to offset gains, but, because an In-Kind Purchase
will not result in any gains, the inability of In-Kind Investors to utilize
unrealized losses will have no immediate tax effect. For new shareholders, to
the extent that unrealized losses are realized by the Funds, new shareholders
may benefit by any reduction in net tax liability attributable to the losses.
The Adviser cannot predict whether securities acquired in any In-Kind Purchase
will have unrealized gains or losses on the date of the In-Kind Purchase.
Consistent with its duties as investment adviser, the Adviser will, however,
take tax consequences to investors into account when making decisions to sell
portfolio assets, including the impact of realized capital gains on shareholders
of the Funds.
-23-
<PAGE>
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 in the year declared, if paid by the Fund at any time during the
following January. Each Fund intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the federal excise tax
applicable to regulated investment companies.
Income received on direct U.S. obligations is exempt from income tax at the
state level when received directly by a Fund and may be exempt, depending on the
state, when received by a shareholder from a Fund provided certain
state-specific conditions are satisfied. The Funds 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. Income derived by a Fund from securities of
foreign issuers may be subject to foreign withholding taxes. The Funds will not
be able to elect to treat shareholders as having paid their proportionate share
of such foreign taxes.
Each sale, exchange or redemption of a Fund's shares is a taxable event to the
shareholder.
GENERAL INFORMATION
The Trust
The Trust, an open-end management investment company, was organized under
Massachusetts law as a business trust under a Declaration of Trust dated January
26, 1996. The Declaration of Trust permits the Trust to offer separate series
("Funds") of shares. 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
services to the Trust.
Voting Rights
-24-
<PAGE>
Each share held entitles the Shareholder of record to one vote for each dollar
invested. In other words, each shareholder of record is entitled to one vote for
each dollar of net asset value of the shares held on the record date for the
meeting. Shareholders of each Fund will vote separately on matters pertaining
solely to that Fund. As a Massachusetts business trust, the Trust is not
required to hold annual meetings of Shareholders, but approval will be sought
for certain changes in the operation of the Trust and for the election of
Trustees under certain circumstances.
In addition, a Trustee may be removed by the remaining Trustees or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested, the Trust will provide appropriate assistance and
information to the Shareholders requesting the meeting.
Reporting
The Trust issues unaudited financial information semiannually and audited
financial statements annually for each Fund. The Trust also furnishes periodic
reports and, as necessary, proxy statements to shareholders of record.
Shareholder Inquiries
Shareholder inquiries should be directed to TIP Funds, P.O. Box 419805, Kansas
City, Missouri 64141-6805, or to 1-800-224-6312. Purchases, exchanges and
redemptions of shares should be made through the Transfer Agent by calling
1-800-224-6312.
Dividends and Distributions
Substantially all of the net investment income (excluding capital gain) of the
Equity Value and Small Cap Value Funds is distributed in the form of dividends
to shareholders of record on the last Business Day of each quarter. The Fixed
Income Fund declares dividends of substantially all of its net investment income
(exclusive of capital gain) daily and distributes such dividends on the first
Business Day of each month. Shares of the Fixed Income Fund purchased begin
earning dividends on the Business Day following receipt of payment by the
Transfer Agent. Normally, this will occur within two Business Days after an
order is effective. If any capital gain is realized for a Fund, substantially
all of it will be distributed at least annually.
Shareholders automatically receive all income dividends and capital gain
distributions in additional shares, unless the shareholder has elected to take
such payment in cash. Shareholders may change their election by providing
written notice to the Transfer Agent at least 15 days prior to the distribution.
Shareholders may receive payments for cash distributions in the form of a check
or by Federal Reserve or ACH wire transfer.
Dividends and other distributions of each Fund are paid on a per share basis.
The value of each share will be reduced by the amount of the payment. If shares
are purchased shortly before the record date
-25-
<PAGE>
for a distribution of ordinary income or capital gains, a shareholder will pay
the full price for the shares and receive some portion of the price back as a
taxable distribution or dividend.
Counsel and Independent Public Accountants
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Ernst & Young LLP
serves as the independent public accountants for the Trust.
Custodian
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
Pennsylvania 19101 acts as the custodian (the "Custodian") of the Trust. The
Custodian holds cash, securities and other assets of the Trust as required by
the Investment Company Act of 1940, as amended (the "1940 Act").
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of permitted investments for one or more of the
Funds:
AMERICAN DEPOSITARY RECEIPTS ("ADRs") -- ADRs are securities, typically issued
by a U.S. financial institution (a "depositary"), that evidence ownership
interests in a security or a pool of securities issued by a foreign issuer and
deposited with the depositary. ADRs may be available 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.
ASSET-BACKED SECURITIES - Asset-backed securities are secured by non-mortgage
assets such as company receivables, truck and auto loans, leases and credit card
receivables. Such securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in the underlying pools
of assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity, such as a trust, organized solely for the purpose of owning such
assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire
-26-
<PAGE>
an interest in the obligations superior to that of the holders of the
asset-backed securities. There also is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on those securities. Asset-backed securities entail prepayment risk, which may
vary depending on the type of asset, but is generally less than the prepayment
risk associated with mortgage-backed securities. In addition, credit card
receivables are unsecured obligations of the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities.
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 of both fixed income and
equity securities. Because of the conversion feature, the market value of a
convertible security tends to move with the market value of the underlying
stock. The value of a convertible security is also affected by prevailing
interest rates, the credit quality of the issuer and any call provisions.
DERIVATIVES -- Derivatives are securities that derive their value from other
securities, financial instruments or indices. The following are considered
derivative securities: options on futures, futures, options (e.g., puts and
calls), swap agreements, mortgage-backed securities (e.g., CMOs, REMICs, IOs and
POs), when issued securities and forward commitments, floating and variable rate
securities, convertible securities, "stripped" U.S. Treasury securities (e.g.,
Receipts and STRIPs), privately issued stripped securities (e.g., TGRs, TRs, and
CATs). See elsewhere in the "Description of Permitted Investments and Risk
Factors" and in the Statement of Additional Information for discussions of these
various instruments.
ILLIQUID SECURITIES -- Illiquid securities are securities that cannot be
disposed of within seven business days at approximately the price at which they
are being carried on the Fund's books. Illiquid securities include demand
instruments with demand notice periods exceeding seven days, securities for
which there is no active secondary market, and repurchase agreements with
durations or maturities over 7 days in length.
MONEY MARKET INSTRUMENTS -- 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 ratings;
and (v) repurchase agreements involving any of the foregoing obligations entered
into with highly-rated banks and broker-dealers; and (vi) to the extent
permitted by applicable law, shares of other investment companies investing
solely in money market instruments.
-27-
<PAGE>
MORTGAGE BACKED SECURITIES - Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, adjustable rate mortgages, and balloon 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 the Government National Mortgage Association ("GNMA"), Fannie Mae
and the Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC
obligations are not backed by the full faith and credit of the U.S. Government
as GNMA certificates are, but Fannie Mae and FHLMC securities are supported by
the instrumentalities' right to borrow from the U.S. Treasury. GNMA, Fannie Mae
and FHLMC each guarantee timely distributions of interest to certificate
holders. GNMA and Fannie Mae also each guarantee timely distributions of
scheduled principal. FHLMC has in the past guaranteed only the ultimate
collection of principal of the underlying mortgage loan; however, FHLMC now
issues mortgage-backed securities (FHLMC Gold PCS) which also guarantee timely
payment of monthly principal reductions. Government and private guarantees do
not extend to the securities' value, which is likely to vary inversely with
fluctuations in interest rates.
Private Pass-Through Securities: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include CMOs and
REMICs that are rated in one of the top two rating categories. While they are
generally structured with one or more types of credit enhancement, private
pass-through securities typically lack a guarantee by an entity having the
credit status of a governmental agency or instrumentality.
CMOs: CMOs are debt obligations of 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 usually issued in multiple classes. Principal and interest paid
on the underlying mortgage assets may be allocated among the several classes of
a series of a CMO in a variety of ways. Each class of a CMO, often referred to
as a "tranche," is issued with a specific fixed or floating coupon rate and has
a stated maturity or final distribution date. Principal payments on the
underlying mortgage assets may cause CMOs to be retired substantially earlier
than their stated maturities or final distribution dates, resulting in a loss of
all or part of any premium paid.
REMICs: A REMIC is a CMO that qualifies for special tax treatment under the Code
and invests in certain mortgages principally secured by interests in real
property. Investors may purchase beneficial interests in REMICs, which are known
as "regular" interests, or "residual" interests. Guaranteed REMIC pass-through
certificates ("REMIC Certificates") issued by Fannie Mae or
-28-
<PAGE>
FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates. Fannie Mae REMIC Certificates are issued and guaranteed as to
timely distribution of principal and interest by Fannie Mae.
Parallel Pay Securities; PAC Bonds: Parallel pay CMOs and REMICs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which must be retired by
its stated maturity date or final distribution date, but may be retired earlier.
Planned Amortization Class CMOs ("PAC Bonds") generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.
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.
REITs -- REITs pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests. A REIT is not
taxed on income distributed to its shareholders or unitholders if it complies
with regulatory requirements. Equity REITs invest the majority of their assets
directly in real property and derive their income primarily from rents and
capital gains from appreciation realized through property sales. A shareholder
in a Portfolio should realize that by investing in REITs indirectly through the
Portfolio, he or she will bear not only his or her proportionate share of the
expenses of the Portfolio, but also indirectly, similar expenses of underlying
REITs. REITs may be affected by changes in the value of their underlying
properties and by defaults by borrowers or tenants.
-29-
<PAGE>
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 (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. Repurchase
agreements are considered loans under the 1940 Act.
U.S. GOVERNMENT AGENCY OBLIGATIONS -- Certain Federal agencies, such as the
Government National Mortgage Association ("GNMA"), have been established as
instrumentalities of the United States Government to supervise and finance
certain types of activities. Issues of these agencies, while not direct
obligations of the United States Government, are either backed by the full faith
and credit of the United States (e.g., GNMA securities) or supported by the
issuing agencies' right to borrow from the Treasury. The issues of other
agencies are supported by the credit of the instrumentality (e.g., Fannie Mae
securities).
U.S. GOVERNMENT SECURITIES -- Bills, notes and bonds issued by the U.S.
Government and backed by the full faith and credit of the United States.
U.S. TREASURY OBLIGATIONS -- Bills, notes and bonds issued by the U.S. Treasury,
and separately traded interest and principal component parts of such obligations
that are transferable through the Federal book-entry system known as Separately
Traded Registered Interested and Principal Securities ("STRIPS") and Coupon
Under Book Entry Safekeeping ("CUBES").
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices. The interest rates
on these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WARRANTS -- Warrants are instruments giving holders the right, but not the
obligation, to buy equity or fixed income securities of a company at a given
price during a specified period.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES -- When-issued or delayed delivery
transactions involve the purchase of an instrument with payment and delivery
taking place in the future. Delivery of and payment for these securities may
occur a month or more after the date of the purchase commitment. The Fund will
maintain with the Custodian a separate account with liquid, 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.
-30-
<PAGE>
ZERO COUPON SECURITIES -- Zero coupon obligations are debt securities that do
not bear any interest, but instead are issued at a deep discount from par. The
value of a zero coupon obligation increases over time to reflect the interest
accreted. Such obligations will not result in the payment of interest until
maturity, and will have greater price volatility than similar securities that
are issued at par and pay interest periodically.
-31-
<PAGE>
Trust:
TIP FUNDS
Funds:
CLOVER EQUITY VALUE FUND
CLOVER SMALL CAP VALUE FUND
CLOVER FIXED INCOME FUND
Adviser:
CLOVER CAPITAL MANAGEMENT, INC.
Distributor:
CCM SECURITIES, INC.
Administrator:
SEI FUND RESOURCES
Legal Counsel:
MORGAN, LEWIS & BOCKIUS LLP
Independent Auditors:
ERNST & YOUNG LLP
June 20, 1997
<PAGE>
[SAI STARTS HERE]
Trust:
TIP FUNDS
Funds:
CLOVER EQUITY VALUE FUND
CLOVER SMALL CAP VALUE FUND
CLOVER FIXED INCOME FUND
Investment Adviser:
CLOVER CAPITAL MANAGEMENT, INC.
This Statement of Additional Information is not a prospectus and relates only to
the Clover Equity Value Fund (the "Equity Value Fund"), Clover Small Cap Value
Fund (the "Small Cap Value Fund") and Clover Fixed Income Fund (the "Fixed
Income Fund") (each a "Fund" and, together, the "Funds"). It is intended to
provide additional information regarding the activities and operations of the
TIP Funds (the "Trust") and should be read in conjunction with the Funds'
Prospectus dated June 20, 1997. The Prospectus may be obtained without charge
by calling 1-800-224-6312.
TABLE OF CONTENTS
THE TRUST...................................................................S-2
DESCRIPTION OF PERMITTED INVESTMENTS........................................S-2
INVESTMENT LIMITATIONS......................................................S-6
THE ADVISER.................................................................S-8
THE ADMINISTRATOR...........................................................S-9
THE DISTRIBUTOR............................................................S-10
TRUSTEES AND OFFICERS OF THE TRUST.........................................S-11
COMPUTATION OF YIELD AND TOTAL RETURN......................................S-14
PURCHASE AND REDEMPTION OF SHARES..........................................S-14
DETERMINATION OF NET ASSET VALUE...........................................S-15
TAXES ..................................................................S-15
PORTFOLIO TRANSACTIONS.....................................................S-17
DESCRIPTION OF SHARES......................................................S-19
SHAREHOLDER LIABILITY......................................................S-19
LIMITATION OF TRUSTEES' LIABILITY..........................................S-20
5% SHAREHOLDERS............................................................S-20
FINANCIAL INFORMATION......................................................S-22
APPENDIX ...................................................................A-1
June 20, 1997
<PAGE>
THE TRUST
This Statement of Additional Information relates only to the Clover Equity Value
Fund (the "Equity Value Fund"), Clover Small Cap Value Fund (the "Small Cap
Value Fund") and Clover Fixed Income Fund (the "Fixed Income Fund") (each a
"Fund" and, together, the "Funds"). Each Fund is a separate series of the TIP
Funds (the "Trust"), a diversified, open-end management investment company
established as a Massachusetts business trust under a Declaration of Trust dated
January 26, 1996. The Declaration of Trust permits the Trust to offer separate
series ("portfolios") of shares of beneficial interest ("shares"). Each
portfolio is a separate mutual fund, and each share of each portfolio represents
an equal proportionate interest in that portfolio. On June 17, 1997, the Equity
Value, Small Cap Value and Fixed Income Funds acquired substantially all of the
assets and liabilities of the Clover Capital Equity Value, Clover Capital Small
Cap Value and Clover Capital Fixed Income Portfolios (collectively, the "Clover
Capital Portfolios") of The Advisors' Inner Circle Fund. See "Description of
Shares." Capitalized terms not defined herein are defined in the Prospectus
offering shares of the Funds.
DESCRIPTION OF PERMITTED INVESTMENTS
Futures Contracts and Options on Futures Contracts
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time and at a specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume a position in a
futures contract at a specified exercise price during the term of the option. A
Fund may use futures contracts and related options for bona fide hedging
purposes, to offset changes in the value of securities held or expected to be
acquired or be disposed of, to minimize fluctuations in foreign currencies, or
to gain exposure to a particular market or instrument. A Fund will minimize the
risk that it will be unable to close out a futures contract by only entering
into futures contracts which are traded on national futures exchanges. In
addition, a Fund will only sell covered futures contracts and options on futures
contracts.
Stock and bond index futures are futures contracts for various stock and bond
indices that are traded on registered securities exchanges. Stock and bond index
futures contracts obligate the seller to deliver (and the purchaser to take) an
amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock or bond index at the close of the last trading day
of the contract and the price at which the agreement is made.
Stock and bond index futures contracts are bilateral agreements pursuant to
which two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock or bond index
value at the close of trading of the contract and the price at which the futures
contract is originally struck. No physical delivery of the stocks or bonds
comprising the Index is made; generally contracts are closed out prior to the
expiration date of the contracts.
S-2
<PAGE>
No price is paid upon entering into futures contracts. Instead, a Fund would be
required to deposit an amount of cash or U.S. Treasury securities known as
"initial margin." Subsequent payments, called "variation margin," to and from
the broker, would be made on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The margin is in the nature of
a performance bond or good-faith deposit on a futures contract.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures; (3) there may not be a liquid secondary market
for a futures contract or option; (4) trading restrictions or limitations may be
imposed by an exchange; and (5) government regulations may restrict trading in
futures contracts and futures options.
A Fund may enter into futures contracts and options on futures contracts traded
on an exchange regulated by the Commodities Futures Trading Commission ("CFTC"),
as long as, to the extent that such transactions are not for "bona fide hedging
purposes," the aggregate initial margin and premiums on such positions
(excluding the amount by which such options are in the money) do not exceed 5%
of a Fund's net assets. A Fund may buy and sell futures contracts and related
options to manage its exposure to changing interest rates and securities prices.
Some strategies reduce a Fund's exposure to price fluctuations, while others
tend to increase its market exposure. Futures and options on futures can be
volatile instruments and involve certain risks that could negatively impact a
Fund's return.
In order to avoid leveraging and related risks, when a Fund purchases futures
contracts, it will collateralize its position by depositing an amount of cash or
liquid, high grade debt securities, equal to the market value of the futures
positions held, less margin deposits, in a segregated account with its
custodian. Collateral equal to the current market value of the futures position
will be marked to market on a daily basis.
GNMA Securities
The Fixed Income Fund may invest in securities issued by the Government National
Mortgage Association ("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 accurately predict 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.
S-3
<PAGE>
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.
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 of such
investment companies, including advisory fees, in addition to paying Fund
expenses. Under applicable regulations, a 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."
Mortgage-Backed Securities
The Fixed Income Fund may invest in mortgage-backed securities and asset-backed
securities. Two principal types of mortgage-backed securities are collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"), which are rated in one of the top two categories by Standard &
Poor's Corporation ("S&P") or Moody's Investors Services, Inc. ("Moody's"). 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). CMOs typically are issued
with a number of classes or series which have different maturities and which are
retired using cash flow from underlying collateral according to a specified
plan.
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
S-4
<PAGE>
underlying mortgages plus all unscheduled prepayments of principal up to a
predetermined portion of the total CMO obligation. Until that portion of such
CMO obligation is repaid, investors in the longer maturities receive interest
only. Accordingly, the CMOs in the longer maturity series are less likely than
other mortgage pass-throughs to be prepaid prior to their stated maturity.
Although some of the mortgages underlying CMOs may be supported by various types
of insurance, and some CMOs may be backed by GNMA certificates or other mortgage
pass-throughs issued or guaranteed by U.S. Government agencies or
instrumentalities, the CMOs themselves are not generally guaranteed.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
In addition to mortgage-backed securities, the Fixed Income Fund may invest in
securities secured by asset-backed securities including company receivables,
truck and auto loans, leases, and credit card receivables. These issues may be
traded over-the-counter and 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.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities. Asset-backed securities
entail prepayment risk, which may vary depending on the type of asset, but is
generally less than the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are unsecured obligations of
the card holder.
Obligations of Supranational Agencies
The Fixed Income Fund may purchase obligations of supranational agencies.
Currently, the Portfolio only intends to invest in obligations issued or
guaranteed by the Asian Development Bank, Inter-American Development Bank,
International Bank for Reconstruction and Development (World Bank), African
Development Bank, European Coal and Steel Community, European Economic
Community, European Investment Bank and Nordic Investment Bank.
S-5
<PAGE>
Options
A put option gives the purchaser of the option the right to sell, and the writer
of the option the obligation to buy, the underlying security at any time during
the option period. A call option gives the purchaser of the option the right to
buy, and the writer of the option the obligation to sell, the underlying
security at any time during the option period. The premium paid to the writer is
the consideration for undertaking the obligations under the option contract. The
initial purchase (sale) of an option contract is an "opening transaction." In
order to close out an option position, a Fund may enter into a "closing
transaction," which is simply the sale (purchase) of an option contract on the
same security with the same exercise price and expiration date as the option
contract originally opened. If a Fund is unable to effect a closing purchase
transaction with respect to an option it has written, it will not be able to
sell the underlying security until the option expires or the Fund delivers the
security upon exercise.
A Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to anticipate an increase in
the market value of securities that the Fund may seek to purchase in the future.
A Fund purchasing put and call options pays a premium therefor. If price
movements in the underlying securities are such that exercise of the options
would not be profitable for the Fund, loss of the premium paid may be offset by
an increase in the value of the Fund's securities or by a decrease in the cost
of acquisition of securities by the Fund.
A Fund may write covered call options as a means of increasing the yield on its
fund and as a means of providing limited protection against decreases in its
market value. When a fund sells an option, if the underlying securities do not
increase or decrease to a price level that would make the exercise of the option
profitable to the holder thereof, the option generally will expire without being
exercised and the Fund will realized as profit the premium received for such
option. When a call option written by a Fund is exercised, the Fund will be
required to sell the underlying securities to the option holder at the strike
price, and will not participate in any increase in the price of such securities
above the strike price. When a put option written by a Fund is exercised, the
Fund will be required to purchase the underlying securities at the strike price,
which may be in excess of the market value of such securities.
A Fund may purchase and write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the SEC that OTC options are generally illiquid.
S-6
<PAGE>
A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an equal amount of the
underlying foreign currency. With respect to put options on foreign currency
written by a Fund, the Fund will establish a segregated account with its
Custodian consisting of cash or liquid, high grade debt securities in an amount
equal to the amount the Fund would be required to pay upon exercise of the put.
A Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. A Fund may choose to
terminate an option position by entering into a closing transaction. The ability
of a Fund to enter into closing transactions depends upon the existence of a
liquid secondary market for such transactions.
All options written on indices must be covered. When a Fund writes an option on
an index, it will establish a segregated account containing cash or liquid, high
grade debt securities with its custodian in an amount at least equal to the
market value of the option and will maintain the account while the option is
open or will otherwise cover the transaction.
Risk Factors: Risks associated with options transactions include: (1) the
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while a Fund will receive a premium
when it writes covered call options, it may not participate fully in a rise in
the market value of the underlying security.
REITS
The Fixed Income and Small Cap Value Funds may also invest in real estate
investment trusts ("REITs"), which pool investors' funds for investment in
income producing commercial real estate or real estate related loans or
interests.
A REIT is not taxed on income distributed to its shareholders or unitholders if
it complies with regulatory requirements relating to its organization,
ownership, assets and income, and with a regulatory requirement that it
distribute to its shareholders or unitholders at least 95% of its taxable income
for each taxable year. Generally, REITs
S-7
<PAGE>
can be classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs
invest the majority of their assets directly in real property and derive their
income primarily from rents and capital gains from appreciation realized through
property sales. Mortgage REITs invest the majority of their assets in real
estate mortgages and derive their income primarily from interest payments.
Hybrid REITs combine the characteristics of both Equity and Mortgage REITs. A
shareholder in the Fund should realize that by investing in REITs indirectly
through the Fund, he or she will bear not only his or her proportionate share of
the expenses of the Fund, but also indirectly, similar expenses of underlying
REITs.
A Fund may be subject to certain risks associated with the direct investments of
the REITs. REITs may be affected by changes in the value of their underlying
properties and by defaults by borrowers or tenants. Mortgage REITs may be
affected by the quality of the credit extended. Furthermore, REITs are dependent
on specialized management skills. Some REITs may have limited diversification
and may be subject to risks inherent in financing a limited number of
properties. REITs depend generally on their ability to generate cash flow to
make distributions to shareholders or unitholders, and may be subject to
defaults by borrowers and to self-liquidations. In addition, the performance of
a REIT may be affected by its failure to qualify for tax-free pass-through of
income under the Code or its failure to maintain exemption from registration
under the 1940 Act.
Repurchase Agreements
Repurchase agreements are agreements by which a Fund obtains a security and
simultaneously commits to return the security to the seller (a member bank of
the Federal Reserve System or primary securities dealer as recognized by the
Federal Reserve Bank of New York) at an agreed upon price (including principal
and interest) on an agreed upon date within a number of days (usually not more
than seven) from the date of purchase. The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Adviser monitors
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the Trust's 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 Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, a Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest
S-8
<PAGE>
if the Fund is treated as an unsecured creditor and is required to return the
underlying security to the seller's estate.
Securities of Foreign Issuers
The Fixed Income Fund may invest in U.S. dollar denominated fixed income
securities of foreign issuers which are traded in the United States. In
addition, the Equity Value Fund may invest in American Depositary Receipts.
These instruments may subject the 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. 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.
Variable or Floating Rate Instruments
The Fixed Income Fund may invest in variable or floating rate instruments which
may involve a demand feature and may include variable amount master demand notes
which may or may not be backed by bank letters of credit. The holder of an
instrument with a demand feature may tender the instrument back to the issuer at
par prior to maturity. A variable amount master demand note is issued pursuant
to a written agreement between the issuer and the holder, its amount may be
increased by the holder or decreased by the holder or issuer, it is payable on
demand, and the rate of interest varies based upon an agreed formula. The
quality of the underlying credit must, in the opinion of the Adviser, be
equivalent to the long-term bond or commercial paper ratings applicable to
permitted investments for the Fixed Income Fund. The Adviser will monitor on an
ongoing basis the earnings power, cash flow and liquidity ratios of the issuers
of such instruments and will similarly monitor the ability of an issuer of a
demand instrument to pay principal and interest on demand.
When-Issued and Delayed Delivery Securities
When-issued or delayed delivery securities are subject to market fluctuations
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 investment portfolio, a Fund
may dispose of a when-issued security or forward commitment prior to settlement
if it deems appropriate.
S-9
<PAGE>
INVESTMENT LIMITATIONS
Fundamental Policies
The following investment limitations (and those set forth in the Prospectus) are
fundamental policies of each Fund which cannot be changed with respect to a Fund
without the consent of the holders of a majority of that Fund's outstanding
shares. The term "majority of the outstanding shares" means the vote of (i) 67%
or more of a Fund's shares present at a meeting, if more than 50% of the
outstanding shares of a Fund are present or represented by proxy, or (ii) more
than 50% of a Fund's outstanding shares, whichever is less.
No Fund may:
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 fund to purchase securities or require a
Fund to segregate assets are not considered to be borrowings. Asset
coverage of a least 300% is required for all borrowings, except where a
Fund has borrowed money for temporary purposes in amounts not exceeding 5%
of its total assets. A Fund will not purchase securities while its
borrowings exceed 5% of its total assets.
2. Make loans if, as a result, more than 33 1/3% of its total assets would be
lent to other parties, except that each Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) lend its securities.
3. Purchase or sell real estate, physical commodities, or commodities
contracts, except that each Fund may purchase (i) marketable securities
issued by companies which own or invest in real estate (including real
estate investment trusts), commodities, or commodities contracts; and (ii)
commodities contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.
4. Issue senior securities (as defined in the Investment Company Act of 1940
(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 (except with respect to the limitation on borrowing)
will apply at the time of the purchase of a security and shall not be considered
violated
S-10
<PAGE>
unless an excess or deficiency occurs immediately after or as a result of a
purchase of such security.
Non-Fundamental Policies
The following investment limitations are non-fundamental policies of each Fund
and may be changed with respect to a Fund by the Board of Trustees.
No Fund may:
1. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by the Fund'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 each Fund
may (i) obtain short-term credits as necessary for the clearance of
security transactions; (ii) provide initial and variation margin payments
in connection with transactions involving futures contracts and options on
such contracts; and (iii) make short sales "against the box" or in
compliance with the SEC's position regarding the asset segregation
requirements imposed by Section 18 of the 1940 Act.
4. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act.
5. Purchase or hold illiquid securities, i.e., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 15% of its net assets
would be invested in illiquid securities.
In addition, each Fund will invest no more than 5% of its net assets in short
sales, unregistered securities, futures contracts, options and investment
company 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.
THE ADVISER
The Trust and Clover Capital Management, Inc. (the "Adviser") have entered into
an advisory agreement (the "Advisory Agreement"). The 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.
S-11
<PAGE>
The 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 in which the shares of the Fund are
registered, the Adviser will bear the amount of such excess. The Adviser will
not be required to bear expenses of any Fund to an extent which would result in
the Fund's inability to qualify as a regulated investment company under
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
The continuance of the Advisory Agreement as to any Fund after the first two
years must be specifically approved at least annually (i) by the vote of the
Trustees or by a vote of the shareholders of that Fund, and (ii) by the vote of
a majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the Trust or, with respect to any Fund,
by a majority of the outstanding shares of that Fund, on not less than 30 days'
nor more than 60 days' written notice to the Adviser, or by the Adviser on 90
days' written notice to the Trust.
For the fiscal years ended October 31, 1994, 1995, and 1996, the Clover Capital
Portfolios paid the following advisory fees:
<TABLE>
<CAPTION>
=======================================================================================================================
Advisory Fees Paid Advisory Fees Waived
------------------ --------------------
1994 1995 1996 1994 1995 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Value Portfolio $110,578 $238,624 $437,862 $30,260 $39,599 $73,383
- -----------------------------------------------------------------------------------------------------------------------
Fixed Income Portfolio $0 $0 $23,932 $38,976* $68,168* $53,322
- -----------------------------------------------------------------------------------------------------------------------
Small Cap Value Portfolio N/A N/A $0 N/A N/A $14,442**
=======================================================================================================================
</TABLE>
*Reimbursement of fees by the Adviser in the amount of $16,812 and $17,918 with
respect to the Clover Capital Fixed Income Portfolio for the fiscal years of
1995 and 1994, respectively.
**Reimbursement of fees by the Adviser in the amount of $51,578 with respect to
the Clover Capital Small Cap Portfolio for the fiscal year of 1996.
THE ADMINISTRATOR
The Trust and SEI Fund Resources (the "Administrator") have entered into an
administration agreement (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
S-12
<PAGE>
performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. The Administration Agreement shall remain in effect for
a period of three (3) years after the effective date of the agreement and shall
continue in effect for successive periods of one (1) year unless terminated by
either party on not less than 90 days' prior written notice to the other party.
The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Financial Management Corporation ("SFM"), a
wholly-owned subsidiary of SEI Investments Company ("SEI"), is the owner of all
beneficial interests in the Administrator. SEI and its 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., CUFUND, FMB
Funds, First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc., Marquis Funds(R), Monitor Funds, Morgan Grenfell
Investment Trust, The PBHG Funds, Inc., The Pillar Funds, Profit Funds
Investment Trust, Rembrandt Funds(R), Santa Barbara Group of Mutual Funds, Inc.,
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 and STI Classic Variable Trust.
For the fiscal years ended October 31, 1994 and 1995, and October 31, 1996, the
Clover Capital Portfolios paid the following administrative fees:
================================================================================
Administrative Fees Paid
- --------------------------------------------------------------------------------
1994 1995 1996
- --------------------------------------------------------------------------------
Equity Value Portfolio $50,000 $73,770 $138,175
- --------------------------------------------------------------------------------
Fixed Income Portfolio $50,000 $49,962 $50,022
- --------------------------------------------------------------------------------
Small Cap Value N/A N/A $33,606
Portfolio
================================================================================
THE DISTRIBUTOR
CCM Securities, Inc. (the "Distributor"), a wholly-owned subsidiary of CCM, and
the Trust are parties to a distribution agreement (the "Distribution
Agreement"). The Distributor receives no compensation for distribution of shares
of the Funds.
The Distribution Agreement shall remain in effect for a period of two years
after the effective date of the agreement and is renewable annually. The
Distribution Agreement may be terminated by the Distributor or by the Trust, by
a majority vote of the Trustees who are not interested persons and have no
financial interest in the Distribution
S-13
<PAGE>
Agreement or by a majority vote of the outstanding securities of the Trust upon
not more than 60 days' written notice by either party or upon assignment by the
Distributor.
TRUSTEES AND OFFICERS 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 and executive officers
of the Trust 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. The Trust pays the fees for unaffiliated Trustees.
The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with named companies during that
period. Unless otherwise noted, the business address of each Trustee and each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some or all of the following:
The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund,
ARK Funds, Bishop Street Funds, CoreFunds, Inc., CrestFunds, Inc., CUFUND, FMB
Funds, Inc., First American Funds, Inc., First American Investment Funds, Inc.,
First American Strategy Funds, Inc, Marquis Funds(R), Monitor Funds, Morgan
Grenfell Investment Trust, The PBHG Funds, Inc., The Pillar Funds, Profit Funds
Investment Trust, Rembrandt Funds(R), Santa Barbara Group of Mutual Funds, Inc.,
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, and STI Classic Variable Trust, each of which is an
open-end management investment company managed by SEI Fund Resources or its
affiliates and, except for Profit Funds Investment Trust, Rembrandt Funds(R),
and Santa Barbara Group of Mutual Funds, Inc., are distributed by SEI Financial
Services Company.
ROBERT E. TURNER (DOB 11/26/56) - Trustee* - Chairman and Chief Investment
Officer of Turner Investment Partners, Inc. (the Adviser) since 1990.
ALFRED C. SALVATO (DOB 01/09/58) - Trustee - Treasurer, Thomas Jefferson
University Health Care Pension Fund, since 1995, and Assistant Treasurer,
1988-1995.
MARK D. TURNER (DOB 12/12/57) - Trustee* - President and Director of Fixed
Income Management of Turner Investment Partners, Inc. (the Adviser), since 1990.
JOHN T. WHOLIHAN (DOB 12/12/37) - Trustee - Professor, Loyola Marymount
University, since 1984.
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.
S-14
<PAGE>
STEPHEN J. KNEELEY (DOB 02/09/63) - Vice President and Assistant Secretary -
Chief Operating Officer of Turner Investment Partners, Inc., since 1990.
TODD B. CIPPERMAN (DOB 02/14/66) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the administrator and distributor
since 1995. Associate, Dewey Ballantine (law firm), 1994-1995. Associate,
Winston and Strawn (law firm), 1991-1994.
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, 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.
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.
ROBERT DELLACROCE (DOB 12/17/63) - Controller and Chief Accounting Officer -
Director, Funds Administration and Accounting of SEI since 1994. Senior Audit
Manager, Arthur Anderson LLP, 1986-1994.
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).
JAMES W. JENNINGS (DOB 01/15/37) - Secretary - Partner, Morgan, Lewis & Bockius
LLP (law firm), counsel to the Trust, the Adviser, the Administrator and
Distributor.
JOHN H. GRADY, JR. (DOB 06/01/61) - Assistant Secretary - 1800 M Street, N.W.,
Washington, D.C. 20036, Partner, Morgan, Lewis & Bockius LLP, Counsel to the
Trust, Adviser, Administrator and Distributor.
EDWARD B. BAER (DOB 09/27/68) - Assistant Secretary - 1800 M Street, N.W.,
Washington, D.C. 20036, Associate, Morgan, Lewis & Bockius LLP, Counsel to the
S-15
<PAGE>
Trust, Adviser, Administrator and Distributor, since 1995. Attorney, Aquila
Management Corporation, 1994. Rutgers University School of Law - Newark, 1991-
1994.
___________________________
* Messrs. Robert Turner and Mark Turner are Trustees who may be deemed to be
"interested persons" of the Trust as the term is defined in the 1940 Act.
The Trustees and Officers of the Trust own less than 1% of the
outstanding shares of the Trust. The Trust pays fees only to the Trustees who
are not interested persons of the Trust. Compensation of Officers and interested
Trustees of the Trust is paid by the Adviser or the Administrator.
* Messrs. Robert Turner and Mark Turner are Trustees who may be deemed to be
"interested persons" of the Trust as the term is defined in the 1940 Act.
COMPUTATION OF YIELD AND TOTAL RETURN
From time to time the Trust may advertise yield and total return of the Funds.
These figures will be based on historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future yields or returns. 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 income generated by the investment during
that 30-day period is generated in each period 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.
For the 30-day period ended October 31, 1996, yields were 1.25% for the Clover
Capital Equity Value Portfolio, 5.98% for the Clover Capital Fixed Income
Portfolio, and 0% for the Clover Capital Small Cap Portfolio, respectively.
The total return of a 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 Fund 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, as of the end of the designated time period, of a hypothetical
$1,000 payment made at the beginning of the designated time period.
S-16
<PAGE>
For the fiscal year ended October 31, 1996 and for the period from December 6,
1991 (commencement of operations) through October 31, 1996, the total return was
16.47% and 15.53% for the Clover Capital Equity Value Portfolio and 6.26% and
7.87% for the Clover Capital Fixed Income Portfolio, respectively. For the
fiscal period from February 28, 1996 (commencement of operations) through
October 31, 1996 the total return of the Clover Capital Small Cap Portfolio was
13.60% (annualized).
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through the Transfer Agent on days when
the New York Stock Exchange is open for business. Currently, the weekdays on
which the Fund is closed for business are: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Shares of each Fund are offered on a continuous basis.
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by a Fund in lieu
of cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Trust also
reserves the right to suspend sales of shares of any Fund for any period during
which the New York Stock Exchange, the Adviser, the Administrator, the Transfer
Agent and/or the Custodian are not open for business.
DETERMINATION OF NET ASSET VALUE
The securities of each Fund are valued by the Administrator. The Administrator
will use an independent pricing service to obtain valuations of securities. The
pricing service relies primarily on prices of actual market transactions as well
as on trade quotations obtained from third parties. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
TAXES
The following is only a summary of certain tax considerations generally
affecting the Funds and their shareholders, and is not intended as a substitute
for careful tax planning. Shareholders are urged to consult their tax advisors
with specific reference to their own tax situations, including their state and
local tax liabilities.
S-17
<PAGE>
Federal Income Tax
The following discussion of federal income tax consequences is based on the Code
and the regulations issued thereunder as in effect on the date of this Statement
of Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
Each Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By following such a policy, each Fund
expects to eliminate or reduce to a nominal amount the federal taxes to which it
may be subject.
In order to qualify for treatment as a RIC under the Code, each Fund must
distribute annually to its shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
the Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities, or certain other income (including
gains from options, futures or forward contracts); (ii) the Fund must derive
less than 30% of its gross income each taxable year from the sale or other
disposition of stocks or securities held for less than three months; (iii) at
the close of each quarter of the Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICs and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of the Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer; and (iv) at the
close of each quarter of the Fund's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of any one issuer, or of two or more
issuers which are engaged in the same, similar or related trades or business if
the Fund owns at least 20% of the voting power of such issuer.
Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
each Fund will be subject to a nondeductible 4% federal excise tax to the extent
it fails to distribute by the end of any calendar year 98% of its ordinary
income for that year and 98% of its capital gain net income (the excess of
short- and long-term capital gains over short-and long-term capital losses) for
the one-year period ending on October 31 of that year, plus certain other
amounts.
In certain cases, a Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup withholding by the
S-18
<PAGE>
Internal Revenue Service, or (3) has not certified to that Fund that such
shareholder is not subject to backup withholding.
If any Fund fails to qualify as a RIC for any taxable year, it will be taxable
at regular corporate rates. In such an event, all distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of the Fund's current and accumulated earnings and profits, and such
distributions will generally be eligible for the corporate dividends-received
deduction.
State Taxes
No Fund is liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by any Fund to
shareholders and the ownership of shares may be subject to state and local
taxes.
PORTFOLIO TRANSACTIONS
The Adviser is authorized to select brokers and dealers to effect securities
transactions for the Funds. The Adviser will seek to obtain the most favorable
net results by taking into account various factors, including price, commission,
if any, size of the transactions and difficulty of executions, 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, a Fund will not necessarily be paying the
lowest spread or commission available. The Adviser seeks to select brokers or
dealers that offer a Fund best price and execution or other services which are
of benefit to the Fund.
The Funds have no obligation to deal with any broker-dealer or group of
broker-dealers in the execution of transactions in portfolio securities. Subject
to policies established by the Trustees of the Fund, the Adviser is responsible
for placing the orders to execute transactions for the Funds. In placing orders,
it is the policy of the Fund 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 Portfolios will not necessarily be paying the lowest
spread or commission available.
The money market instruments 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 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
instruments are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost
S-19
<PAGE>
of executing portfolio securities transactions of the Funds will primarily
consist of dealer spreads and underwriting commissions.
The Adviser may, consistent with the interests of the Fund, select brokers on
the basis of the research services they provide to the Adviser. Such services
may include analyses of the business or prospects of a company, industry or
economic sector, or statistical and pricing services. Information so received by
the Adviser will be in addition to and not in lieu of the services required to
be performed by the Adviser under the Advisory Agreement. If, in the judgment of
the Adviser, a Fund or other accounts managed by the Adviser will be benefitted
by supplemental research services, the Adviser is authorized to pay brokerage
commissions to a broker furnishing such services which are in excess of
commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; and providing portfolio
performance evaluation and technical market analyses. The expenses of the
Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information, such services may not be used exclusively, or at all,
with respect to the Fund or account generating the brokerage, and there can be
no guarantee that the Adviser will find all of such services of value in
advising that Fund.
It is not expected that the Funds may execute brokerage or other agency
transactions through the Distributor, which, although a registered
broker-dealer, is limited to the sale of shares of mutual funds, for a
commission in conformity with the 1940 Act, the Securities Exchange Act of 1934
and rules promulgated by the SEC. Under these provisions, the Distributor is
permitted to receive and retain compensation for effecting portfolio
transactions for a Fund on an exchange if a written contract is in effect
between the Trust and the Distributor expressly permitting the Distributor to
receive and retain such compensation. These rules further require that
commissions paid to the Distributor by a Fund for exchange transactions not
exceed "usual and customary" brokerage commissions. The rules define "usual and
customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." The Trustees, including those who are not "interested persons"
of the Trust, have adopted procedures for evaluating the reasonableness of
commissions paid to the Distributor and will review these procedures
periodically.
Because no Fund markets its shares through intermediary brokers or dealers, it
is not the Funds' practice to allocate brokerage or principal business on the
basis of sales of its shares which may be made through such firms. However, the
Adviser may place portfolio orders with qualified broker-dealers who recommend a
Fund's shares to
S-20
<PAGE>
clients, and may, when a number of brokers and dealers can provide best net
results on a particular transaction, consider such recommendations by a broker
or dealer in selecting among broker-dealers.
For the fiscal years October 31, 1994 and 1995, the Clover Capital Equity Value
Portfolio paid SEI Financial Services Company ("SFS"), prior Distributor of the
Portfolios brokerage commissions in the aggregate amount of $0 and $2,512. For
the fiscal year ended October 31, 1995, the commissions the Equity Value
Portfolio paid to SFS represented 2% of the aggregate brokerage commissions
which were paid on transactions that represented 55% of the aggregate dollar
amount of transactions that incurred commissions paid by that Portfolio during
such period. Aggregate brokerage commissions paid by the Equity Value Portfolio
for the fiscal years ended October 31, 1994 and 1995 were $46,917 and $136,995,
respectively. For the fiscal years ended October 31, 1994 and 1995, the Clover
Capital Fixed Income Portfolio paid SFS brokerage commissions in the aggregate
amount of $0 and $411. For the fiscal year ended October 31, 1995, the
commission the Fixed Income Portfolio paid to SFS represented 100% of the
aggregate brokerage commissions which were paid on transactions that represented
42% of the aggregate dollar amount of transactions that incurred commissions
paid by the Portfolio during such period. Aggregate brokerage commissions paid
by the Fixed Income Portfolio for the fiscal years ended October 31, 1994 and
1995 were $0 and $411, respectively. For the fiscal year ended October 31, 1996,
the Clover Capital Portfolios paid brokerage commissions as follows:
<TABLE>
<CAPTION>
=================================================================================================================
Total
Brokerage
Commissions
paid to SFS in
Total $ Connection
Total $ Amount Amount of With
of Brokered Brokered Repurchase
Brokerage Transactions Brokerage Transactions Agreement
Commissions for Last Commissions Paid With Affiliate Transactions
Fund Paid Year to Affiliates for Last Year For Last Year
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Value Portfolio $152,253 $54,101,590 $0 $0 $3,360
- -----------------------------------------------------------------------------------------------------------------
Fixed Income Portfolio $0 $0 $0 $0 $265
- -----------------------------------------------------------------------------------------------------------------
Small Cap Value $22,829 $4,164,807 $0 $0 $108
Portfolio
=================================================================================================================
</TABLE>
The Portfolios are required to identify any securities of their "regular brokers
or dealers" (as such term is defined in the 1940 Act), which the Portfolios have
acquired during their most recent fiscal year. As of October 31, 1996, the
Clover Capital Equity Value, Clover Capital Fixed Income and Clover Capital
Small Cap Value Portfolios held $10,483,623; $589,302; and $230,302,
respectively, of tri-party repurchase agreements with Lehman Brothers.
For the fiscal years ended October 31, 1995 and 1996, the Clover Capital
Portfolios' turnover rates were was as follows:
S-21
<PAGE>
================================================================================
TURNOVER RATE
--------------------------
PORTFOLIO 1996 1995
- --------------------------------------------------------------------------------
Equity Value Portfolio 51.36% 84.76%
- --------------------------------------------------------------------------------
Fixed Income Portfolio 24.52% 35.84%
- --------------------------------------------------------------------------------
Small Cap Value Portfolio 14.17% N/A
================================================================================
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
portfolios and shares of each portfolio. Each share of a portfolio represents an
equal proportion ate interest in that portfolio with each other share. Shares
are entitled upon liquidation to a pro rata share in the net assets of the
portfolio. Shareholders have no preemptive rights. All consideration received by
the Trust for shares of any portfolio and all assets in which such consideration
is invested would belong to that portfolio and would be subject to the
liabilities related thereto. 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, however, the Trust were held to be a partnership, the
possibility of the shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for obligations of the Trust, and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any shareholder held personally liable for the
obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
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
S-22
<PAGE>
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.
FINANCIAL STATEMENTS
The Clover Capital Portfolios' financial statements and notes thereto and the
report of Arthur Andersen LLP thereon, are herein incorporated by reference. On
June 20, 1997 all of the outstanding assets and liabilities of the Clover
Capital Portfolios of The Advisors' Inner Circle Fund were acquired by the
Trust. A copy of the Clover Capital Portfolios' 1996 Annual Report must
accompany the delivery of this Statement of Additional Information. Ernst &
Young LLP has been selected to serve as the Funds independent public accountants
for the fiscal year ending September 30, 1997.
S-23
<PAGE>
APPENDIX
The following descriptions are summaries of published ratings.
DESCRIPTION OF CORPORATE BOND RATINGS
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA by S&P also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and differs from AAA issues only in
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 rated BBB by S&P are considered as medium-grade obligations (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Debt rated BB, B, CCC, CC and C is regarded as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the least degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties of major risk exposures to adverse conditions.
The rating CI is reserved for income bonds on which no interest is being paid.
Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Bonds rated Aaa by Moody's are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged". Interest payments are protected by a large, or an exceptionally stable,
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa by Moody's are
judged by Moody's to be of high quality by all standards. Together with bonds
rated Aaa, they comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than in Aaa securities.
Bonds rated A by Moody's possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal
A-1
<PAGE>
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 interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Fitch uses plus and minus signs with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the AAA category. Bonds rated AAA by Fitch are considered to be
investment grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events. Bonds rated AA by
Fitch are considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+. Bonds rated A 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 conditions 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.
A-2
<PAGE>
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 considered sufficient for prudent investment, with 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 on 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.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by Standard & Poor's Corporation ("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, the highest rating category, reflect a "very
strong" degree of safety regarding timely payment. Those rated A-2, the second
highest rating category, reflect a satisfactory degree of safety regarding
timely payment but not as high as A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") are judged by Moody's to be of "superior" quality and "strong"
quality respectively on the basis of relative repayment capacity.
F-1+ (Exceptionally Strong) is the highest commercial paper rating Fitch
assigns; paper rated F-1+ is regarded as having the strongest degree of
assurance for timely payment. Paper rated F-1 (Very Strong) reflects an
assurance of timely payment only slightly less in degree than paper rated F-1+.
The rating F-2 (Good) reflects a satisfactory degree
A-3
<PAGE>
of assurance for timely payment, but the margin of safety is not as great as for
issues rated F-1+ or F-1.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. 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. Duff has incorporated gradations of 1+ and 1-
to assist investors in recognizing quality differences within this highest tier.
Paper rated Duff-1+ has the highest certainty of timely payment, with
outstanding short-term liquidity and safety just below risk-free U.S. Treasury
short-term obligations. Paper rated Duff-1- has high certainty of timely payment
with strong liquidity factors which are supported by good fundamental protection
factors. Risk factors are very small. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets (although
ongoing funding may enlarge total financing requirements) and sound liquidity
factors and company fundamentals. Risk factors are small.
The designation A1, the highest rating by IBCA, indicates that the obligation is
supported by a strong capacity for timely repayment. Those obligations rated A1+
are supported by the highest capacity for timely repayment. Obligations rated
A2, the second highest rating, are supported by a satisfactory capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
A-4
<PAGE>
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements
Part A: Financial Highlights
Part B: The following audited financial statements for Clover
Capital Funds as of October 31, 1996 and the report
of the independent auditors, Arthur Andersen, LLP
dated December 6, 1996 are incorporated by reference
to the Statement of Additional Information from
Form N-30D filed on December 30, 1996 with Accession
Number 0000935069-96-000170.
Schedule of Investments
Statement of Assets & Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
(b) Additional Exhibits
1 Agreement and Declaration of Trust of the Registrant,
dated January 26, 1996 (incorporated herein by
reference to Initial Registration Statement filed on
February 1, 1996).
1(a) Amendment dated March 28, 1997, to the Agreement and
Declaration of Trust of the Registrant, dated January
26, 1996, is filed herewith.
2 By-Laws of the Registrant (incorporated herein by
reference to Initial Registration Statement filed on
February 1, 1996).
5(a) Investment Advisory Agreement between the Registrant
and Turner Investment Partners, Inc., as originally
filed with Pre-Effective Amendment No. 1 to
Registration Statement filed April 19, 1996
(incorporated herein by reference to Post-Effective
Amendment No. 4 filed on January 28, 1997).
5(b) Form of Investment Advisory Agreement between the
Registrant and Clover Capital Management, Inc., is
filed herewith.
6(a) Distribution Agreement between the Registrant and SEI
Financial Services Company, as originally filed with
Pre-Effective Amendment No. 1 to Registration Statement
filed April 19, 1996 (incorporated herein by reference
to Post-Effective Amendment No. 4 filed on January 28,
1997).
6(b) Form of Distribution Agreement between TIP Funds and
CCM Securities, Inc., as filed herewith.
8(a) Custodian Agreement between the Registrant and
CoreStates Bank, N.A., as originally filed with
Pre-Effective Amendment No. 1 to Registration Statement
filed April 19, 1996 (incorporated herein by reference
to Post-Effective Amendment No. 4 filed on January 28,
1997).
9(a) Administration Agreement between the Registrant and
SEI Financial Management Corporation, as originally
filed with Pre-Effective Amendment No. 1 to
C-1
<PAGE>
Registration Statement filed April 19, 1996
(incorporated herein by reference to Post-Effective
Amendment No. 4 filed on January 28, 1997).
9(b) Form of Agency Agreement between the Registrant and
DST Systems, Inc., (incorporated herein by reference to
Pre-Effective Amendment No. 1 to Registration Statement
filed April 19, 1996).
10 Opinion and Consent of Counsel, (incorporated herein
by reference to Pre-Effective Amendment No. 1 to
Registration Statement filed April 19, 1996).
11(a) Consent of Arthur Andersen LLP is filed herewith.
16 Performance Calculations, (incorporated herein by
reference to Pre-Effective Amendment No. 1 to
Registration Statement filed April 19, 1996).
17 Financial Data Schedules are filed herewith.
24 Powers of Attorney for David G. Lee, Alfred C. Salvato,
Mark Turner, Robert E. Turner, and John T. Wholihan
(incorporated herein by reference to Post-Effective
Amendment No. 4 filed on January 28, 1997).
24(a) Power of Attorney for Robert DellaCroce, is filed
herewith.
Item 25. Persons Controlled by or under Common Control with Registrant:
See the Prospectus and the Statement of Additional Information
regarding the Registrant's control relationships. SEI Financial Management
Corporation is the owner of all beneficial interest in the Administrator and is
a subsidiary of SEI Investments Company, which also controls the distributor of
the Registrant, SEI Financial Services Company, as well as to other corporations
engaged in providing various financial and record keeping services, primarily to
bank trust departments, pension plan sponsors, and investment managers.
Item 26. Number of Holders of Securities, as of March 26, 1997:
Turner Ultra Large Cap Fund 15
----
Turner Growth Equity Fund 126
----
Turner Midcap Fund 50
----
Turner Small Cap Fund 339
----
Turner Fixed Income Fund 1
----
Clover Equity Value Fund 0
----
Clover Small Cap Value Fund 0
----
Clover Fixed Income Fund 0
----
Item 27. Indemnification:
Article VIII of the Agreement of Declaration of Trust filed as
Exhibit 1 to the Registration Statement is incorporated by reference. Insofar as
indemnification for liability arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the Declaration of Trust or otherwise, the Registrant is aware that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by trustees, directors, officers or
C-2
<PAGE>
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
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 Advisers:
ADVISERS
- --------
Turner Investment Partners, Inc.
- --------------------------------
Turner Investment Partners, Inc. ("Turner") is the investment adviser for the
Trust. The principal address of Turner is 1235 Westlakes Drive, Suite 350,
Berwyn, PA 19312. Turner is an investment adviser registered under the Advisers
Act.
The list required by this Item 28 of officers and directors of Turner, together
with information as to any other business profession, vocation or employment of
substantial nature engaged in by such officers and directors during the past two
years is incorporated by reference to Schedules A and D of Form ADV filed by
Turner to the Advisers Act (SEC File No. 801-36220).
Clover Capital Management, Inc.
- -------------------------------
Clover Capital Management, Inc. is the investment adviser for the Clover Capital
Equity Value, Clover Capital Fixed Income and Clover Capital Small Cap Value
Funds. The principal address of Clover Capital Management, Inc. is 11 Tobey
Village Office Park, Pittsford, NY 14534.
The list required by this Item 28 of general partners of Clover Capital
Management, Inc., together with information as to any other business profession,
vocation, or employment of a substantial nature engaged in by such general
partners during the past two years is incorporated by reference to Schedules A
and D of Form ADV filed by Clover Capital Management, Inc. under the Advisers
Act of 1940 (SEC File No.
801-27041).
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.
The Advisors' Inner Circle Fund February 28, 1997
--Clover Capital Equity Value Portfolio
--Clover Capital Small Cap Value Portfolio
--Clover Capital Fixed Income Portfolio
C-3
<PAGE>
(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 11 Tobey Village Office
Park, Pittsford, New York 14534.
Position and office
Name with Underwriter
---- -------------------
Ned W.Roman Director, President
Michael E. Jones Director, Vice President, Secretary &
Treasurer
William E. Wilson Vice President
Gary B. Van Nostrand Vice President
Frederick J. Minges Vice President
James G. Gould Vice President
Sean E. Cosgrove Vice President
Alyssa A. Ehrman Vice President
Item 30. Location of Accounts and Records:
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the rules promulgated
thereunder, are maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3);
(6); (8); (12); and 31a-1(d), the required books and records will be
maintained at the offices of Registrant's Custodian:
CoreStates Bank, N.A.
Broad & Chestnut Streets
P.O. Box 7618
Philadelphia, Pennsylvania 19101
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and
(D); (4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required
books and records are maintained at the offices of Registrant's
Administrator:
SEI Fund Resources
Oaks, Pennsylvania 19456
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f),
the required books and records are maintained at the principal offices
of the Registrant's Adviser:
Turner Investment Partners, Inc.
1235 Westlakes Drive, Suite 350
Berwyn, Pennsylvania 19312
Clover Capital Management, Inc.
11 Tobey Village Office Park
Pittsford, NY 14534
Item 31. Management Services: None.
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 Directors of their desire to communicate with Shareholders of the
Corporation, the Directors will inform such Shareholders
C-4
<PAGE>
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 hereby undertakes to call a meeting of Shareholders for
the purpose of voting upon the question of removal of a Director(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.
Registrant hereby undertakes to file a post-effective amendment,
including financial statements which need not be certified for the Ultra Large
Cap Fund, within 4-6 months from the effective date of the Registrant's
Post-Effective Amendment No. 3.
Registrant hereby undertakes to furnish each prospective person to
whom a prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, when such annual report is issued containing information
called for by Item 5A of Form N-1A, upon request and without charge.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 5 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Oaks, Commonwealth of Pennsylvania on
the 3rd day of April 1997.
TURNER FUNDS
By: /s/ David G. Lee
--------------------
David G. Lee
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following person in the capacity on the
dates indicated.
* Trustee April 3, 1997
---------------------------
Alfred C. Salvato
* Trustee April 3, 1997
---------------------------
Mark D. Turner
* Trustee April 3, 1997
---------------------------
Robert E. Turner
* Trustee April 3, 1997
---------------------------
John T. Wholihan
/s/ David G. Lee President and Chief April 3, 1997
--------------------------- Executive Officer
David G. Lee
/s/ Robert DellaCroce Controller and April 3, 1997
--------------------------- Chief Financial
Robert DellaCroce Officer
By: /s/ David G. Lee April 3, 1997
--------------------------
David G. Lee
Attorney-in-Fact
C-6
<PAGE>
EXHIBIT INDEX
Name Exhibit
- ---- -------
Agreement and Declaration of Trust of the Registrant, Ex-99.B1
dated January 26, 1996, (incorporated herein by
reference to Initial Registration Statement filed on
February 1, 1996).
Amendment dated March 28, 1997, to the Agreement Ex-99.B1(a)
and Declaration of Trust of the Registrant, dated
January 26, 1996, is filed herewith.
By-Laws of the Registrant, (incorporated herein Ex-99.B2
by reference to Initial Registration Statement
filed on February 1, 1996).
Investment Advisory Agreement between Ex-99.B5(a)
the Registrant and Turner Investment Partners, Inc.
as originally filed with Pre-Effective Amendment
No. 1 to Registration Statement filed April 19,1996
(incorporated herein by reference to Post-Effective
Amendment No. 4 filed on January 28, 1997).
Form of Investment Advisory Agreement between Ex-99.B5(b)
the Registrant and Clover Capital Management, Inc.,
is filed herewith.
Distribution Agreement between the Ex-99.B6(a)
Registrant and SEI Financial Services Company
as originally filed with Pre-Effective Amendment
No. 1 to Registration Statement filed April 19,1996
(incorporated herein by reference to Post-Effective
Amendment No. 4 filed on January 28, 1997).
Form of Distribution Agreement between TIP Funds Ex-99.B6(b)
and CCM Securities, Inc., is filed herewith.
Custodian Agreement between the Registrant Ex-99.B8(a)
and CoreStates Bank, N.A. as originally filed
with Pre-Effective Amendment No. 1 to
Registration Statement filed April 19,1996
(incorporated herein by reference to Post-Effective
Amendment No. 4 filed on January 28, 1997).
Administration Agreement between the Ex-99.B9(a)
Registrant and SEI Financial Management Corporation
as originally filed with Pre-Effective Amendment
No. 1 to Registration Statement filed April 19,1996
(incorporated herein by reference to Post-Effective
Amendment No. 4 filed on January 28, 1997).
C-7
<PAGE>
Form of Agency Agreement between the Registrant and Ex-99.B9(b)
DST Systems, Inc. (incorporated herein by reference
to Pre-Effective Amendment No. 1 to Registration
Statement filed April 19,1996)
Opinion and Consent of Counsel Ex-99.B10
(incorporated herein by reference to Pre-Effective
Amendment No. 1 to Registration Statement filed
April 19,1996)
Consent of Arthur Andersen LLP is filed herewith. Ex-99.B11(a)
Performance Calculations Ex-99.B16
(incorporated herein by reference to Pre-Effective
Amendment No. 1 to Registration Statement filed
April 19,1996)
Powers of Attorney for David G. Lee, Ex-99.B24
Alfred C. Salvato, Mark D. Turner, Robert E. Turner,
and John T. Wholihan (incorporated herein by reference
to Post-Effective Amendment No. 4 filed on
January 28, 1997).
Power of Attorney for Robert DellaCroce, is filed herewith Ex-99.B24(a)
Financial Data Schedule for Clover Capital Equity Ex-27.1
Value Fund, is filed herewith.
Financial Data Schedule for Clover Capital Ex-27.2
Small Cap Value Fund, is filed herewith.
Financial Data Schedule for Clover Capital Fixed Ex-27.3
Income Fund, is filed herewith.
C-8
TURNER FUNDS
Secretary's Certificate
Amendment to Declaration of Trust
The undersigned, Edward B. Baer, being the duly elected and acting
Assistant Secretary of Turner Funds (the "Trust"), a Massachusetts business
trust, DOES HEREBY CERTIFY that the following is true and a correct copy of the
resolution adopted amending Article I Section 1, pursuant to Article IX Section
9 of the Agreement and Declaration of Trust, by the Board of Trustees of the
Trust at the meeting held on February 21, 1997:
VOTED: That the name of the Trust be, and it hereby is, changed to
TIP Funds (the "Trust").
Witness my hand this 31st day of March, 1997
/s/ Edward B. Baer
-----------------------
Edward B. Baer
Assistant Secretary
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of May, 1997, by and between TIP Funds, a
Massachusetts business trust (the "Trust"), and Clover Capital Management, Inc.
(the "Adviser").
WHEREAS, the Trust is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended,
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 control of the Board of Trustees;
WHEREAS, the Trust desires to retain the Adviser to render investment
management services with respect to the Portfolios set forth in the attached
schedule and such other portfolios as the Trust and the Adviser may agree upon
(the "Portfolios"), and the Adviser is willing to render such services:
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. Duties of Adviser. The Trust employs the Adviser to manage the
investment and reinvestment of the assets, 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 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
Portfolio'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.
<PAGE>
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 from
time to time in the Portfolios' Prospectuses and Statement of
Additional Information. 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, 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 or as described from time to time
by the Portfolios' Prospectuses and Statement of Additional
Information.
3. 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 (less any
assets of such Portfolios held in non-interest bearing special
deposits with a Federal Reserve Bank).
All rights of compensation under this Agreement for services
performed as of the termination date shall survive the
termination of this Agreement.
4. Other Expenses. The Adviser shall pay all expenses of printing
and mailing reports, prospectuses, statements of additional
information, and sales literature relating to the solicitation of
prospective clients. The Trust shall pay all expenses relating to
mailing to existing shareholders prospectuses, statements of
additional information, proxy solicitation material and
shareholder reports.
5. 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 of a Portfolio are qualified for
<PAGE>
offer and sale, the Adviser shall bear such excess cost. However,
the Adviser will not bear expenses of any Portfolio which would
result in the 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 5
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 3 and, if such reduction shall
be insufficient to offset such expenses, by reimbursing the
Trust.
6. Reports. The Trust and the Adviser agree to furnish to each
other, if applicable, current prospectuses, proxy statements,
reports to shareholders, certified copies of their financial
statements, and such other information with regard to their
affairs as each may reasonably request.
7. Status of Adviser. The services of the Adviser to the Trust 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
Trust 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.
8. 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 Investment Company Act of 1940 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.
9. Limitation of Liability of 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 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 by
reason of reckless disregard of its obligations and duties
hereunder, except as may otherwise be provided under provisions
of applicable state law or Federal securities 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).
10. 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,
<PAGE>
agents, and shareholders of the Adviser are or may be interested
in the Trust as Trustees, 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 if approved by the Board of Trustees, subject to the
rules and regulations of the Securities and Exchange Commission.
11. License of Adviser's Name. The Adviser hereby agrees to grant a
license to the Trust for use of its name in the names of the
Portfolios for the term of this Agreement and such license shall
terminate upon termination of this Agreement.
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 Investment
Company Act of 1940 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 Investment Company Act of 1940 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 not less than 30 days nor
more than 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. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postpaid, to the
other party at any office of such party. As used in this Section
11, the terms "assignment", "interested persons", and a "vote of
a majority of the outstanding voting securities" shall have the
<PAGE>
respective meanings set forth in the Investment Company Act of
1940 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 Oaks, PA 19456 and if to the Adviser at 11 Tobey
Village Office Park, Pittsford, NY 14534.
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.
15. Governing Law. This Agreement shall be construed in accordance
with the laws of the Commonwealth of Massachusetts and the
applicable provisions of the 1940 Act. To the extent that the
applicable laws of the Commonwealth of Massachusetts, or any of
the provisions herein, conflict with the applicable provisions of
the 1940 Act, the latter shall control.
A copy of the 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.
Further, the obligations of the Trust with respect to any one Portfolio shall
not be binding upon any other Portfolio.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.
TIP FUNDS
By:_____________________________
Attest:_________________________
CLOVER CAPITAL MANAGEMENT, INC.
By:_____________________________
Attest:_________________________
<PAGE>
Schedule A dated May ____, 1997
to the
Investment Advisory Agreement
dated May ______ 1997
between
TIP Funds
and
Clover Capital Management, Inc.
Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:
Portfolio Fee (in basis points)
- ------------------------- ----------------------
Clover Equity Value Fund .74% of the average daily net assets
Clover Small Cap Value Fund .85% of the average daily net assets
Clover Fixed Income Fund .45% of the average daily net assets
DISTRIBUTION AGREEMENT
TIP FUNDS
CLOVER FUNDS
THIS AGREEMENT is made as of this __th day of ________, 199_ between
TIP Funds ("the Trust"), a Massachusetts business trust and CCM Securities, Inc.
(the "Distributor"), a New York corporation, with respect to the portfolios of
Clover Capital Management, Inc., as further defined below.
WHEREAS, the Trust is registered as an investment company with the
Securities and Exchange Commission (the "SEC") under the Investment Company Act
of 1940, as amended (the "1940 Act"), and its shares are registered with the SEC
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Trust and Distributor hereby agree as follows:
ARTICLE 1. Sale of Shares. The Trust grants to the Distributor the
exclusive right to sell units of beneficial interest (the "Shares") of the
portfolios of the Trust listed on Schedule X hereto (each a "Fund" and,
collectively, the "Clover Funds") at the net asset value per Share, plus any
applicable sales charges in accordance with the current prospectuses, as agent
and on behalf of the Trust, during the term of this Agreement and subject to the
registration requirements of the 1933 Act, the rules and regulations of the SEC
and the laws governing the sale of securities in the various states ("Blue Sky
Laws").
ARTICLE 2. Solicitation of Sales. In consideration of these rights
granted to the Distributor, the Distributor agrees to use all reasonable
efforts, consistent with its other business, in connection with the distribution
of Shares of the Clover Funds; provided, however, that the Distributor shall not
be prevented from entering into like arrangements with other issuers. The
provisions of this paragraph do not obligate the Distributor to sell any
particular number of Shares.
ARTICLE 3. Authorized Representations. The Distributor is not
authorized by the Trust to give any information or to make any representations
other than those contained in the current registration statements and
prospectuses of the Trust filed with the SEC or contained in Shareholder reports
or other material that may be prepared by or on behalf of the Trust for the
Distributor's use. The Distributor may prepare and distribute sales literature
and other material as it may deem appropriate, provided that such literature and
materials have been prepared in accordance with applicable rules and
regulations.
<PAGE>
ARTICLE 4. Registration of Shares. The Trust agrees that it will take
all action necessary to register Shares under applicable federal and state
securities laws so that there will be available for sale the number of Shares of
the Clover Funds the Distributor may reasonably be expected to sell and to pay
all fees associated with said registration. The Trust shall make available to
the Distributor such number of copies of its currently effective prospectuses
and statements of additional information for the Clover Funds as the Distributor
may reasonably request. The Trust shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Shares of the
Clover Funds.
ARTICLE 5. Compensation. As compensation for providing the services
under this Agreement:
(a) The Distributor shall receive from the Trust:
(1) all distribution and service fees, as
applicable, at the rate and under the terms and conditions set
forth in each Distribution and Shareholder Services Plan
(collectively, "Plans") adopted by the appropriate class of
Shares of each of the Clover Funds, as such Plans may be
amended from time to time, and subject to any further
limitations on such fees as the Board of Trustees of the Trust
may impose;
(2) all deferred sales charges ("DSCs"), if
any, applied on redemptions of the applicable class(es) of
Shares of each Portfolio on the terms and subject to such
waivers as are described in the Trust's Registration Statement
and current prospectuses, as amended from time to time, or as
otherwise required pursuant to applicable law; and
(3) all front-end sales charges, if any, on
purchases the applicable class(es) of Shares of each
Portfolio sold subject to such charges as described in the
Trust's Registration Statement and current prospectuses, as
amended from time to time. The Distributor, or brokers,
dealers and other financial institutions and intermediaries
that have entered into sub-distribution agreements with the
Distributor, may collect the gross proceeds derived from the
sale of such class(es) of Shares, remit the net asset value
thereof to the Trust upon receipt of the proceeds and retain
the applicable sales charge.
(b) The Distributor may reallow any or all of the distribution or
service fees, contingent deferred sales charges and front-end sales
charges which it is paid by the Trust to such brokers, dealers and
other financial institutions and intermediaries as the Distributor may
from time to time determine.
ARTICLE 6. Indemnification of Distributor. The Trust agrees to
indemnify and hold harmless the Distributor and each of its directors and
officers and each person, if any, who controls the Distributor within the
meaning of Section 15 of the 1933 Act against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages, or expense and reasonable counsel
fees and disbursements incurred in connection therewith), arising by
<PAGE>
reason of any person acquiring any Shares, based upon the ground that the
Trust's Registration Statement, prospectuses, Shareholder reports or other
information filed or made public by the Trust (as from time to time amended)
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements made not
misleading. However, the Trust does not agree to indemnify the Distributor or
hold it harmless to the extent that the statements or omission was made in
reliance upon, and in conformity with, information furnished to the Trust by or
on behalf of the Distributor.
In no case (i) is the indemnity of the Trust to be deemed to protect
the Distributor against any liability to the Trust or its Shareholders to which
the Distributor or such person otherwise would be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Trust to be liable to the Distributor under the
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
other person shall have notified the Trust in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
Distributor or such other person (or after the Distributor or the person shall
have received notice of service on any designated agent). However, failure to
notify the Trust of any claim shall not relieve the Trust from any liability
which it may have to the Distributor or any person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph.
The Trust shall be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any claims subject to this indemnity provision. If the Trust elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Trust and satisfactory to the indemnified defendants in the suit
whose approval shall not be unreasonably withheld. In the event that the Trust
elects to assume the defense of any suit and retain counsel, the indemnified
defendants shall bear the fees and expenses of any additional counsel retained
by them. If the Trust does not elect to assume the defense of a suit, it will
reimburse the indemnified defendants for the reasonable fees and expenses of any
counsel retained by the indemnified defendants.
The Trust agrees to notify the Distributor promptly of the commencement
of any litigation or proceedings against it or any of its officers or Trustees
in connection with the issuance or sale of any of its Shares.
ARTICLE 7. Indemnification of Trust. The Distributor covenants and
agrees that it will indemnify and hold harmless the Trust and each of its
Trustees and officers and each person, if any, who controls the Trust within the
meaning of Section 15 of the Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith) based upon the 1933 Act or any other statute or common
law and arising by reason of any person acquiring any Shares, and alleging a
wrongful act of the Distributor or any of its employees or alleging that the
Trust's Registration Statement, prospectuses, Shareholder reports or other
information filed or made public by the Trust (as from time to time amended)
relating to the Clover Funds included an untrue statement of a
<PAGE>
material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements not misleading, insofar as the
statement or omission was made in reliance upon and in conformity with
information furnished to the Trust by or on behalf of the Distributor.
In no case (i) is the indemnity of the Distributor in favor of the
Trust or any other person indemnified to be deemed to protect the Trust or any
other person against any liability to which the Trust or such other person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Trust or upon any person (or after the
Trust or such person shall have received notice of service on any designated
agent). However, failure to notify the Distributor of any claim shall not
relieve the Distributor from any liability which it may have to the Trust or any
person against whom the action is brought otherwise than on account of its
indemnity agreement contained in this paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce the claim, but if the Distributor elects to assume the defense, the
defense shall be conducted by counsel chosen by the Distributor and satisfactory
to the indemnified defendants whose approval shall not be unreasonably withheld.
In the event that the Distributor elects to assume the defense of any suit and
retain counsel, the defendants in the suit shall bear the fees and expenses of
any additional counsel retained by them. If the Distributor does not elect to
assume the defense of any suit, it will reimburse the indemnified defendants in
the suit for the reasonable fees and expenses of any counsel retained by them.
The Distributor agrees to notify the Trust promptly of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any of the Trusts' Shares.
ARTICLE 8. Effective Date. This Agreement shall be effective upon its
execution, and unless terminated as provided, shall continue in force for two
years from the effective date and thereafter from year to year, provided that
such annual continuance is approved by (i) either the vote of a majority of the
Trustees of the Trust, or the vote of a majority of the outstanding voting
securities of the Trust, and (ii) the vote of a majority of those Trustees of
the Trust who are not parties to this Agreement or the Trust's Distribution
Plan(s), if any, or interested persons of any such party ("Qualified Trustees"),
cast in person at a meeting called for the purpose of voting on the approval.
This Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph the terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested person" shall have the respective
meanings specified in the 1940 Act. In addition, this Agreement may at any time
be terminated without penalty by the Distributor, by a vote of a majority of
Qualified Trustees, or by vote of a majority of the outstanding voting
securities of the Trust upon not less than sixty days prior written notice to
the other party.
<PAGE>
ARTICLE 9. Notices. 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 1235 Westlakes Drive, Suite 350, Berwyn, PA 19312,
and if to the Distributor, at 11 Tobey Village Office Park, Pittsford, NY 14534.
ARTICLE 10. Limitation of Liability. A copy of the Declaration of Trust
of the Trust is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Clover Funds on behalf of the Trustees of the Trust as Trustees
and not individually and that the obligations of this instrument 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 Clover Funds of the Trust.
No Portfolio of the Trust shall be liable for the obligations of any
other portfolio of the Trust. Without limiting the generality of the foregoing,
a distributor of any such portfolio shall look only to the assets of the
portfolio distributed by it for payment of fees for services rendered by that
distributor to such portfolio. Thus for instance, the Distributor shall look
only to the assets of a Portfolio for payment of fees for services rendered to
that Portfolio.
ARTICLE 11. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Massachusetts and the applicable
provisions of the 1940 Act. To the extent that the applicable laws of the
Commonwealth of Massachusetts, or any of the provisions herein, conflict with
the applicable provisions of the 1940 Act, the latter shall control.
ARTICLE 12. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
<PAGE>
IN WITNESS, the Trust and Distributor have each duly executed this
Agreement, as of the day and year above written.
TIP FUNDS
By:
-------------------------------------
Attest:
---------------------------------
CCM SECURITIES, INC.
By:
-------------------------------------
Attest:
---------------------------------
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated December 6, 1996, on the October 31, 1996
financial statements of The Clover Capital Equity Value Fund, Clover Capital
Fixed Income Fund and Clover Capital Small Cap Value Fund, included in the Post-
Effective Amendment No. 28 to the Registration Statement on Form N-1A of The
Advisors' Inner Circle Funds (File No. 33-42484), and to all references to our
firm included in or made part of Post-Effective Amendment No. 5 to the
Registration Statement File No. 333-00641.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
April 1, 1997
TIP FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of TIP Funds (the "Trust"), a business trust organized under the laws of
The Commonwealth of Massachusetts, hereby constitutes and appoints David G. Lee,
Kevin P. Robins and James W. Jennings, and each of them singly, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him and in his name, place and stead, and in the
capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Robert DellaCroce Date: 3/13/97
- --------------------------------- ------------
Robert DellaCroce, Controller/CFO
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001006783
<NAME> TIP FUNDS
<SERIES>
<NUMBER> 020
<NAME> CLOVER EQUITY VALUE
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 75,045
<INVESTMENTS-AT-VALUE> 84,306
<RECEIVABLES> 1,482
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 85,788
<PAYABLE-FOR-SECURITIES> 656
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 82
<TOTAL-LIABILITIES> 738
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71,765
<SHARES-COMMON-STOCK> 5,249
<SHARES-COMMON-PRIOR> 3,378
<ACCUMULATED-NII-CURRENT> 57
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,967
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,261
<NET-ASSETS> 85,050
<DIVIDEND-INCOME> 899
<INTEREST-INCOME> 772
<OTHER-INCOME> 0
<EXPENSES-NET> (760)
<NET-INVESTMENT-INCOME> 911
<REALIZED-GAINS-CURRENT> 3,967
<APPREC-INCREASE-CURRENT> 5,039
<NET-CHANGE-FROM-OPS> 9,917
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (992)
<DISTRIBUTIONS-OF-GAINS> (4,207)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,281
<NUMBER-OF-SHARES-REDEEMED> (758)
<SHARES-REINVESTED> 349
<NET-CHANGE-IN-ASSETS> 33,403
<ACCUMULATED-NII-PRIOR> 97
<ACCUMULATED-GAINS-PRIOR> 4,248
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 511
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 833
<AVERAGE-NET-ASSETS> 69,066
<PER-SHARE-NAV-BEGIN> 15.29
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> 2.15
<PER-SHARE-DIVIDEND> (.22)
<PER-SHARE-DISTRIBUTIONS> (1.21)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.20
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001006783
<NAME> TIP FUNDS
<SERIES>
<NUMBER> 190
<NAME> CLOVER SMALL CAP VALUE
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> FEB-28-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 4,405
<INVESTMENTS-AT-VALUE> 4,482
<RECEIVABLES> 1
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,500
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,355
<SHARES-COMMON-STOCK> 414
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 63
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 77
<NET-ASSETS> 4,495
<DIVIDEND-INCOME> 13
<INTEREST-INCOME> 10
<OTHER-INCOME> 0
<EXPENSES-NET> (23)
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 67
<APPREC-INCREASE-CURRENT> 77
<NET-CHANGE-FROM-OPS> 144
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 442
<NUMBER-OF-SHARES-REDEEMED> (29)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 4,495
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 89
<AVERAGE-NET-ASSETS> 2,535
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> .88
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.87
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001006783
<NAME> TIP FUNDS
<SERIES>
<NUMBER> 010
<NAME> CLOVER FIXED INCOME
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 19,264
<INVESTMENTS-AT-VALUE> 19,430
<RECEIVABLES> 325
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,755
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24
<TOTAL-LIABILITIES> 24
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,358
<SHARES-COMMON-STOCK> 2,003
<SHARES-COMMON-PRIOR> 1,485
<ACCUMULATED-NII-CURRENT> 11
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 196
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 166
<NET-ASSETS> 19,731
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,166
<OTHER-INCOME> 0
<EXPENSES-NET> (137)
<NET-INVESTMENT-INCOME> 1,029
<REALIZED-GAINS-CURRENT> 208
<APPREC-INCREASE-CURRENT> (166)
<NET-CHANGE-FROM-OPS> 1,071
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,030)
<DISTRIBUTIONS-OF-GAINS> (76)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 877
<NUMBER-OF-SHARES-REDEEMED> (471)
<SHARES-REINVESTED> 112
<NET-CHANGE-IN-ASSETS> 5,046
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 76
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 77
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 190
<AVERAGE-NET-ASSETS> 17,161
<PER-SHARE-NAV-BEGIN> 9.89
<PER-SHARE-NII> .59
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> (.59)
<PER-SHARE-DISTRIBUTIONS> (.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.85
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
