<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1999
<TABLE>
<S> <C>
1933 ACT REG. NO. 333-63295
1940 ACT FILE NO. 811-09001
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
---------------
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 POST-EFFECTIVE AMENDMENT NO. 1 /X/
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 2
</TABLE>
PPM AMERICA FUNDS
(Registrant)
225 WEST WACKER DRIVE, SUITE 1200
CHICAGO, ILLINOIS 60606
TELEPHONE NUMBER: (312) 634-2500
------------------------
<TABLE>
<S> <C>
MARK B. MANDICH JANET D. OLSEN
PPM America, Inc. Bell, Boyd & Lloyd
225 West Wacker Drive Three First National Plaza, #3300
Suite 1200 Chicago, Illinois 60602
Chicago, Illinois 60606
</TABLE>
(Agents for Service)
------------------------
AMENDING PARTS A, B AND C AND FILING EXHIBITS.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
/ / immediately upon filing pursuant to rule 485(b)
/X/ or May 1, 1999 pursuant to rule 485(b)
/ / 60 days after filing pursuant to rule 485(a)(1)
/ / on pursuant to rule 485(a)(1) by acceleration
/ / 75 days after filing pursuant to rule 485(a)(2)
/ / on pursuant to rule 485(a)(2)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PPM America Funds
Prospectus
May 1, 1999
PPM America Value Equity Fund
PPM America Small Cap Value Equity Fund
PPM America High Yield Bond Fund
[LOGO]
<PAGE>
PPM AMERICA FUNDS
PPM AMERICA VALUE EQUITY FUND
PPM AMERICA SMALL CAP VALUE EQUITY FUND
PPM AMERICA HIGH YIELD BOND FUND
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
MAY 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Funds' Investment Objectives...................... 1
The Funds' Principal Investment Strategies............ 1
The Principal Risks of Investing in the Funds......... 2
Annual Investment Returns............................. 3
The Funds' Fees and Expenses.......................... 3
More Information on the Funds' Objectives, Strategies
and Risks........................................... 4
Management of the Funds............................... 6
Shareholder Information............................... 11
Valuation of the Funds' Shares........................ 16
Dividends, Distributions and Taxes.................... 17
Year 2000 Information................................. 18
Financial Highlights.................................. 19
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES:
PPM AMERICA VALUE EQUITY FUND AND PPM AMERICA SMALL CAP VALUE EQUITY FUND -- To
increase the value of your shares through long-term growth of capital and
current income.
PPM AMERICA HIGH YIELD BOND FUND -- To provide current income and to increase
the value of your shares through long-term growth of capital.
THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES:
PPM AMERICA VALUE EQUITY FUND -- The Fund will invest at least 65% of its assets
in the common stocks of U.S. domiciled companies that have a market value in
excess of $2.5 billion and which PPM America (the Funds' investment adviser)
believes are undervalued relative to the stocks which comprise the S&P 500 Stock
Index. The Fund may also invest up to 25% of its assets in the common stocks of
U.S. exchange-traded foreign companies that PPM America believes are selling for
low prices.
PPM AMERICA SMALL CAP VALUE EQUITY FUND -- The Fund will invest at least 65% of
its assets in the common stocks of U.S. domiciled companies that have a market
value less than $2.5 billion at the time of purchase and which PPM America
believes are undervalued relative to the value of those issuers that have
similar market values. The Fund may also invest up to 25% of its assets in the
common stocks of U.S. exchange-traded foreign companies that PPM America
believes are selling for low prices.
PPM AMERICA HIGH YIELD BOND FUND -- The Fund will invest at least 65% of its
assets in fixed-income securities that are higher-yielding, non-investment grade
corporate bonds with maturities exceeding three years. Moody's generally rates
these securities Ba or below, while S&P generally rates these securities BB or
below, although the Fund may invest in securities that are not rated if PPM
America believes these securities are of equivalent credit quality. The Fund may
invest in corporate bonds that Moody's rates Ca or S&P rates C, or in unrated
bonds that PPM America believes are of equivalent credit quality.
To increase the value of the Fund's shares, the Fund will invest in corporate
bonds that PPM America expects to increase in value because of improvements in
credit quality or rating or anticipated declines in interest rates. The Fund may
also invest up to 25% of its assets in equity securities to seek to increase the
value of the Fund's shares. The Fund may invest up to 25% of its assets in U.S.
dollar-denominated fixed-income or equity securities of foreign companies.
1
<PAGE>
THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS:
PPM AMERICA VALUE EQUITY FUND AND PPM AMERICA SMALL CAP VALUE EQUITY FUND -- A
shareholder can lose money on an investment in either Fund or either Fund could
underperform other investments if:
- - the stock market goes down;
- - value stocks fall out of favor with the stock market;
- - the stock market continues to value the Funds' holdings lower than PPM
America expected;
- - the Funds were incorrect in their assessment that a prospective security was
undervalued; or
- - there are adverse political or economic events in foreign countries that
impact the value of the Funds' investments in foreign securities.
In addition, the Small Cap Value Equity Fund could underperform other
investments or lose money if the market for that Fund's investments is not
actively traded.
PPM AMERICA HIGH YIELD BOND FUND -- A shareholder can lose money on an
investment in the Fund or the Fund could underperform other investments if:
- - a corporate bond issuer does not make interest or principal payments to the
Fund when due;
- - there is an economic downturn, a substantial period of rising interest rates
or a period of political uncertainty that affects the Fund's investments;
- - the markets for the Fund's investments are not actively traded which could
cause the price of the Fund's investments to fall; or
- - the credit quality of a corporate bond issuer falls
In addition, any Fund could underperform other investments or lose money if it
invests in foreign securities, because such securities tend to be more volatile
than U.S. securities. A Fund's investment in foreign securities (including U.S.
exchange traded or U.S. dollar-denominated securities) may subject that Fund to
risks that it may not encounter with an investment in U.S. securities. These
risks include less available public information about the issuer of securities;
less stringent regulatory standards; lack of uniform accounting, auditing and
financial reporting
2
<PAGE>
standards; and country risks including less liquidity, high inflation rates,
unfavorable economic practices and political instability.
ANNUAL INVESTMENT RETURNS:
Although the Funds' past performance will not necessarily indicate how the Funds
will perform in the future, the Funds will provide performance information to
investors to assist them in understanding that the Funds' returns may vary and
that there are possible risks associated with investing in the Funds. For a
discussion of PPM America's investment performance for its separately managed
accounts, refer to MANAGEMENT OF THE FUNDS.
THE FUNDS' FEES AND EXPENSES:
This table describes the fees and expenses that you will pay if you buy and hold
shares of the Funds.
<TABLE>
<CAPTION>
SMALL CAP
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM VALUE EQUITY VALUE EQUITY HIGH YIELD
YOUR INVESTMENT) FUND FUND BOND FUND
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases None None None
Maximum Deferred Sales Charge None None None
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP
ANNUAL FUND OPERATING EXPENSES (EXPENSES VALUE EQUITY VALUE EQUITY HIGH YIELD
THAT ARE DEDUCTED FROM THE FUNDS' ASSETS) FUND FUND BOND FUND
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
Management Fees 0.80% 0.90% 0.65%
Distribution Fees None None None
Other Expenses (1) 0.30% 0.30% 0.30%
-----------------------------------------
Total Annual Fund Operating Expenses (2) 1.10% 1.20% 0.95%
</TABLE>
(1) These expenses are based on estimated amounts for the fiscal year ending
December 31, 1999.
(2) PPM America has voluntarily agreed to reimburse the Funds if, and to the
extent, total annual fund operating expenses exceed 1.00% for the Value
Equity Fund, 1.10% for the Small Cap Value Equity Fund and 0.85% for the High
Yield Bond Fund.
3
<PAGE>
EXAMPLE
The example below is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds. The example assumes
that:
- - you invest $10,000 in each Fund for the time periods indicated and then
redeem all of your shares at the end of those periods;
- - your investment has a 5% return each year; and
- - each Fund's operating expenses remain the same as shown under "Annual Fund
Operating Expenses," above.
Although your actual costs, and the Funds' returns, may be higher or lower,
based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
VALUE EQUITY SMALL CAP VALUE HIGH YIELD
FUND EQUITY FUND BOND FUND
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
One Year $ 112 $ 122 $ 97
Three Years $ 350 $ 381 $ 303
</TABLE>
Taking into account the voluntary expense limitations by PPM America, the actual
costs for the one year and three year time periods described above would be:
Value Equity Fund -- $102 and $318; Small Cap Value Equity Fund -- $112 and
$350; and High Yield Bond Fund -- $87 and $271.
MORE INFORMATION ON THE FUNDS' OBJECTIVES, STRATEGIES AND RISKS
OBJECTIVES:
PPM AMERICA VALUE EQUITY FUND AND PPM AMERICA SMALL CAP VALUE EQUITY FUND -- To
increase the value of your shares through long-term growth of capital and
current income.
PPM AMERICA HIGH YIELD BOND FUND -- To provide current income and to increase
the value of your shares through long-term growth of capital.
HOW THE FUNDS INVEST:
PPM AMERICA VALUE EQUITY FUND AND PPM AMERICA SMALL CAP VALUE EQUITY FUND -- The
Value Equity Fund and Small Cap Value Equity Fund invest in common stocks of
companies that are primarily domiciled in the U.S., as well as securities
convertible into common stocks and securities having common stock
characteristics, such as rights and warrants to purchase common stocks.
4
<PAGE>
PPM America buys and sells common stocks of companies based on the philosophy
that a diversified portfolio of undervalued equity securities will outperform
the market over the long term. PPM America generally will consider stocks
potentially undervalued and therefore attractive for the PPM America Value
Equity Fund if:
- - they have below average valuation characteristics (e.g., price/earnings or
price/cash flow ratios) relative to the stocks which comprise the S&P 500
Index; or
- - they have above average dividend yields relative to the stocks that comprise
the S&P 500 Index.
PPM America generally will consider stocks potentially undervalued and therefore
attractive for the PPM America Small Cap Value Equity Fund if:
- - they have below average valuation characteristics (e.g., price/earnings or
price/cash flow ratios) relative to companies that have market values less
than $2.5 billion.
PPM America uses a fundamental research process that concentrates on determining
and understanding the reasons the market prices a stock inexpensively. The
thrust of this approach is to seek investments where current investor enthusiasm
is low, as reflected in the stock's valuation. Exposure is reduced when the
investment community's perceptions improve and the stock approaches fair
valuation. PPM America takes a long-term investment approach by placing a strong
emphasis on its ability to determine attractive values and does not try to
determine short-term changes in the general market level.
PPM AMERICA HIGH YIELD BOND FUND -- The High Yield Bond Fund's investments in
high yield securities are generally based on PPM America's analysis of industry
trends and individual security characteristics. PPM America conducts credit
analyses for each security considered for investment to evaluate its
attractiveness relative to its risk. PPM America also maintains a diversified
portfolio to limit credit exposure to individual issuers. PPM America tries to
identify those issuers whose financial condition is adequate to meet future
obligations, or has improved or is expected to improve in the future.
From time to time, the High Yield Bond Fund may adopt a temporary defensive
position during adverse market, economic or other circumstances when PPM America
believes that action is needed to avoid
5
<PAGE>
losses. During periods when the Fund has assumed a temporary defensive position,
the Fund may not be able to achieve its investment objective.
OTHER RISKS OF INVESTING IN THE FUNDS:
PPM AMERICA VALUE EQUITY FUND AND PPM AMERICA SMALL CAP VALUE EQUITY FUND --
Over time, stocks have shown greater growth potential than other types of
securities. In the short term, however, stock prices may fluctuate widely in
response to company, market, or economic news.
PPM AMERICA SMALL CAP VALUE EQUITY FUND -- Stocks of small companies tend to be
more volatile and less liquid than stocks of large companies and have returns
that vary, sometimes significantly, from the overall stock market. As compared
to larger companies, small companies may:
- - have a shorter history of operations,
- - not have as great an ability to raise additional capital
- - have a less diversified product line making them susceptible to market
pressure
- - have a smaller public market for their shares
PPM AMERICA HIGH YIELD BOND FUND -- Companies generally issue high yield
securities as a consequence of corporate restructuring or similar events, with
the issuer generally less able to make scheduled payments of interest and
principal. The secondary market for high yield securities is generally less
liquid than that for investment grade corporate securities. During periods of
economic downturns, rising interest rates or when there is reduced market
liquidity, high yield bond prices may become more volatile, which may cause the
fund to experience sudden and substantial price declines. Since the last major
economic recession, there has been a substantial increase in the use of
high-yield bond debt securities to fund highly leveraged corporate acquisitions
and restructurings, so past experience with high-yield securities in a prolonged
economic downturn may not provide an accurate indication of future performance
during similar periods.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
PPM America, Inc., located at 225 West Wacker Drive, Chicago, Illinois 60606, is
the investment adviser to each of the Funds. PPM America currently manages
approximately $41 billion in assets.
6
<PAGE>
PPM America selects each of the Funds' investments under the supervision of the
Board of Trustees. PPM America makes investment decisions for each Fund and
places each Fund's purchase and sales orders.
As compensation for the services rendered by PPM America, each Fund pays PPM
America an advisory fee, calculated daily and paid monthly, at the annual rate
of 0.80% of the average daily net asset value of the PPM America Value Equity
Fund, 0.90% of the average daily net asset value of the PPM America Small Cap
Equity Fund and 0.65% of the average daily net asset value of the PPM America
High Yield Bond Fund.
PPM America has voluntarily agreed to reimburse each Fund to the extent that its
total annual operating expenses exceed the following percent of each Fund's
average net assets: 1.00% in the case of PPM America Value Equity Fund, 1.10%
for PPM America Small Cap Value Equity Fund and 0.85% in the case of PPM America
High Yield Bond Fund. For the purpose of determining whether a Fund is entitled
to any expense reimbursement, that Fund's expenses are calculated daily and any
reimbursement is made monthly. PPM America's agreement to limit each Fund's
expenses may be terminated by PPM America at any time.
PPM America utilizes teams of investment professionals acting together to manage
the assets of the Funds. The teams meet regularly to review portfolio holdings
and to discuss purchase and sale activity. The teams adjust holdings in the
Funds as they deem appropriate in the pursuit of the Funds' investment
objectives.
PRIOR PERFORMANCE OF THE FUNDS' INVESTMENT ADVISER -- PPM AMERICA, INC.
The following tables reflect past investment performance achieved by composites
of portfolios having investment objectives, policies, strategies and risks
substantially similar to those of the Funds. Each composite includes all
discretionary, fee-paying accounts and mutual funds (or a segregated portion of
the mutual funds) managed or sub-advised by PPM America, all of which have
similar investment profiles. The data is provided to illustrate the past
performance of PPM America in managing substantially similar accounts as
measured against specified market indices and does not represent the performance
of the Funds. PPM America Funds may incur certain administrative fees and
expenses that were not included in the composite returns shown. Therefore, Fund
returns may be lower. Investors should not consider this performance data as an
indication of future performance of the Funds or PPM America.
DIVERSIFIED LARGE CAPITALIZATION EQUITY COMPOSITE. The accounts included in PPM
America's Diversified Equity Composite have substantially
7
<PAGE>
similar investment objectives, policies and strategies as PPM America Value
Equity Fund.
<TABLE>
<CAPTION>
DIVERSIFIED LARGE
CAPITALIZATION
EQUITY COMPOSITE
-- ANNUAL NET S&P/BARRA
YEAR TOTAL RETURNS VALUE INDEX(1)
<S> <C> <C>
- --------------------------------------------------------------------------------------
1998 12.78% 14.68%
- --------------------------------------------------------------------------------------
1997 28.59% 29.99%
- --------------------------------------------------------------------------------------
1996 24.14% 21.99%
- --------------------------------------------------------------------------------------
1995 43.88% 37.00%
- --------------------------------------------------------------------------------------
1994 3.30% -0.64%
- --------------------------------------------------------------------------------------
1993 12.92% 18.60%
- --------------------------------------------------------------------------------------
1992 2.23%(2) 1.81%(2)
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED LARGE
CAPITALIZATION
EQUITY COMPOSITE
PERIODS ENDED -- AVERAGE ANNUAL
DECEMBER 31, 1998 NET TOTAL RETURNS S&P/BARRA VALUE INDEX
<S> <C> <C>
- -------------------------------------------------------------------------------------
One year 12.78 % 14.68%
- -------------------------------------------------------------------------------------
Three years 21.06 % 22.06%
- -------------------------------------------------------------------------------------
Five years 21.76 % 19.87%
- -------------------------------------------------------------------------------------
Since Inception 20.37 % 19.72%
- -------------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED SMALL CAP EQUITY COMPOSITE. The accounts included in PPM America's
Diversified Small Cap Equity Composite have substantially similar investment
objectives, policies and strategies as PPM America Small Cap Value Equity Fund.
<TABLE>
<CAPTION>
DIVERSIFIED SMALL
CAPITALIZATION EQUITY
-- ANNUAL NET TOTAL RUSSELL 2000 VALUE
YEAR RETURNS INDEX(3)
<S> <C> <C>
- ------------------------------------------------------------------------------------
1998 1.23% -6.45%
- ------------------------------------------------------------------------------------
1997 33.58% 31.79%
- ------------------------------------------------------------------------------------
1996 20.07% 21.37%
- ------------------------------------------------------------------------------------
1995 43.85% 25.75%
- ------------------------------------------------------------------------------------
1994 -0.80%(4) 0.19%(4)
- ------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED SMALL CAP
EQUITY COMPOSITE --
PERIODS ENDED AVERAGE ANNUAL NET RUSSELL 2000
DECEMBER 31, 1998 TOTAL RETURNS VALUE INDEX
<S> <C> <C>
- ------------------------------------------------------------------------------------
One year 1.23% -6.45 %
- ------------------------------------------------------------------------------------
Three years 17.53% 14.38 %
- ------------------------------------------------------------------------------------
Since Inception 17.35% 14.19 %
- ------------------------------------------------------------------------------------
</TABLE>
HIGH YIELD COMPOSITE. The accounts included in PPM America's High Yield
Composite have substantially similar investment objectives, policies and
strategies as the PPM America High Yield Bond Fund.
<TABLE>
<CAPTION>
HIGH YIELD COMPOSITE
-- ANNUAL NET TOTAL LEHMAN HIGH YIELD
YEAR RETURNS INDEX(5)
<S> <C> <C>
- -------------------------------------------------------------------------------------
1998 4.18 % 1.87
- -------------------------------------------------------------------------------------
1997 15.49 % 12.77%
- -------------------------------------------------------------------------------------
1996 13.32 % 11.35%
- -------------------------------------------------------------------------------------
1995 7.19 %(6) 6.01%(6)
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD COMPOSITE --
PERIODS ENDED AVERAGE ANNUAL NET
DECEMBER 31, 1998 TOTAL RETURNS LEHMAN HIGH YIELD INDEX
<S> <C> <C>
- ----------------------------------------------------------------------------------------
One Year 4.18% 1.87 %
- ----------------------------------------------------------------------------------------
Three years 10.89% 8.55 %
- ----------------------------------------------------------------------------------------
Since Inception 11.45% 9.09 %
- ----------------------------------------------------------------------------------------
</TABLE>
NOTES TO PRESENTATION OF COMPOSITE PERFORMANCE:
(1) The S&P/Barra Value Index is constructed by ranking the securities in the
S&P 500 Index by price-to-book ratio and including the securities with the
lowest price-to-book ratios that represent approximately half of the market
capitalization of the S&P 500 Index. The S&P 500 Index is an unmanaged index
containing common stocks of 500 industrial, transportation, utility and
financial companies, regarded as generally representative of the U.S. stock
market. The Index reflects the reinvestment of income, dividends and capital
gains distributions, if any, but does not reflect fees, brokerage commissions or
other expenses of investing.
(2) For the period December 1, 1992 (composite inception) through December 31,
1992.
9
<PAGE>
(3) The Russell 2000 Value Index is an index of common stocks with dividends
reinvested, which measures the performance of those Russell 2000 companies with
lower price-to-book ratios and lower forecasted growth values. The Russell 2000
Index is formed by taking the 3,000 largest U.S. companies and eliminating the
largest 1,000, leaving an unweighted index of 2,000 small companies. The Russell
2000 Index is an unmanaged index and returns include reinvested dividends, but
does not include any transaction costs, management fees or other costs in its
returns.
(4) For the period April 1, 1994 (composite inception) through December 31,
1994.
(5) The Lehman High Yield Index is an unmanaged, total return index that covers
all fixed income securities having a maximum rating of Ba1 (including default
issues), a minimum amount outstanding of $100 million, and at least a 1 year
maturity; PIKS and Eurobonds excluded. The index is a fully invested index,
which includes reinvestment of income, but does not include any transaction
costs, management fees or other costs in its returns.
(6) For the period July 1, 1995 (composite inception) through December 31, 1995.
The representative composite performance data shown above is summarized from PPM
America's complete report on composite performance. PPM America prepared the
composite performance report in accordance with the recommended standards of the
Association for Investment Management and Research ("AIMR")(1). PPM America
retained PricewaterhouseCoopers LLP to conduct a Level II AIMR verification on
each of the composites contained in the report for the period from the inception
of each composite through December 31, 1998. AIMR was not involved in the
preparation or verification of the data. A complete list of PPM America's
composites and copies of the verified presentations are available upon request.
- ------------------------
(1) AIMR is a non-profit membership and education organization with more than
33,000 members in 77 countries worldwide that, among other things, has
formulated a set of performance presentation standards for investment
advisers. These AIMR performance presentation standards are intended to (i)
promote full and fair presentations by investment advisers of their
performance results, and (ii) ensure uniformity in reporting so that
performance results of investment advisers are directly comparable.
10
<PAGE>
All annual returns presented were calculated net of the highest advisory fee
that could have been charged by PPM America according to its standard fee
schedule to any account included in the composite and were not calculated using
actual fees charged.
The average annual total return is equivalent to the annual rate of return
which, if earned in each year of the indicated multi-year period, would produce
the actual cumulative rate of return over the time period.
The monthly returns of PPM America's composite are calculated by weighing each
account's monthly return by its beginning market value as a percent of the total
composite beginning market value. Quarterly returns are calculated by linking
the monthly composite returns through compounded multiplication. Annual returns
are calculated by linking the quarterly returns through compounded
multiplication.
The private accounts that are included in PPM America's composites are not
subject to the same types of expenses to which the Funds are subject, nor to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the funds by the Investment Company Act of 1940 or
Subchapter M of the Internal Revenue Code. In fact, the expenses of the private
accounts included in the composites are lower than the Funds' expenses.
Consequently, if PPM America had included the Funds in the composites, or if the
private accounts included in the composite had been regulated as investment
companies under the federal securities and tax laws, the composites' performance
results would have been lower than what is shown above.
The investment results of PPM America's composite presented above are not
intended to predict or suggest the returns that might be experienced by the
Funds or an individual investor in the Funds. Investors should also be aware
that the use of a methodology different from that used above to calculate
performance could result in different performance data and that the methodology
used above is not the SEC standard to calculate total return for mutual funds.
As a result, the performance results may differ from the results calculated
according to the SEC's method.
SHAREHOLDER INFORMATION
HOW TO PURCHASE SHARES
Shares of the Funds are offered to (i) qualified retirement plans (including
employer, municipality, union and association and other group retirement plans),
employee-benefit trusts, foundations and endowments, (ii) certain
11
<PAGE>
financial institutions having sales or service agreements with the Funds or a
broker-dealer or financial institution with respect to sales of shares of the
funds, (iii) employees and officers of PPM America and its affiliates, or (iv)
any other institution or individual, at the sole discretion of PPM America.
The minimum initial investment in shares of a Fund is $500,000. That high
minimum is intended to help the Funds control their expenses, for the benefit of
all the Funds' shareholders. Employees and officers of PPM America and its
affiliates have a minimum initial investment of $10,000 and PPM America may
waive the minimum initial investment.
Investments by a qualified retirement plan are made by the plan sponsor or
administrator, who is responsible for transmitting all orders for the purchase,
redemption and exchange of Fund shares. The availability of an investment by a
plan participant in the Funds, and the procedures for investing, depend upon the
provisions of the qualified retirement plan and whether the plan sponsor or
administrator has contracted with the Funds or the transfer agent for special
processing services, including subaccounting. Other institutional and eligible
purchasers must arrange for services through the transfer agent by calling toll
free 877-PPM-FUND (877-776-3863).
Shares of the Funds may be purchased at the net asset value per share next
determined after receipt of the purchase order. The Funds determine net asset
value as described under VALUATION OF THE FUNDS' SHARES each day that the Funds
are open for business.
INITIAL PURCHASE BY MAIL: Subject to acceptance by the Funds, an account may be
opened by completing and signing a Funds Application Form (provided at the end
of the prospectus) and mailing it to PPM America Funds, c/o First Data Investor
Services Group, P. O. Box 61503, 3200 Horizon Drive, King of Prussia, PA
19406-0903, together with a check ($500,000 minimum or $10,000 minimum for
officers and employees of PPM America and its affiliates) payable to PPM America
Funds. The Funds do not accept third party checks. If an investor's check fails
to clear, the Funds may cancel the purchase and charge the investor $20.00 for
any losses or fees incurred.
An investor should designate the Fund(s) requested on the Funds Application
Form. Subject to acceptance by the Fund(s), payment for the purchase of shares
received by mail will be credited at the net asset value per share of the Fund
next determined after receipt. Such payment need not be converted into Federal
Funds (monies credited to the Funds'
12
<PAGE>
Custodian Bank by a Federal Reserve Bank) before acceptance by the Fund(s).
Please note that payments to investors who redeem shares purchased by check will
not be made until payment of the purchase has been collected, which may take up
to fifteen business days after purchase. Shareholders can avoid this delay by
purchasing shares by wire.
INITIAL PURCHASE BY WIRE: Subject to acceptance by a Fund, shares of a Fund may
also be purchased by wiring Federal Funds to UMB Bank (see instructions below).
A completed Funds Application Form should be forwarded to PPM America Funds, c/o
First Data Investor Services Group, P.O. Box 61503, 3200 Horizon Drive, King of
Prussia, PA 19406-0903 in advance of the wire. Notification must be given to the
Funds prior to the determination of net asset value.
Fund shares will be purchased at the net asset value per share next determined
after receipt of the purchase order. (Prior notification must also be received
from investors with existing accounts.) Instruct your bank to send a Federal
Funds Wire in a specified amount using the following wiring instructions:
UMB Bank K.C.NA
For: First Data Investor Services Group
ABA #:10-10-00695
--------------
Account #: 98-7037-071-9
--------------
FBO: (Fund Name, Account Number, and Account Registration)
Wires must be received before 4:00 p.m. (Eastern Time) to receive that day's
price. Federal Funds purchases will be accepted only on a day on which the Funds
are open for business. SEE CLOSED HOLIDAYS.
ADDITIONAL INVESTMENTS: Additional investments may be made at any time (minimum
additional investment $5,000, although PPM America may waive the minimum
additional investment requirement) by mailing a check along with the detachable
stub from a recent account statement, payable to PPM America Funds to First Data
Investor Services Group, P.O. Box 412707, Kansas City, MO 64191-2791 or at the
address noted under Initial Purchase by Mail or by wiring Federal Funds to UMB
Bank, as outlined above. Shares will be purchased at the net asset value per
share next determined after receipt of the money for the purchase. Notification
must be given to the Funds prior to the determination of net asset value.
13
<PAGE>
OTHER PURCHASE INFORMATION: The Funds may suspend sales of shares of any Fund or
reject any purchase order when management believes doing so is in the best
interest of the Funds. If management in good faith believes that a shareholder
is purchasing and redeeming shares for market timing purposes, the Funds may
refuse to sell further shares of any Fund to such shareholder for up to six
months. The Funds also reserves the right, in their sole discretion, to waive
the minimum initial and additional investment amounts. In the interest of
economy and convenience, certificates for shares will not be issued.
HOW TO REDEEM SHARES
Fund shares may be redeemed by mail, or, if authorized, by telephone. No charge
is made for redemptions. The value of shares redeemed may be more or less than
the purchase price, depending on the net asset value at the time of redemption,
which is based on the market value of the investment securities held by a Fund.
SEE CLOSED HOLIDAYS AND VALUATION OF THE FUNDS' SHARES.
BY MAIL: Each Fund will redeem shares at the net asset value next determined
after the request is received in good order. Requests should be addressed to PPM
America Funds, c/o First Data Investor Services Group, P.O. Box 61503, 3200
Horizon Drive, King of Prussia, PA 19406-0903.
To be in good order, redemption requests must include the following
documentation:
(a) A letter of instruction, if required, or a stock assignment specifying
the number of shares or dollar amount to be redeemed, signed by all
registered owners of the shares in the exact names in which the shares are
registered;
(b) Any required signature guarantees (see Signature Guarantees); and
(c) Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit
sharing plans and other organizations.
SIGNATURE GUARANTEES: To protect against fraud, signature guarantees are
required to enable the Funds to verify the identity of the person who has
authorized a redemption from an account. Signature guarantees are required for
(1) redemptions where the proceeds are to be sent to someone other than the
registered shareholder(s) and the registered
14
<PAGE>
address, and (2) share transfer requests. Please contact PPM America Funds, c/o
First Data Investor Services Group, P.O. Box 61503, 3200 Horizon Drive, King of
Prussia, PA 19406-0903 for further details.
BY TELEPHONE: Provided the telephone redemption option has been authorized by
the shareholder on the Funds Application Form, a redemption of shares may be
requested by calling and requesting that the redemption proceeds be mailed to
the primary registration address or wired per previously received instructions.
Redemption of shares by telephone must be received by 4:00 p.m. (Eastern Time)
to receive that day's price. Receipt of proceeds by wire will cost $9.00 per
transaction.
Neither National Planning Corporation, the Funds' distributor, First Data
Investor Services Group nor the Funds will be responsible for any loss,
liability, cost, or expense for acting upon telephone instructions that they
reasonably believe to be genuine. In order to confirm that telephone
instructions in connection with redemptions are genuine, the Funds and National
Planning Corporation will provide written confirmation of transactions initiated
by telephone.
Payment of the redemption proceeds will ordinarily be made within three business
days after receipt of an order for a redemption although, at times, it may be up
to seven days before proceeds are received by an investor. The Funds may suspend
the right of redemption or postpone the date of redemption at times when the New
York Stock Exchange ("NYSE"), is closed (SEE CLOSED HOLIDAYS), when trading on
the NYSE is restricted or under any emergency circumstances as determined by the
SEC or for such other periods as the SEC may permit.
If the Board of Trustees determines that it would be detrimental to the best
interests of the remaining shareholders of a Fund to make payment wholly or
partly in cash, the Fund may pay the redemption proceeds in whole or in part by
a distribution in-kind of readily marketable securities held by the Fund in lieu
of cash in conformity with applicable rules of the SEC. Investors may incur
brokerage charges on the sale of a Fund's securities received in such payments
of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE: Shares of each Fund may be exchanged for shares of another
Fund based on the respective net asset values of the shares involved. There are
no exchange fees. Exchange requests by telephone must be placed prior to 4:00
p.m. (Eastern Time) to receive that day's price. Written exchange requests
should be sent to PPM America Funds,
15
<PAGE>
c/o First Data Investor Services Group, P.O. Box 61503, 3200 Horizon Drive, King
of Prussia, PA 19406.
Because an exchange of shares is a redemption from one Fund and purchase of
shares of another Fund, the above information regarding purchase and redemption
of shares applies to exchanges. Shareholders should note that an exchange is a
sale and purchase of shares and may result in a capital gain or loss for tax
purposes.
The Funds may refuse to accept any request for an exchange when, in their
opinion, the exchange privilege is being used as a tool for market timing. The
Funds may change the terms or conditions of the exchange privilege at any time,
but will try to give shareholders sixty days' notice of any change.
TRANSFER OF REGISTRATION: The registration of a Fund's shares may be transferred
by writing to PPM America Funds, c/o First Data Investor Services Group, P.O.
Box 61503, 3200 Horizon Drive, King of Prussia, PA 19406. As in the case of
redemptions, the written request must be received in good order as defined above
and should be signature guaranteed. Unless shares are being transferred to an
existing account, requests for transfer must be accompanied by a completed Funds
Application Form for the receiving party.
VALUATION OF THE FUNDS' SHARES
The price of the shares of each Fund is that Fund's net asset value. Net asset
value per share is determined by dividing the total market value of a Fund's
investments and other assets, less any liabilities, by the total outstanding
shares of that Fund. Net asset value per share is determined as of the close of
the NYSE (normally 4:00 p.m. Eastern Time) on each day the Funds are open for
business.
EQUITY FUNDS
Equity securities listed on a U.S. securities exchange or Nasdaq National Market
for which market quotations are available are valued at the last quoted sale
price on the day the valuation is made. Price information on listed equity
securities is taken from the exchange where the security is primarily traded.
Unlisted equity securities and listed U.S. equity securities not traded on the
valuation date or for which market quotations are not readily available
(including restricted securities), and securities, the value of which have been
materially affected by events, occurring after the close of the market on which
they principally trade, are determined in good faith at a fair value using
methods approved by the Board of Trustees.
16
<PAGE>
HIGH YIELD BOND FUND
Bonds and other fixed-income securities which are traded over the counter and on
an exchange will be valued according to the broadest and most representative
market, and it is expected that for bonds and other fixed-income securities this
ordinarily will be the over-the-counter market. However, bonds and other
fixed-income securities may be valued on the basis of prices provided by a
pricing service when such prices are believed to reflect the fair market value
of such securities. The prices provided by a pricing service are determined
without regard to bid or last sale prices but take into account institutional
size trading in similar groups of securities and any developments related to
specific securities. Bonds and other fixed-income securities not priced in this
manner are valued at the most recent quoted bid price, or when stock exchange
valuations are used, at the latest quoted sale price on the day of valuation. If
there is no such reported sale, the latest quoted bid price will be used. In the
absence of readily available market quotations (or when in the view of PPM
America, available market quotations do not accurately reflect a security's fair
value), securities are valued in good faith at a fair value using methods
approved by the Board of Trustees. Equity securities held by the High Yield Bond
Fund are valued as described above under "Equity Funds".
If a security held in any of the Funds is valued using fair value pricing
because of an event that occurred after the market close, the effect of this
will be that the net asset value will not be based on the last quoted price on
the security, but on a price which the Board of Trustees or their delegate
believes reflects the current and true price of the security.
CLOSED HOLIDAYS: Currently, the weekdays on which the Funds are closed for
business and their shares are not priced are: New Years Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. During these days, the price of foreign
securities held by the funds may change. As a result, the Funds' net asset
values may also change during these days, but shareholders will not be able to
purchase or redeem the Funds' shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES:
DIVIDENDS AND DISTRIBUTIONS: The Funds normally distribute substantially all of
their net investment income and net realized capital gains to shareholders on an
annual basis. If any Fund does not have income available to distribute, as
determined in compliance with the appropriate
17
<PAGE>
tax laws, no distribution will be made. All dividends and capital gains
distributions are automatically paid in additional shares of the Funds unless
the shareholder elects otherwise. A shareholder may elect to receive cash by
writing to the Funds or by electing to do so on the Funds Application Form.
Undistributed net investment income is included in the Funds' net assets for the
purposes of calculating net asset value per share. Therefore, on the ex-dividend
date, the net asset value per share is reduced by the per share amount of the
dividend. Dividends paid shortly after the purchase of shares by an investor,
although in effect a return of capital, are taxable as ordinary income.
TAX CONSEQUENCES: The Funds intend to make distributions that may be taxed as
ordinary income. Capital gains distributions are taxable to shareholders at
capital gains rates.
Each Fund will designate capital gains distributions to individual shareholders
as either subject to the federal capital gains rate imposed on property held for
more than 12 months or on property held for less than 12 months. Distributions
paid in January but declared by a Fund in October, November or December of the
previous year are taxable to shareholders in the previous year. Exchanges and
redemptions of shares in a Fund are taxable events.
STATE AND LOCAL TAXES: Shareholders should consult with their tax advisers for
the state and local income tax consequences of distributions from the Funds.
YEAR 2000 INFORMATION
As the year 2000 approaches, there is concern that some computer systems used
today are unable to process and calculate date-related information because they
are not programmed to distinguish between the year 2000 and the year 1900. PPM
America is taking steps to ensure that the computer systems on which the smooth
operation of the Funds depends will continue to function properly. PPM America
will work with the service providers to the Funds, such as the transfer agent,
fund accountant and custodian to arrange for testing of internal and external
systems. Based on the information currently available, PPM America does not
anticipate any material impact on the delivery of services. There can be no
assurance, however, that the steps taken by PPM America in preparation for the
Year 2000 will be sufficient to avoid any adverse impact on the Funds. There can
also be no assurance that the systems' of the companies in which the Funds
invest will be timely converted or that the Year 2000 issue will not adversely
affect the value of such investments.
18
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance for each Fund. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned (or lost) on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with the each
Fund's financial statements, in included in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
PPM AMERICA PPM AMERICA
VALUE EQUITY SMALL CAP VALUE
FUND EQUITY FUND
--------------- ---------------
<S> <C> <C>
PERIOD FROM PERIOD FROM
DECEMBER 23, DECEMBER 23,
1998* TO 1998* TO
DECEMBER 31, DECEMBER 31,
1998 1998
--------------- ---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD............................. $ 5.00 $ 5.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................................... 0.01 0.01
Net realized and unrealized gains on investments............... 0.06 0.19
------- ---------------
Total income from investment operations........................ 0.07 0.20
------- ---------------
LESS DISTRIBUTIONS:
From net investment income..................................... (0.01) (0.01)
From net realized gains on investment transactions............. -- --
------- ---------------
Total distributions............................................ (0.01) (0.01)
------- ---------------
Net increase................................................... 0.06 0.19
------- ---------------
NET ASSET VALUE, END OF PERIOD................................... $ 5.06 $ 5.19
------- ---------------
------- ---------------
TOTAL RETURN (a)............................................. 1.24% 3.86%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....................... $ 5,163 $ 10,386
Ratio of net operating expenses to average net assets (b)...... 1.00% 1.10%
Ratio of net investment income to average net assets (b)....... 4.76% 3.81%
Portfolio turnover............................................. -- --
RATIO INFORMATION ASSUMING NO EXPENSE
REIMBURSEMENT OR FEES PAID INDIRECTLY
Ratio of expenses to average net assets (b).................... 5.42% 3.26%
Ratio of net investment income to average net assets (b)....... 0.34% 1.65%
</TABLE>
- ----------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period,
reinvestment of all distributions, and a complete redemption of the
investment at the net asset value at the end of the period. Total return is
not annualized for the period ended December 31, 1998.
(b) Annualized for the period ended December 31, 1998.
19
<PAGE>
FOR MORE INFORMATION ABOUT THE FUNDS, THE FOLLOWING DOCUMENTS ARE AVAILABLE FREE
UPON REQUEST:
STATEMENT OF ADDITIONAL INFORMATION (SAI): The Funds' statements of additional
information includes additional information about the Funds and is incorporated
into this prospectus by reference.
You may obtain copies of the SAI and obtain other information or make inquiries
by contacting the Funds at:
PPM America Funds
225 West Wacker Drive, Suite 1200
Chicago, Illinois 60606
Call toll free 877-PPM-FUND (877-776-3863)
E-mail: [email protected]
Information about the Funds, their reports and SAI can be reviewed and copied at
the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. Information on the operation of the public reference room may
be obtained by calling 1-800-SEC-0330.
Reports and other information about the Funds are also available on the SEC's
internet site at http:/www.sec.gov. You may obtain copies of this information,
upon payment of a duplicating fee, by writing the Public Reference Section of
the SEC, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-09001
20
<PAGE>
PPM America Funds
APPLICATION
We place great emphasis on service. If you have any questions about this
application, please feel free to call toll free
(877) PPM-FUND (877-776-3863).
- - Please read the Prospectus carefully before investing in the Funds.
- - Please sign this application in the appropriate section.
- - Mail and make checks payable to: PPM America Funds, P.O. Box 61503, King of
Prussia, PA 19406-0903 or wire funds to: UMB Bank K.C. NA, for: First Data
Investor Services Group, ABA#: 10-10-00695, Account #: 98-7037-071-9 FBO:
(PPM America Funds and Account Registration)
- - Overnight packages should be sent to: PPM America Funds, 3200 Horizon Drive,
King of Prussia, PA 19406-0903.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1.A. YOUR ACCOUNT / / Corporation
REGISTRATION / / Partnership
-------------------------------------------------------------------------------------
Exact Name of Organization/Trustee
/ / Trust
/ / Other Entity
-------------------------------------------------------------------------------------
Exact Name of Trust Date of Trust
------------------------- -------------------------------------------------------------------------------------
For the Benefit of Tax Identification No.
1.B. YOUR ADDRESS ( )
------------------------------------------------------------------------------------------
AND TELEPHONE
Street Address Suite No. Phone No.
NUMBER
-------------------------------------------------------------
City State Zip Code
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
2.A. / / Individual
/ / Joint Registration
-------------------------------------------------------------------------------------
First Name Middle Initial Soc. Sec. No. (For first individual)
-------------------------------------------------------------------------------------
First Name Middle Initial Soc. Sec. No.
Joint tenancy with rights of survivorship will be presumed unless otherwise
specified.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
2.B. YOUR ADDRESS, ( )
TELEPHONE
-------------------------------------------------------------------------------------
NUMBER AND
Street Address Apt. No. Daytime Telephone
EMPLOYER
/ / U.S. Citizen / / Other -----
---------------------------------------------
City State Zip Code
-------------------------------------------------------------------------------------
Name and Address of Employer Occupation
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
3. YOUR INVESTMENT Minimum initial investment is $500,000 per Fund or, $10,000 if you are an employee of PPM
or its affiliates. Make check payable to: PPM America Funds
$ ---------- PPM America Value Equity Fund
$ ---------- PPM America Small Cap Value Equity Fund
$ ---------- PPM America High Yield Bond Fund
$ ---------- Total Investment
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
4. DIVIDEND AND Choose the way you want your dividend and capital gain distributions paid. Check one box
CAPITAL GAIN for dividends, one box for capital gains. If not specified, dividends and capital gains
DISTRIBUTIONS will be reinvested.
/ / Mail check to address of record. / / Dividends / / Capital Gains
</TABLE>
[LOGO]
<PAGE>
PPM America Funds
- ---------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
5. TELEPHONE You will automatically have telephone exchange privileges. If you would like to be able to
PRIVILEGES: redeem shares over the telephone, please check the box below.
EXCHANGES AND
REDEMPTIONS Redemptions: / / by myself or any person
The Funds will not be responsible for any loss, liability, cost or expense for acting upon
telephone instructions that they reasonably believe to be genuine. In order to confirm
that telephone instructions in connection with redemptions are genuine, the Funds will
provide written confirmation of transactions initiated by telephone.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
6. TAXPAYER By the signature below and under penalties of perjury, you certify: (1) that the number
IDENTIFICATION shown on this application is your correct Social Security or Taxpayer Identification
NUMBER CERTIFICATION Number, and (2) that you are not subject to backup withholding because either you have not
been notified by the Internal Revenue Service that you are subject to backup withholding,
or the Internal Revenue Service has notified you that you are no longer subject to backup
withholding.
IF YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING DUE TO INTERNAL REVENUE SERVICE NOTICE,
STRIKE OUT CLAUSE (2) OF THE PROCEEDING SENTENCE, AND CHECK THE BOX BELOW.
/ / Check here if you have been notified by the IRS that you are currently subject to
backup withholding.
/ / Check here if you qualify as a non-resident alien. If so, your country of residence
is: ---------------.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
7. SIGNATURE AND I/we have read the Prospectus and application and agree to its terms. I/we understand that
CERTIFICATION PPM America Funds will not be responsible for any loss, liability, cost or expense for
acting upon telephone instructions that they reasonably believe to be genuine. I am of
legal age. SIGN BELOW EXACTLY AS PRINTED IN REGISTRATION. FOR JOINT REGISTRATION, BOTH
MUST SIGN.
For Corporations, Trusts, Partnerships or other Entities. (Please include a copy of the
corporate resolution form). We hereby certify that each of the persons listed below has
been duly elected, and is now legally holding the office set forth opposite his/her name
and has the authority to make this authorization. Please print titles below if signing on
behalf of a business or trust to establish this account. THE INTERNAL REVENUE SERVICE DOES
NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
PLEASE SIGN BELOW:
------------------------------------------------------------------------------------------
Individual signature
------------------------------------------------------------------------------------------
Joint registrant (if any) signature
------------------------------------------------------------------------------------------
Corporate officer, partner, trustee, etc. signature
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------
Print name and title
</TABLE>
[LOGO]
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
PPM AMERICA FUNDS
PPM America Value Equity Fund
PPM America Small Cap Value Equity Fund
PPM America High Yield Bond Fund
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT CONTAINS
INFORMATION IN ADDITION TO AND MORE DETAILED THAN SET FORTH IN THE PROSPECTUS
AND SHOULD BE READ IN CONJUNCTION WITH THE PPM AMERICA FUNDS' PROSPECTUS, DATED
MAY 1, 1999. THE PROSPECTUS MAY BE OBTAINED AT NO CHARGE BY CALLING TOLL FREE
(877) PPM-FUND (877-776-3863), OR WRITING PPM AMERICA FUNDS, 225 WEST WACKER
DRIVE, SUITE 1200, CHICAGO, ILLINOIS 60606.
[LOGO]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Information About the Funds........................... 1
Investment Strategies and Risks....................... 1
Investment Techniques and Risks....................... 2
The Funds' Policies................................... 13
Trustees and Officers of the Trust.................... 15
Investment Adviser and Other Services................. 17
Principal Underwriter............................. 19
Accounting Services Agent......................... 19
Custodian and Transfer Agent...................... 19
Independent Accountants........................... 20
Fund Transactions and Brokerage................... 20
Performance........................................... 23
Valuation of the Funds' Shares........................ 27
Equity Funds...................................... 27
High Yield Bond Fund.............................. 27
Purchase of Shares.................................... 28
Redemption of Shares.................................. 29
Shareholder Services.................................. 30
Exchange Privilege................................ 30
Transfer of Shares................................ 30
Additional Information................................ 31
Tax Status............................................ 32
Financial Statements.................................. 32
Appendix -- Bond Ratings.............................. A-1
Ratings by Moody's................................ A-1
</TABLE>
<PAGE>
INFORMATION ABOUT THE FUNDS
PPM America Value Equity Fund ("Value Fund"), PPM America Small Cap Value Equity
Fund ("Small Cap Fund") and PPM America High Yield Bond Fund ("High Yield Bond
Fund")(each, a "Fund" and together, the "Funds") are series of PPM America Funds
(the "Trust"). The Trust is an open-end management investment company organized
under the laws of Massachusetts, by an Agreement and Declaration of Trust dated
September 9, 1998.
PPM America, Inc. ("PPM America") is the investment adviser to each of the
Funds. For a description of PPM America and its fees, see INVESTMENT ADVISER AND
OTHER SERVICES.
The discussion below supplements the description in the prospectus of the Funds'
investment objectives, strategies and risks.
INVESTMENT STRATEGIES AND RISKS
The Value Fund and Small Cap Fund invest to increase the value of an investor's
shares through long-term growth of capital and current income.
These funds will invest in common stocks of companies that are primarily
domiciled in the U.S., as well as securities convertible into common stocks and
securities having common stock characteristics, such as rights and warrants to
purchase common stocks.
PPM America buys and sells common stocks of companies based on the philosophy
that a diversified portfolio of undervalued equity securities will outperform
the market over the long term. PPM America generally will consider stocks
potentially undervalued and therefore attractive for the Value Fund if:
- - they have below average valuation characteristics (e.g., price/earnings or
price/cash flow ratios) relative to the stocks which comprise the S&P 500
Index; or
- - they have above average dividend yields relative to the stocks that comprise
the S&P 500 Index
PPM America generally will consider stocks potentially undervalued and therefore
attractive for the Small Cap Fund if:
- - they have below average valuation characteristics (e.g., price/earnings or
price/cash flow ratio) relative to companies that have market values less
than $2.5 billion.
1
<PAGE>
PPM America uses a fundamental research process that concentrates on determining
and understanding the reasons the market prices a stock inexpensively. The
thrust of this approach is to seek investments where current investor enthusiasm
is low, as reflected in the stock's valuation. Exposure is reduced when the
investment community's perceptions improve and the company approaches fair
valuation. PPM America takes a long-term investment approach by placing a strong
emphasis on its ability to determine attractive values and does not try to
determine short-term changes in the general market level.
The High Yield Bond Fund invests to provide current income and to increase the
value of your shares through long-term growth of capital. The High Yield Bond
Fund may enter into repurchase agreements and firm commitment agreements and may
purchase securities on a when-issued basis. The Fund also invests in foreign
securities, which involves special risks. Under normal market conditions, the
High Yield Bond Fund invests at least 65% of its total assets in high yielding,
non-investment grade bonds. Subject to this requirement, the High Yield Bond
Fund may maintain assets in cash or cash equivalents, including commercial bank
obligations, commercial paper and obligations issued or guaranteed by the U.S.
Government.
Each of the Funds is a diversified investment company.
INVESTMENT TECHNIQUES AND RISKS
BANK OBLIGATIONS. Bank obligations include certificates of deposit, bankers'
acceptances, and other short-term debt obligations. Certificates of deposit are
short-term obligations of commercial banks. A bankers' acceptance is a time
draft drawn on a commercial bank by a borrower, usually in connection with
international commercial transactions. Certificates of deposit may have fixed or
variables rates. The Funds may invest in U.S. banks, foreign branches of U.S.
banks, U.S. branches of foreign banks, and foreign branches of foreign banks.
COMMERCIAL PAPER. Commercial paper are short-term promissory notes issued by
corporations primarily to finance short-term credit needs. Certain notes may
have floating or variable rates.
FOREIGN GOVERNMENT SECURITIES. Foreign government securities are issued or
guaranteed by a foreign government, province, instrumentality, political
subdivision or similar until thereof.
2
<PAGE>
HIGH YIELD BONDS. High yield bonds are fixed income securities offering high
current income that are in the lower rated categories or recognized rating
agencies or not rated. These lower-rated fixed income securities are considered,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation and
generally will involve more credit risk than securities in the higher rated
categories.
High yield securities frequently are issued by corporations in the growth stage
of their development. They may also be issued in connection with a corporate
reorganization or a corporate takeover. Companies that issue such high yielding
securities often are highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risk associated with acquiring
the securities of such issuers generally is greater than is the case with higher
rated securities. For example, during an economic downturn or recession, highly
leveraged issuers of high yield securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific corporate developments,
or the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. Adverse publicity and investor
perceptions regarding lower rated bonds, whether or not based upon fundamental
analysis, may also depress the price for such securities. The risk of loss from
default by the issuer is significantly greater for the holders of high yield
securities because such securities are generally unsecured and are often
subordinated to other creditors of the issuer.
HYBRID INSTRUMENTS. Hybrid instruments have recently been developed and combine
the elements of futures contracts or options with those of debt, preferred
equity or a depository instrument. Often these hybrid instruments are indexed to
the price of a commodity, a particular currency, or a domestic or foreign debt
or equity securities index. Hybrid instruments may take a variety of forms,
including, but not limited to, debt instruments with interest or principal
payments or redemption terms determined by reference to the value of a currency
or commodity or securities index at a future point in time, preferred stock with
dividend rates determined by reference to the value of a currency, or
convertible securities with the conversion terms related to a particular
commodity.
REPURCHASE AGREEMENTS. A Repurchase Agreement may be considered a loan
collateralized by securities. The Funds must take physical possession of the
security or receive written confirmation of the purchase and a
3
<PAGE>
custodial or safekeeping receipt from a third party or be recorded as the owner
of the security through the Federal Reserve Book Entry System. The Funds may
invest in open repurchase agreements which vary from the typical agreement in
the following respects: (1) the agreement has no set maturity, but instead
matures upon 24 hours' notice to the seller; and (2) the repurchase price is not
determined at the time the agreement is entered into, but is instead based on a
variable interest rate and the duration of the agreement.
SHORT-TERM CORPORATE DEBT SECURITIES. Short-term corporate debt securities are
outstanding non-convertible corporate debt securities (e.g., bonds and
debentures) which have one year or less remaining to maturity. Corporate notes
may have fixed, variable, or floating rates.
SUPRANATIONAL AGENCY SECURITIES. Supranational agency securities are securities
issued or guaranteed by certain supranational entities, such as the
International Development Bank.
U.S. GOVERNMENT AGENCY SECURITIES. U.S. Government agency securities are issued
or guaranteed by U.S. Government sponsored enterprises and federal agencies.
These include securities issued by the Federal National Mortgage Association,
Governmental National Mortgage Association, Federal Home Loan Bank, Federal Land
Banks, Farmers Home Administration, Banks for cooperatives, Federal Intermediate
Credit Banks, Federal Financing Bank, Farm Credit Banks, the Small Business
Association, Student Loan Marketing Association, and the Tennessee Valley
Authority. Some of these securities are supported by the full faith and credit
of the U.S. Treasury; the remainder are supported only by the credit of the
instrumentality, which may or may not include the right of the issuer to borrow
from the Treasury.
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include bills, notes,
bonds, and other debt securities issued by the U.S. Treasury. These are direct
obligations of the U.S. Government and differ mainly in the length of their
maturities.
VARIABLE RATE SECURITIES. Variable rate securities provide for a periodic
adjustment in the interest rate paid on the obligations. The terms of such
obligations must provide that interest rates are adjusted periodically based
upon some appropriate interest rate adjustment index as provided in the
respective obligations. The adjustment intervals may be regular and range from
daily up to annually, or may be event based, such as on a change in the prime
rate. Variable rate securities that cannot be disposed of promptly within seven
days and in the usual course of business without
4
<PAGE>
taking a reduced price will be treated as illiquid and subject to the limitation
on investments in illiquid securities.
WARRANTS. The Funds may invest in warrants. Warrants have no voting rights, pay
no dividends and have no rights with respect to the assets of the corporation
issuing them. Warrants basically are options to purchase equity securities at a
specific price valid for a specific period of time. They do not represent
ownership of the securities, but only the right to buy them. Warrants differ
from call options in that warrants are issued by the issuer of the security
which may be purchased on their exercise, whereas call options may be written or
issued by anyone. The prices of warrants do not necessarily move parallel to the
price of the underlying securities.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENT CONTRACTS. The Funds may purchase
securities on a when-issued or delayed delivery basis ("When-Issued") and may
purchase securities on a forward commitment basis ("Forwards"). Any or all of
the Funds' investments in debt securities may be in the form of When-Issueds and
Forwards. The price of such securities, which may be expressed in yield terms,
is fixed at the time the commitment to purchase is made, but delivery and
payment take place at a later date. Normally, the settlement date occurs within
90 days of the purchase for When-Issueds, but may be substantially longer for
Forwards. During the period between purchase and settlement, no payment is made
by the Funds to the issuer and no interest accrues to the Funds. The purchase of
these securities will result in a loss if their value declines prior to the
settlement date. This could occur, for example, if interest rates increase prior
to settlement. The longer the period between purchase and settlement, the
greater the risks. At the time the Funds make the commitment to purchase these
securities, it will record the transaction and reflect the value of the security
in determining its net asset value. The Funds will segregate for these
securities by maintaining cash and/or liquid assets with its custodian bank
equal in value to commitments for them during the time between the purchase and
the settlement. Therefore, the longer this period, the longer the period during
which alternative investment options are not available to the Funds (to the
extent of the securities used for cover). Such securities either will mature or,
if necessary, be sold on or before the settlement date.
ZERO COUPON BONDS. Zero coupon bonds do not make regular interest payments;
rather, they are sold at a discount from face value. Principal and accreted
discount (representing interest accrued but not paid) are paid at maturity.
Strips are debt securities that are stripped of their interest after the
securities are issued, but otherwise are comparable to zero coupon
5
<PAGE>
bonds. The market value of strips and zero coupon bonds generally fluctuates in
response to changes in interest rates to a greater degree than interest-paying
securities of comparable term and quality.
RULE 144A SECURITIES. The High Yield Bond Fund may purchase securities that have
been privately placed but that are eligible for purchase and sale under Rule
144A under the Securities Act of 1933 (the "1933 Act"). That Rule permits
certain qualified institutional buyers, such as the High Yield Bond Fund, to
trade in privately placed securities that have not been registered for sale
under the 1933 Act. PPM America, under the supervision of the Board of Trustees
of the Trust (the "Board"), will consider whether securities purchased under
Rule 144A are illiquid and thus subject to the High Yield Bond Fund's
restriction of investing no more than 15% of its net assets in illiquid
securities. A determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination, PPM America will consider the
trading markets for the specific security, taking into account the unregistered
nature of a Rule 144A security. In addition, PPM America could consider the (1)
frequency of trades and quotes, (2) number of dealers and potential purchasers,
(3) dealer undertakings to make a market, and (4) nature of the security and of
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer). The liquidity of Rule 144A
securities would be monitored and if, as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, the High Yield Bond
Fund's holdings of illiquid securities would be reviewed to determine what, if
any, steps are required to assure that the High Yield Bond Fund does not invest
more than 15% of its assets in illiquid securities. Investing in Rule 144A
securities could have the effect of increasing the amount of assets invested in
illiquid securities if qualified institutional buyers are unwilling to purchase
such securities.
OPTIONS ON SECURITIES AND INDEXES. The High Yield Bond Fund may purchase and may
sell both put options and call options on debt or other securities or indexes in
standardized contracts traded on national securities exchanges, boards of
trades, or similar entities, or quoted on Nasdaq, and agreements, sometimes
called cash puts, that may accompany the purchase of a new issue of bonds from a
dealer.
An option on a security (or index) is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of the option the security underlying the
option (or the cash value of the index) at a specified
6
<PAGE>
exercise price at any time during the term of the option. The writer of an
option on an individual security has the obligation upon exercise of the option
to deliver the underlying security upon payment of the exercise price or to pay
the exercise price upon delivery of the underlying security. Upon exercise, the
writer of an option on an index is obligated to pay the difference between the
cash value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain economic indicators.)
The High Yield Bond Fund will write call options and put options only if they
are "covered." In the case of a call option on a security, the option is
"covered" if the High Yield Bond Fund owns the security underlying the call or
has an absolute and immediate right to acquire that security without additional
cash consideration (or, if additional cash consideration is required, cash or
cash equivalents in such amount are held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio.
If an option written by the High Yield Bond Fund expires, it realizes a capital
gain equal to the premium received at the time the option was written. If an
option purchased by the High Yield Bond Fund expires, it realizes a capital loss
equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out by
an offsetting purchase or sale of an option of the same series (type, exchange,
underlying security or index, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction can be effected
when the High Yield Bond Fund desires.
The High Yield Bond Fund will realize a capital gain from a closing purchase
transaction if the cost of the closing option is less than the premium received
from writing the option, or, if it is more, the High Yield Bond Fund will
realize a capital loss. If the premium received from a closing sale transaction
is more than the premium paid to purchase the option the High Yield Bond Fund
will realize a capital gain or, if it is less, it will realize a capital loss.
The principal factors affecting the market value of a put or a call option
include supply and demand, interest rates, the current market price of the
underlying security or index in relation to the exercise price of the option,
the volatility of the underlying security or index, and the time remaining until
the expiration date.
7
<PAGE>
A put or call option purchased by the High Yield Bond Fund is an asset of the
Fund, valued initially at the premium paid for the option. The premium received
for an option written by the High Yield Bond Fund is recorded as a deferred
credit. The value of an option purchased or written is marked-to-market daily
and is valued at the closing price on the exchange on which it is traded or, if
not traded on an exchange or no closing price is available, at the mean between
the last bid and asked prices.
RISKS ASSOCIATED WITH OPTIONS ON SECURITIES AND INDEXES. There are several risks
associated with transactions in options on securities and on indexes. For
example, there are significant differences between the securities markets and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision
as to whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when the High Yield
Bond Fund seeks to close out an option position. If the High Yield Bond Fund
were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security until the option
expired. As the writer of a covered call option, the High Yield Bond Fund
foregoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the exercise price of the call.
If trading were suspended in an option purchased by the High Yield Bond Fund, it
would not be able to close out the option. If restrictions on exercise were
imposed, the High Yield Bond Fund might be unable to exercise an option it has
purchased.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The High Yield Bond Fund may
use interest rate futures contracts and index futures contracts. An interest
rate or index futures contract provides for the future sale by one party and
purchase by another party of a specified quantity of a financial instrument or
the cash value of an index(1) at a specified price and time. A public market
exits in futures contracts covering a number of indexes as well as the following
financial instruments; U.S. Treasury bonds; U.S. Treasury notes; GNMA
Certificates; three-month U.S. Treasury bills; 90-day commercial paper; bank
certificates of deposit; Eurodollar
8
<PAGE>
certificates of deposit; and foreign currencies. It is expected that other
futures contract will be developed and traded.
The High Yield Bond Fund may purchase and write call and put futures options.
Futures options possess many of the same characteristics as options on
securities and indexes (discussed above). A future option gives the holder the
right, in return for the premium paid, to assume a long position (call) or short
position (put) in a futures contract at a specified exercise price at any time
during the period of the option. Upon exercise of a call option, the holder
acquires a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true. The
High Yield Bond Fund might, for example, use futures contracts to hedge against
or gain exposure to fluctuations in the general level of security prices,
anticipated changes in interest rates or currency fluctuations that might
adversely affect either the value of its securities or the price of the
securities that it intends to purchase. Although other techniques could be used
to reduce exposure to security price, interest rate and currency fluctuations,
the High Yield Bond Fund may be able to achieve its exposure more effectively
and perhaps at a lower cost by using futures contracts and future options.
The success of any futures transaction depends on PPM America correctly
predicting changes in the level and direction of security prices, interest
rates, currency exchange rates and other factors. Should those predictions be
incorrect, the High Yield Bond Fund's return might have been better had the
transaction not been attempted; however, in the absence of the ability to use
futures contracts, PPM America might have taken portfolio actions in
anticipation of the same market movements with similar investment results but,
presumably, at greater transaction costs.
When a purchase or sale of a futures contract is made, the High Yield Bond Fund
is required to deposit with its custodian (or broker, if legally permitted) a
specified amount of cash or U.S. Government securities or other securities
acceptable to the broker ("initial margin"). The margin
- ------------------------
(1) A futures contract on an index is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the difference
between the value of the index at the close of the last trading day of the
contract and the price at which the index contract was originally written.
Although the value of a securities index is a function of the value of
certain specified securities, no physical delivery of those securities is
made.
9
<PAGE>
required for a futures contract is set by the exchange on which the contract is
traded and may be modified during the term of the contract. The initial margin
is in the nature of a performance bond or good faith deposit on the futures
contract that is returned to the High Yield Bond Fund upon termination of the
contract, assuming all contractual obligations have been satisfied. The High
Yield Bond Fund expects to earn interest income on its initial margin deposits.
A futures contract held by the High Yield Bond Fund is valued daily at the
official settlement price of the exchange on which it is traded. Each day the
High Yield Bond Fund pays or receives cash, called "variation margin," equal to
the daily change in value of the futures contract. This process is known as
"marking-to-market." Variation margin paid or received by the High Yield Bond
Fund does not represent a borrowing or loan by the High Yield Bond Fund but is
instead settlement between the High Yield Bond Fund and the broker of the amount
one would owe the other if the futures contract had expired at the close of the
previous trading day. In computing daily net asset value the High Yield Bond
Fund will mark-to-market its open futures positions.
The High Yield Bond Fund is also required to deposit and maintain with respect
to put and call options on futures contracts written by it. Such margin,
deposits will vary depending on the nature of the underlying futures contract
(and the related initial margin requirements), the current market value of the
option, and other futures positions held by the High Yield Bond Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, usually these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the High Yield Bond Fund
realizes a capital gain, or if it is more, it realizes a capital loss.
Conversely, if an offsetting sale price is more than the original purchase
price, the High Yield Bond Fund realizes a capital gain, or if it is less, it
realizes a capital loss. The transaction costs must also be included in these
calculations.
RISKS ASSOCIATED WITH FUTURES. There are several risks associated with the use
of futures contracts and futures options as hedging techniques. A purchase or
sale of a futures contract may result in losses in excess of the amount invested
in the futures contract. In trying to increase or reduce market exposure, there
can be no guarantee that there will be a correlation between price movements in
the futures contract and in the
10
<PAGE>
portfolio exposure sought. In addition, there are significant differences
between the securities and futures markets that could result in an imperfect
correlation between the markets, causing a given transaction not to achieve its
objectives. The degree of imperfection of correlation depends on circumstances
such as: variations in speculative market demand for futures, futures options
and debt securities, including technical influences in futures trading and
futures options and differences between the financial instruments and the
instruments underlying the standard contract available for trading in such
respects as interest rate levels, maturities, and creditworthiness of issuers. A
decision as to whether, when and how to hedge involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial losses.
There can be no assurance that a liquid market will exist at a time when the
High Yield Bond Fund seeks to close out a futures or a futures option position.
The High Yield Bond Fund would be exposed to possible loss on the position
during the interval of inability to close and would continue to be required to
meet margin requirements until the position is closed. In addition, many of the
contracts discussed above are relatively new instruments without a significant
trading history. As a result, there can be no assurance that an active secondary
market will develop or continue to exist.
LIMITATIONS ON OPTIONS AND FUTURES. If other options, futures contracts, or
futures options of types other than those described herein are traded in the
futures, the High Yield Bond Fund may also use those investment
11
<PAGE>
vehicles, provided the Board determines that their use is consistent with the
investment objective.
When purchasing a futures contract or writing a put on a futures contract, the
High Yield Bond Fund must maintain with its custodian (or broker, if legally
permitted) cash or cash equivalents (including any margin) equal to the market
value of such contract. When writing a call option on a futures contract, the
High Yield Bond Fund similarly will maintain with its custodian cash or cash
equivalents (including any margin) equal to the amount by which such option is
in-the-money until the option expires or is closed out by the High Yield Bond
Fund.
The High Yield Bond Fund may not maintain open short positions in futures
contracts, call options written on futures contracts or call options written on
indexes if, in the aggregate, the market value of all such open positions
exceeds the current value of the securities in its portfolio, plus or minus
unrealized gains and losses on the open positions, adjusted for the historical
relative volatility of the relationship between the portfolio and the positions.
For this purpose, to the extent the High Yield Bond Fund has written call
options on specific securities in its portfolio, the value of those securities
will be deducted from the current market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission Regulation 4.5 and
thereby avoid being deemed a "commodity pool operator," the High Yield Bond Fund
will use commodity futures or commodity options contracts solely for bona fide
hedging purposes within the meaning and intent of the Regulation 1.3(z), or,
with respect to positions in commodity futures and commodity options contracts
that do not come within the meaning and intent of 1.3(z), the aggregate initial
margin and premiums required to establish such positions will not exceed 5% of
the fair market value of the assets of the High Yield Bond Fund, after taking
into account unrealized profits and unrealized losses on any such contracts it
has entered into in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount (as defined in Section 190.01(x) of the
Commission Regulations) may be excluded in computing such 5%.
If the High Yield Bond Fund adopts a temporary defensive position, it will
invest in cash and cash equivalents, as well as U.S. Treasury securities.
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<PAGE>
THE FUNDS' POLICIES
The Funds are subject to certain fundamental policies and restrictions that may
not be changed without shareholder approval. Shareholder approval means approval
by the lesser of (i) more than 50% of the outstanding voting securities of the
Trust (or a particular Fund if a matter affects just that Fund), or (ii) 67% or
more of the voting securities present at a meeting if the holders of more than
50% of the outstanding voting securities of the Trust (or a particular Fund) are
present or represented by proxy. Upon otherwise indicated, all restrictions
apply at the time of investment. As fundamental policies, no Fund may:
(1) Own more than 10% of the outstanding voting securities of any one issuer and
as to seventy-five percent (75%) of the value of the total assets of such Fund,
purchase the securities of any one issuer (except cash items and "government
securities" as defined under the Investment Company Act of 1940, as amended (the
"1940 Act")), if immediately after and as a result of such purchase, the value
of the holdings of a Fund in the securities of such issuer exceeds 5% of the
value of such Fund's total assets.
(2) Invest more than 25% of the value of their respective assets in any
particular industry (other than U.S. Government securities).
(3) Invest directly in real estate or interests in real estate; however, a Fund
may own debt or equity securities issued by companies engaged in those
businesses.
(4) Purchase or sell physical commodities other than foreign currencies unless
acquired as a result of ownership of securities (but this limitation shall not
prevent a Fund from purchasing or selling options, futures, swaps and forward
contracts or from investing in securities or other instruments backed by
physical commodities).
(5) Lend any security or make any other loan if, as a result, more than 33 1/3%
of a Fund's total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or repurchase
agreements).
(6) Act as an underwriter of securities issued by others, except to the extent
that a Fund may be deemed an underwriter in connection with the disposition of
portfolio securities of such Fund.
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<PAGE>
(7) Invest more than 15% of a Fund's net assets in securities that are
restricted as to disposition under federal securities laws or are subject to
other legal or contractual restrictions on resale. This limitation does not
apply to securities eligible for resale pursuant to Rule 144A of the 1933 Act or
commercial paper issued in reliance upon the exception from registration
contained in Section 4(2) of the 1933 Act, which have been determined to be
liquid in accordance with guidelines established by the Board.
(8) Issue senior securities except that a Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not exceeding
25% of the value of its total assets (including the amount borrowed) less
liabilities (other than borrowings). If borrowings exceed 25% of the value of a
Fund's total assets by reason of a decline in net assets, the Fund will reduce
its borrowings within three business days to the extent necessary to comply with
the 25% limitation. This policy shall not prohibit reverse repurchase
agreements, deposits of assets to margin or guarantee positions in futures,
options, swaps and forward contracts, or the segregation of assets in connection
with such contracts.
Each Fund has the following additional investment restrictions that are
operating policies of the Funds and may be changed without shareholder approval:
(a) The Funds do not currently intend to sell securities short, unless they own
or have the right to obtain securities equivalent in kind and amount to the
securities sold short without the payment of any additional consideration
therefor, and provided that transactions in futures, options, swaps and forward
contracts are not deemed to constitute selling securities short.
(b) The Funds do not currently intend to purchase securities on margin, except
that the Funds may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments and other deposits
in connection with transactions in futures, options, swaps and forward contracts
shall not be deemed to constitute purchasing securities on margin.
(c) The Funds do not currently intend to (i) purchase securities of other
investment companies, except in the open market where no commission, except the
ordinary broker's commission is paid, or (ii) purchase or retain securities
issued by other open-end investment companies. Limitations (i) and (ii) do not
apply to money market funds or to securities received
14
<PAGE>
as dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
The investment objective of a Fund may be changed by the Board without
shareholder approval.
TRUSTEES AND OFFICERS OF THE TRUST
The officers of the Trust manage its day to day operations and are responsible
to the Board. The Board sets broad policies for each Fund and choose the Trust's
officers. The following is a list of the Trustees and officers of the Trust and
a statement of their present positions and principal occupations during the past
five years. The mailing address of the officers and Trustees, unless otherwise
noted, is 225 West Wacker Drive, Suite 1200, Chicago, Illinois 60606.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION(S) HELD WITH THE DURING
NAME (AGE) FUNDS PAST 5 YEARS
- ----------------------------- ------------------------- -------------------------
<S> <C> <C>
Swansen, Russell W. (41)* Trustee and President President, PPM America,
Inc.
Mandich, Mark B. (38)* Trustee, Chief Financial Executive Vice President,
Officer and Treasurer Senior Vice President,
Vice President, Chief
Compliance Officer and
Treasurer, PPM America,
Inc.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION(S) HELD WITH THE DURING
NAME (AGE) FUNDS PAST 5 YEARS
- ----------------------------- ------------------------- -------------------------
<S> <C> <C>
Nerud, Mark D. (32) Secretary and Assistant Chief Financial Officer,
Treasurer Jackson National
Financial Serices, LLC;
Chief Operating Officer
and Treasurer, Jackson
National Financial
Services, Inc.; Assistant
Vice President, Assistant
Controller and Senior
Manager, Jackson National
Life Insurance Company;
Manager, Voyageur Asset
Management Company.
Brody, Richard S. (44) Vice President Executive Vice President,
Senior Vice President,
PPM America, Inc.
White, James J., Jr. (39) Vice President Senior Managing
Director-Marketing, PPM
America, Inc., Principal,
NFJ Investment Group
Bianco, JoAnne M. (36) Vice President Managing Director --
Corporate Bond Portfolio
Manager, Vice President,
PPM America, Inc.
Hogan, Therese M. (36) Assistant Secretary Director of State
Regulation, First Data
Investor Services Group;
Palmer & Dodge
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION(S) HELD WITH THE DURING
NAME (AGE) FUNDS PAST 5 YEARS
- ----------------------------- ------------------------- -------------------------
<S> <C> <C>
Pape, Arthur E. (59) Trustee Of counsel, Ottosen
Trevarthen Britz &
Dooley, Ltd,; Partner,
Katten Muchin & Zavis
Hannon, James R. (50) Trustee Attorney, Hannon &
Scalzo, Attorneys at Law
</TABLE>
* The Trustees who are "interested persons" and officers as designated above
receive no compensation from the Trust.
Trustees who are not interested persons ("Outside Trustees") will be paid $1,000
for each meeting they attend. It is anticipated that the Outside Trustees will
receive the following annual fees for services as Trustee:
<TABLE>
<CAPTION>
TRUSTEE AGGREGATE COMPENSATION FROM TRUST
- ----------------------------------------------- -----------------------------------
<S> <C>
Arthur E. Pape $ 4,000
James R. Hannon $ 4,000
</TABLE>
INVESTMENT ADVISER AND OTHER SERVICES
PPM America is the investment adviser to each Fund and provides each Fund with
professional investment supervision and management. PPM America is an indirect,
wholly-owned subsidiary of Prudential Portfolio Managers, Ltd., which is in turn
wholly-owned by Prudential Corporation plc, ("Prudential"), the holding company
to one of the largest life insurance companies in the United Kingdom. As of the
date of this SAI, PPM America owns 100% of the issued and outstanding shares of
the Funds and is deemed to control the Funds under the 1940 Act.
Pursuant to an Investment Advisory Agreement, PPM America acts as the Trust's
investment adviser, furnishes office facilities and equipment, and permits any
of its officers or employees to serve without compensation as trustees or
officers of the Trust if elected to such positions. The Investment Advisory
Agreement continues in effect from year to year after its initial two-year term,
so long as its continuation is approved at least annually by (i) a majority of
the Trustees who are not parties to such agreement or interested persons of any
such party except in their capacity as Trustees of the Trust, and (ii) the
shareholders of each Fund or the
17
<PAGE>
Board. It may be terminated at any time upon 60 days notice by either party, or
by a majority vote of the outstanding shares of a Fund with respect to that
Fund, and will terminate automatically upon assignment. If a new fund is formed
in the future as a series of the Trust, that series will be subject to the
Investment Advisory Agreement. The Investment Advisory Agreement provides that
PPM America shall not be liable for any error of judgment, or for any loss
suffered by the Funds in connection with the matters to which the agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of PPM America in the performance of its obligations and
duties, or by reason of its reckless disregard of its obligations and duties
under the agreement.
As compensation for the services rendered by PPM America, each Fund pays PPM
America an advisory fee, calculated daily and paid monthly, at the annual rate
of 0.80% of the average daily net asset value of the Value Fund, 0.90% of the
average daily net asset value of the Small Cap Fund and 0.65% of the average
daily net asset value of the High Yield Bond Fund.
PPM America has voluntarily agreed to reimburse each Fund to the extent that its
total annual operating expenses exceed the following percent of the Fund's
average net assets: 1.00% in the case of Value Fund, 1.10% for the Small Cap
Fund and 0.85% in the case of the High Yield Bond Fund. For the purpose of
determining whether a Fund is entitled to any expense reimbursement, that Fund's
expenses are calculated daily and any reimbursement is made monthly. PPM
America's voluntary expense limitation may be terminated by PPM America at any
time.
The Trust pays the compensation of the Trustees who are not affiliated with PPM
America and all expenses (other than those assumed by PPM America), including
governmental fees, interest charges, taxes, membership dues in certain industry
associations, fees and expenses of independent certified public accountants,
legal counsel, and any transfer agent, registrar, and divided disbursing agent
of the Trust, expenses of preparing, printing, and mailing shareholders'
reports, notices, proxy statements, and reports to governmental offices and
commissions, expenses connected with the execution, recording, and settlement of
Fund security transactions, insurance, calculating the net asset value of shares
of the Trust, and expenses relating to the issuance, registration, and
qualification of shares of the Trust.
18
<PAGE>
PRINCIPAL UNDERWRITER
National Planning Corporation ("NPC"), 401 Wilshire Boulevard, Santa Monica,
California 90401, acts as the distributor to the Funds' shares. NPC is an
indirect, wholly-owned subsidiary of Prudential.
Shares of each Fund are offered for sale by NPC without any sales commissions,
12b-1 fees or other charges to the Funds or their shareholders. All distribution
expenses relating to the Funds are paid by PPM America, including the payment or
reimbursement of any expenses incurred by NPC. The Distribution Agreement will
continue in effect for two years and thereafter from year to year provided such
continuance is approved annually (i) by a majority of the Trustees or by a
majority of the outstanding voting securities of the Trust, and (ii) by a
majority of the Trustees who are not parties to the Distribution Agreement or
interested persons of any such party.
The Trust has agreed to pay all expenses in connection with registration of its
shares with the Securities and Exchange Commission and any auditing and filing
fees required in compliance with various state securities laws. PPM America
bears all sales and promotional expenses, including the cost of prospectuses and
other materials used for sales and promotional purposes by NPC. NPC offers the
Funds' shares only on a best efforts basis.
ACCOUNTING SERVICES AGENT
Jackson National Financial Services, LLC ("JNFS"), 225 West Wacker Drive, Suite
1200, Chicago Illinois 60606, acts as the Funds' accounting agent. JNFS is an
indirect, wholly-owned subsidiary of Prudential. Pursuant to a contract between
the Trust and JNFS, JNFS provides accounting and administrative services to the
Funds. For its services, JNFS is paid $27,000 per Fund per year plus 0.04% of
the daily average net assets of each Fund.
CUSTODIAN AND TRANSFER AGENT
Boston Safe Deposit & Trust Company, One Boston Place, Boston, Massachusetts
02108, acts as custodian for the Trust. The custodian has custody of all
securities and cash of the Trust and attends to the collection of principal and
income and payment for and collection of proceeds of securities bought and sold
by the Trust.
First Data Investor Services Group, P.O. Box 61503, 3200 Horizon Drive, King of
Prussia, Pennsylvania 19406, is the transfer agent, blue sky agent and
dividend-paying agent for the Trust.
19
<PAGE>
INDEPENDENT ACCOUNTANTS
The Trust's independent accountants, PricewaterhouseCoopers LLP, 200 East
Randolph Drive, Chicago, Illinois 60601, audit and report on the Trust's annual
financial statements, prepare the Trust's federal income and excise tax returns,
and perform other professional accounting, auditing and advisory services when
engaged to do so by the Trust.
FUND TRANSACTIONS AND BROKERAGE
PPM America places the orders for the purchase and sale of the Funds' portfolio
securities and options and futures contracts. Purchases and sales of portfolio
securities for the Value Fund and the Small Cap Fund are ordinarily transacted
through brokers, acting as agent and receiving a commission, or through dealers
acting as principal. Purchases and sales of portfolio securities for the High
Yield Bond Fund are ordinarily transacted with primary or secondary market
makers acting as principal or agent for the securities on a net basis.
Transactions placed through dealers reflect the spread between the bid and asked
prices. Occasionally, each of the Funds may make purchases of underwritten
issues at prices that include underwriting discounts or selling concessions.
PPM America's overriding objective in effecting portfolio transactions is to
seek to obtain the best combination of price and execution. The best net price,
giving effect to brokerage commissions, if any, and other transaction costs,
normally is an important factor in this decision, but a number of other
judgmental factors also may enter into the decision. These include: PPM
America's knowledge of negotiated commission rates currently available and other
current transaction costs; the nature of the security being traded; the size of
the transaction; the desired timing of the trade; the activity existing and
expected in the market for the particular security; confidentiality; the
execution, clearance and settlement capabilities of the broker or dealer
selected and others which are considered; PPM America's knowledge of the
financial stability of the broker or dealer selected. Recognizing the value of
these factors, a Fund may pay a brokerage commission in excess of that which
another broker or dealer may have charged for effecting the same transaction.
Evaluations of the reasonableness of brokerage commissions, based on the
foregoing factors, are made on an ongoing basis by PPM America while effecting
portfolio transactions. The general level of brokerage commissions paid is
reviewed by PPM America, and reports are made at least annually to the Board.
20
<PAGE>
Before effecting brokerage transactions, PPM America determines in good faith
that the amount of such commission is reasonable in relation to the factors set
forth above, including the value of the brokerage and research services provided
by such broker viewed in terms of either that particular transaction or PPM
America's overall responsibilities to all its clients.
When more than one broker is believed to be capable of providing the best
combination of price and execution with respect to particular securities
transactions, PPM America generally will select brokers or dealers which provide
it with research services or products. Research and other products or services
so provided may relate to a specific transaction placed with such broker, but
for the most part the services so provided will consist of a wide variety of
information useful to PPM America and all of its clients, including the Funds.
This material relates to general economic, interest rate, and equity and debt
market conditions as well as information on specific companies and industries.
Some of the types of products, research and services which may be paid for with
client commissions include: research reports, subscriptions and financial and
industry publications and research compilations, quantitative, economic,
international and market strategy services, compilations of securities prices,
dividends and similar data bases, quotation equipment and services, professional
seminars, and the services of certain economic or financial consultants. The
above list contains some examples of the services and products which may be
acquired with client commissions; PPM America may receive other types of
products, research and services. The research materials may be originated by the
broker performing execution services or by third parties who are paid by the
broker. PPM America's ability to obtain such products, research and services is
an integral factor in the establishment of PPM America's fees.
From time to time PPM America may receive products or services which are used
both as investment research and for administrative, marketing or other
non-research purposes. In those cases, PPM America makes a good faith effort to
determine the relative proportions of such products or services which constitute
"research." The portion of the cost of such products or services attributable to
research may be paid, in whole or in part, by brokerage commissions on client
transactions. The costs not attributable to research is paid by PPM America in
cash.
Research products or services may benefit any or all of PPM America's clients
and such products or services may not necessarily be used by
21
<PAGE>
PPM America in connection with the account(s) which paid the commissions to the
broker providing such products or services.
PPM America also may advise clients, including the Funds, regarding debt issues
or other fixed price offerings ("Fixed Price Offerings"). In such situations,
PPM America may direct that a portion of a Fixed Price Offering be purchased for
a client from a broker who provides "selling concessions" to PPM America in the
form of research services, products or analysis which will consist of a wide
variety of information and products useful to PPM America or its clients in
general. The direction of such purchases of Fixed Price Offerings to particular
brokers generally will not result in any added costs to clients. Nevertheless,
since PPM America derives a benefit from such selling concessions which it would
not otherwise have absent its relationship with its clients, those arrangements
may create a conflict of interest. In other words, PPM America theoretically may
have an incentive to use broker-dealers providing it with selling concessions,
even if such broker-dealers are not providing the best qualitative execution
services. Despite this incentive, PPM America uses its best efforts to cause
transactions to be executed in a manner consistent with applicable law and its
obligations to its clients, including the Funds.
Transactions for PPM America's client accounts generally are completed
independently. PPM America, however, may purchase or sell the same securities or
instruments for a number of clients simultaneously. When possible, orders for
the same security are combined or "batched" to facilitate best execution and to
reduce brokerage commissions or other costs. PPM America effects batched
transactions in a manner designed to ensure that no participating client is
favored over any other client. Specifically, each client that participates in a
batched transaction will participate at the average share price for all of PPM
America's transactions in that security on that business day. Securities
purchased or sold in a batched transaction are allocated pro-rata, when
possible, to the participating client accounts in proportion to the size of the
order placed for each account. Each client that participates in a batched
transaction is assessed the pro rata costs associated with that transaction in
proportion to size of the order placed for that account. PPM America may,
however, increase or decrease the amount of securities allocated to each account
if necessary to avoid holding odd-lot or small numbers of shares for particular
clients. Additionally, if PPM America is unable to fully execute a batched
transaction and PPM America determines that it would be impractical to allocate
a small number of securities among the accounts participating in the transaction
on a pro-rata basis, PPM America may
22
<PAGE>
allocate such securities in a manner determined in good faith to be fair and
equitable. From inception through December 31, 1998, the Value Fund paid
brokerage commissions totaling $2,352 and the Small Cap Fund paid brokerage
commissions totaling $6,028.
PERFORMANCE
From time to time the Funds may quote total return figures in sales material.
"Total Return" for a period is the percentage change in value during the period
of an investment in Fund shares, including the value of shares acquired through
reinvestment of all dividends and capital gains distributions. "Average Annual
Total Return" is the average annual compounded rate of change in value
represented by the Total Return for the period.
Average Annual Total Return will be computed as follows:
ERV = P(1+T) TO THE POWER OF n
Where:
P = the amount of an assumed initial investment in
Fund shares
T = average annual total return
n = number of years from initial investment to the end
of the period
ERV = ending redeemable value of shares held at the
end of the period
In addition, the High Yield Bond Fund may quote yield figures from time to time.
"Yield" is computed by dividing the net investment income per share earned
during a 30-day period (using the average number of shares entitled to receive
dividends) by the net asset value per share on the last day of the period. The
Yield formula provides for semiannual compounding which assumes that net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period.
23
<PAGE>
The Yield formula is as follows:
YIELD = 2[((a - b DIVIDED BY cd) +1) TO THE POWER OF (6) - 1].
Where: a = dividends and interest earned during the period.
(For this purpose, the High Yield Bond Fund will
recalculate the yield to maturity based on market
value of each portfolio security on each business
day on which net asset value is calculated.)
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the ending net asset value of the High Yield Bond
Fund for the period.
Performance figures quoted by the Funds will assume reinvestment of all
dividends and distributions, but will not take into account income taxes payable
by shareholders. The Funds impose no sales charge and pay no distribution
("12b-1") expenses. Each Fund's performance is a function of conditions in the
securities markets, portfolio management, and operating expenses. Although
information such as yield and total return is useful in reviewing a Fund's
performance and in providing some basis for comparison with other investment
alternatives, it should not be used for comparison with other investments using
different reinvestment assumptions or time periods.
In advertising and sales literature, the performance of a Fund may be compared
with that of other mutual funds, indexes or averages of other mutual funds,
indexes of related financial assets or data, and other competing investment and
deposit products available from or through other financial institutions. The
composition of these indexes or averages differs from that of the Funds.
Comparison of a Fund to an alternative investment should consider differences in
features and expected performance.
All of the indexes and averages noted below will be obtained from the indicated
sources or reporting services, which the Funds generally believe to be accurate.
The Funds may also refer to publicity (including performance rankings) in
newspapers, magazines, or other media from time to time. However, the Funds
assume no responsibility for the
24
<PAGE>
accuracy of such data. Newspapers and magazines that might mention the Funds
include, but are not limited to, the following:
<TABLE>
<S> <C> <C>
Barron's Global Finance Personal Investor
Boston Globe Institutional Investor Smart Money
Business Week Investor's Business Stanger Reports
Changing Times Daily Time
Chicago Tribune Kiplinger's Personal USA Today
Chicago Sun-Times Finance U.S. News and World
Crain's Chicago Los Angeles Times Report
Business Money The Wall Street Journal
Consumer Reports Mutual Fund Letter Worth
Consumer Digest Mutual Funds
Financial World Magazine
Forbes Morningstar
Fortune Newsweek
The New York Times
Pensions and
Investments
</TABLE>
A Fund may compare its performance to the Consumer Price Index (All Urban), a
widely recognized measure of inflation. The performance of a Fund may also be
compared to the Morgan Stanley EAFE (Europe, Australasia Far East) Index*, a
generally accepted benchmark for performance of major overseas markets, and to
the following indexes or averages:
Dow Jones Industrial Average*
First Boston High Yield Index
Lehman High Yield Index*
Merrill Lynch High Yield Index
Standard & Poor's 500 Stock Index*
Standard & Poor's/Barra Value Index *
Standard & Poor's 400 Industrials
Standard & Poor's Small Cap 600*
Standard & Poor's Mid Cap 400*
Russell 1000 Index
Russell 1000 Value Index
Russell 2000 Index*
Russell 2000 Value Index*
Russell 2500 Index*
Russell 2500 Value Index*
25
<PAGE>
Wilshire 5000
New York Stock Exchange Composite Index
American Stock Exchange Composite Index
NASDAQ Composite
NASDAQ Industrials
* with dividends reinvested
In addition, each Fund may compare its performance to the following indexes and
averages: Lipper Equity Index Fund Average; Lipper High Yield Fund Average,
Value Line Index; Lipper Capital Appreciation Fund Average; Lipper Growth Funds
Average; Lipper Small Company Growth Funds Average; Lipper General Equity Funds
Average; Lipper Equity Funds Average; Lipper Small Company Growth Fund Index;
and Lehman Brothers Government/Corporate Bond Index.
Lipper Indexes and Averages are calculated and published by Lipper, Inc.
("Lipper"), an independent service that monitors the performance of more than
1,000 funds. The Funds may also use comparative performance as computed in a
ranking by Lipper or category averages and rankings provided by another
independent service. Should Lipper or another service reclassify a Fund to a
different category or develop (and place a Fund into) a new category, that Fund
may compare its performance or ranking against other funds in the newly assigned
category, as published by the service. Each Fund may also compare its
performance or ranking against all funds tracked by Lipper or another
independent service, including Morningstar, Inc. ("Morningstar").
The Funds may cite their ratings, recognition, or other mention by Morningstar
or any other entity. Morningstar's rating system is based on risk-adjusted total
return performance and is expressed in a star-rating format. The risk-adjusted
number is computed by subtracting a fund's risk score (which is a function of
the fund's monthly returns less the 3-month T-bill return) from the fund's
load-adjusted total return score. This numerical score is then translated into
rating categories, with the top 10% labeled five star, the next 22.5% labeled
four star, the next 35% labeled three star, the next 22.5% labeled two star, and
the bottom 10% one star. A high rating reflects either above-average returns or
below-average risk or both.
To illustrate the historical returns on various types of financial assets, the
Funds may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or
26
<PAGE>
obtains) very long-term (since 1926) total return data (including, for example,
total return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks; small company stocks; long-term corporate bonds; long-term government
bonds; intermediate-term government bonds; U.S. Treasury bills; and Consumer
Price Index.
VALUATION OF THE FUNDS' SHARES
As stated in the Trust's prospectus, the price of the shares of each Fund is
that Fund's net asset value. Net asset value per share is determined by dividing
the total market value of a Fund's investment and other assets, less any
liabilities, by the total outstanding shares of that Fund. Net asset value per
share is determined as of the close of the New York Stock Exchange ("NYSE")
(normally 4:00 p.m. Eastern Time) on each day the Funds are open for business.
EQUITY FUNDS
Equity securities listed on a U.S. securities exchange or Nasdaq National Market
for which market quotations are available are valued at the last quoted sale
price on the day the valuation is made. Price information on listed equity
securities is taken from the exchange where the security is primarily traded.
Unlisted equity securities and listed U.S. equity securities not traded on the
valuation date or for which market quotations are not readily available
(including restricted securities), and securities, the value of which have been
materially affected by events, occurring after the close of the market on which
they principally trade, are determined in good faith at a fair value using
methods approved by the Board.
HIGH YIELD BOND FUND
Bonds and other fixed-income securities which are traded over the counter and on
an exchange will be valued according to the broadest and most representative
market, and it is expected that for bonds and other fixed-income securities this
ordinarily will be the over-the-counter market. However, bonds and other
fixed-income securities may be valued on the basis of prices provided by a
pricing service when such prices are believed to reflect the fair market value
of such securities. The prices provided by a pricing service are determined
without regard to bid or last sale prices but take into account institutional
size trading in similar groups of securities and any developments related to
specific securities. Bonds and other
27
<PAGE>
fixed-income securities not priced in this manner are valued at the most recent
quoted bid price, or when stock exchange valuations are used, at the latest
quoted sale price on the day of valuation. If there is no such reported sale,
the latest quoted bid price will be used. In the absence of readily available
market quotations (or when in the view of PPM America, available market
quotations do not accurately reflect a security's fair value), securities are
valued in good faith at a fair value using methods approved by the Board. Equity
securities held by the High Yield Bond Fund are valued as described above under
"Equity Funds."
If any Fund holds a security that is valued using fair value pricing because of
an event that occurred after the market close, the effect of this will be that
the net asset value will not be based on the last quoted price on the security,
but on a price which the Board or their delegate believes reflects the current
and true price of the securely.
CLOSED HOLIDAYS: Currently, the weekdays on which the Funds are closed for
business and their shares are not priced are: New Years Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. During these days, the price of foreign
securities held by the Funds may change. As a result, the Funds' net asset
values may also change during these days, but shareholders will not be able to
purchase or redeem the Funds' shares.
PURCHASE OF SHARES
Shares of the Funds are offered to (i) qualified retirement plans (including
employer, municipality, union and association and other group retirement plans),
employee-benefit trusts, foundations and endowments, (ii) certain financial
institutions having sales or service agreements with the Funds or a
broker-dealer or financial institution with respect to sales of shares of the
Funds, (iii) employees and officers of PPM America and its affiliates, or (iv)
any other institution or individual, at the sole discretion of PPM America.
The minimum initial investment in shares of a Fund is $500,000. That high
minimum is intended to help the Funds control their expenses, for the benefit of
all the Funds' shareholders. Employees and officers of PPM America and its
affiliates have a minimum initial investment of $10,000 and PPM America may
waive minimum initial and subsequent investment.
28
<PAGE>
Investments by a qualified retirement plan are made by the plan sponsor or
administrator, who is responsible for transmitting all orders for the purchase,
redemption and exchange of Fund shares. The availability of an investment by a
plan participant in the Funds, and the procedures for investing, depend upon the
provisions of the qualified retirement plan and whether the plan sponsor or
administrator has contracted with the Funds or the transfer agent for special
processing services, including subaccounting. Other institutional and eligible
purchasers must arrange for services through the transfer agent by calling toll
free 877-PPM-FUND (877-776-3863).
Shares of the Funds may be purchased at the net asset value per share next
determined after receipt of the purchase order. The funds determine net asset
value as described under VALUATION OF THE FUNDS' SHARES each day that the Funds
are open for business. The Funds reserve the right in their sole discretion (i)
to suspend the offering of its shares (ii) to reject purchase orders, and (iii)
to reduce or waive the minimum for initial and subsequent investments.
REDEMPTION OF SHARES
Fund shares may be redeemed by mail, or, if authorized, by telephone. No charge
is made for redemptions. The value of shares redeemed may be more or less than
the purchase price, depending on the net asset value at the time of redemption,
which is based on the market value of the investment securities held by a fund.
To protect against fraud, signature guarantees are required to enable the Funds
to verify the identity of the person who has authorized a redemption from an
account. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareholder(s) and
the registered address, and (2) share transfer requests.
The Funds may suspend redemption privileges or postpone the date of payment (i)
during any period that the NYSE is closed, or trading on the NYSE is restricted
as determined by the SEC, (ii) during any period when an emergency exists as
defined by the rules of the SEC as a result of which it is not reasonably
practicable for the Funds to dispose of securities owned by them, or fairly to
determine the value of its assets, and (iii) for such other periods as the SEC
may permit.
The Funds have made an election with the SEC pursuant to Rule 18f-1 under the
1940 Act to pay in cash all redemptions requested by any
29
<PAGE>
shareholder of record limited in amount during any 90-day period to the lesser
of $250,000 or 1% of the net assets of the Fund at the beginning of such period.
Such commitment is irrevocable without the prior approval of the SEC.
Redemptions in excess of the above limits may be paid in whole or in part in
investment securities or in cash, as the Trustees may deem advisable; however,
payment will be made wholly in cash unless the Trustees believe that economic or
market conditions exist which would make such a practice detrimental to the best
interests of the Funds. If redemptions are paid in investment securities, such
securities will be valued as set forth in VALUATION OF THE FUNDS' SHARES and a
redeeming shareholder would normally incur brokerage expenses in converting
these securities to cash.
No charge is made for redemptions. Redemption proceeds may be more or less than
the shareholder's cost depending on the market value of the securities held by
the Fund.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Exchange requests should be sent to PPM America Funds, c/o First Data Investor
Services Group, P.O. Box 61503, 3200 Horizon Drive, King of Prussia,
Pennsylvania 19406-0903. Any such exchange will be based on the respective net
asset values of the shares involved. Before making an exchange, a shareholder
should consider the investment objectives of the Fund to be purchased. Exchange
requests may be made either by mail or telephone. Requests received after 4:00
p.m. (Eastern Time) will be processed on the next business day. The officers of
the Fund reserve the right not to accept any request for an exchange when, in
their opinion, the exchange privilege is being used as a tool for market timing.
For federal income tax purposes, an exchange is a taxable event and,
accordingly, a capital gain or loss may be realized. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Funds; you
may want to consult your tax adviser for further information in this regard. The
exchange privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares of a Fund to another person by written request
to PPM America Funds, c/o First Data Investor Services Group, P.O. Box 61503,
3200 Horizon Drive, King of Prussia, Pennsylvania
30
<PAGE>
19406-0903. As in the case of redemptions, the written request must be received
in good order and should be signature guaranteed.
ADDITIONAL INFORMATION
Description of Shares -- The Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of beneficial interest of each
Fund and to divide or combine such shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interests in the
Trust. Each share of a Fund represents an equal proportionate interest in that
Fund with each other share. Upon liquidation of a Fund, shareholders are
entitled to share pro rata in the net assets of such Fund available for
distribution to shareholders.
Voting Rights -- Shareholders are entitled to one vote for each share held.
Shareholders may vote in the election of Trustees and on other matters submitted
to meetings of shareholders. No amendment may be made to the Agreement and
Declaration of Trust without the affirmative vote of a majority of the
outstanding shares of the Trust. The Trustees may, however, amend the Agreement
and Declaration of Trust without the vote or consent of shareholders to:
- - designate series of the Trust; or
- - change the name of the Trust; or
- - supply any omission, cure any ambiguity or cure, correct or supplement any
defective or inconsistent provision contained in the Agreement and
Declaration of Trust.
Shares have no pre-exemptive or conversion rights. Shares are fully paid and
non-assessable, except as set forth in the prospectus. In regard to termination,
sale of assets, or change of investment restrictions, the right to vote is
limited to the holders of shares of the particular Fund affected by the
proposal. When a majority is required, it means the lesser of 67% or more of the
shares present at a meeting when the holders of more than 50% of the outstanding
shares are present or represented by proxy, or more than 50% of the outstanding
shares.
SHAREHOLDER INQUIRIES -- All inquiries regarding the Trust should be directed to
the Trust at the telephone number or address shown on the cover page of the
Prospectus.
31
<PAGE>
TAX STATUS
The Trust's policy is to meet the requirements of Subchapter M of the Internal
Revenue Code. Each Fund intends to distribute taxable net investment income and
net realized capital gains to shareholders in amounts that will avoid federal
income or excise tax. All income, dividends, and capital gains distribution, if
any, on Fund shares are reinvested automatically in additional shares of the
Fund at the NAV determined on the first business day following the record date,
unless otherwise requested by a shareholder.
Each Fund is treated as a separate entity for purpose of the regulated
investment company provisions of the Internal Revenue Code and, therefore, the
assets, income, and distributions of each Fund are considered separately for
purposes of determining whether or not the Fund qualifies as a regulated
investment company.
FINANCIAL STATEMENTS
The financial statements of the Trust appearing in this Registration Statement
have been audited by PricewaterhouseCoopers LLP, independent auditors, as set
forth in their reports thereon appearing in the Registration Statement, and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of
Trustees of PPM America Funds
In our opinion, the accompanying statement of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the PPM America Value Equity Fund
and the PPM America Small Cap Value Equity Fund, two of the portfolios
constituting the PPM America Funds (the "Trust") at December 31, 1998, and the
results of each of their operations and the changes in each of their net assets
and the financial highlights for the period from inception to December 31, 1998,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
January 22, 1999
33
<PAGE>
PPM AMERICA VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- -------------
<S> <C> <C>
COMMON STOCKS--97.91%
AEROSPACE & DEFENSE--3.79%
Lockheed Martin Corp................................... 1,200 $ 101,700
United Technologies Corp............................... 900 97,875
-------------
199,575
APPAREL--4.41%
Jones Apparel Group Inc.(a)............................ 2,700 59,569
Liz Claiborne Inc...................................... 2,200 69,438
V.F. Corp.............................................. 2,200 103,125
-------------
232,132
AUTO MANUFACTURERS--3.57%
Ford Motor Co.......................................... 1,500 88,031
General Motors Corp.................................... 1,400 100,187
-------------
188,218
AUTO PARTS & EQUIPMENT--1.92%
TRW Inc................................................ 1,800 101,138
BANKS--6.79%
BankAmerica Corp....................................... 1,700 102,212
Chase Manhattan Corp................................... 1,400 95,287
KeyCorp................................................ 3,300 105,600
Union Planters Corp.................................... 1,200 54,375
-------------
357,474
CHEMICALS--3.79%
Dow Chemical Co........................................ 1,100 100,031
Rohm & Haas Co......................................... 3,300 99,413
-------------
199,444
</TABLE>
See notes to the financial statements.
34
<PAGE>
PPM AMERICA VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- -------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
COMPUTERS--3.05%
Adaptec Inc.(a)........................................ 3,900 $ 68,494
International Business Machines Corp................... 500 92,375
-------------
160,869
ELECTRIC--3.91%
FirstEnergy Corp....................................... 3,200 104,200
GPU Inc................................................ 2,300 101,631
-------------
205,831
ELECTRONICS--2.18%
Parker-Hannifin Corp................................... 3,500 114,625
FOREST PRODUCTS & PAPER--2.00%
Mead Corp.............................................. 3,600 105,525
HEALTH CARE--2.26%
Columbia/HCA Healthcare Corp........................... 4,800 118,800
INSURANCE--9.31%
Aetna Inc.............................................. 1,000 78,625
American Financial Group Inc........................... 1,400 61,425
American General Corp.................................. 900 70,200
CIGNA Corp............................................. 1,300 100,506
Hartford Financial Services Group Inc.................. 1,800 98,775
Transamerica Corp...................................... 700 80,850
-------------
490,381
IRON & STEEL--1.97%
Nucor Corp............................................. 2,400 103,800
LEISURE TIME--2.49%
Brunswick Corp......................................... 2,800 69,300
Hasbro Inc............................................. 1,700 61,412
-------------
</TABLE>
See notes to the financial statements.
35
<PAGE>
PPM AMERICA VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- -------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
130,712
</TABLE>
See notes to the financial statements.
36
<PAGE>
PPM AMERICA VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- -------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
METALS & MINING--1.93%
Phelps Dodge Corp...................................... 2,000 $ 101,750
MANUFACTURING--6.89%
Cooper Industries Inc.................................. 1,600 76,300
ITT Industries Inc..................................... 2,000 79,500
PPG Industries Inc..................................... 1,800 104,850
Tenneco Inc............................................ 3,000 102,188
-------------
362,838
OFFICE & BUSINESS EQUIPMENT--2.02%
Harris Corp............................................ 2,900 106,212
OIL & GAS PRODUCERS--6.76%
Ashland Inc............................................ 1,800 87,075
Chevron Corp........................................... 900 74,644
Occidental Petroleum Corp.............................. 6,200 104,625
Phillips Petroleum Co.................................. 2,100 89,513
-------------
355,857
RETAIL--6.39%
Federated Department Stores Inc.(a).................... 2,600 113,263
Kmart Corp.(a)......................................... 7,900 120,969
Sears, Roebuck and Co.................................. 2,400 102,000
-------------
336,232
SAVINGS & LOANS--4.30%
Charter One Financial Inc.............................. 3,900 108,225
Washington Mutual Inc.................................. 3,100 118,381
-------------
226,606
</TABLE>
See notes to the financial statements.
37
<PAGE>
PPM AMERICA VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- -------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
TELEPHONE--10.52%
AT&T Corp.............................................. 1,000 $ 75,250
Bell Atlantic Corp..................................... 1,700 96,581
GTE Corp............................................... 1,500 101,156
SBC Communications Inc................................. 1,900 101,888
Sprint Corp............................................ 900 75,713
US West Inc............................................ 1,600 103,400
-------------
553,988
TOBACCO--3.90%
Philip Morris Cos. Inc................................. 1,900 101,650
RJR Nabisco Holdings Corp.............................. 3,500 103,906
-------------
205,556
TRANSPORTATION--3.76%
Burlington Northern Santa Fe Corp...................... 2,800 94,500
CSX Corp............................................... 2,500 103,750
-------------
198,250
Total Common Stocks
(cost $5,097,680).................................. 5,155,813
</TABLE>
See notes to the financial statements.
38
<PAGE>
PPM AMERICA VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- -------------
SHORT TERM INVESTMENTS--2.09%
<S> <C> <C>
DIVERSIFIED FINANCIAL SERVICES--1.90%
Household Finance Corp., 5.10%, 1/04/1999.............. $ 100,000 $ 99,958
MONEY MARKET FUND--0.19%
Dreyfus Treasury Cash Management Fund, 5.01%(b)........ 10,338 10,338
-------------
Total Short Term Investments
(cost $110,296).................................... 110,296
-------------
TOTAL INVESTMENTS--100%
(cost $5,207,976)...................................... $ 5,266,109
-------------
</TABLE>
(a) Non-income producing security.
(b) Dividend yields change daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1998.
See notes to the financial statements.
39
<PAGE>
PPM AMERICA SMALL CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<S> <C> <C>
COMMON STOCKS--88.61%
AEROSPACE & DEFENSE--5.09%
Alliant Techsystems Inc.(a).......................... 3,000 $ 247,312
Gencorp Inc.......................................... 13,900 346,631
--------------
593,943
APPAREL--3.86%
Columbia Sportswear Co.(a)........................... 15,400 259,875
Garan Inc............................................ 6,800 191,250
--------------
451,125
AUTO PARTS & EQUIPMENT--2.74%
Superior Industries International, Inc............... 11,500 319,844
BANKS--6.69%
CCB Financial Corp................................... 3,600 205,200
GBC Bancorp.......................................... 12,400 319,300
Peoples Heritage Financial Group..................... 12,800 256,000
--------------
780,500
CHEMICALS--2.16%
Ferro Corp........................................... 9,700 252,200
COMMERICAL SERVICES--2.50%
Franklin Covey Co.(a)................................ 17,400 291,450
COMPUTERS--5.24%
Adaptec Inc.(a)...................................... 14,300 251,144
Banctec Inc.(a)...................................... 28,700 360,544
--------------
611,688
ELECTRIC--3.37%
Black Hills Corp..................................... 7,000 184,625
Sierra Pacific Resources............................. 5,500 209,000
--------------
393,625
</TABLE>
See notes to the financial statements.
39
<PAGE>
PPM AMERICA SMALL CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRICAL COMPONENTS & EQUIPMENT--3.39%
Tecumseh Products Co................................. 8,500 $ 396,313
ELECTRONICS--2.67%
Flowserve Corp....................................... 18,800 311,375
HAND & MACHINE TOOLS--2.99%
Kennametal Inc....................................... 16,400 348,500
HOME BUILDERS--1.85%
Champion Enterprises Inc.(a)......................... 7,900 216,262
HOUSEWARES--3.99%
Mikasa Inc........................................... 13,100 167,025
National Presto Industries Inc....................... 7,000 298,375
--------------
465,400
INSURANCE--7.33%
American Financial Group Inc......................... 8,700 381,713
Fremont General Corp................................. 12,800 316,800
Reliastar Financial Corp............................. 3,400 156,825
--------------
855,338
IRON & STEEL--6.32%
AK Steel Holding Corp................................ 15,600 366,600
Cleveland-Cliffs Inc................................. 9,200 370,875
--------------
737,475
LEISURE TIME--2.78%
Brunswick Corp....................................... 13,100 324,225
MACHINERY--3.09%
Esterline Technologies Corp.(a)...................... 16,600 361,050
</TABLE>
See notes to the financial statements.
40
<PAGE>
PPM AMERICA SMALL CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
----------- --------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
MEDIA--4.85%
Central Newspapers Inc............................... 3,600 $ 257,175
King World Productions Inc.(a)....................... 10,500 309,094
--------------
566,269
MANUFACTURING--2.83%
Lancaster Colony Corp................................ 10,300 330,887
OIL & GAS PRODUCERS--6.72%
Peoples Energy Corp.................................. 5,100 203,362
Ultramar Diamond Shamrock Corp....................... 15,600 378,300
WD-40 Co............................................. 7,100 203,238
--------------
784,900
RETAIL--2.13%
Sbarro Inc........................................... 9,500 248,781
SAVINGS & LOANS--1.85%
Charter One Financial Inc............................ 7,800 216,450
TRANSPORTATION--1.77%
Frozen Food Express Industries, Inc.................. 26,200 206,325
TRUCKING & LEASING--2.40%
Gatx Corp............................................ 7,400 280,275
--------------
Total Common Stocks
(cost $9,966,650)................................ 10,344,200
--------------
</TABLE>
See notes to the financial statements.
41
<PAGE>
PPM AMERICA SMALL CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
----------- --------------
SHORT TERM INVESTMENTS--11.39%
<S> <C> <C>
DIVERSIFIED FINANCIAL SERVICES--0.27%
American Express Credit Corp.,4.85%, 01/04/1999...... $ 400,000 $ 399,838
Household Finance Corp., 5.10%, 01/04/1999........... 400,000 399,830
USAA Capital Corp., 5.15%, 01/04/99.................. 400,000 399,828
--------------
1,199,496
FOOD--0.86%
Sara Lee Corp., 5.00%, 01/04/1999.................... 100,000 99,959
MONEY MARKET FUND--0.26%
Dreyfus Treasury Cash Management Fund, 5.01%(b)...... 30,085 30,085
--------------
Total Short Term Investments
(cost $1,329,540)................................ 1,329,540
--------------
TOTAL INVESTMENTS--100%
(cost $11,296,190)................................... $ 11,673,740
--------------
</TABLE>
(a) Non-income producing security.
(b) Dividend yields change daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1998.
See notes to the financial statements.
42
<PAGE>
PPM AMERICA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PPM AMERICA
PPM AMERICA SMALL CAP
VALUE VALUE EQUITY
EQUITY FUND FUND
------------- -------------
<S> <C> <C>
ASSETS
Investments in securities, at cost....................... $ 5,207,976 $11,296,190
------------- -------------
------------- -------------
Investments in securities, at value...................... $ 5,266,109 $11,673,740
Cash -- --
Receivables:
Dividends and interest................................. 2,019 1,756
Reimbursement from Adviser............................. 4,959 4,745
------------- -------------
Total assets............................................. 5,273,087 11,680,241
------------- -------------
Liabilities and net assets:
Payables:
Investment advisory fees............................... 897 1,976
Investment securities purchased........................ 103,538 1,287,161
Other liabilities...................................... 5,184 5,185
------------- -------------
Total liabilities........................................ 109,619 1,294,322
------------- -------------
Net assets............................................... $ 5,163,468 $10,385,919
------------- -------------
------------- -------------
Net assets consist of:
Paid-in capital.......................................... $ 5,105,335 $10,008,369
Undistributed net investment income...................... -- --
Accumulated net realized gain on investments............. -- --
Net unrealized appreciation on investments............... 58,133 377,550
------------- -------------
Net assets............................................... $ 5,163,468 $10,385,919
------------- -------------
------------- -------------
Total shares outstanding, no par value, unlimited shares
authorized............................................. 1,021,054 2,001,613
------------- -------------
------------- -------------
Net asset value, offering and redemption price per
share.................................................. $ 5.06 $ 5.19
------------- -------------
------------- -------------
</TABLE>
See notes to the financial statements.
43
<PAGE>
PPM AMERICA FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PPM AMERICA
PPM AMERICA SMALL CAP
VALUE VALUE EQUITY
EQUITY FUND* FUND*
------------- -------------
<S> <C> <C>
Investment income:
Dividends........................................... $ 1,925 $ 1,744
Interest............................................ 4,532 9,041
------------- -------------
Total investment income............................... 6,457 10,785
------------- -------------
Expenses
Investment advisory fees............................ 897 1,976
Custodian fees...................................... 359 317
Portfolio accounting fees........................... 637 680
Professional fees................................... 3,750 3,750
Transfer agent fees................................. 438 438
------------- -------------
Total operating expenses.............................. 6,081 7,161
Less:
Reimbursement from Adviser.......................... 4,959 4,745
------------- -------------
Net expenses.......................................... 1,122 2,416
------------- -------------
Net investment income................................. 5,335 8,369
------------- -------------
Realized and unrealized gains:
Net realized gain on investments.................... -- --
Net change in unrealized appreciation on
investments....................................... 58,133 377,550
------------- -------------
Net realized and unrealized gains................... 58,133 377,550
------------- -------------
Net increase in net assets resulting from operations.. $ 63,468 $ 385,919
------------- -------------
------------- -------------
</TABLE>
* For the period from December 23, 1998 (commencement of operations) to December
31, 1998.
See notes to financial statements.
44
<PAGE>
PPM AMERICA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PPM AMERICA
PPM AMERICA SMALL CAP
VALUE VALUE EQUITY
EQUITY FUND* FUND*
------------- -------------
<S> <C> <C>
Operations:
Net investment income.................................. $ 5,335 $ 8,369
Net realized gain on investments....................... -- --
Net change in unrealized appreciation on investments... 58,133 377,550
------------- -------------
Net increase in net assets from operations............. 63,468 385,919
------------- -------------
Distributions to shareholders:
From net investment income............................. (5,335) (8,369)
From net realized gains on investment transactions..... -- --
------------- -------------
Total distributions to shareholders.................... (5,335) (8,369)
------------- -------------
Share transactions:
Proceeds from the sale of shares....................... 5,100,000 10,000,000
Reinvestment of distributions.......................... 5,335 8,369
Cost of shares redeemed................................ -- --
------------- -------------
Net increase in net assets from share transactions..... 5,105,335 10,008,369
------------- -------------
Net increase in net assets............................. 5,163,468 10,385,919
Net Assets:
Net assets beginning of period......................... -- --
------------- -------------
Net assets end of period............................... $ 5,163,468 $10,385,919
------------- -------------
------------- -------------
Undistributed net investment income $ -- $ --
------------- -------------
------------- -------------
</TABLE>
* For the period from December 23, 1998 (commencement of operations) to
December 31, 1998.
See notes to financial statements.
45
<PAGE>
PPM AMERICA FUNDS
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION
PPM America Funds (the "Trust") is an open-end management investment company
comprised of PPM America Value Equity Fund and PPM America Small Cap Value
Equity Fund, (collectively the "Funds"). The Trust is organized under the
laws of Massachusetts. The Trust is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions. Actual results could differ from those estimates.
SECURITY VALUATION--Equity securities listed on a U.S. securities exchange
or NASDAQ National Market for which market quotations are available are
valued at the last quoted sale price on the day the valuation is made. Price
information on listed equity securities and listed U.S. equity securities
not traded on the valuation date or for which market quotations are not
readily available, and securities, the value of which have been materially
affected by events, occurring after the close of the market on which they
principally trade, are determined in good faith at a fair value using
methods approved by the Board of Trustees. Short-term securities maturing
within 60 days are valued at amortized cost, which approximates market
value.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
accounted for as the date purchased or sold. Dividend income is recorded on
the ex-dividend date. Interest income is recorded on the accrual basis and
includes amortization of discounts and premiums. Gains and losses are
determined on the identified cost basis, which is the same basis used for
federal income tax purposes.
46
<PAGE>
UNREGISTERED SECURITIES--A Fund may own certain investment securities which
are unregistered and thus restricted to resale. These securities are valued
by the Funds after giving due consideration to pertinent factors including
recent private sales, market conditions and the issuer's financial
performance. Where future dispositions of the securities require
registration under the Securities Act of 1933, the Funds have the right to
include their securities in such registration generally without cost to the
Funds. The Funds have no right to require registration of unregistered
securities. Unregistered and other illiquid securities are limited to 15% of
the net assets of a Fund.
REPURCHASE AGREEMENTS--A Fund may invest in repurchase agreements. A
repurchase agreement involves the purchase of a security by a Fund and a
simultaneous agreement (generally by a bank or broker-dealer) to repurchase
that security back from the Fund at a specified price and date or upon
demand. Securities pledged as collateral for repurchase agreements are held
by the Funds' custodian bank until the maturity of the repurchase agreement.
Procedures for all repurchase agreements have been designed to assure that
the daily market value of the collateral is in excess of the repurchase
agreement in the event of default.
DISTRIBUTIONS TO SHAREHOLDERS--The Funds normally declare and pay dividends
from net investment income annually, but may do so more frequently to avoid
excise tax. Distributions of net realized capital gains, if any, will be
distributed at least annually.
FEDERAL INCOME TAXES--The Funds' policy is to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies
and to distribute income in amounts that will avoid federal income or excise
taxes for each Fund. A Fund may periodically make reclassifications among
certain of its capital accounts as a result of the recognition and
characterization of certain income and capital gain distributions determined
annually in accordance with federal tax regulations which may differ from
generally accepted accounting principles.
3. INVESTMENT MANAGEMENT FEES AND TRANSACTIONS WITH AFFILIATES
Each Fund has an investment advisory agreement with PPM America, Inc. ("PPM
America"). As compensation for management services rendered, each Fund pays
an advisory fee, calculated daily
47
<PAGE>
and paid monthly, based on average daily net assets, at the annual rate of
0.80% for the PPM America Value Equity Fund and 0.90% for the PPM America
Small Cap Value Equity Fund.
Jackson National Financial Services, LLC ("JNFS"), an affiliate, provides
accounting and administrative services to the Funds. For its services, JNFS
is paid $27,000 per Fund per year plus 0.04% of the average daily net assets
of each Fund.
PPM America has voluntarily agreed to reimburse each of the Funds for total
annual operating expenses (excluding advisory fees) which exceed 0.20% of
the fund's average daily net assets. These voluntary reimbursements may be
modified or discontinued at any time.
Trustees and officers of the Trust who are affiliated persons receive no
compensation from the Trust. Trustees who are not interested persons of the
Trust, as defined in the 1940 Act, collectively received no compensation
from the Trust for the period ended December 31, 1998.
The Trust's distributor is National Planning Corporation, an affiliate.
Prudential Corporation plc, an affiliate of the advisor, owns substantially
all of the outstanding shares of the Trust.
4. SECURITY TRANSACTIONS
During the period ended December 31, 1998, the cost of purchases and
proceeds from sales and maturities of securities, other than short-term
investments, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM SALES
PURCHASES AND MATURITIES
------------- --------------------
<S> <C> <C>
PPM America Value Equity Fund.................. $ 5,097,680 $ --
PPM America Small Cap Value Equity Fund........ 9,966,650 --
</TABLE>
48
<PAGE>
The federal income tax cost basis and gross unrealized appreciation and
depreciation on investments as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
TAX GROSS GROSS NET
COST UNREALIZED UNREALIZED UNREALIZED
BASIS APPRECIATION DEPRECIATION APPRECIATION
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PPM America Value Equity
Fund................... $ 5,207,976 $ 94,650 $ (36,517) $ 58,133
PPM America Small Cap
Value Equity Fund...... 11,296,190 386,882 (9,332) 377,550
</TABLE>
5. FUND TRANSACTIONS
Transactions of fund shares for the period ended December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
SHARES DISTRIBUTIONS SHARES NET
PURCHASED REINVESTED REDEEMED INCREASE
----------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
PPM America Value Equity
Fund........................ 1,020,000 1,054 -- 1,021,054
PPM America Small Cap Value
Equity Fund................. 2,000,000 1,613 -- 2,001,613
</TABLE>
49
<PAGE>
APPENDIX -- BOND RATINGS
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the credit-worthiness of
an issuer. Consequently, PPM America believes that the quality of debt
securities in which the Funds invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell, or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating should be evaluated independently. Ratings are based on
current information furnished by the issuer or obtained by the rating services
from other sources which they consider reliable. Ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.
The following is a description of the characteristics of ratings used by Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P").
RATINGS BY MOODY'S
Aaa. Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or an exceptionally stable margin and
principal is secure. Although 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 bonds.
Aa. Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in the Aaa bonds, fluctuation of protective elements may be of
greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be
A-1
<PAGE>
present which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba. Bonds 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 other good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B. Bonds 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.
Caa. Bonds 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.
Ca. Bonds rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C. Bonds 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.
Ratings By Standard & Poor's:
AAA. Debt rated AAA has the highest rating. Capacity to pay interest and repay
principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in a small degree.
A. Debt rated A has a very 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.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate
A-2
<PAGE>
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 for debt in higher rated categories.
Bb-b-ccc-cc. Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
C. This rating is reserved for income bonds on which no interest is being paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
NOTE: The ratings from AA to B may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
A-3
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) Conformed Copy of Amendment Declaration of Trust of the Registrant*
(b) Copy of By-Laws of the Registrant*
(c) Not Applicable
(d) Investment Advisory Agreement
(e) Distribution Agreement
(f) Not Applicable
(g) Delegation, Custody and Information Services Agreement
(h) Accounting Services Agreement; Services Agreement (Transfer Agent)
(i)(1) Consent of Bell, Boyd & Lloyd
(j) Consent of PricewaterhouseCoopers, LLP
(k) Not Applicable
(l) Not Applicable
(m) Not Applicable
(n) Financial Data Schedule
(o) Not Applicable
* Incorporated by reference to the exhibit of the same letter filed with
the initial registration statement on Form N-1A, No. 333-63295, filed
September 11, 1998.
ITEM 24. Persons Controlled by or Under Common Control With Registrant.
The Registrant does not consider that there are any persons directly or
indirectly controlling, controlled by, or under common control with, the
Registrant within the meaning of this item.
ITEM 25. Indemnification.
Article VIII of Registrant's Agreement and Declaration of Trust (Exhibit (a)),
which Article is incorporated herein by reference, provides that Registrant
shall provide indemnification of its trustees and officers (including each
person who serves or has served at Registrant's request as
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<PAGE>
a director, officer, or trustee of another organization in which Registrant has
any interest as a shareholder, creditor or otherwise ("Covered Persons") under
specified circumstances.
Section 17(h) of the Investment Company Act of 1940 ("1940 Act") provides that
neither the Agreement and Declaration of Trust nor the By-Laws of Registrant,
nor any other instrument pursuant to which Registrant is organized or
administered, shall contain any provision which protects or purports to protect
any trustee or officer or Registrant against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. In accordance with Section 17(h) of the
1940 Act, Article VIII shall not protect any person against any liability to
Registrant or its shareholders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.
Unless otherwise permitted under the 1940 Act,
(i) Article VIII does not protect any person against any liability to
Registrant or to its shareholders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office;
(ii) in the absence of a final decision on the merits by a court or other
body before whom a proceeding was brought that a Covered Person was not
liable by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of his
office, no indemnification is permitted under Article VIII unless a
determination that such person was not so liable is made on behalf of
Registrant by (a) the vote of a majority of the trustees who are
neither "interested persons" of Registrant, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the proceeding
("disinterested, non-party trustees"), or (b) an independent legal
counsel as express in a written opinion; and
(iii) Registrant will not advance attorneys' fees or other expenses incurred
by a Covered Person in connection with a civil or criminal action, suit
or proceeding unless Registrant receives an undertaking by or on behalf
of the Covered Person to repay the advance (unless it is ultimately
determined that he is entitled to
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<PAGE>
indemnification) and (a) the Covered Person provides security for his
undertaking, or (b) Registrant is insured against losses arising by
reason of any lawful advances, or (c) a majority of the disinterested,
non-party trustees of Registrant or an independent legal counsel as
expressed in a written opinion, determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there
is reason to believe that the Covered Person ultimately will be found
entitled to indemnification.
Any approval of indemnification pursuant to Article VIII does not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with Article VIII as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's action was in,
or not opposed to, the best interests of Registrant or to have been liable to
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
such Covered Person's office.
Article VIII also provides that its indemnification provisions are not
exclusive.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1940 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, 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 of whether such indemnification by it is against
public policy as expressed in the 1940 Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, its investment adviser, the other
investment companies advised by the adviser, and persons affiliated with them
are insured against certain expenses in connection with the defense of actions,
suits, or proceedings, and certain liabilities that might be
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<PAGE>
imposed as a result of such actions, suits, or proceedings. Registrant will not
pay any portion of the premiums for coverage under such insurance that would (1)
protect any trustee or officer against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office or (2) protect its investment adviser or
principal underwriter, if any, against any liability to Registrant or its
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence, in the performance or its
duties, or by reason of its reckless disregard of its duties and obligations
under its contract or agreement with the Registrant; for this purpose the
Registrant will rely on an allocation of premiums determined by the insurance
company.
Registrant, its trustees, officers, employees and representatives and each
person, if any, who controls the Registrant within the meaning of Section 15 of
the Securities Act of 1933 are indemnified by the distributor of Registrant's
shares (the "distributor"), pursuant to the terms of the distribution agreement,
which governs the distribution of Registrant's shares, against any and all
losses, liabilities, damages, claims and expenses arising out of the acquisition
of any shares of the Registrant by any person which (i) may be based upon any
wrongful act by distributor or any of distributor's members, managers,
directors, officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, Statement of Additional Information,
shareholder report or other information covering Shares filed or made public by
the Registrant or any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such statement or
omission was made in reliance upon information furnished to the Registrant by
distributor in writing. In no case does the distributor's indemnity indemnify an
indemnified party against any liability to which such indemnified party would
otherwise be subject by reason of willful misfeasance, bad faith, or negligence
in the performance of its or his duties or by reason of its or his reckless
disregard of its or his obligations and duties under the distribution agreement.
ITEM 26. Business and Other Connections of Investment Adviser.
PPM America is an indirect, wholly-owned subsidiary of Prudential Portfolio
Managers, Ltd., which is in turn wholly-owned by Prudential Corporation plc,
("Prudential"), the holding company to one of the
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<PAGE>
largest life insurance companies in the United Kingdom. PPM America acts as
investment adviser to pension and profit sharing plans, corporations or other
business entities and registered and unregistered investment companies.
For a two-year business history of officers and directors of PPM America, please
refer to the Form ADV of PPM America.
ITEM 27. Principal Underwriters.
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<PAGE>
Registrant's principal underwriter, National Planning Corporation ("NPC"), is an
indirect wholly-owned subsidiary of Prudential. The table below lists each
director or officer of NPC:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
POSITION AND OFFICES
NAME AND PRINCIPAL WITH POSITIONS AND OFFICES
BUSINESS ADDRESS PRINCIPAL UNDERWRITER WITH REGISTRANT
- ----------------------------------------------------------------------------
<S> <C> <C>
Barrett, William Senior Vice President None
- ----------------------------------------------------------------------------
Cena, Linda Director of Operations None
- ----------------------------------------------------------------------------
Chiulli, Allan Vice President None
- ----------------------------------------------------------------------------
Dreffein, Mary S. Senior Vice President None
- ----------------------------------------------------------------------------
Elliot, Jay A. Senior Vice President None
- ----------------------------------------------------------------------------
Emanuel, Joseph D. Assistant Secretary None
- ----------------------------------------------------------------------------
Fram, Fred Vice President None
- ----------------------------------------------------------------------------
Hopping, Andrew B. Director None
- ----------------------------------------------------------------------------
Jack, Clifford J. Director, President and None
CEO
- ----------------------------------------------------------------------------
Kemper, Dawna Vice President None
- ----------------------------------------------------------------------------
Kinder, Douglas K. Senior Vice President None
- ----------------------------------------------------------------------------
Kitter, Harry M. Senior Vice President, None
Chief Financial Officer,
Chief Operating Officer
& Treasurer
- ----------------------------------------------------------------------------
Nerud, Mark Vice President Secretary and Assistant
Treasurer
- ----------------------------------------------------------------------------
Powell, Bradley J. Vice President None
- ----------------------------------------------------------------------------
Richardson, Scott Senior Vice President None
- ----------------------------------------------------------------------------
Simon, James L. Secretary, Director of None
Compliance
- ----------------------------------------------------------------------------
Steinbacher, Patricia R. Assistant Vice President None
- ----------------------------------------------------------------------------
Thompson, April Director of Trading and None
Operations
- ----------------------------------------------------------------------------
Wells, Michael A. Vice President, Director None
- ----------------------------------------------------------------------------
</TABLE>
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<PAGE>
ITEM 28. Location of Accounts and Records.
Registrant maintains the records required to be maintained by it under Rules
31a-1(a), 31a-1(b) and 31a-2(a) under the Investment Company Act of 1940 at its
principal executive offices at 225 West Wacker Drive, Suite 1200, Chicago,
Illinois 60606. Certain records, including records relating to Registrant's
shareholders and the physical possession of its securities, may be maintained
pursuant to Rule 31a-3 at the main office of Registrant's transfer agent or
custodian.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
Registrant hereby undertakes to comply with the provisions of Section 16(c) of
the 1940 Act with respect to the removal of Trustees and the calling of special
shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request without charge.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this post-effective amendment pursuant to Rule
458(b) under the Securities Act of 1933 and has duly caused this post-effective
amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Chicago and state of Illinois on April 27, 1999.
<TABLE>
<S> <C> <C>
PPM AMERICA FUNDS
By: /s/ RUSSELL W. SWANSEN
--------------------------------
Russell W. Swansen
PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ----------------------------------- ------------------------ -------------------
<C> <S> <C> <C>
/s/ RUSSELL W. SWANSEN
--------------------------- Trustee and President )
Russell W. Swansen )
/s/ MARK B. MANDICH
--------------------------- Trustee, Chief Financial )
Mark B. Mandich Officer and Treasurer )
)
/s/ ARTHUR E. PAPE
--------------------------- Trustee )
Arthur E. Pape
April 27, 1999
)
/s/ JAMES R. HANNON
--------------------------- Trustee )
James R. Hannon
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
N-1A ITEM 23
EXHIBIT
LETTER DESCRIPTION
- ------------- ----------------------------------------------------------------------
<C> <S>
(d) Investment Advisory Agreement
(e) Distribution Agreement
(g) Delegation, Custody and Information Services Agreement
(h)(1) Accounting Services Agreement
(h)(2) Services Agreement (Transfer Agent)
(i)(1) Consent of Bell, Boyd & Lloyd
(j) Consent of PricewaterhouseCoopers, LLP
(n) Financial Data Schedule
</TABLE>
<PAGE>
Exhibit (d)
INVESTMENT ADVISORY AGREEMENT
PPM America Funds, a Massachusetts business trust registered under the
Investment Company Act of 1940 (the "1940 Act") as an open-end diversified
management investment company ("PPMA Funds"), and PPM America, Inc., a Delaware
corporation registered under the Investment Advisers Act of 1940 as an
investment adviser ("PPMA"), agree that:
1. ENGAGEMENT OF PPMA. PPMA Funds appoints PPMA to furnish investment
advisory and other services to PPMA Funds for its series designated PPM America
Value Equity Fund, PPM America Small Cap Value Equity Fund and PPM America High
Yield Bond Fund (each, a "Fund"), and PPMA accepts that appointment, for the
period and on the terms set forth in this agreement.
If PPMA Funds establish one or more series in addition to the Funds named
above with respect to which it desires to retain PPMA as investment adviser
hereunder, and if PPMA is willing to provide such services under this agreement,
PPMA Funds and PPMA may add such new series to this agreement, by written
supplement to this agreement. Such supplement shall include a schedule of
compensation to be paid to PPMA by PPMA Funds with respect to such series and
such other modifications of the terms of this agreement with respect to such
series as PPMA Funds and PPMA may agree. Upon execution of such a supplement by
PPMA Funds and PPMA, that series will become a Fund hereunder and shall be
subject to the provisions of this agreement to the same extent as the Funds
named above, except as modified by the supplement.
2. SERVICES OF PPMA.
(a) INVESTMENT MANAGEMENT. Subject to the overall supervision and control
of PPMA Funds' Board of Trustees (the "Board"), PPMA shall have supervisory
responsibility for the general management and investment of the Funds' assets.
PPMA shall comply with the 1940 Act and with all applicable rules and
regulations of the Securities and Exchange Commission, the provisions of the
Internal Revenue Code applicable to the Funds as regulated investment companies,
the investment policies and restrictions, portfolio transaction policies and the
other statements concerning the Funds in PPMA Funds' Agreement and Declaration
of Trust, Bylaws, and registration statements under the 1940 Act and the
Securities Act of 1933 (the "1933 Act"), and policy decisions and procedures
adopted by the Board from time to time.
PPMA is authorized to make the decisions to buy and sell securities and
other assets for the Funds, to place the Funds' portfolio transactions with
broker-dealers, and to negotiate the terms of such transactions including
brokerage commissions on brokerage transactions, on behalf of the Funds. PPMA
is authorized to exercise discretion within the Funds' policy concerning
allocation of its portfolio brokerage, as permitted by law, including but not
limited to section 28(e) of the Securities Exchange Act of 1934, and in so doing
shall not be required to make any reduction in its investment advisory fees.
All activities of PPMA shall be conducted in accordance with PPMA Funds'
Agreement
<PAGE>
and Declaration of Trust, Bylaws and registration statement, under the
supervision and direction of the Board, and in conformity with the 1940 Act and
other applicable federal and state laws and regulations.
(b) REPORTS AND INFORMATION. PPMA shall furnish to the Board periodic
reports on the investment strategy and performance of the Funds and such
additional reports and information as the Board or the officers of PPMA Funds
may reasonably request.
(c) CONFIDENTIALITY. PPMA shall treat confidentially and as proprietary
information of PPMA Funds, all records and other information relating to PPMA
Funds or to prior, present or potential shareholders of PPMA Funds, and will not
use such records or information for any purpose other than in the performance of
its responsibilities and duties hereunder, except (i) after prior notification
to and approval by PPMA Funds, (ii) when so requested by PPMA Funds, or (iii) as
required by applicable law or regulation, provided that, in the case of any
disclosure pursuant to applicable law or regulation, PPMA shall, to the extent
it is reasonably able to do so, provide PPMA Funds with prior notice in order to
allow PPMA Funds to contest such request, requirement or order.
(d) BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, PPMA agrees to maintain records relating to its services
under this agreement, and further agrees that all records that it maintains for
PPMA Funds are the property of PPMA Funds and to surrender promptly to PPMA
Funds any of such records upon PPMA Funds' request. PPMA further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 3la-1 under the 1940 Act.
(e) STATUS OF PPMA. PPMA shall for all purposes herein be deemed to be an
independent contractor and not an agent of PPMA Funds and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent PPMA Funds in any way.
3. EXPENSES TO BE PAID BY TRUST. Except as otherwise provided in this
agreement or any other contract to which PPMA Funds is a party, PPMA Funds shall
pay all expenses incidental to its organization, operations and business,
including, without limitation:
(a) all charges of depositories, custodians, sub-custodians and other
agencies for the safekeeping and servicing of its cash, securities and other
property and of its transfer agents and registrars and its dividend disbursing
and redemption agents, if any;
(b) all charges of its fund accounting services agent, if any;
(c) all charges of legal counsel and of independent auditors;
(d) all compensation of trustees other than those affiliated with PPMA or
PPMA Funds' fund accounting services agent, if any, and all expenses
incurred in connection with their services to PPMA Funds;
(e) all expenses of preparing, printing and distributing notices, proxy
solicitation materials and reports to shareholders of the Funds;
2
<PAGE>
(f) all expenses of meetings of shareholders of the Funds;
(g) all expenses of registering and maintaining the registration of PPMA
Funds under the 1940 Act and of shares of the Funds under the 1933
Act, including all expenses of preparing, filing and printing of
annual or more frequent revisions of the Funds' registration
statements under the 1940 Act and 1933 Act, and of supplying each then
existing shareholder or beneficial owner of shares of the Funds of a
copy of each revised prospectus or supplement thereto, and of
supplying a copy of the statement of additional information upon
request to any then existing shareholder;
(h) all costs of borrowing money;
(i) all expenses of publication of notices and reports to shareholders and
to governmental bodies or regulatory agencies;
(j) all taxes and fees payable to federal, state or other governmental
agencies, domestic or foreign, and all stamp or other taxes;
(k) all expenses of bond and insurance coverage required by law or deemed
advisable by the Board;
(l) all expenses of qualifying and maintaining qualification of, or
providing appropriate notification of intention to sell relating to,
shares of the Funds under the securities laws of the various states
and other jurisdictions, and of registration and qualification of PPMA
Funds under any other laws applicable to PPMA Funds or its business
activities;
(m) all fees, dues and other expenses related to membership of PPMA Funds
in any trade association or other investment company organization; and
(n) any extraordinary expenses.
In addition to the payment of expenses, PPMA Funds shall also pay all
brokers' commissions and other charges relating to the purchase and sale of
portfolio securities for each Fund.
4. ALLOCATION OF EXPENSES PAID BY PPMA FUNDS. Any expenses paid by PPMA
Funds that are attributable solely to the organization, operation or business of
a Fund or Funds shall be paid solely out of the assets of that Fund or Funds.
Any expense paid by PPMA Funds that is not solely attributable to a Fund or
Funds, nor solely to any other series of PPMA Funds, shall be apportioned in
such manner as PPMA Funds or PPMA determines is fair and appropriate, or as
otherwise specified by the Board.
5. EXPENSES TO BE PAID BY PPMA. PPMA shall furnish to PPMA Funds, at
PPMA's own expense, office space and all necessary office facilities, equipment
and personnel required to provide its services pursuant to this agreement. PPMA
shall also assume and pay all expenses incurred by it in connection with
managing the assets of the Funds, all expenses of marketing shares of the Funds
and all expenses of placement of securities orders and related bookkeeping.
3
<PAGE>
6. COMPENSATION OF PPMA. For the services to be rendered and the
expenses to be assumed and to be paid by PPMA under this agreement, PPMA Funds
shall pay to PPMA fees calculated daily and paid monthly at the annual rate of
0.80% of the average daily net asset value of the PPM America Value Equity Fund,
0.90% of the average daily net asset value of the PPM America Small Cap Value
Equity Fund and 0.65% of the average daily net asset value of the PPM America
High Yield Bond Fund.
The fees attributable to each Fund shall be a separate charge to such Fund
and shall be the several (and not joint or joint and several) obligation of each
such Fund.
7. SERVICES OF PPMA NOT EXCLUSIVE. The services of PPMA to PPMA Funds
under this agreement are not exclusive, and PPMA shall be free to render similar
services to others so long as its services under this agreement are not impaired
by such other activities.
8. SERVICES OTHER THAN AS ADVISER. Within the limits permitted by law,
PPMA may receive compensation from PPMA Funds for other services performed by it
for PPMA Funds which are not within the scope of the duties of PPMA under this
agreement, including the provision of brokerage services.
9. STANDARD OF CARE. To the extent permitted by applicable law, neither
PPMA nor any of its directors, officers, agents or employees shall be liable to
PPMA Funds or its shareholders for any loss suffered by PPMA Funds or its
shareholders as a result of any error of judgment, or any loss arising out of
any investment, or as a consequence of any other act or omission of PPMA in the
performance of its duties under this agreement, except for liability resulting
from willful misfeasance, bad faith or gross negligence on the part of PPMA, or
by reason of reckless disregard by PPMA of its obligations and duties under this
agreement.
10. EFFECTIVE DATE, DURATION AND RENEWAL. This agreement shall become
effective on December __, 1998. Unless terminated as provided in Section 11,
this agreement shall continue in effect as to a Fund until December __, 2000 and
thereafter from year to year only so long as such continuance is specifically
approved at least annually (a) by a majority of those trustees who are not
interested persons of PPMA Funds or of PPMA, voting in person at a meeting
called for the purpose of voting on such approval, and (b) by either the Board
or vote of the holders of a "majority of the outstanding shares" of that Fund
(which term as used throughout this agreement shall be construed in accordance
with the definition of "vote of a majority of the outstanding voting securities
of a company" in section 2(a)(42) of the 1940 Act).
11. TERMINATION. This agreement may be terminated as to a Fund at any
time, without payment of any penalty, by the Board, or by a vote of the holders
of a majority of the outstanding shares of that Fund, upon 60 days' written
notice to PPMA. This agreement may be terminated by PPMA at any time upon 60
days' written notice to PPMA Funds. This agreement shall terminate
automatically in the event of its assignment (as defined in Section 2(a)(4) of
the 1940 Act).
12. AMENDMENT. This agreement may not be amended as to a Fund without the
affirmative vote (a) of a majority of those trustees who are not "interested
persons" (as defined in
4
<PAGE>
section 2(a)(19) of the 1940 Act) of PPMA Funds or of PPMA, voting in person at
a meeting called for the purpose of voting on such approval, and (b) of the
holders of a majority of the outstanding shares of that Fund.
13. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. All obligations of PPMA
Funds hereunder shall be binding only upon the assets of PPMA Funds (or the
appropriate Fund) and shall not be binding upon any trustee, officer, employee,
agent or shareholder of PPMA Funds. Neither the authorization of any action by
the Trustees or shareholders of PPMA Funds nor the execution of this agreement
on behalf of PPMA Funds shall impose any liability upon any trustee, officer or
shareholder of PPMA Funds.
14. NOTICES. Any notice, demand, change of address or other communication
to be given in connection with this agreement shall be given in writing and
shall be given by personal delivery, by registered or certified mail or by
transmittal by facsimile or other electronic medium addressed to the recipient
as follows:
If to PPMA: Mark B. Mandich
PPM America, Inc.
225 West Wacker Drive, Suite 1200
Chicago, IL 60602
If to PPMA Mark D. Nerud
Funds: c/o PPM America Funds
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
All notices shall be conclusively deemed to have been given on the day of
actual delivery thereof and, if given by registered or certified mail, on the
fifth business day following the deposit thereof in the mail and, if given by
facsimile or other electronic medium, on the day of transmittal thereof.
15. GOVERNING LAW. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Illinois and the laws of the United
States of America applicable to contracts executed and to be performed therein.
Dated: December 10, 1998
PPM AMERICA FUNDS
By /s/ Mark D. Nerud
Mark D. Nerud
5
<PAGE>
PPM AMERICA, INC.
By /s/ Mark B. Mandich
Mark B. Mandich
Executive Vice President
6
<PAGE>
Exhibit (e)
DISTRIBUTION AGREEMENT
BETWEEN
PPM AMERICA FUNDS
AND
NATIONAL PLANNING CORPORATION
THIS DISTRIBUTION AGREEMENT (the "Agreement") is made as of this 10th day
of December 1998 by and between PPM AMERICA FUNDS, a business trust organized
and existing under the laws of the Commonwealth of Massachusetts ("PPMA Funds"),
and NATIONAL PLANNING CORPORATION, a corporation organized and existing under
the laws of the State of Delaware ("Distributor").
RECITALS:
WHEREAS, PPMA Funds is engaged in business as an open-end management
investment company registered under the Investment Company Act of 1940, as
amended ("1940 Act");
WHEREAS, Distributor is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended ("1934 Act"), and the laws of each state
(including the District of Columbia) in which it engages in business to the
extent such law requires, and is a member of the National Association of
Securities Dealers, Inc. ("NASD") (such registrations and membership are
referred to collectively as the "Registrations");
WHEREAS, PPMA Funds desire Distributor to act as the distributor in the
public offering of its shares of beneficial interest (hereinafter called
"Shares") which currently are divided into three series designated PPM America
Value Equity Fund, PPM America Small Cap Value Equity Fund and PPM America High
Yield Bond Fund, and including shares of any additional series which may from
time to time be offered for sale to the public (hereinafter called,
collectively, the "Funds" and, individually, a "Fund");
WHEREAS, PPMA Funds has entered into an investment advisory agreement with
PPM America, Inc. ("PPMA"), an affiliate of Distributor, pursuant to which PPMA
has agreed to pay all expenses incurred in the sale and promotion of shares of
PPMA Funds;
NOW, THEREFORE, the parties hereto agree as follows:
1. APPOINTMENT. PPMA Funds appoints Distributor to act as principal
underwriter (as such term is defined in Section 2(a)(29) of the 1940 Act) of its
Shares.
2. DELIVERY OF PPMA FUNDS DOCUMENTS. PPMA Funds has furnished
Distributor with properly certified or authenticated copies of each of the
following in effect on the date
<PAGE>
hereof and shall furnish Distributor from time to time properly certified or
authenticated copies of all amendments or supplements thereto:
(a) Agreement and Declaration of Trust;
(b) Bylaws; and
(c) Resolutions of its Board of Trustees (hereinafter referred to as
the "Board") selecting Distributor as distributor and approving
this form of agreement and authorizing its execution.
PPMA Funds shall furnish Distributor promptly with copies of any
registration statements filed by it with the Securities and Exchange Commission
("SEC") under the Securities Act of 1933 (the "1933 Act") or the 1940 Act,
together with any financial statements and exhibits included therein, and all
amendments or supplements thereto hereafter filed.
PPMA Funds also shall furnish Distributor such other certificates or
documents which Distributor may from time to time, in its discretion, reasonably
deem necessary or appropriate in the proper performance of its duties.
3. SOLICITATION OF ORDERS FOR PURCHASE OF SHARES.
(a) Subject to the provisions of Paragraphs 5, 6 and 8 hereof, and to such
minimum purchase requirements as may from time to time be indicated in the
prospectus of each Fund, Distributor is authorized to solicit, as agent on
behalf of PPMA Funds, unconditional orders for purchases of Shares authorized
for issuance and registered under the 1933 Act, provided that:
(1) Distributor shall act as a disclosed agent on behalf of and for
the account of PPMA Funds;
(2) PPMA Funds' transfer agent shall receive directly from investors
all payments for the purchase of Shares and also shall pay
directly to shareholders amounts due to them for the redemption
or repurchase of all Shares, with Distributor having no rights or
duties to accept such payment or to effect such redemptions or
repurchases; if a payment for the purchase of Shares is delivered
to Distributor, such payment shall not be negotiated by
Distributor, but shall be delivered as soon as reasonably
practicable to PPMA Funds' transfer agent;
(3) Distributor shall have no liability for payment for purchases of
Shares it sells as agent;
(4) Distributor shall not be obligated to sell any certain number of
shares; and
(5) Distributor shall be free to render other services different from
or similar to these rendered to the Funds hereunder so long as
the services hereunder are not impaired thereby.
2
<PAGE>
The purchase price to the public of Shares shall be the public offering
price as defined in Paragraph 7 hereof.
(b) In consideration of the rights granted to Distributor under this
Agreement, Distributor will use its reasonable best efforts (but only in states
in which Distributor may lawfully do so) to solicit from investors unconditional
orders to purchase Shares. This Agreement does not obligate the Distributor to
register as a broker or dealer under the state Blue Sky laws of any jurisdiction
when it determines it would be uneconomical for it to do so or to maintain its
registration in any jurisdiction in which it is now registered nor obligate the
Distributor to sell any particular number of Shares. The Distributor shall
promptly notify PPMA Funds in the event it fails to maintain its registration in
any jurisdiction in which it is currently registered. PPMA Funds shall make
available to Distributor, at no cost to Distributor, such number of copies of
the currently effective prospectus and Statement of Additional Information of
each Fund and copies of all information, financial statements and other papers
which Distributor may reasonably request for use in connection with the
distribution of Shares.
4. SELLING AGREEMENTS. Distributor is authorized, as agent on behalf of
PPMA Funds, to enter into agreements with other broker-dealers providing for the
solicitation of unconditional orders for purchases of Shares authorized for
issuance and registered under the 1933 Act. All such agreements shall be in a
form as may be approved by the officers of PPMA Funds ("Selling Agreement").
All solicitations made by other broker-dealers pursuant to a Selling Agreement
shall be subject to the same terms as are applied by this Agreement to
solicitations made by Distributor.
5. SOLICITATION OF ORDERS TO PURCHASE SHARES BY PPMA FUNDS. The rights
granted to Distributor shall be exclusive, except that PPMA Funds reserves the
right to solicit purchases from, and sell its Shares to, investors. Further,
PPMA Funds reserves the right to issue Shares in connection with the merger or
consolidation of any other investment company, trust or personal holding company
with PPMA Funds, or PPMA Funds' acquisition, by the purchase or otherwise, of
all or substantially all of the assets of an investment company, trust or
personal holding company, or substantially all of the outstanding shares or
interests of any such entity. Any right granted to Distributor to solicit
purchases of Shares will not apply to Shares that may be offered by PPMA Funds
to shareholders by virtue of their being shareholders of PPMA Funds.
6. SHARES COVERED BY THIS AGREEMENT. This Agreement relates to the
solicitation of orders to purchase Shares that are duly authorized and
registered and available for sale by PPMA Funds, including redeemed or
repurchased Shares if and to the extent that they may be legally sold and if,
but only if, PPMA Funds authorizes Distributor to sell them. If PPMA Funds
establishes one or more series, in addition to PPM America Value Equity Fund,
PPM America Small Cap Value Equity Fund and PPM America High Yield Bond Fund,
and wishes to appoint Distributor as principal underwriter of the shares of
beneficial interest of such series, PPMA Funds shall so notify Distributor in
writing, and if Distributor agrees in writing to provide such services and PPMA
acknowledges that agreement by Distributor, the shares of beneficial interest of
such series shall become Shares under the Agreement.
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<PAGE>
7. PUBLIC OFFERING PRICE. All solicitations by Distributor pursuant to
this Agreement shall be for orders to purchase Shares through PPMA Funds'
transfer agent at the public offering price. The public offering price for each
accepted order for Shares will be the net asset value per share of the
particular Fund subscribed for calculated by PPMA Funds at the next close of
regular session trading on the New York Stock Exchange after such order is
accepted by PPMA Funds or by a person authorized by PPMA Funds to accept such
orders. The net asset value per share shall be determined in the manner as
reflected in the then current prospectus and Statement of Additional Information
of PPMA Funds.
8. SUSPENSION OF SALES. If and whenever the determination of a Fund's
net asset value is suspended and until such suspension is terminated, no further
orders for Shares of such Fund shall be accepted by PPMA Funds, except such
unconditional orders placed with PPMA Funds and accepted by it before the
suspension. In addition, PPMA Funds reserves the right to suspend sales of
Shares if, in the judgment of the Board of PPMA Funds, it is in the best
interest of PPMA Funds to do so, such suspension to continue for such period as
may be determined by PPMA Funds' Board; and in that event, (i) at the written
direction of PPMA Funds, Distributor shall suspend its solicitation of orders to
purchase Shares until otherwise instructed in writing by PPMA Funds and (ii) no
orders to purchase Shares shall be accepted by PPMA Funds while such suspension
remains in effect unless otherwise directed in writing by its Board.
9. AUTHORIZED REPRESENTATIONS. Distributor is not authorized by PPMA
Funds to give on behalf of PPMA Funds or any Fund any information or to make any
representations in connection with the sale of Shares other than information and
representations which are consistent with PPMA Funds' registration statement
filed with the SEC under the 1933 Act and/or the 1940 Act, covering Shares, as
such registration statement or PPMA Funds' prospectus may be amended or
supplemented from time to time, or contained in shareholder reports or other
material that may be prepared by or on behalf of PPMA Funds or approved by PPMA
Funds for Distributor's use. No person other than Distributor is authorized to
act as principal underwriter (as such term is defined in the 1940 Act, as
amended) for PPMA Funds.
10. REGISTRATION OF ADDITIONAL SHARES. PPMA Funds hereby agrees to
register an indefinite number of Shares pursuant to Rule 24f-2 under the 1940
Act, as amended, and pay all fees associated with such registration. PPMA Funds
will, in cooperation with Distributor, take such action as may be necessary from
time to time to permit such Shares (so registered or otherwise qualified for
sale under the 1933 Act) to be sold in any state mutually agreeable to
Distributor and PPMA Funds, and to maintain such qualification; provided,
however, that nothing herein shall be deemed to prevent PPMA Funds from taking
action, without approval of Distributor, to permit its Shares to be sold in any
state it deems appropriate.
11. CONFORMITY WITH LAW. Distributor agrees that in soliciting orders to
purchase Shares it shall duly conform in all respects with applicable federal
and state laws and the rules and regulations of the NASD. Distributor will use
its best efforts to maintain its Registrations in good standing during the term
of this Agreement and will promptly notify PPMA Funds and PPMA in the event of
the suspension or termination of any of the Registrations.
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<PAGE>
12. INDEPENDENT CONTRACTOR. Distributor shall be an independent
contractor and neither Distributor, nor any of its members, managers, officers,
directors, employees or representatives is or shall be an employee of PPMA Funds
in the performance of Distributor's duties hereunder. Distributor shall be
responsible for its own conduct and the employment, control and conduct of its
agents and employees and agrees to pay all applicable employee taxes thereunder.
13. INDEMNIFICATION. Distributor agrees to indemnify and hold harmless
PPMA Funds and each of the members of its Board and its officers, employees and
representatives and each person, if any, who controls PPMA Funds within the
meaning of Section 15 of the 1933 Act against any and all losses, liabilities,
damages, claims and expenses (including the reasonable costs of investigating or
defending any alleged loss, liability, damage, claim or expense and reasonable
legal counsel fees incurred in connection therewith) to which PPMA Funds or such
of the members of its Board and of its officers, employees, representatives, or
controlling person or persons may become subject under the 1933 Act, under any
other statute, at common law, or otherwise, arising out of the acquisition or
sale of any Shares by any person which (i) may be based upon any wrongful act by
Distributor or any of Distributor's members, managers, directors, officers,
employees or representatives, or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement, prospectus, Statement of Additional Information, shareholder report
or other information covering Shares filed or made public by PPMA Funds or any
amendment thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or omission was made in
reliance upon information furnished to PPMA Funds by Distributor in writing. In
no case (i) is Distributor's indemnity in favor of PPMA Funds, or any person
indemnified, to be deemed to protect PPMA Funds or such indemnified person
against any liability to which PPMA Funds or such person would otherwise be
subject by reason of willful misfeasance, bad faith or negligence in the
performance of its or his duties or by reason of its or his reckless disregard
of its or his obligations and duties under this Agreement, or (ii) is
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against PPMA Funds or any person
indemnified unless PPMA Funds or such person, as the case may be, shall have
notified 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 served upon PPMA Funds or upon such person (or after PPMA Funds or
such person shall have received notice of such service on any designated agent).
However, failure to notify Distributor of any such claim shall not relieve
Distributor from any liability which Distributor may have to PPMA Funds or any
person against whom such action is brought otherwise than on account of
Distributor's indemnity agreement contained in this paragraph.
Distributor shall be entitled to participate, at its own expense, in the
defense, or, if Distributor so elects, to assume the defense of any suit brought
to enforce any such claim but, if Distributor elects to assume that defense,
such defense shall be conducted by legal counsel chosen by Distributor and
satisfactory to the persons indemnified who are defendants in the suit. In the
event that Distributor elects to assume the defense of any such suit and retain
such legal counsel, persons indemnified who are defendants in the suit shall
bear the fees and expenses of
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any additional legal counsel retained by them. If Distributor does not elect to
assume the defense of any such suit, Distributor will reimburse persons
indemnified who are defendants in such suit for the reasonable fees of any legal
counsel retained by them in such litigation.
PPMA Funds agrees to indemnify and hold harmless Distributor and each of
its members, managers, directors, officers, employees, and representatives and
each person, if any, who controls Distributor within the meaning of Section 15
of the 1933 Act against any and all losses, liabilities, damages, claims or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claim or expense and reasonable legal counsel
fees incurred in connection therewith) to which Distributor or such of its
members, managers, directors, officers, employees, representatives or
controlling person or persons may otherwise become subject under the 1933 Act,
under any other statute, at common law, or otherwise arising out of the
acquisition of any Shares by any person which (i) may be based upon any wrongful
act by PPMA Funds or any of the members of PPMA Funds' Board, or PPMA Funds'
officers, employees or representatives other than Distributor, or (ii) may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement, prospectus, Statement of Additional
Information, shareholder report or other information covering Shares filed or
made public by PPMA Funds or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading unless
such statement or omission was made in reliance upon information furnished by
Distributor in writing to PPMA Funds. In no case (i) is PPMA Funds' indemnity
in favor of Distributor or any person indemnified to be deemed to protect
Distributor or such indemnified person against any liability to which
Distributor or such indemnified person would otherwise be subject by reason of
willful misfeasance, bad faith, or negligence in the performance of its or his
duties or by reason of its or his reckless disregard of its or his obligations
and duties under this Agreement, or (ii) is PPMA Funds to be liable under its
indemnity agreement contained in this Paragraph with respect to any claim made
against Distributor or any person indemnified unless Distributor, or such
person, as the case may be, shall have notified PPMA Funds 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 served upon
Distributor or upon such person (or after Distributor or such person shall have
received notice of such service on any designated agent). However, failure to
notify PPMA Funds of any such claim shall not relieve PPMA Funds from any
liability which PPMA Funds may have to Distributor or any person against whom
such action is brought otherwise than on account of PPMA Funds' indemnity
agreement contained in this paragraph.
PPMA Funds shall be entitled to participate, at its own expense, in the
defense or, if PPMA Funds so elects, to assume the defense of any suit brought
to enforce such claim but, if PPMA Funds elects to assume the defense, such
defense shall be conducted by legal counsel chosen by PPMA Funds and
satisfactory to the persons indemnified who are defendants in the suit. In the
event that PPMA Funds elects to assume the defense of any such suit and retain
such legal counsel, the persons indemnified who are defendants in the suit shall
bear the fees and expenses of any additional legal counsel retained by them. If
PPMA Funds does not elect to assume the defense of any such suit, PPMA Funds
will reimburse the persons indemnified who are defendants in such suit for the
reasonable fees and expenses of any legal counsel retained by
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<PAGE>
them in such litigation.
14. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
become effective upon its execution ("Effective Date") and unless terminated as
provided herein, shall remain in effect through two years from the Effective
Date, and from year to year thereafter, but only so long as such continuance is
specifically approved at least annually by (a) a vote of majority of the members
of the Board of PPMA Funds who are not interested persons of Distributor or PPMA
Funds, voting in person at a meeting called for the purpose of voting on such
approval, and (b) the vote of either the Board of PPMA Funds or a majority of
the outstanding Shares of PPMA Funds. This Agreement may be terminated at any
time, without the payment of any penalty (a) on 60 days' prior written notice,
by the Board of PPMA Funds or by a vote of a majority of the outstanding Shares
of PPMA Funds, or by Distributor, or (b) immediately, on written notice by the
Board of PPMA Funds, in the event of termination or suspension of any of the
Registrations, or (c) on 60 days prior written notice by the Distributor. This
Agreement will automatically terminate in the event of its assignment. In
interpreting the provisions of this Paragraph 14, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "interested
person," "assignment" and "majority of the outstanding shares") shall be
applied.
15. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by each party against which enforcement of the change, waiver,
discharge or termination is sought. If PPMA Funds should at any time deem it
necessary or advisable in the best interests of PPMA Funds that any amendment of
this Agreement be made in order to comply with the recommendations or
requirements of the SEC or any other governmental authority or to obtain any
advantage under state or federal tax laws and notifies Distributor of the form
of such amendment and the reasons therefore, and if Distributor should decline
to assent to such amendment, PPMA Funds may terminate this Agreement in writing
forthwith. If Distributor should at any time request that a change be made in
PPMA Funds'. Agreement and Declaration of Trust, Bylaws or its methods of doing
business, in order to comply with any requirements of federal law or regulations
of the SEC, or of a national securities association of which Distributor is or
may be a member, relating to the sale of Shares, and PPMA Funds should not make
such necessary changes within a reasonable time, Distributor may terminate this
Agreement in writing forthwith.
16. LIABILITY. It is understood and expressly stipulated that neither the
shareholders of PPMA Funds nor the members of the Board of PPMA Funds shall be
personally liable hereunder. The obligations of PPMA Funds are not personally
binding upon, nor shall resort to the private property of, any of the members of
the Board of PPMA Funds nor of the shareholders, officers, employees or agents
of PPMA Funds, but only PPMA Funds' property shall be bound.
17. MISCELLANEOUS.
(a) The captions in this Agreement are included for convenience or
reference only,
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and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(b) The provisions of Paragraph 13 (Indemnification) shall survive
termination of this Agreement.
(c) The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are
entitled to under state and federal laws.
18. NOTICE. Any notice required or permitted to be given by a party to
this Agreement or to any other party hereunder shall be deemed sufficient if
delivered in person or sent by registered or certified mail, postage prepaid,
addressed by the party giving notice to each such other party at the address
provided below or to the last address furnished by each such other party to the
party giving notice.
If to PPMA Funds: 225 West Wacker Drive
Suite 1200
Chicago, Illinois 60606
Attn: Mark B. Mandich
If to Distributor: 401 Wilshire Blvd., Ste 1065
Santa Monica, CA 90401
Attn: President
with a copy to:
5901 Executive Drive
Lansing, Michigan 48911-5389
Attn: James L. Simon
If to PPMA: 225 West Wacker Drive
Suite 1200
Chicago, Illinois 60606
Attn: Mark Mandich
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<PAGE>
NATIONAL PLANNING CORPORATION
By: /s/ Jack Clifford
PPM AMERICA FUNDS
By: /s/ Mark Mandich
ACKNOWLEDGED:
PPM AMERICA, INC.
By: /s/ Mark Mandich
<PAGE>
Exhibit (g)
DELEGATION, CUSTODY AND INFORMATION SERVICES AGREEMENT
AGREEMENT dated as of December 10th, 1998 between PPM American Funds
("Trust"), a business trust organized under the laws of the Commonwealth of
Massachusetts having its principal office and place of business at 225 West
Wacker Drive, Chicago, IL 60606, and BOSTON SAFE DEPOSIT AND TRUST COMPANY
("Custodian"), a Massachusetts trust company with its principal place of
business at One Boston Place, Boston, Massachusetts 02108.
W I T N E S S E T H:
WHEREAS, The Trust is authorized to issue shares in separate series with
each such series representing interests in a separate portfolio of securities
and other assets, and the Trust has made the PPM America Value Equity Fund, the
PPM America Small Cap Value Equity Fund and the PPM American High Yield Bond
Fund subject to this Agreement (each such series, together with all other series
subsequently established by the Trust and made subject to the Agreement in
accordance with the terms hereof, shall be referred to as a Fund" and
collectively as the "Funds";.
WHEREAS, The Board desires to delegate certain of its responsibilities for
performing the services set forth in paragraphs (c)(1), (c)(2) and (c)(3) of
Rule 17f-5 to the Custodian;
WHEREAS, The Custodian agrees to accept such delegation with respect to
Assets held by Eligible Foreign Custodians in the jurisdictions listed on
APPENDIX B as set forth in Article II;
WHEREAS, The Trust desires to hire the Custodian as a vendor to provide
certain information available to the Custodian with respect to foreign
jurisdictions, Securities Depositories and Foreign Custodians not listed on
APPENDIX B for which the board or a delegatee other than the Custodian has the
responsibilities described in paragraphs (c)(1), (c)(2) and (c)(3) of
Rule 17f-5; and
WHEREAS, The Custodian agrees to provide, as a vendor, the information
described in Article IV if, and when available in accordance with the terms and
conditions of Article IV.
WHEREAS, The Trust and the Custodian desire to set forth their agreement
with respect to the custody of the Funds' Securities and cash and the processing
of Securities transactions;
NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Trust and the Custodian agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement or in any Appendices to this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
(a) "Affiliated Person" shall have the meaning of the term within
Section 2(a)3 of the 1940 Act.
(b) "Agreement" shall mean this Delegation, Custody and Information
Services Agreement.
(c) "Assets" shall mean any of Funds' investments (including foreign
currencies) for which the primary market is outside the United States,
and such cash and cash equivalents as are reasonably necessary to
effect the Funds' transactions in such investments.
(d) "Authorized Person" shall be deemed to include the Chairman of
the Board, the President, and any Vice President, the Secretary, the
Treasurer or any other person, whether or not any such person is an
officer or employee of the Trust, duly authorized by the Board to add
or delete jurisdictions pursuant to Article II and to give Oral
Instructions and Written Instructions on behalf of a Fund and listed
in the certification annexed hereto as APPENDIX A or such other
certification as may be received by the Custodian from time to time.
(e) "Board" shall mean the Board of Trustees of the Trust.
(f) "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency Securities, its
successor or successors and its nominee or nominees.
(g) "Business Day" shall mean any day on which the Fund, the
Custodian, the Book-Entry System and appropriate clearing
corporation(s) are open for business.
(h) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian, which is actually received by the Custodian
and signed on behalf of a Fund by any two Authorized Persons.
(i) "Country Risk" means all factors reasonably related to the
systematic risk of holding assets in a particular country including,
but not limited to, such country's financial infrastructure (including
any Securities Depositories operating in such country), prevailing
custody and settlement practices and laws applicable to the
safekeeping and recovery of Assets held in custody.
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(j) "Custodian" shall mean Boston Safe Deposit and Trust Company in
its capacity as delegate, custodian or information services provider
as required under the terms of each Article.
(k) "Custody Agreement" shall mean the provisions of Articles I, III
and V of this Agreement and any Appendices referenced therein and
attached to this Agreement.
(l) "Information Services Agreement" shall mean the provisions of
Articles I and IV and V of this Agreement and any Appendices
referenced therein and attached to this Agreement.
(m) Master Trust Agreement shall mean Declaration and Agreement of
Trust of the Trust dated September 9, 1998, as the same may be amended
from time to time.
(n) "Foreign Custodian" shall mean: (a) a banking institution or
trust company incorporated or organized under the laws of a country
other than the United States, that is regulated as such by the
country's government or an agency of the country's government; (b) a
majority-owned direct or indirect subsidiary of a U.S. Bank or bank-
holding company; or (c) any entity other than a Securities Depository
with respect to which exemptive or no-action relief has been granted
by the U. S. Securities and Exchange Commission. For the avoidance of
doubt, the term "Foreign Custodian" shall not include Euroclear,
Cedel, First Chicago Clearing Centre or any other transnational system
for the central handling of securities or equivalent book-entries
regardless of whether or not such entities are acting in a custodial
capacity with respect to Assets, Securities or other property of the
Fund.
(o) "Delegation Agreement" shall mean the provisions of Articles I,
II and V of this Agreement and any Appendices referenced therein and
attached to this Agreement.
(p) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and
principal by the government of the United States or agencies or
instrumentalities thereof ("U.S. government securities"), commercial
paper, bank certificates of deposit, bankers' acceptances and
short-term corporate obligations, where the purchase or sale of such
securities normally requires settlement in federal funds on the same
day as such purchase or sale, and repurchase and reverse repurchase
agreements with respect to any of the foregoing types of securities.
(q) "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from a person reasonably believed by the
Custodian to be an
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<PAGE>
Authorized Person or Senior Authorized Person.
(r) "Prospectus" shall mean a Fund's current prospectus and statement of
additional information relating to the registration of the Fund's
Shares under the Securities Act of 1933, as amended.
(s) "Rule 17f-5" shall mean Rule 17f-5 promulgated under Section 17(f) of
the 1940 Act as such rule (and any successor regulation) may be
amended from time to time.
(t) "Selected Countries" means the jurisdictions listed on APPENDIX B as
such may be amended from time to time in accordance with Article II.
(u) "Senior Authorized Person" shall be deemed to be Mark B. Mandich or
Mark D. Nerud
(v) "Shares" refers to shares of beneficial interest of each Fund.
(w) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
other securities, commodities interests and investments from time to
time owned by the Funds.
(x) "Securities Depository" shall mean any entity described in
subparagraph (a)(1)(ii) or paragraph (a)(6) of Rule 17f-5 or any
other recognized foreign or domestic clearing facility, book-entry
system, centralized custodial depository or similar organization. For
the avoidance of doubt, the term "Securities Depository" shall include
Euroclear, Cedel, First Chicago Clearing Centre or any other
transnational system for the central handling of securities or
equivalent book-entries regardless of whether or not such entities are
acting in a custodial capacity with respect to Assets, Securities or
other property of the Funds.
(y) "Transfer Agent" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent
functions for a Fund.
(z) "Written Instructions" shall mean a written communication actually
received by the Custodian from a person reasonably believed by the
Custodian to be an Authorized Person or Senior Authorized Person by
any system, including, without limitation, electronic transmissions,
facsimile and telex.
(aa) The "1940 Act" refers to the Investment Company Act of 1940, and the
Rules and Regulations thereunder, all as amended from time to time.
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<PAGE>
ARTICLE II
DELEGATION AGREEMENT
1. REPRESENTATIONS.
(a) STATUS OF CUSTODIAN. The Custodian represents that it is a U.S. Bank
within the meaning of paragraph (a)(7) of Rule 17f-5 under the 1940
Act.
(b) TRUST DETERMINATIONS AND AUTHORIZATIONS. The Board represents that it
has determined that it is reasonable to rely on Custodian to perform
the responsibilities delegated pursuant to this Delegation Agreement
and that it has made the delegations set forth below, subject to the
acceptance of such delegation by the Custodian on the terms and
conditions set forth in this Delegation Agreement.
(c) TRUST RESPONSIBILITIES. The Trust acknowledges and agrees that,
except as expressly set forth in this Delegation Agreement, the Trust
is solely responsible to assure that the maintenance of the each
Fund's Securities and cash (including Assets) hereunder complies with
applicable laws and regulations, including without limitation the 1940
Act and the rules and regulations promulgated thereunder and
applicable interpretations thereof or exemptions therefrom.
2. DELEGATION AND CUSTODIAN'S SERVICES.
(a) DELEGATION. Subject to the provisions of this Delegation Agreement
and the requirements of Rule 17f-5, the Board hereby delegates to, and
the Custodian hereby agrees to accept the responsibility for
selecting, contracting with and monitoring Foreign Custodians in
Selected Countries in accordance with paragraphs (c)(1), (c)(2) and
(c)(3) of Rule 17f-5. Pursuant to this delegation, the Board
authorizes the Custodian to place and maintain Assets in the care of
any Foreign Custodian(s) in the Selected Countries and to enter into,
on behalf of a Fund, such written contracts governing the Fund's
foreign custody arrangements with such Foreign Custodian(s) as the
Custodian deems appropriate.
(b) SCOPE OF DELEGATION. The delegation contained in Section 2(a) applies
only to the selection of, contracting with and monitoring of Foreign
Custodians located in Selected Countries and only with respect to
Assets held by such Foreign Custodians in Selected Countries. The
Board and the Custodian agree that nothing in this Delegation
Agreement or this Agreement as a whole shall cause or be deemed to
cause any delegation to the Custodian of any of the Board's
responsibilities with respect to Assets, Securities or other property
held in Securities Depositories or Assets held by Foreign Custodians
in jurisdictions other than Selected Countries.
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<PAGE>
(c) ADDITIONS TO APPENDIX B. APPENDIX B may be amended from time to time
to add jurisdictions by an instrument in writing signed by an
Authorized Person and the Custodian, provided that with respect to any
amendment that adds a jurisdiction to APPENDIX B, the Custodian's
responsibility and authority with respect to any jurisdiction so added
will commence at the later of (i) the time that the Custodian and the
Authorized Person have both executed such amendment, or (ii) the time
that the Custodian receives a copy of such executed amendment.
(d) DELETIONS FROM APPENDIX B. The Board may withdraw its delegation with
respect to any jurisdiction upon written notice to the Custodian. The
Custodian shall withdraw its acceptance of delegated authority with
respect to any jurisdiction upon written notice to the Board. Upon
receipt of such notice by the party to whom such notice is given, the
Custodian shall have no further responsibilities under this Delegation
Agreement with respect to the selecting, contracting with, and
monitoring of any Foreign Custodian holding Assets in the removed
jurisdiction.
(e) REPORTS TO BOARD. Custodian shall provide written reports notifying
Board of the placement of Assets with a particular Foreign Custodian
and of any material change in a Fund's foreign custody arrangements.
Such reports shall be provided to Board quarterly, except as otherwise
agreed by the Custodian and the Trust.
(f) MONITORING SYSTEM. In each case in which the Custodian has exercised
the authority delegated under this Article II, Section 2 to place
Assets with an Foreign Custodian, the Custodian is authorized to, and
shall, on behalf of a Fund, establish a system to re-assess or
re-evaluate, at least annually (i) the appropriateness of maintaining
Assets with such Foreign Custodian and (ii) the contract governing the
Fund's arrangements with such Foreign Custodian.
3. GUIDELINES AND PROCEDURES.
(a) COUNTRY RISK. In exercising its delegated authority under Article II,
Section 2, the Custodian may assume, for all purposes, that the Board
(or the Fund's investment adviser, pursuant to authority delegated by
the Board) has considered, and, pursuant to its fiduciary duties to
the Funds and the Fund's shareholders, determined to accept, such
Country Risk. In exercising its delegated authority under Article II,
Section 2, the Custodian may also assume that the Board (or the Fund's
investment adviser, pursuant to authority delegated by the Board) has,
and will continue to, monitor such Country Risk to the extent the
Board deems necessary or appropriate. Nothing in this Delegation
Agreement shall require the Custodian to make any selection or to
engage in any monitoring on behalf of a Fund (i) that would entail
consideration of Country Risk or (ii) otherwise in connection with any
Securities Depository or Foreign Custodians in jurisdictions other
than Selected Countries.
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(b) STANDARD OF CARE FOR SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. In
exercising the authority delegated under Article II, Section 2, to
place Assets with a Foreign Custodian in a Selected Country, the
Custodian shall determine that Assets will be subject to reasonable
care, based on the standards applicable to custodians in the Selected
Country in which the Assets will be held, after considering all
factors relevant to the safekeeping of such assets, including the
factors set forth in Rule 17f-5(c)(1)(i)-(iv).
(c) STANDARD FOR CONTRACTING WITH ELIGIBLE FOREIGN CUSTODIANS. In
exercising the authority delegated under Article II, Section 2, to
enter into a written contract governing a Fund's foreign custody
arrangements with a Foreign Custodian in a Selected Country, the
Custodian shall determine that such contract provides reasonable care
for Assets based on the standards applicable to Foreign Custodians in
the Selected Country. In making this determination, the Custodian
shall consider the provisions of Rule 17f-5(c)(2).
(d) STANDARD OF CARE FOR DELEGATED AUTHORITY. In exercising the authority
delegated under Article II, Section 2, the Custodian agrees to
exercise reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of the Assets would
exercise.
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ARTICLE III
CUSTODY PROVISIONS
1. APPOINTMENT OF CUSTODIAN.
(a) The Board hereby constitutes and appoints the Custodian as
custodian of all the Securities and monies at the time owned by or in
the possession of the Funds during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth
2. CUSTODY OF CASH AND SECURITIES.
(a) RECEIPT AND HOLDING OF ASSETS. The Funds will deliver or cause
to be delivered to the Custodian all Securities and monies owned by
them at any time during the period of this Custody Agreement. The
Custodian will not be responsible for such Securities and monies until
actually received by it. The Board hereby specifically authorizes the
Custodian to hold Securities, Assets or other property of the Funds
with any domestic subcustodian, Foreign Custodian or Securities
Depository. Securities and monies of the Funds deposited in a
Securities Depository will be represented in accounts which include
only assets held by the Custodian for customers, including but not
limited to accounts for which the Custodian acts in a fiduciary or
representative capacity.
(b) ACCOUNTS AND DISBURSEMENTS. The Custodian shall establish and
maintain a separate account in the name of each Fund and shall credit
to such separate accounts all monies received by it for the account of
each Fund and shall disburse the same only:
1. In payment for Securities purchased for the applicable Fund;
2. In payment of dividends or distributions with respect to the
Shares;
3. In payment of original issue or other taxes with respect to the
Shares;
4. In payment for Shares which have been redeemed by the applicable
Fund;
5. Pursuant to Written Instructions received by a Senior Authorized
Person setting forth the name and address of the person to whom the
payment is to be made, the amount to be paid and the purpose for which
payment is to be made, provided that in the event of disbursements
pursuant to this sub-section 2(b), the
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Trust shall indemnify and hold the Custodian harmless from any claims
or losses arising out of such disbursements in reliance on such
Written Instructions which it, in good faith, believes to be received
from duly Senior Authorized Persons; or
6. In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the applicable Fund, as
provided in Article III, Section 9(I) and Article V, Section 1.
(c) CONFIRMATION AND STATEMENTS. Promptly after the close of
business on each day, the Custodian shall furnish each Fund with
confirmations and a summary of all transfers to or from the account of
the Fund during said day. Where securities purchased by a Fund are in
a fungible bulk of securities registered in the name of the Custodian
(or its nominee) or shown on the Custodian's account on the books of a
Securities Depository, the Custodian shall by book-entry or otherwise
identify the quantity of those securities belonging to that Fund. At
least monthly, the Custodian shall furnish each Fund with a detailed
statement of the Securities and monies held for the Fund under this
Custody Agreement.
(d) REGISTRATION OF SECURITIES AND PHYSICAL SEPARATION. The
Custodian is authorized to hold all Securities, Assets, or other
property of each Fund in nominee name, in bearer form or in book-entry
form. The Custodian may register any Securities, Assets or other
property of each Fund in the name of the Trust or the Fund, in the
name of the Custodian, any domestic subcustodian, or Foreign
Custodian, in the name of any duly appointed registered nominee of
such entity, or in the name of a Securities Depository or its
successor or successors, or its nominee or nominees. The Custodian is
hereby authorized to deposit with, and hold Securities, Assets or
other property of the applicable Fund with any Securities Depository.
The Trust agrees to furnish to the Custodian appropriate instruments
to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee or in
the name of a Securities Depository, any Securities which it may hold
for the account of the applicable Fund and which may from time to time
be registered in the name of the Trust or the applicable Fund. The
Custodian shall hold all such Securities specifically allocated to the
applicable Fund which are not held in a Securities Depository in a
separate account for the Fund in the name of the Fund physically
segregated at all times from those of any other person or persons.
(e) SEGREGATED ACCOUNTS. Upon receipt of a Written Instruction, the
Custodian will establish segregated accounts on behalf of the
applicable Fund to hold liquid or other assets as it shall be directed
by a Written Instruction and shall increase or decrease the assets in
such segregated account only as it shall be directed by subsequent
Written Instruction.
(f) COLLECTION OF INCOME AND OTHER MATTERS AFFECTING SECURITIES.
Unless otherwise instructed to the contrary by a Written Instruction,
the Custodian by
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itself, or through the use of a Securities Depository with respect to
Securities therein deposited, shall with respect to all Securities
held for the Funds in accordance with this Agreement:
1. Collect all income due or payable, provided that the Custodian
shall not be responsible for the failure to receive payment of (or
late payment of) distribution with respect to securities or other
property held in the account;
2. Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed, retired or
otherwise become payable. Notwithstanding the foregoing, the
Custodian shall have no responsibility to the Funds for monitoring or
ascertaining any call, redemption or retirement dates with respect to
put bonds which are owned by the Funds and held by the Custodian or
its nominees. Nor shall the Custodian have any responsibility or
liability to the Funds for any loss by the Funds for any missed
payments or other defaults resulting therefrom, unless the Custodian
received timely notification from the Funds specifying the time, place
and manner for the presentment of any such put bond owned by the Funds
and held by the Custodian or its nominee. The Custodian shall not be
responsible and assumes no liability for the accuracy or completeness
of any notification the Custodian may furnish to the Funds with
respect to put bonds;
3. Surrender Securities in temporary form for definitive Securities;
4. Promptly execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or regulations
of any other taxing authority now or hereafter in effect; and
5. Hold directly, or through a Securities Depository with respect to
Securities therein deposited, for the account of the applicable Fund
all rights and similar Securities issued with respect to any
Securities held by the Custodian hereunder for that Fund.
(g) DELIVERY OF SECURITIES AND EVIDENCE OF AUTHORITY. Upon receipt
of a Written Instruction and not otherwise, except for subparagraphs
5, 6, 7, and 8 of this section 2(g) which may be effected by Oral or
Written Instructions, the Custodian, directly or through the use of a
Securities Depository, shall:
1. Execute and promptly deliver or cause to be executed and
delivered to such persons as may be designated in such Written
Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the applicable Fund as owner of
any Securities may be exercised;
2. Deliver or cause to be delivered any Securities held for the
applicable Fund in exchange for other Securities or cash issued or
paid in connection with
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the liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
3. Deliver or cause to be delivered any Securities held for the
applicable Fund to any protective committee, reorganization committee
or other person in connection with the reorganization, refinancing,
merger, consolidation or recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this Custody
Agreement in the separate account for the Fund such certificates of
deposit, interim receipts or other instruments or documents as may be
issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of the
applicable Fund and take such other steps as shall be stated in
Written Instructions to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation
or recapitalization of the Fund;
5. Deliver Securities upon sale of such Securities for the account
of the applicable Fund pursuant to Section 3;
6. Deliver Securities upon the receipt of payment in connection with
any repurchase agreement related to such Securities entered into by
the applicable Fund;
7. Deliver Securities owned by the applicable Fund to the issuer
thereof or its agent when such Securities are called, redeemed,
retired or otherwise become payable; provided, however, that in any
such case the cash or other consideration is to be delivered to the
Custodian. Notwithstanding the foregoing, the Custodian shall have no
responsibility to the Fund for monitoring or ascertaining any call,
redemption or retirement dates with respect to the put bonds which are
owned by the Fund and held by the Custodian or its nominee. Nor shall
the Custodian have any responsibility or liability to the Fund for any
loss by the Fund for any missed payment or other default resulting
therefrom unless the Custodian received timely notification from the
Fund specifying the time, place and manner for the presentment of any
such put bond owned by the Fund and held by the Custodian or its
nominee. The Custodian shall not be responsible and assumes no
liability to the Fund for the accuracy or completeness of any
notification the Custodian may furnish to the Fund with respect to put
bonds;
8. Deliver Securities for delivery in connection with any loans of
Securities made by the Funds but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian and the
Funds which may be in the form of cash or U.S. government securities
or a letter of credit;
9. Deliver Securities for delivery as security in connection with
any
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borrowings by the Funds requiring a pledge of the applicable Fund's
assets, but only against receipt of amounts borrowed;
10. Deliver Securities upon receipt of Written Instructions from a
Fund for delivery to the Transfer Agent or to the holders of Shares in
connection with distributions in kind, as may be described from time
to time in the Fund's Prospectus, in satisfaction of requests by
holders of Shares for repurchase or redemption;
11. Deliver Securities as collateral in connection with short sales
by a Fund of common stock for which the Fund owns the stock or owns
preferred stocks or debt securities convertible or exchangeable,
without payment or further consideration, into shares of the common
stock sold short;
12. Deliver Securities for any purpose expressly permitted by and in
accordance with procedures described in the Trust's Prospectus; and
13. Deliver Securities for any other proper business purpose, but
only upon receipt of, in addition to Written Instructions, a certified
copy of a resolution of the Board signed by an Authorized Person and
certified by the Secretary of the Funds, specifying the Securities to
be delivered, setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper business purpose, and
naming the person or persons to whom delivery of such Securities shall
be made.
Notwithstanding anything in this Agreement to the contrary, the Custodian
shall not be liable for the acts or omissions of any agent appointed under
paragraph (f) of Section 9 pursuant to Oral or Written Instructions
including, but not limited to, any broker-dealer or other entity designated
by a Fund or its investment advisor to hold any Securities or other
property of the Fund as collateral or otherwise pursuant to any investment
strategy.
(h) ENDORSEMENT AND COLLECTION OF CHECKS, ETC. The Custodian is
hereby authorized to endorse and collect all checks, drafts or other
orders for the payment of money received by the Custodian for the
account of the applicable Fund.
3. SETTLEMENT OF FUNDS TRANSACTIONS.
(a) CUSTOMARY PRACTICES. Notwithstanding anything to the contrary in this
Agreement, the Custodian is authorized to settle transactions in
accordance with trading and processing practices customary in the
jurisdiction or market where the transaction occurs. The Trust
acknowledges that this may, in certain circumstances, require the
delivery of cash or Securities (or other property) without the
concurrent receipt of Securities (or other property) or cash and, in
such circumstances, the Trust shall have responsibility for
nondelivery of Securities or other property (or late delivery)
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or nonreceipt of payments of monies (or late payment) by the
counterparty.
(b) CONTRACTUAL INCOME. The Custodian shall credit the applicable Fund
with income and maturity proceeds on securities on contractual payment
date net of any taxes or upon actual receipt as agreed between the
Custodian and the Fund. To the extent the Fund and the Custodian have
agreed to credit income on contractual payment date, the Custodian may
reverse such accounting entries with back value to the contractual
payment date if the Custodian reasonably believes that it will not
receive such amount.
(c) CONTRACTUAL SETTLEMENT. The Custodian will attend to the settlement
of securities transactions on the basis of either contractual
settlement date accounting or actual settlement date accounting as
agreed between the Trust and the Custodian. To the extent the Trust
and the Custodian have agreed to settle certain securities
transactions on the basis of contractual settlement date accounting,
the Custodian may reverse with back value to the contractual
settlement date any entry relating to such contractual settlement
where the related transaction remains unsettled in accordance with
established procedures.
4. LENDING OF SECURITIES.
The Custodian may lend the assets of the Funds in accordance with the terms
and conditions of a separate securities lending agreement.
5. PAYMENT OF DIVIDENDS OR DISTRIBUTIONS.
(a) The Trust shall furnish to the Custodian the vote of the Board
certified by the Secretary (i) authorizing the declaration of
distributions on a specified periodic basis and authorizing the
Custodian to rely on Oral or Written Instructions specifying the date
of the declaration of such distribution, the date of payment thereof,
the record date as of which shareholders entitled to payment shall be
determined, the amount payable per share to the shareholders of record
as of the record date and the total amount payable to the Transfer
Agent on the payment date, or (ii) setting forth the date of
declaration of any distribution by the Funds, the date of payment
thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per share to the shareholders
of record as of the record date and the total amount payable to the
Transfer Agent on the payment date.
(b) Upon the payment date specified in such vote, Oral Instructions
or Written Instructions, as the case may be, the Custodian shall pay
out the total amount payable to the Transfer Agent of the Trust.
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6. SALE AND REDEMPTION OF SHARES OF THE FUNDS.
(a) Whenever a Fund shall sell any Shares, that Fund shall deliver or
cause to be delivered to the Custodian a Written Instruction duly
specifying:
1. The number of Shares sold, trade date, and price; and
2. The amount of money to be received by the Custodian for the sale
of such Shares.
The Custodian understands and agrees that Written Instructions may be
furnished subsequent to the purchase of Shares and that the
information contained therein will be derived from the sales of Shares
as reported to the Fund by the Transfer Agent.
(b) Upon receipt of money from the Transfer Agent, the Custodian
shall credit such money to the separate account of the applicable
Fund.
(c) Upon issuance of any Shares in accordance with the foregoing
provisions of this Section 6, the Custodian shall pay all original
issue or other taxes required to be paid in connection with such
issuance upon the receipt of a Written Instruction specifying the
amount to be paid.
(d) Except as provided hereafter, whenever any Shares are redeemed, a
Fund shall cause the Transfer Agent to promptly furnish to the
Custodian Written Instructions, specifying:
1. The number of Shares redeemed; and
2. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information contained in
such Written Instructions will be derived from the redemption of
Shares as reported to the Fund by the Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth the
number of Shares received by the Transfer Agent for redemption and
that such Shares are valid and in good form for redemption, the
Custodian shall make payment to the Transfer Agent of the total amount
specified in a Written Instruction issued pursuant to paragraph (d) of
this Section 6.
(f) Notwithstanding the above provisions regarding the redemption of
Shares, whenever such Shares are redeemed pursuant to any check
redemption privilege which may from time to time be offered by the
Funds, the Custodian, unless otherwise instructed by a Written
Instruction shall, upon receipt of advice from
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the Funds or its agent stating that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor
the check presented as part of such check redemption privilege out of
the monies specifically allocated to the Funds in such advice for such
purpose.
7. INDEBTEDNESS.
(a) The Trust will cause to be delivered to the Custodian by any bank
(excluding the Custodian) from which the a Fund borrows money for
temporary administrative or emergency purposes using Securities as
collateral for such borrowings, a notice or undertaking in the form
currently employed by any such bank setting forth the amount which
such bank will loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian Written
Instructions stating with respect to each such borrowing: (1) the
name of the bank; (2) the amount and terms of the borrowing, which may
be set forth by incorporating by reference an attached promissory
note, duly endorsed by the Funds, or other loan agreement; (3) the
time and date, if known, on which the loan is to be entered into (the
"borrowing date"); (4) the date on which the loan becomes due and
payable; (5) the total amount payable to the Funds on the borrowing
date; (6) the market value of Securities to be delivered as collateral
for such loan, including the name of the issuer, the title and the
number of shares or the principal amount of any particular Securities;
(7) whether the Custodian is to deliver such collateral through a
Securities Depository; and (8) a statement that such loan is in
conformance with the 1940 Act and the Trust's Prospectus.
(b) Upon receipt of the Written Instruction referred to in
subparagraph (a) above, the Custodian shall deliver on the borrowing
date the specified collateral and the executed promissory note, if
any, against delivery by the lending bank of the total amount of the
loan payable, provided that the same conforms to the total amount
payable as set forth in the Written Instruction. The Custodian may,
at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein
given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver as additional collateral in
the manner directed by the Fund from time to time such Securities as
may be specified in Written Instruction to collateralize further any
transaction described in this Section 7. The Fund shall cause all
Securities released from collateral status to be returned directly to
the Custodian, and the Custodian shall receive from time to time such
return of collateral as may be tendered to it. In the event that the
Fund fails to specify in Written Instruction all of the information
required by this Section 7, the Custodian shall not be under any
obligation to deliver any Securities. Collateral returned to the
Custodian shall be held hereunder as it was prior to being used as
collateral.
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8. PERSONS HAVING ACCESS TO ASSETS OF THE FUNDS.
(a) No trustee or agent of the Trust, and no officer, director,
employee or agent of the Trust's investment adviser, of any
sub-investment adviser of the Trust, or of the Trust's administrator,
shall have physical access to the assets of the Funds held by the
Custodian or be authorized or permitted to withdraw any investments of
the Funds, nor shall the Custodian deliver any assets of the Funds to
any such person. No officer, director, employee or agent of the
Custodian who holds any similar position with the Trust's investment
adviser, with any sub-investment adviser of the Trust or with the
Trust's administrator shall have access to the assets of the Funds.
(b) Nothing in this Section 8 shall prohibit any duly authorized
officer, employee or agent of the Trust, including the Trust's
independent public accountants or any duly authorized officer,
director, employee or agent of the investment adviser, of any
sub-investment adviser of the Funds or of the Fund's administrator,
from giving Oral Instructions or Written Instructions to the Custodian
or executing a Certificate so long as it does not result in delivery
of or access to assets of the Funds prohibited by paragraph (a) of
this Section 8.
9. CONCERNING THE CUSTODIAN.
(a) STANDARD OF CONDUCT. Notwithstanding any other provision of this
Custody Agreement, the Custodian shall not be liable for any loss or
damage, including counsel fees, resulting from its action or omission
to act or otherwise, except for any such loss or damage arising out of
the negligence or willful misconduct of the Custodian. The Custodian
will use reasonable care in the performance of its duties under this
contract. The Custodian may, with respect to questions of law, apply
for and obtain the advice and opinion of counsel to the Trust or of
its own counsel, at the expense of the Trust, and shall be fully
protected with respect to anything done or omitted by it in good faith
in conformity with such advice or opinion.
(b) LIMIT OF DUTIES. Without limiting the generality of the
foregoing, the Custodian shall be under no duty or obligation to
inquire into, and shall not be liable for:
1. The validity of the issue of any Securities purchased by the
Funds, the legality of the purchase thereof, or the propriety of the
amount paid therefor;
2. The legality of the sale of any Securities by the Funds or the
propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any Shares, or the
sufficiency of the
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amount to be received therefor;
4. The legality of the redemption of any Shares, or the propriety of
the amount to be paid therefor;
5. The legality of the declaration or payment of any distribution of
the Funds;
6. The legality of any borrowing for temporary administrative or
emergency purposes.
(c) NO LIABILITY UNTIL RECEIPT. The Custodian shall not be liable
for, or considered to be the Custodian of, any money, whether or not
represented by any check, draft, or other instrument for the payment
of money, received by it on behalf of the Funds until the Custodian
actually receives and collects such money.
(d) AMOUNTS DUE FROM TRANSFER AGENT. The Custodian shall not be
under any duty or obligation to take action to effect collection of
any amount due to the Funds from the Transfer Agent nor to take any
action to effect payment or distribution by the Transfer Agent of any
amount paid by the Custodian to the Transfer Agent in accordance with
this Custody Agreement.
(e) COLLECTION WHERE PAYMENT REFUSED. The Custodian shall not be
under any duty or obligation to take action to effect collection of
any amount, if the Securities upon which such amount is payable are in
default, or if payment is refused after due demand or presentation,
unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such
action.
(f) APPOINTMENT OF SUBCUSTODIANS. (i) The Custodian is hereby
authorized to appoint one or more domestic subcustodians (which may be
an affiliate of the Custodian) to hold Securities and monies at any
time owned by the Funds. The Custodian is also hereby authorized to
place Assets with any Foreign Custodian located in a jurisdiction
which is not a Selected Country and with Euroclear, Cedel, First
Chicago Clearing Centre or any other transnational depository.
(g) NO DUTY TO ASCERTAIN AUTHORITY. The Custodian shall not be under
any duty or obligation to ascertain whether any Securities at any time
delivered to or held by it for the Funds are such as may properly be
held by the Funds under the provisions of the Master Trust Agreement
and the Prospectus.
(h) RELIANCE ON CERTIFICATES AND INSTRUCTIONS. The Custodian shall
be entitled to rely upon any Certificate, notice or other instrument
in writing received by the Custodian and reasonably believed by the
Custodian to be genuine and to be signed by an officer or Authorized
Person or a Senior Authorized Person. The Custodian shall be entitled
to rely upon any Written Instructions or Oral
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Instructions actually received by the Custodian pursuant to the
applicable Sections of this Agreement and reasonably believed by the
Custodian to be genuine and to be given by such person. The Funds
agree to forward to the Custodian Written Instructions from an
Authorized Person or Senior Authorized Person confirming such Oral
Instructions in such manner so that such Written Instructions are
received by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business on the same day that such Oral
Instructions are given to the Custodian. The Funds agree that the
fact that such confirming instructions are not received by the
Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Funds.
The Funds agree that the Custodian shall incur no liability to the
Funds in acting upon Oral Instructions given to the Custodian
hereunder concerning such transactions provided such instructions
reasonably appear to have been received from a duly Authorized Person
or Senior Authorized Person. The Custodian shall be under no duty to
question any direction of an Authorized Person or a Senior Authorized
Person with respect to the portion of the account over which such
person has authority, to review any property held in the account, to
make any suggestions with respect to the investment and reinvestment
of the assets in the account, or to evaluate or question the
performance of any Authorized Person or Senior Authorized Person. The
Custodian shall not be responsible or liable for any diminution of
value of any securities or other property held by the Custodian.
(i) OVERDRAFT FACILITY AND SECURITY FOR PAYMENT. In the event that the
Custodian is directed by Written Instruction (or Oral Instructions
confirmed in writing in accordance with Section 9(h) hereof) to make
any payment or transfer of monies on behalf of the Funds for which
there would be, at the close of business on the date of such payment
or transfer, insufficient monies held by the Custodian on behalf of
the Funds, the Custodian may, in its sole discretion, provide an
overdraft (an "Overdraft") to the Funds in an amount sufficient to
allow the completion of such payment or transfer. The Custodian shall
promptly notify the Funds (an "Overdraft Notice") of any Overdraft by
facsimile transmission or in such other manner as the Funds and the
Custodian may agree. Any Overdraft provided hereunder: (a) shall be
payable on the next Business Day after receipt of an Overdraft Notice,
unless otherwise agreed by the Funds and the Custodian; and (b) shall
accrue interest from the date of the Overdraft to the date of payment
in full by the Funds at a rate agreed upon from time to time, by the
Custodian and the Funds. The Custodian and the Funds acknowledge that
the purpose of such Overdraft is to temporarily finance the purchase
of Securities for prompt delivery in accordance with the terms hereof,
to meet unanticipated or unusual redemptions, to allow the settlement
of foreign exchange contracts or to meet other emergency expenses not
reasonably foreseeable by the Funds. To secure payment of any
Overdraft, the Funds hereby grant to the Custodian a continuing
security interest in and right of setoff against the Securities and
cash in the Fund's accounts from time to time in the full amount of
such Overdraft. Should the Funds fail to pay promptly any amounts
owed hereunder, the Custodian shall be
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entitled to use available cash in the applicable Fund's account and to
liquidate Securities in the account as is necessary to meet the Fund's
obligations under the Overdraft. In any such case, and without
limiting the foregoing, the Custodian shall be entitled to take such
other actions(s) or exercise such other options, powers and rights as
the Custodian now or hereafter has as a secured creditor under the
Massachusetts Uniform Commercial Code or any other applicable law.
ARTICLE IV
INFORMATION SERVICES AGREEMENT
The following sets forth our agreement with respect to the delivery of certain
information to the Board or its agents as requested by the Board from time to
time.
1. PROVISIONS OF INFORMATION
In accordance with the provisions of this Information Services Agreement, the
Custodian agrees to provide to the Board, or at the direction of the Board,
to the Trust's investment advisers, the information set forth in Article
IV, Section 2 with respect to Foreign Custodians and Securities
Depositories which hold Securities, Assets, or other property of the Funds
and the systems and environment for securities processing in the
jurisdiction in which such Foreign Custodians or Securities Depositories
are located. The Custodian shall provide only that portion of such
information as is reasonably available to it.
2. INFORMATION TO BE PROVIDED
COUNTRY INFORMATION
- Settlement Environment
- Depository
- Settlement Period
- Trading
- Security Registration
- Currency
- Foreign Investment Restrictions
- Entitlements
- Proxy Voting
- Foreign Taxation
DEPOSITORY INFORMATION (IF APPLICABLE TO THE COUNTRY)
- Name
- Information relative to Determining Compulsory or Voluntary Status of
the Facility
- Type of Entity
- Ownership Structure
- Operating History
- Eligible Instruments
19
<PAGE>
- Security Form
- Financial Data
- Regulator
- External Auditor
SUBCUSTODIAN INFORMATION
- Financial Information
- Regulator
- External Auditor
- How Securities are Held
- Operational Capabilities
- Insurance Coverage
INFORMATION ON THE FOLLOWING LEGAL QUESTIONS
- Would the applicable foreign law restrict the access afforded the
independent public accountants of the Funds to books and records kept
by a foreign custodian?
- Would the applicable foreign law restrict the ability of the Funds to
recover its assets in the event of bankruptcy of the foreign custodian?
- Would the applicable foreign law restrict the ability of the Funds to
recover assets that are lost while under the control of the foreign
custodian?
- What are the foreseeable difficulties in converting the Fund's cash into
U.S. dollars?
3. LIABILITY AND WARRANTIES
The Custodian will use reasonable best efforts to ensure that the information
provided is accurate. However, due to the nature and source of this
information, and the necessity of relying on various information sources, most
of which are external to the Custodian, the Custodian shall have no liability
for direct or indirect use of such information. The Custodian makes no other
warranty or condition, either express or implied, as to the merchantability or
fitness for any particular purpose of the information provided under this
Article IV.
ARTICLE V
ADDITIONAL PROVISIONS
1. COMPENSATION.
(a) The Custodian shall be entitled to receive, and the Trust agrees
to pay to the Custodian, such compensation as may be agreed upon from
time to time between
20
<PAGE>
the Custodian and the Trust. The Custodian may charge against any
monies held on behalf of the Funds pursuant to this Agreement such
compensation and any reasonable expenses incurred by the Custodian in
the performance of its duties pursuant to this Agreement. The
Custodian shall also be entitled to charge against any money held on
behalf of the Funds pursuant to this Agreement the amount of any loss,
damage, liability or expense incurred with respect to the Funds,
including counsel fees, for which it shall be entitled to
reimbursement under the provisions of this Agreement. The expenses
which the Custodian may charge against such account include, but are
not limited to, the expenses of domestic subcustodians and Foreign
Custodians incurred in settling transactions outside of Boston,
Massachusetts or New York City, New York involving the purchase and
sale of Securities.
(b) The Trust will compensate the Custodian for its services rendered
under this Agreement in accordance with the fees set forth in a
separate Fee Schedule which schedule may be modified by the Custodian
upon not less than sixty days prior written notice to the Trust.
(c) Any compensation agreed to hereunder may be adjusted from time to
time by a revised Fee Schedule, dated and signed by a Senior
Authorized Person or authorized representative of each party hereto.
(d) The Custodian will bill the Trust as soon as practicable after
the end of each calendar month. The Trust will promptly pay to the
Custodian the amount of such billing. In making payments to service
providers pursuant to Written Instructions, the Trust acknowledges
that the Custodian is acting as a paying agent and not as the payor,
for tax information reporting and withholding purposes.
2. INSOLVENCY OF ELIGIBLE FOREIGN CUSTODIANS.
The Custodian shall not be responsible or liable for any losses or
damages suffered by the Funds arising as a result of the insolvency of any
Foreign Custodian except with respect to any Foreign Custodian in any
Selected Country which the Custodian appointed in accordance with the
provisions of Article II but only to the extent that the Custodian failed
to comply with the standard of care set forth in Article II with respect to
the selection and monitoring of such Foreign Custodian.
3. LIABILITY FOR DEPOSITORIES.
The Custodian shall not be responsible for any losses resulting from
the deposit or maintenance of Securities, Assets or other property of the
Funds with any Securities Depository.
21
<PAGE>
4. DAMAGES.
Under no circumstances shall the Custodian be liable for any indirect,
consequential or special damages with respect to its role as Delegate,
Custodian or information vendor.
5. LIMITATION OF LIABILITY.
The Funds and the Custodian agree that the obligations of the Trust under
this Agreement shall not be binding upon any of the Trustees, shareholders,
nominees, officers, employees or agents, whether past, present or future,
of the Funds, individually, but are binding only upon the assets and
property of the Trust, as provided in the Master Trust Agreement. The
execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust,
acting as such. Neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them or any shareholder of the Funds individually or to impose any
liability on any of them or any shareholder of the Funds personally, but
shall bind only the assets and property of the Trust as provided in the
Master Trust Agreement.
6. TERM AND TERMINATION.
(a) This Agreement and any portion thereof shall become effective on
the date first set forth above (the "Effective Date") and shall
continue in effect thereafter until such time as this Agreement may be
terminated in accordance with the provisions hereof.
(b) Either of the parties hereto may terminate this Agreement as a
whole or may terminate either the Delegation Agreement or the
Information Services Agreement individually or the Delegation
Agreement collectively by giving to the other party a notice in
writing specifying the date and scope of such termination, which shall
be not less than 60 days after the date of receipt of such notice. In
the event such notice is given by the Trust, it shall be accompanied
by a certified vote of the Board, electing to terminate this Agreement
or the applicable portion thereof and designating a successor, which
shall be a person qualified to so act under the 1940 Act if necessary.
In the event such notice is given by the Custodian of any
termination which include the Custody Agreement, the Trust shall, on
or before the termination date, deliver to the Custodian a certified
vote of the Board, designating a successor custodian or custodians.
In the absence of such designation by the Trust, the Custodian may
designate a successor custodian, which shall be a person qualified to
so act under the 1940 Act. If the Trust fails to designate a
successor custodian, the Trust shall upon the date specified in the
notice of termination of this Agreement and upon the delivery by the
Custodian of all Securities and monies
22
<PAGE>
then owned by the Funds, be deemed to be its own custodian and the
Custodian shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement or the portion so terminated, other than
the duty with respect to Securities held in the Book-Entry System
which cannot be delivered to the Funds.
(c) Upon the date set forth in such notice under paragraph (b) of
this Section 6, this Agreement or portion thereof shall terminate to
the extent specified in such notice, and if the Custody Agreement is
terminated the Custodian shall upon receipt of a notice of acceptance
by the successor custodian on that date deliver directly to the
successor custodian all Securities and monies then held by the
Custodian on behalf of the Funds, after deducting all fees, expenses
and other amounts for the payment or reimbursement of which it shall
then be entitled.
7. FORCE MAJEURE.
Notwithstanding anything in this Agreement to the contrary, neither the
Custodian nor the Trust shall be liable for any losses resulting from or
caused by events or circumstances beyond its reasonable control, including,
but not limited to, losses resulting from nationalization, strikes,
expropriation, devaluation, revaluation, confiscation, seizure,
cancellation, destruction or similar action by any governmental authority,
de facto or de jure; or enactment, promulgation, imposition or enforcement
by any such governmental authority of currency restrictions, exchange
controls, taxes, levies or other charges affecting the Fund's property; or
the breakdown, failure or malfunction of any utilities or
telecommunications systems; or any order or regulation of any banking or
securities industry including changes in market rules and market conditions
affecting the execution or settlement of transactions; or acts of war,
terrorism, insurrection or revolution; or any other similar or third-party
event. This Section shall survive the termination of this Agreement.
8. INSPECTION OF BOOKS AND RECORDS.
The books and records of the Custodian shall be open to inspection and
audit at reasonable times by officers and auditors employed by the Trust at
its own expense and with prior written notice to the Custodian, and by the
appropriate employees of the Securities and Exchange Commission.
9. MISCELLANEOUS.
(a) Annexed hereto as APPENDIX C is a certification signed by the
Secretary of the Trust setting forth the names and the signatures of
the present Authorized and Senior Authorized Persons. The Trust
agrees to furnish to the Custodian a new certification in similar form
in the event that any such present person ceases to be such an
Authorized Person or Senior Authorized Person or in the event that
other or additional persons are elected or appointed. Until such new
certification shall be received, the Custodian shall be fully
protected in acting under the provisions
23
<PAGE>
of this Agreement upon Oral Instructions or signatures of the present
Authorized and Senior Authorized Persons as set forth in the last
delivered certification.
(b) Annexed hereto as APPENDIX A is a certification signed by the
Secretary of the Trust setting forth the names and the signatures of
the present officers of the Trust. The Trust agrees to furnish to the
Custodian a new certification in similar form in the event any such
present officer ceases to be an officer of the Trust or in the event
that other or additional officers are elected or appointed. Until
such new certification shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement upon the
signature of an officer as set forth in the last delivered
certification.
(c) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently
given if addressed to the Custodian and mailed or delivered to it at
its offices at One Boston Place, Boston, Massachusetts 02108 or at
such other place as the Custodian may from time to time designate in
writing.
(d) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Trust, shall be sufficiently
given if addressed to the Trust and mailed or delivered to it at its
offices at 225 West Wacker Drive, Suite 1200, Chicago, IL 60606 or at
such other place as the Trust may from time to time designate in
writing.
(e) Except as provided in Article II, Section 2 this Agreement may
not be amended or modified in any manner except by a written agreement
executed by both parties with the same formality as this Agreement (i)
authorized, or ratified and approved by a vote of the Board of
Trustees of the Trust, including a majority of the members of the
Board of Trustees of the Trust who are not "interested persons" of the
Fund (as defined in the 1940 Act), or (ii) authorized, or ratified and
approved by such other procedures as may be permitted or required by
the 1940 Act.
(f) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trust
without the written consent of the Custodian, or by the Custodian
without the written consent of the Trust authorized or approved by a
vote of the Board of Trustees of the Trust provided, however, that the
Custodian may assign the Agreement to an Affiliated Person and any
attempted assignment without such written consent shall be null and
void. Nothing in this Agreement shall give or be construed to give or
confer upon any third party any rights hereunder.
(g) The Fund represents that a copy of the Master Trust Agreement is
on file with the Secretary of the Commonwealth of Massachusetts and
with the Boston
24
<PAGE>
City Clerk.
(h) This Agreement shall be construed in accordance with the laws of
The Commonwealth of Massachusetts.
(i) The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
(j) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
(k) Each party represents to the other that it has all necessary
power and authority, and has obtained any consent or approval
necessary to permit it, to enter into and perform under this Agreement
and that this Agreement does not violate, breach, give rise to a
default or right of termination under or otherwise conflict with any
applicable law, regulation, ruling, decree or other governmental
authorization or any contract to which it is a party or by which any
of its assets is bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective representatives duly authorized as of the day and year first
above written.
PPM AMERICA FUNDS
By: /s/ Mark Mandich
Name: Mark Mandich
Title: CFO
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By: /s/ Christopher Healy
Name: Christopher Healy
Title: Vice President
25
<PAGE>
APPENDIX A
I, Mark D. Nerud, the Secretary of the PPM America Funds, a business trust
organized under the laws of the Commonwealth of Massachusetts (the "Trust"), do
hereby certify that:
The following individuals have been duly authorized as Authorized Persons
to give Oral Instructions and Written Instructions on behalf of the Trust and
each Fund thereof and the specimen signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
---- -------- ---------
Mark B. Mandich* Chief Financial /s/ Mark B. Mandich
Officer and Treasurer
Mark D. Nerud* Secretary /s/ Mark D. Nerud
JoAnne Bianco Vice President /s/ JoAnne Bianco
Richard Brody Vice President /s/ Richard Brody
Heather Kang Employee of PPM America, Inc. /s/ Heather Kang
Sarah Williams Employee of PPM America, Inc. /s/ Sarah Williams
Bob Graham Employee of PPM America, Inc. /s/ Bob Graham
Sam Fusco Employee of PPM America, Inc. /s/ Sam Fusco
Tuan Hoang Employee of PPM America, Inc. /s/ Tuan Hoang
Craig Close Employee of PPM America, Inc. /s/ Craig Close
Sylvia Fulk Employee of PPM America, Inc. /s/ Sylvia Fulk
Sheridan Auth Employee of PPM America, Inc. /s/ Sheridan Auth
David Grzesiak Employee of PPM America, Inc. /s/ David Grzesiak
Leandra Knes Employee of PPM America, Inc. /s/ Leandra Knes
Matt McDonald Employee of PPM America, Inc. /s/ Matt McDonald
Samuel Yee Employee of PPM America, Inc. /s/ Samuel Yee
Tim Bui Employee of PPM America, Inc. /s/ Tim Bui
* Senior Authorized Person
By: /s/ Mark Nerud
Secretary
Dated: 12/10/98
APPENDIX B
SELECTED COUNTRIES
ARGENTINA KOREA, REPUBLIC OF
AUSTRALIA LUXEMBOURG
AUSTRIA MALAYSIA
BANGLADESH MAURITIUS
BELGIUM MEXICO
BERMUDA NAMIBIA
BOTSWANA THE NETHERLANDS
BRAZIL NEW ZEALAND
CANADA NORWAY
CHILE PAKISTAN
CHINA, PEOPLES' REPUBLIC OF PERU
COLOMBIA THE PHILIPPINES
CYPRUS POLAND
THE CZECH REPUBLIC PORTUGAL
DENMARK SINGAPORE
EGYPT SLOVAK REPUBLIC
FINLAND SOUTH AFRICA
FRANCE SPAIN
GERMANY SRI LANKA
GHANA SWEDEN
GREECE SWITZERLAND
HONG KONG TAIWAN
HUNGARY THAILAND
INDIA TURKEY
INDONESIA UNITED KINGDOM
IRELAND URUGUAY
ISRAEL VENEZUELA
ITALY ZAMBIA
JAPAN ZIMBABWE
KENYA
26
<PAGE>
APPENDIX C
I, Mark D. Nerud, the Secretary of the PPM America Funds, a business trust
organized under the laws of the Commonwealth of Massachusetts (the "Trust"), do
hereby certify that:
The following individuals serve in the following positions with the Fund
and each individual has been duly elected or appointed to each such position and
qualified therefor in conformity with the Trust's Master Trust Agreement and the
specimen signatures set forth opposite their respective names are their true and
correct signatures:
Name Position Signature
---- -------- ---------
Russell W. Swansen President /s/ Russell W. Swansen
Mark B. Mandich Chief Financial /s/ Mark B. Mandich
Officer and Treasurer
Mark D. Nerud Secretary and Assistant Treasurer /s/ Mark D. Nerud
Richard S. Brody Vice President /s/ Richard S. Brody
James J. White, Jr. Vice President /s/ James J. White, Jr.
JoAnne M. Bianco Vice President /s/ JoAnne M. Bianco
By: /s/ Mark D. Nerud
Secretary
Dated: 12/10/98
27
<PAGE>
Exhibit (h)(1)
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT, made as of the 10th day of December, 1998, by and
between PPM America Funds ("Trust"), a Massachusetts business trust, and Jackson
National Financial Services, LLC ("Agent"), a Michigan limited liability
company.
WITNESSETH:
WHEREAS, the Trust wishes to retain Agent to be its Accounting Services
Agent to furnish services to the investment portfolios of the Trust listed on
Schedule A (individually, a "Fund" and collectively, the "Funds") upon and
subject to the terms and provisions of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree as follows:
A. APPOINTMENT OF AGENT AS ACCOUNTING SERVICES AGENT FOR THE FUNDS;
ACCEPTANCE.
(1) The Trust hereby appoints Agent to act as Accounting Services
Agent for the Funds upon and subject to the terms and provisions of this
Agreement. In connection with such appointment, the Trust shall provide Agent
with such documents related to the operations of the Trust which Agent may
reasonably request.
(2) Agent hereby accepts the appointment as Accounting Services Agent
for the Funds and agrees to act as such upon and subject to the terms and
provisions of this Agreement.
B. DUTIES OF THE AGENT.
Agent shall perform such duties as set forth in this Paragraph B as agent
for and on behalf of the Funds.
(1) Agent shall provide the services specified on Schedule B.
(2) Agent shall maintain and keep current the accounts, books,
records, and other documents relating to the Funds' financial and portfolio
transactions as may be required by rules and regulations of the Securities and
Exchange Commission adopted under Section 31(a) of the Investment Company Act of
1940, as amended (the "Act").
(3) Agent shall cause the subject records of the Funds to be
maintained and preserved pursuant to the requirements under the Act.
(4) Agent shall price daily the value of shares of the Funds.
<PAGE>
(5) Agent shall maintain duplicate copies of, or information from
which copies of, the records necessary for the preparation of the Funds'
financial statements and valuations of the Funds' assets may be reconstructed.
Such duplicate copies or information shall be maintained at a location other
than where Agent performs its normal duties hereunder so that in the event the
records established and maintained pursuant to the foregoing provisions of this
Section B are damaged or destroyed, Agent shall be able to provide the
bookkeeping and accounting services and assistance specified in this Section B.
(6) Agent may consult with the Trust's officers, independent
accountants, legal counsel, custodian and transfer and dividend disbursing
agent(s) in establishing the accounting policies of the Trust. It is the
responsibility of the Trust to notify the agent in a timely manner of any change
to any rule, regulation, law or statute that will affect the services to be
provided hereunder. Without limiting the obligations or responsibilities of
any of the parties hereto, the Agent agrees that all services provided hereunder
are subject to review and correction by the Trust's accountants and legal
counsel, and the services provided by Agent shall not constitute the practice of
public accountancy or law.
C. COMPENSATION OF THE AGENT.
The Trust agrees to pay to Agent for its services under this Agreement:
(1) $27,000 per Fund per year, plus
(2) .04% of the average daily net assets of each Fund.
Such fee is accrued daily and payable monthly on the last day of each
month.
In addition, Agent shall be reimbursed by the Trust for the reasonable
out-of-pocket expenses in incurred by it in connection with this Agreement.
D. RIGHT OF FUND TO INSPECT, AND OWNERSHIP OF RECORDS.
The Trust will have the right under this Agreement to perform on-site
inspection of records and accounts, and audits directly pertaining to the Funds'
accounting and portfolio records maintained by Agent hereunder at Agent's
facilities. Agent will cooperate with the Trust's independent accountants or
representatives of appropriate regulatory agencies and promptly furnish all
reasonably requested records and data. Agent acknowledges that these records
are the property of the Trust, and that it will surrender to the Trust all such
records promptly on request.
E. INSTRUCTIONS
At any time Agent may apply to any officer of the Trust for instructions
and may consult with legal counsel for the Trust as directed by the Trust, or
its own outside legal counsel or the outside auditors for the Trust, at the
expense of the Trust with respect to any matter arising in
2
<PAGE>
connection with the services to be performed by Agent under this Agreement. The
Agent shall not be held to have notice of any change of authority of any person
until receipt of written notice thereof from the Fund.
F. STANDARD OF CARE; INDEMNIFICATION.
(1) Agent will at all times exercise due diligence and good faith in
performing its duties hereunder. Agent will make every reasonable effort and
take all reasonably available measures to assure the adequacy of its personnel,
facilities and equipment as well as the accurate performance of all services to
be performed by it hereunder within, at a minimum, the time requirements of any
applicable statutes, rules or regulations and in conformity with Trust's
Declaration of Trust and representations made in the Trust's current
registration statement as filed with the Securities and Exchange Commission and
provided to Agent by the Trust.
(2) Agent shall be responsible for the performance of only such
duties as are set forth herein. The Agent shall have no liability for any
losses, costs, damages and expenses, including reasonable expenses for counsel,
(i) resulting from the performance or nonperformance of its duties hereunder,
except to the extent caused by, or resulting from, the negligence or willful
misconduct of Agent, its officers or employees, (ii) for any delay, error or
omission by reason of circumstances beyond its control, including acts of civil
or military authority, national emergencies, labor difficulties (except with
respect to Agent's employees), fire, material mechanical breakdown beyond its
control, flood or catastrophe, acts of God, insurrection, war, riots or failure
beyond its control of transportation, communication or power supply; or (iii)
for any action taken or omitted to be taken by Agent in good faith in reliance
on the accuracy of any information provided to it by the Trust or its trustees
or officers or in reliance on advice of outside counsel for the Trust or advice
of any independent accountant or expert employed by the Trust with respect to
the preparation and filing of any document with a governmental agency or
authority.
In any event, agent's liability shall be limited to its total annual
compensation earned and fees paid during the preceding twelve months for any
liability suffered by the trust including, but not limited to, any liability
relating to qualification of the trust as a regulated investment company or any
liability relating to the trust's compliance with any with any federal or state
tax or securities statute, regulation or ruling.
(3) The Trust shall indemnify and hold the Agent harmless from all
loss, cost, damage and expense, including reasonable expenses for counsel,
incurred by Agent resulting from any claim, demand, action or suit in connection
with the Agent's acceptance of this Agreement, any action or omission by it in
the performance of its duties hereunder, any action taken or omitted by it
without negligence and in good faith in reliance upon any instructions from the
Trust, its counsel, Trust's counsel or outside auditors, or as a result of
acting upon any instructions reasonably believed by it to have been executed by
a duly authorized officer of the Trust provided that this indemnification shall
not apply to actions or omissions of the Agent, its officers, employees or
agents in cases of its or their own gross negligence or willful misconduct.
3
<PAGE>
(4) The Trust shall not be responsible for, and Agent agrees to
indemnify the Trust for, any losses, damages or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit
arising out of Agent's failure to comply with the terms of this Agreement or
which arises out of Agent's failure to exercise good faith or due diligence or
arising out of the gross negligence or willful misconduct of Agent or its
agents; provided that such negligence and misconduct is not attributable to the
Trust, its agents or contractors.
(5) The Trust will 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 liability subject to the indemnification provided above. In the
event the Trust elects to assume the defense of any such suit and retain such
counsel, the Agent or any of its affiliated persons named as defendant or
defendants in the suit may retain additional counsel but shall bear the fees and
expenses of such counsel unless the Trust shall have specifically authorized the
retaining of such counsel.
G. TERM OF THE AGREEMENT; TAKING EFFECT; AMENDMENTS.
This Agreement shall become effective as to a Fund at the start of business
on the date of execution or, if later, the date that initial capital for such
Fund is first provided to it and shall continue, unless terminated as
hereinafter provided, for a period of one (1) year and from year-to-year
thereafter.
(1) This Agreement may be terminated by Agent at any time without
penalty upon giving the Fund at least sixty (60) days' prior written notice
(which notice may be waived by the Trust) and may be terminated by the Trust at
any time without penalty upon giving Agent at least sixty (60) days' prior
written notice (which notice may be waived by Agent).
(2) On termination, Agent will deliver to the Trust or its designee
all files, documents and records of the Trust used, kept or maintained by Agent
in the performance of its services hereunder, including such of the Trust's
records in machine readable form as may be maintained by Agent, as well as such
summary and/or control data relating thereto used by or available to Agent.
(3) In addition, on such termination or in preparation therefore at
the request of the Trust and at the Trust's expense, Agent shall provide, to the
extent that its capabilities then permit, such documentation, personnel and
equipment as may be reasonably necessary in order for a new agent or the Trust
to fully assume and commence to perform the services described in this Agreement
with a minimum disruption to the Trust's activities.
(4) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Act and the rules and regulations thereunder of the
Securities and Exchange Commission.
(5) Upon termination of this Agreement the Fund shall pay Agent such
compensation as may be due under the terms hereof as of the date of such
termination including
4
<PAGE>
reasonable out-of-pocket expenses associated with such termination.
H. MISCELLANEOUS
(1) Any notice or other communication authorized or required by this
Agreement to be given to any party mentioned herein shall be sufficiently given
if addressed to such party and mailed postage prepaid or delivered to its
principal office.
(2) The services of Agent to the Trust are not to be deemed
exclusive, and the Agent shall be free to render similar services to others.
The Agent shall be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Trust as the case may
be from time to time, have no authority to act or represent the Trust in any
way.
(3) The provisions of Section F (Indemnification) shall survive
termination of this Agreement.
(4) Neither this Agreement, nor any provision hereof, may be amended,
waived, discharged or terminated orally, but only by an instrument in writing
signed by all of the parties hereto.
(5) The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
(6) This Agreement shall be binding on and shall inure to the benefit
of the Trust and Agent and their respective successors.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date and year first above written.
PPM AMERICA FUNDS
By: /s/ Mark Mandich
-------------------------------------
ATTEST:
By: /s/ Grant Davidson
--------------------------------
JACKSON NATIONAL FINANCIAL SERVICES, LLC
By: /s/ Mark D. Nerud
-------------------------------------
Mark D. Nerud
Chief Financial Officer
ATTEST:
By: /s/ William Simon
--------------------------------
6
<PAGE>
SCHEDULE A
Funds:
PPM America Value Equity Fund
PPM America Small Cap Value Equity Fund
PPM America High Yield Bond Fund
7
<PAGE>
SCHEDULE B
Services:
-Preparation of accounting policies
-Preparation of Fund expense budgets
-Calculation, accrual and reconciliation of expenses
-Maintenance of investment, capital share, income and expense journals
-Maintenance of ledgers for individual investment securities
-Maintenance of each Fund's general ledger
-Calculation of Fund daily net asset value
-Reporting to listing and tracking agencies
-Monitoring of compliance with requirements of the Funds' prospectus,
Internal Revenue Code and Investment Company Act of 1940, as amended
-Recommendations regarding dividends
-Calculation of Fund distributions
-Year-end tax reporting
-Preparation and filing of tax returns
-Preparation, publication and filing of financial statements with
assistance and advice of the Trust's attorneys and independent accountants
-Calculation of SEC yield and total return
-Preparation and filing of Form NSAR
-Preparation of financial reports for presentation to Trust's Board of
Trustees
-Coordination of independent audits
-Interpretation of accounting data for meaningful management review
8
<PAGE>
Exhibit (h)(2)
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 10th day of December, 1998 (the "Effective
Date") between PPM AMERICA FUNDS (the "Fund"), a Massachusetts business trust
having its principal place of business at 225 West Wacker Drive, Suite 1200,
Chicago, Illinois 60606 and FIRST DATA INVESTOR SERVICES GROUP, INC. ("Investor
Services Group"), a Massachusetts corporation with principal offices at 4400
Computer Drive, Westboro, Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series, with
each such series representing interests in a separate portfolio of securities or
other assets;
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint Investor
Services Group as its blue sky agent, transfer agent, dividend disbursing agent
and agent in connection with certain other activities and Investor Services
Group desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 DEFINITIONS.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Agreement and Declaration of Trust, or other similar
organizational document as the case may be, of the Fund as the same may be
amended from time to time.
(b) "Authorized Person" shall be deemed to include (i) any authorized
officer of the Fund; or (ii) any person, whether or not such person is an
officer or employee of the Fund, duly authorized to give Oral Instructions
or Written Instructions on behalf of the Fund to Investor Services Group
from time to time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
(d) "Board of Trustees" shall mean the Board of Directors or Board of
Trustees of the Fund, as the case may be.
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(e) "Commencement Date" shall mean the date on which Investor
Services Group commences providing services to the Fund pursuant to this
Agreement.
(f) "Commission" shall mean the Securities and Exchange Commission.
(g) "Custodian" refers to any custodian or subcustodian with which
the Fund may from time to time deposit, or cause to be deposited, or held
under the name or account of such a custodian pursuant to a Custodian
Agreement.
(h) "1934 Act" shall mean the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder, all as amended from time
to time.
(i) "1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder, all as amended from time to
time.
(j) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by Investor Services Group from a person
reasonably believed by Investor Services Group to be an Authorized Person.
(k) "Portfolio" shall mean each separate series of shares offered by
the Fund representing interests in a separate portfolio of securities and
other assets.
(l) "Prospectus" shall mean the most recently dated Fund Prospectus
and Statement of Additional Information, including any supplements thereto
if any, which has become effective under the Securities Act of 1933 and the
1940 Act.
(m) "Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of each
respective Portfolio of the Fund as may be issued from time to time.
(n) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(o) "Written Instructions" shall mean a written communication signed
by a person reasonably believed by Investor Services Group to be an
Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a manually
executed original or other process.
Article 2 APPOINTMENT OF INVESTOR SERVICES GROUP.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its sole and exclusive transfer agent, dividend
disbursing agent for Shares of each respective Portfolio, blue sky agent and
shareholder servicing agent and Investor Services Group hereby accepts such
appointments and agrees to perform the duties hereinafter set forth. This
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Agreement shall be effective as of the Effective Date.
Article 3 DUTIES OF INVESTOR SERVICES GROUP.
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of a
transfer agent; acting as service agent in connection with dividend and
distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance, transfer
and redemption or repurchase (including coordination with the Custodian) of
Shares of each Portfolio, as more fully described in the written schedule
of Duties of Investor Services Group annexed hereto as Schedule B and
incorporated herein, and in accordance with the terms of the Prospectus of
the Fund, applicable law and the procedures established from time to time
between Investor Services Group and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant to
Commission Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of each Portfolio which are authorized, based upon data provided to
it by the Fund, and issued and outstanding. Investor Services Group shall
provide the Fund on a regular basis with the total number of Shares of each
Portfolio which are authorized and issued and outstanding and shall have no
obligation, when recording the issuance of Shares, to monitor the issuance
of such Shares or to take cognizance of any laws relating to the issue or
sale of such Shares, which functions shall be the sole responsibility of
the Fund.
(c) Investor Services Group shall be responsible for the following:
performing the customary services of a blue sky agent for the Fund, as more
fully described in the written schedule of Duties of Investor Services
Group annexed hereto as Schedule B and incorporated herein, and subject to
the oversight of the Board of Trustees of the Fund.
(d) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation to
inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be
received therefor; (ii) the legality of the redemption of any Shares, or
the propriety of the amount to be paid therefor; (iii) the legality of the
declaration of any dividend by the Board of Trustees, or the legality of
the issuance of any Shares in payment of any dividend; or (iv) the legality
of any recapitalization or readjustment of the Shares.
3.2 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the Fund
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the
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investment or reinvestment of the securities or other properties which comprise
the assets of the Fund or any of its Portfolios and shall not provide any
investment advisory services to the Fund or any of its Portfolios.
3.3 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 RECORDKEEPING AND OTHER INFORMATION.
4.1 Investor Services Group shall create and maintain all records required
of it pursuant to its duties hereunder and as set forth in Schedule B in
accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records
shall be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and shall be surrendered
promptly to the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection of Shareholder
records of the Fund, Investor Services Group shall promptly notify the Fund of
such request and secure Written Instructions as to the handling of such request.
Investor Services Group reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to comply with such request.
Article 5 FUND INSTRUCTIONS.
5.1 Investor Services Group shall have no liability when acting upon
Written or Oral Instructions reasonably believed to have been executed or orally
communicated by an Authorized Person and shall not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund.
5.2 At any time, Investor Services Group may request Written Instructions
from the Fund and may seek advice from legal counsel for the Fund with respect
to any matter arising in connection with this Agreement, and it shall not be
liable for any action taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or in accordance with the opinion of
counsel for the Fund except when such liability is the result of its own
negligence or willful misconduct. Written Instructions requested by Investor
Services Group will be provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf
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of the Fund only if said representative is an Authorized Person. The Fund
agrees that all Oral Instructions shall be followed promptly by confirming
Written Instructions, and that the Fund's failure to so confirm shall not impair
in any respect Investor Services Group's right to rely on Oral Instructions.
Article 6 COMPENSATION.
6.1 The Fund on behalf of each of the Portfolios will compensate Investor
Services Group for the performance of its obligations hereunder in accordance
with the fees set forth in the written Fee Schedule annexed hereto as Schedule C
and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund on
behalf of each of the Portfolios agrees to pay, and will be billed separately
for, out-of-pocket expenses reasonably incurred by Investor Services Group in
the performance of its duties hereunder. Out-of-pocket expenses shall include,
but shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may be modified by written agreement between the parties.
Unspecified out-of-pocket expenses shall be limited to those out-of-pocket
expenses reasonably incurred by Investor Services Group in the performance of
its obligations hereunder. Investor Services Group shall not be required to pay
any Blue Sky registration or filing fees unless and until it has received the
amount of such fees from the Fund.
6.3 The Fund on behalf of each of the Portfolios agrees to pay all fees
and out-of-pocket expenses to Investor Services Group by Federal Funds Wire or
Federal Funds check within thirty (30) business days following the receipt of
the respective invoice. In addition, with respect to all fees under this
Agreement, Investor Services Group may charge a service fee equal to the lesser
of (i) one and one half percent (1 1/2%) per month or (ii) the highest interest
rate legally permitted on any past due invoiced amounts.
6.4 Any compensation agreed to hereunder may be adjusted from time to time
by attaching to Schedule C, a revised Fee Schedule executed and dated by the
parties hereto.
6.5 Investor Services Group may from time to time employ or associate with
itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Fund. The compensation of such person or
persons shall be paid by Investor Services Group and no obligation shall be
incurred on behalf of the Fund in such respect.
Article 7 DOCUMENTS.
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In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule E.
Article 8 INVESTOR SERVICES GROUP SYSTEM.
8.1 Investor Services Group shall retain title to and ownership of any and
all data bases, computer programs, screen formats, report formats, interactive
design techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets
in connection with the services provided by Investor Services Group to the Fund
herein (the "Investor Services Group System"), and other related legal rights
utilized by Investor Services Group in connection with the Investor Services
Group System.
8.2 Investor Services Group hereby grants to the Fund a limited license to
the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate upon the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of
on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to or
from the Investor Services Group System is strictly prohibited without the prior
written consent of Investor Services Group.
Article 9 REPRESENTATIONS AND WARRANTIES.
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in good standing
under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to authorize
it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory agency as a
transfer
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agent and such registration will remain in full effect for the duration of
this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, existing and in good standing under the
laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize it
to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933, as
amended, and the 1940 Act on behalf of each of the Portfolios is currently
effective and will remain effective, and all appropriate state securities
law filings have been made and will continue to be made, with respect to
all Shares of the Fund being offered for sale; and
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with the
terms of the Fund's Articles of Incorporation and its Prospectus with
respect to each Portfolio, such Shares shall be validly issued, fully paid
and non-assessable.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR
SERVICES GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS
OTHERWISE SET FORTH IN THIS AGREEMENT.
Article 10 INDEMNIFICATION.
10.1 Investor Services Group shall not be responsible for and the Fund on
behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges,
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payments and liabilities of any sort or kind (a "Claim") arising out of or
attributable to any of the following:
(a) any actions of Investor Services Group required to be taken
pursuant to this Agreement unless such Claim resulted from a negligent act
or omission to act, bad faith or willful misconduct by Investor Services
Group;
(b) Investor Services Group's reasonable reliance on, or reasonable
use of information, data, records and documents (including but not limited
to magnetic tapes, computer printouts, hard copies and microfilm copies)
received by Investor Services Group from the Fund;
(c) the reasonable reliance on, or the implementation of, any Written
or Oral Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of Shares in violation of any requirement
under the U.S. securities laws; and
(e) the Fund's refusal or failure to comply with the terms of this
Agreement, or any Claim which arises out of the Fund's negligence or
willful misconduct or the material breach of any representation or warranty
of the Fund made herein.
10.2 The Fund agrees and acknowledges that Investor Services Group has not
prior to the date hereof assumed, and will not assume, any obligations or
liabilities arising out of the conduct by the Company prior to the date hereof
of those duties which Investor Services Group has agreed to perform pursuant to
this Agreement. The Fund further agrees to indemnify Investor Services Group
against any losses, claims, damages or liabilities to which Investor Services
Group may become subject in connection with the conduct by the Fund or its agent
of such duties prior to the date hereof.
10.3 Investor Services Group shall indemnify and hold the Fund and each of
the Portfolios harmless from and against any and all Claims arising out of or
attributable to Investor Services Group's refusal or failure to comply with the
terms of this Agreement, or Investor Services Group's lack of good faith,
negligence or willful misconduct, or the breach of any representation or
warranty of Investor Services Group hereunder.
10.4 In any case in which one party (the "Indemnifying Party") may be asked
to indemnify or hold the other party (the "Indemnified Party") harmless, the
Indemnified Party will notify the Indemnifying Party promptly after identifying
any situation which it believes presents or appears likely to present a claim
for indemnification against the Indemnifying Party although the failure to do so
shall not prevent recovery by the Indemnified Party and shall keep the
Indemnifying Party advised with respect to all developments concerning such
situation. The Indemnifying Party shall have the option to defend the
Indemnified Party against any Claim which may be the subject of this
indemnification, and, in the event that the Indemnifying Party
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so elects, such defense shall be conducted by counsel chosen by the Indemnifying
Party and satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Claim and the Indemnified Party
shall sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any case
in which the Indemnifying Party will be asked to provide indemnification, except
with the Indemnifying Party's prior written consent. The obligations of the
parties hereto under this Article 10 shall survive the termination of this
Agreement.
10.4 Any claim for indemnification under this Agreement must be made prior
to the earlier of:
(a) one year after the Indemnified Party becomes aware of the event
for which indemnification is claimed; or
(b) one year after the earlier of the termination of this Agreement
or the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
the Indemnified Party's sole and exclusive remedy for claims or other actions or
proceedings to which the Indemnifying Party's indemnification obligations
pursuant to this Article 10 may apply.
Article 11 STANDARD OF CARE.
11.1 Investor Services Group shall at all times act in good faith and with
the degree of care, diligence and skill that a reasonably prudent person would
exercise in comparable circumstances and agrees to use its best efforts within
commercially reasonable limits to ensure the accuracy of all services performed
under this Agreement, but assumes no responsibility for loss or damage to the
Fund unless such loss or damage is caused by Investor Services Group's own
negligence, bad faith or willful misconduct or that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary,
Investor Services Group's cumulative liability (to the Fund) for all losses,
claims, suits, controversies, breaches, or damages for any cause whatsoever
(including but not limited to those arising out of or related to this Agreement)
and regardless of the form of action or legal theory shall not the fees received
by Investor Services Group for services provided under this Agreement during the
Initial Term (as defined in Section 13.1); provided, however, that such
limitation on liability shall not apply to losses which result from the gross
negligence of Investor Services Group.
11.3 Each party shall have the duty to mitigate damages for which the other
party may become responsible.
Article 12 CONSEQUENTIAL DAMAGES.
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NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL ANY PARTY TO THIS AGREEMENT OR THEIR AFFILIATES OR ANY OF ITS OR THEIR
DIRECTORSTRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE
LIABLE FOR CONSEQUENTIAL DAMAGES UNDER ANY PROVISION OF THIS AGREEMENT OR FOR
ANY CONSEQUENTIAL DAMAGES ARISING OUT OF ANY ACT OR FAILURE TO ACT HEREUNDER.
Article 13 TERM AND TERMINATION.
13.1 This Agreement shall be effective on the date first written above and
shall continue for a period of three (3) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Fund or Investor Services Group provides written notice to the
other of its intent not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all expenses
associated with movement of records and materials and conversion thereof to a
successor transfer agent will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Notwithstanding anything contained in this Agreement to the contrary,
should the Fund desire to move any of the services provided by Investor Services
Group hereunder to a successor service provider prior to the expiration of the
then current Initial or Renewal Term, or should the Fund or any of its
affiliates take any action which would result in Investor Services Group ceasing
to provide transfer agency services to the Fund prior to the expiration of the
Initial or any Renewal Term, Investor Services Group shall use its best efforts
to facilitate the conversion on such prior date. In connection with the
foregoing, should services be converted to a successor service provider or
should the Fund or any of its affiliates take any action which would result in
Investor Services Group ceasing to provide transfer agency services to the Fund
prior to the expiration of the Initial or any Renewal Term, the payment of fees
to Investor
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Services Group as set forth herein shall be accelerated to a date prior to the
conversion or termination of services and calculated as if the services had
remained with Investor Services Group until the expiration of the then current
Initial or Renewal Term and calculated at the asset and/or Shareholder account
levels, as the case may be, on the date notice of termination was given to
Investor Services Group.
Article 14 ADDITIONAL PORTFOLIOS
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as transfer agent under
the terms hereof, the Fund shall so notify Investor Services Group in writing,
and if Investor Services Group agrees in writing to provide such services,
Exhibit 1 shall be amended to include such additional Portfolios.
Article 15 CONFIDENTIALITY.
15.1 The parties agree that the Proprietary Information (defined below) and
the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The
Fund and Investor Services Group shall exercise at least the same degree of
care, but not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Fund and Investor Services
Group shall not duplicate, sell or disclose to others the Confidential
Information of the other, in whole or in part, without the prior written
permission of the other party.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive material,
and not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance, operations,
customer relationships, customer profiles, sales estimates, business plans,
and internal performance results relating to the past, present or future
business activities of the Fund or Investor Services Group, their
respective subsidiaries and affiliated companies and the customers, clients
and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and secret
in the sense that its confidentiality affords the Fund or Investor Services
Group a competitive advantage over its competitors; and
(c) all confidential or proprietary concepts, documentation, reports,
data, specifications, computer software, source code, object code, flow
charts, databases, inventions, know-how, show-how and trade secrets,
whether or not patentable or copyrightable.
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15.3 Confidential Information includes, without limitation, all documents,
inventions, substances, engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment, prototypes and models,
and any other tangible manifestation of the foregoing of either party which now
exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein shall
not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such party; or
(b) Was lawfully received by the party from a third party free of any
obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of
such disclosure as practical so the other party may attempt to stop such
disclosure or obtain a protective order concerning such disclosure; or
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the Confidential
Information disclosed under this Agreement.
Article 16 FORCE MAJEURE.
No party shall be liable for any default or delay in the performance of its
obligations under this Agreement if and to the extent such default or delay is
caused, directly or indirectly, by (i) fire, flood, elements of nature or other
acts of God; (ii) any outbreak or escalation of hostilities, war, riots or civil
disorders in any country, (iii) any act of any governmental authority; (iv) any
labor disputes (whether or not the employees' demands are reasonable or within
the party's power to satisfy); or (v) nonperformance by a third party or any
similar cause beyond the reasonable control of such party, including without
limitation, failures or fluctuations in telecommunications or other equipment.
In any such event, the non-performing party shall be excused from any further
performance and observance of the obligations so affected only for as long as
such circumstances prevail and such party continues to use commercially
reasonable efforts to recommence performance or observance as soon as
practicable.
Article 17 ASSIGNMENT AND SUBCONTRACTING.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This
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Agreement may not be assigned or otherwise transferred by either party hereto,
without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that Investor Services Group may, in
its sole discretion, assign all its right, title and interest in this Agreement
to an affiliate, parent or subsidiary, or to the purchaser of substantially all
of its business. Investor Services Group may, in its sole discretion, engage
subcontractors to perform any of the obligations contained in this Agreement to
be performed by Investor Services Group.
Article 18 NOTICE.
Any notice or other instrument authorized or required by this Agreement to
be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
PPM America Funds
225 West Wacker Drive, Suite 1200
Chicago, Illinois 60606
Attention: Mark B. Mondich
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 19 GOVERNING LAW/VENUE.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and the Fund hereby submit themselves to the
-13-
<PAGE>
exclusive jurisdiction of those courts.
Article 20 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 21 CAPTIONS.
The captions of this Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
Article 22 PUBLICITY.
Neither Investor Services Group nor the Fund shall release or publish news
releases, public announcements, advertising or other publicity relating to this
Agreement or to the transactions contemplated by it without the prior review and
written approval of the other party; provided, however, that either party may
make such disclosures as are required by legal, accounting or regulatory
requirements after making reasonable efforts in the circumstances to consult in
advance with the other party.
Article 23 RELATIONSHIP OF PARTIES/NON-SOLICITATION.
23.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
23.2 During the term of this Agreement and for one (1) year afterward, the
Fund shall not recruit, solicit, employ or engage, for the Fund or others,
Investor Services Group's employees.
Article 24 ENTIRE AGREEMENT; SEVERABILITY.
24.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
24.2 The parties intend every provision of this Agreement to be severable.
If a court of competent jurisdiction determines that any term or provision is
illegal or invalid for any reason,
-14-
<PAGE>
the illegality or invalidity shall not affect the validity of the remainder of
this Agreement. In such case, the parties shall in good faith modify or
substitute such provision consistent with the original intent of the parties.
Without limiting the generality of this paragraph, if a court determines that
any remedy stated in this Agreement has failed of its essential purpose, then
all other provisions of this Agreement, including the limitations on liability
and exclusion of damages, shall remain fully effective.
Article 25 MISCELLANEOUS.
The Fund and Investor Services Group agree that the obligations of the Fund
under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally, but shall bind only the assets
and property of the Fund as provided in the Articles of Incorporation.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
PPM AMERICA FUNDS
By: /s/ Mark B. Mandich
------------------------------------------
Title: CFO
---------------------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ Kenneth Kempf
------------------------------------------
Title: Senior V.P.
---------------------------------------
-16-
<PAGE>
SCHEDULE A
LIST OF PORTFOLIOS
PPM America Value Equity Fund
PPM America Small Cap Value Equity Fund
PPM America High Yield Bond Fund
-17-
<PAGE>
SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
I. TRANSFER AGENCY SERVICES
(a) SHAREHOLDER INFORMATION. Investor Services Group shall maintain a
record of the number of Shares held by each Shareholder of record which shall
include name, address, taxpayer identification.
(b) SHAREHOLDER SERVICES. Investor Services Group shall respond as
appropriate to all inquiries and communications from Shareholders relating to
Shareholder accounts with respect to its duties hereunder and as may be from
time to time mutually agreed upon between Investor Services Group and the Fund.
*
*
*
(c) MAILING COMMUNICATIONS TO SHAREHOLDERS; PROXY MATERIALS. Investor
Services Group will address and mail to Shareholders of the Fund, all reports to
Shareholders, dividend and distribution notices and proxy material for the
Fund's meetings of Shareholders. In connection with meetings of Shareholders,
Investor Services Group will prepare Shareholder lists, mail and certify as to
the mailing of proxy materials, process and tabulate returned proxy cards,
report on proxies voted prior to meetings, act as inspector of election at
meetings and certify Shares voted at meetings.
(d) SALES OF SHARES.
* Investor Services Group shall receive for acceptance orders for the
purchase of Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian and pursuant to purchase orders,
issue the appropriate number of Shares and hold such Shares in the
appropriate shareholder account.
* Investor Services Group shall not be required to issue any Shares of
the Fund where it has received a Written Instruction from the Fund or
official notice from any appropriate authority that the sale of the Shares
of the Fund has been suspended or discontinued. The existence of such
Written Instructions or such official notice shall be conclusive evidence
of the right of Investor Services Group to rely on such Written
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<PAGE>
Instructions or official notice.
* In the event that any check or other order for the payment of money
is returned unpaid for any reason, Investor Services Group will endeavor
to: (i) give prompt notice of such return to the Fund or its designee;
(ii) place a stop transfer order against all Shares issued as a result of
such check or order; and (iii) take such actions as Investor Services Group
may from time to time deem appropriate.
(e) TRANSFER AND REPURCHASE.
* Investor Services Group shall process all requests to transfer or
redeem Shares in accordance with the transfer or repurchase procedures set
forth in the Fund's Prospectus.
* Investor Services Group will transfer or repurchase Shares upon
receipt of Oral or Written Instructions or otherwise pursuant to the
Prospectus.
* Investor Services Group reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the
instructions is valid and genuine. Investor Services Group also reserves
the right to refuse to transfer or repurchase Shares until it is satisfied
that the requested transfer or repurchase is legally authorized, and it
shall incur no liability for the refusal, in good faith, to make transfers
or repurchases which Investor Services Group, in its good faith judgment,
deems improper or unauthorized, or until it is reasonably satisfied that
there is no basis to any claims adverse to such transfer or repurchase.
* When Shares are redeemed, Investor Services Group shall, upon receipt
of the instructions and documents in proper form, deliver to the Custodian
and the Fund or its designee a notification setting forth the number of
Shares to be repurchased. Such repurchased shares shall be reflected on
appropriate accounts maintained by Investor Services Group reflecting
outstanding Shares of the Fund and Shares attributed to individual
accounts.
* Investor Services Group shall upon receipt of the monies provided to
it by the Custodian for the repurchase of Shares, pay such monies as are
received from the Custodian, all in accordance with the procedures
described in the written instruction received by Investor Services Group
from the Fund.
* Investor Services Group shall not process or effect any repurchase
with respect to Shares of the Fund after receipt by Investor Services Group
or its agent of notification of the suspension of the determination of the
net asset value of the Fund.
(f) DIVIDENDS.
* Prepare and transmit payments for dividends and distributions declared
by the Fund on behalf of each Portfolio.
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<PAGE>
* Upon the declaration of each dividend and each capital gains
distribution by the Board of Trustees of the Fund with respect to Shares of
the Fund, the Fund shall furnish or cause to be furnished to Investor
Services Group Written Instructions setting forth the date of the
declaration of such dividend or distribution, the ex-dividend date, the
date of payment thereof, the record date as of which Shareholders entitled
to payment shall be determined, the amount payable per Share to the
Shareholders of record as of that date, the total amount payable on the
payment date and whether such dividend or distribution is to be paid in
Shares at net asset value.
* On or before the payment date specified in such resolution of the
Board of Trustees, the Fund will provide Investor Services Group with
sufficient cash to make payment to the Shareholders of record as of such
payment date.
* If Investor Services Group does not receive sufficient cash from the
Fund to make total dividend and/or distribution payments to all
Shareholders of the Fund as of the record date, Investor Services Group
will, upon notifying the Fund, withhold payment to all Shareholders of
record as of the record date until sufficient cash is provided to Investor
Services Group.
(g) CASH MANAGEMENT SERVICES. Funds received by Investor Services Group
in the course of performing its services hereunder will be held in bank or
money market fund accounts in the name of Investor Services Group as agent
for the benefit of its clients. Such accounts may include funds held by
Investor Services Group as agent for the benefit of clients other than the
Fund. Investor Services Group shall be entitled to retain any interest,
dividends, balance credits or fee reductions or other concessions or benefits
earned or generated by or associated with such accounts or made available by
the institution with which such accounts are maintained.
(h) LOST SHAREHOLDERS. Investor Services Group shall perform such
services as are required in order to comply with Rules 17a-24 and 17Ad-17 of the
34 Act (the Lost Shareholder Rules"), including, but not limited to those set
forth below. Investor Services Group may, in its sole discretion, use the
services of a third party to perform the some or all such services.
- documentation of electronic search policies and procedures;
- - execution of required searches;
- - creation and mailing of confirmation letters;
- - taking receipt of returned verification forms;
- - providing confirmed address corrections in batch via electronic media;;
- - tracking results and maintaining data sufficient to comply with the Lost
Shareholder Rules; and
- - preparation and submission of data required under the Lost Shareholder
Rules.
(i) MISCELLANEOUS. In addition to and neither in lieu nor in
contravention of the services set forth above, Investor Services Group shall:
(i) perform all the customary services of
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<PAGE>
a transfer agent, registrar, dividend disbursing agent and agent of the dividend
reinvestment and cash purchase plan as described herein consistent with those
requirements in effect as at the date of this Agreement. The detailed
definition, frequency, limitations and associated costs (if any) set out in the
attached fee schedule, include but are not limited to: maintaining all
Shareholder accounts, preparing Shareholder meeting lists, mailing proxies,
tabulating proxies, mailing Shareholder reports to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts where
applicable, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders.
II. BLUE SKY SERVICES
Performing "Blue Sky" compliance functions, as follows:
* Effecting and maintaining, as the case may be, the Fund's notification
filing for sale under the securities laws of the jurisdictions listed in
the Written Instructions of the Fund, which instructions will include the
amount of Shares to be registered as well as the warning threshold to be
maintained. Any Written Instructions not received at least 45 days prior
to the date the Fund intends to offer or sell its Shares cannot be
guaranteed a timely notification to the states. In addition, Investor
Services Group shall not be responsible for providing to any other service
provider of the Fund a list of the states in which the Fund may offer and
sell its Shares.
* Providing to the Fund quarterly reports of sales activity in each
jurisdiction in accordance with the Written Instructions of the Fund.
Sales will be reported by shareholder residence. NSCC trades and order
clearance will be reported by the state provided by the dealer at the point
of sale. Trades by omnibus accounts will be reported by trustee state of
residence in accordance with the Written Instructions of the Fund outlining
the entities which are permitted to maintain omnibus positions with the
Fund.
* In the event sales of Shares in a particular jurisdiction reach or
exceed the warning levels provided in the Written Instructions of the Fund,
Investor Services Group will promptly notify the Fund with a recommendation
of the amount of Shares to be registered in such jurisdiction and the fee
for such registration. Investor Services Group will not register
additional Shares in such jurisdiction unless and until Investor Services
Group shall have received written instructions from the Fund to do so.
* If Investor Services Group is instructed by the Fund not to file a
notification filing in a particular jurisdiction, Investor Services Group
will use its best efforts to cause any sales in such jurisdictions to be
blocked, and such sales will not be reported to Investor Services Group as
sales of Shares of the Fund.
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<PAGE>
SCHEDULE C
FEE SCHEDULE
1. Transfer Agency Fees
(a) Standard Fees (1/12th payable monthly):
$20.00 per account per year per Portfolio
$24,000 annual minimum fee per Portfolio (reduced to $20,000 for the
first two years from the
Commencement Date)
(b) IRA's, 403(b) Plans, Defined Contribution/Benefit Plans:
Annual Maintenance Fee - $12.00 per account per year
(c) Fund/Serv Processing (if applicable):
$1,000 - one time set-up charge - new Portfolio
$50.00 - per month/per Portfolio monthly maintenance fee
(d) Networking Processing (if applicable):
$1,000 - one time set-up charge - new Portfolio
$75.00 - per month/per Portfolio monthly maintenance fee
2. Blue Sky Fees:
$200.00 per permit per year
$5,000 annual minimum fee (assuming three initial Portfolios)
To the extent that the Fund decides to issue multiple/separate classes of
Shares, additional fees will apply.
3. PROGRAMMING COSTS (FOR SPECIAL PROGRAMMING REQUESTS, IF APPLICABLE)
(a) Dedicated Team:
Programmer $100,000 per annum
BSA $ 85,000 per annum
Tester $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team):
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<PAGE>
Programmer $135.00 per hour
The above rates for this Item 3 are subject to an annual 5% increase after the
one year anniversary of the effective date of this Agreement.
-23-
<PAGE>
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
* Microfiche/microfilm production
* Magnetic media tapes and freight
* Printing costs, including certificates, envelopes, checks and
stationery
* Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct pass
through to the Fund
* Due diligence mailings
* Telephone and telecommunication costs, including all lease,
maintenance and line costs
* Ad hoc reports
* Proxy solicitations, mailings and tabulations
* Daily & Distribution advice mailings
* Shipping, Certified and Overnight mail and insurance
* Year-end form production and mailings
* Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
* Duplicating services
* Courier services
* Incoming and outgoing wire charges
* Federal Reserve charges for check clearance
* Overtime, as approved by the Fund
* Temporary staff, as approved by the Fund
* Travel to and from Board meetings
* Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
* Third party audit reviews
* Ad hoc SQL time
* Insurance
* NAV)
* NAV)
* Forms and supplies for the preparation of Board meetings and other
materials for the Fund
* Vendor set-up charges for Blue Sky services
* Vendor set-up charges for Blue Sky services
* Customized programming requests
* Blue Sky filing or registration fees
* SAS 70
* Cold Storage
* Document Retrieval
* comparison
-24-
<PAGE>
* Manual pricing
* comparison
* Manual pricing
* Such other miscellaneous expenses reasonably incurred by Investor
Services Group in performing its duties and responsibilities under
this Agreement.
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing as agreed with Investor Services Group. In addition, the
Fund will promptly reimburse Investor Services Group for any other unscheduled
expenses incurred by Investor Services Group whenever the Fund and Investor
Services Group mutually agree that such expenses are not otherwise properly
borne by Investor Services Group as part of its duties and obligations under the
Agreement.
-25-
<PAGE>
SCHEDULE E
FUND DOCUMENTS
* Certified copy of the Articles of Incorporation of the Fund, as
amended
* Certified copy of the By-laws of the Fund, as amended
* Copy of the resolution of the Board of Trustees authorizing the
execution and delivery of this Agreement
*
*
* All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by the
Fund
* Certified list of Shareholders of the Fund with the name, address
and taxpayer identification number of each Shareholder, and the number
of Shares of the Fund held by each, certificate numbers and
denominations (if any certificates have been issued), lists of any
accounts against which stop transfer orders have been placed, together
with the reasons therefore, and the number of Shares redeemed by the
Fund
* All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation or
By-laws of the Fund or as required by law and shall perform such other
specific duties as are set forth in the Articles of Incorporation
including the giving of notice of any special or annual meetings of
shareholders and any other notices required thereby.
* All information relative to the monitoring of sales and
registrations of Fund shares in such jurisdictions
* The Fund's most recent post-effective amendment to its
Registration Statement
* The Fund's most recent prospectus and statement of additional
information, if applicable, and all amendments and supplements thereto
<PAGE>
BELL, BOYD & LLOYD
70 West Madison Street, Suite 3300
Chicago, IL 60602
(312) 372-1121
Fax: (312) 372-2098
April 28, 1999
As counsel for PPM America Funds (the "Registrant"), we consent to the
incorporation by reference of our opinion filed with the Registrant's
registration statement on Form N-1A on December 2, 1998 (Securities Act file
no. 333-63295).
In giving this consent we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
/s/ Bell, Boyd & Lloyd
Bell, Boyd & Lloyd
<PAGE>
Exhibit (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 29, 1999, relating to the financial statements and financial
highlights of PPM America Funds, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the references to us under the headings "Financial
Statements" and "Independent Accountants" in such Statement of Additional
Information and to the reference to us under the heading "Financial
Highlights" and "Notes to Presentation of Composite Performance" in such
Prospectus.
/s/ PricewaterhouseCoopers LLP
Chicago, IL
April 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> PPM AMERICA VALUE EQUITY FUND
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 5,207,976
<INVESTMENTS-AT-VALUE> 5,266,109
<RECEIVABLES> 6,978
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,273,087
<PAYABLE-FOR-SECURITIES> 103,538
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,081
<TOTAL-LIABILITIES> 109,619
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,105,335
<SHARES-COMMON-STOCK> 1,021,054
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 58,133
<NET-ASSETS> 5,163,468
<DIVIDEND-INCOME> 1,925
<INTEREST-INCOME> 4,532
<OTHER-INCOME> 0
<EXPENSES-NET> 1,122
<NET-INVESTMENT-INCOME> 5,335
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 58,133
<NET-CHANGE-FROM-OPS> 63,468
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,335
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,020,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1,054
<NET-CHANGE-IN-ASSETS> 5,163,468
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 897
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,081
<AVERAGE-NET-ASSETS> 5,105,942
<PER-SHARE-NAV-BEGIN> 5.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> .06
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.06
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> PPM AMERICA SMALL CAP VALUE EQUITY FUND
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 11,296,190
<INVESTMENTS-AT-VALUE> 11,673,740
<RECEIVABLES> 6,501
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,680,241
<PAYABLE-FOR-SECURITIES> 1,287,161
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,161
<TOTAL-LIABILITIES> 1,294,322
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,008,369
<SHARES-COMMON-STOCK> 2,001,613
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 377,550
<NET-ASSETS> 10,385,919
<DIVIDEND-INCOME> 1,744
<INTEREST-INCOME> 9,041
<OTHER-INCOME> 0
<EXPENSES-NET> 2,416
<NET-INVESTMENT-INCOME> 8,369
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 377,550
<NET-CHANGE-FROM-OPS> 385,919
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,369
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1,613
<NET-CHANGE-IN-ASSETS> 10,385,919
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,976
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,161
<AVERAGE-NET-ASSETS> 10,010,675
<PER-SHARE-NAV-BEGIN> 5.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> .19
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.19
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
