PPM AMERICA FUNDS, 497, 1999-05-13

PPM AMERICA FUNDS
497, 1999-05-13

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<PAGE>
PPM America Funds

Prospectus
May 10, 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 10, 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.................... 18

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.

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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

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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.

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<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.

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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

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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.

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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>

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<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.

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(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.

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<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

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<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, 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 61767, King of Prussia, PA 19406 or at the
address noted under Initial Purchase by Mail or by wiring Federal Funds using
the following wiring instructions:

Boston Safe Deposit & Trust
ABA#: 011001234
Credit: (Insert Name of Your Fund)
Acct.#: 001627
FBO: (Insert shareholder name and account number)

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<PAGE>
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.

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

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

14
<PAGE>
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. 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

15
<PAGE>
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, 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

16
<PAGE>
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.

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

17
<PAGE>
shareholders on an annual basis. If any Fund does not have income available to
distribute, as determined in compliance with the appropriate 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

18
<PAGE>
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.

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, P.O. Box 61503 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>
PPM America Funds

225 West Wacker Drive, Suite 1200
Chicago, IL 60606
877-PPM-FUND
[email protected]
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 10, 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 10, 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.

12
<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.

13
<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, 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

HIGH YIELD BOND FUND

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.

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
-------------
130,712
</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)

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.

36
<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.

37
<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.

38
<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