<PAGE> 1
As filed with the Securities and Exchange Commission on May 1, 2000
1933 Act Reg. No. 333-63295
1940 Act File No. 811-09001
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
----------------------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 2
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 3
---------------------------------
PPM America Funds
(Registrant)
225 West Wacker Drive, Suite 1200
Chicago, Illinois 60606
Telephone Number: (312) 634-2500
Mark B. Mandich Janet D. Olsen
PPM America, Inc. Bell, Boyd & Lloyd LLC
225 West Wacker Drive Three First National Plaza, #3300
Suite 1200 Chicago, Illinois 60602
Chicago, Illinois 60606
(Agents for Service)
----------------------------
Amending Parts A, B and C and filing Exhibits
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to rule 485(b)
[ ] on ___________ pursuant to rule 485(b)
[ ] 60 days after filing pursuant to rule 485(a)(1)
[ ] on ___ pursuant to rule 485 (a)(1) by acceleration
[ ] 75 days after filing pursuant to rule 485(a)(2)
[ ] on _____ pursuant to rule 485(a)(2)
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<PAGE> 2
PPM AMERICA FUNDS
PROSPECTUS
MAY 1, 2000
PPM AMERICA VALUE EQUITY FUND
PPM AMERICA SMALL CAP VALUE EQUITY FUND
PPM AMERICA HIGH YIELD BOND FUND
PPM AMERICA FUNDS LOGO
<PAGE> 3
PPM AMERICA FUNDS
PPM AMERICA VALUE EQUITY FUND
PPM AMERICA SMALL CAP VALUE EQUITY FUND
PPM AMERICA HIGH YIELD BOND FUND
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
MAY 1, 2000
<PAGE> 4
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
How Have the Funds Performed?............................... 3
The Funds' Fees and Expenses................................ 5
More Information on the Funds' Objectives, Strategies and
Risks..................................................... 7
Management of the Funds..................................... 9
Shareholder Information..................................... 14
Valuation of the Funds' Shares.............................. 19
Dividends, Distributions and Taxes.......................... 20
Financial Highlights........................................ 21
</TABLE>
i
<PAGE> 5
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. Moody's generally rates these securities Ba or below, while S&P
generally rates these securities BB or below, although the Fund may invest in
securities that are not rated if PPM America believes these securities are of
equivalent credit quality. The Fund may invest in corporate bonds that Moody's
rates Ca or S&P rates C, or in unrated bonds that PPM America believes are of
equivalent credit quality.
To increase the value of the Fund's shares, the Fund will invest in corporate
bonds that PPM America expects to increase in value because of improvements in
credit quality or rating or anticipated declines in interest rates. The Fund may
also invest up to 25% of its assets in equity securities to seek to increase the
value of the Fund's shares. The Fund may invest up to 25% of its assets in U.S.
dollar-denominated fixed-income or equity securities of foreign companies.
1
<PAGE> 6
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 standards; and country risks including less liquidity, high
inflation rates, unfavorable economic practices and political instability.
2
<PAGE> 7
HOW HAVE THE FUNDS PERFORMED?
The following bar charts and tables are intended to give some indication of the
risks of an investment in each Fund. The bar charts show each Fund's total
returns for the year ended December 31, 1999, and the tables compare each Fund's
performance for the periods indicated with a market index. This information is
intended to help you assess the variability of the Funds' returns over the
periods listed. Performance information for High Yield Bond Fund is not
available for a full calendar year. For a discussion of PPM America's investment
performance for its separately managed accounts, refer to Management of the
Funds. The Funds' past performance does not guarantee future results. The
principal value and return on your investment will fluctuate and on redemption
may be worth more or less than your original investment.
Value Equity Fund
Total Return for the Period(s) Ending
December 31 (%)
Value Equity Fund Chart
During the year ended December 31, 1999, Value Equity Fund's highest and lowest
quarterly returns were:
- - Highest quarterly return: 13.60% for the quarter ended June 30, 1999
- - Lowest Quarterly return: -12.15% for the quarter ended September 30, 1999
3
<PAGE> 8
The following table shows how the Value Equity Fund's average annual total
return for the one-year period ended December 31, 1999 and since the Fund's
inception compares with broad measures of market performance.
<TABLE>
<CAPTION>
FOR THE 12 MONTH FROM INCEPTION
PERIOD ENDED 12/31/99 THROUGH 12/31/99(1)
- ---------------------------------------------------------------------------
<S> <C> <C>
Value Equity Fund -0.82% 0.47%
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S&P/Barra Value Index(2) 12.68% 13.21%
- ---------------------------------------------------------------------------
S&P 500 21.04% 21.15%
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</TABLE>
(1) Fund inception date: December 23, 1998. All returns reflect reinvested
dividends.
(2) 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 large companies, regarded as generally
representative of the U.S. stock market. The S&P/ Barra Value 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.
Small Cap Value Equity Fund
Total Return for the Period(s) Ending
December 31 (%)
Small Cap Value Equity Fund Chart
During the year ended December 31, 1999, Small Cap Value Equity Fund's highest
and lowest quarterly returns were:
- - Highest quarterly return: 15.37% during the quarter ended June 30, 1999
4
<PAGE> 9
- - Lowest quarterly return: -13.49% during the quarter ended March 31, 1999
The following table shows how the Small Cap Equity Fund's average annual total
return for the one-year period ended December 31, 1999 and since the Fund's
inception compares with a broad measure of market performance.
<TABLE>
<CAPTION>
FROM INCEPTION
FOR THE 12 MONTH THROUGH
PERIOD ENDED 12/31/99 12/31/99(1)
- --------------------------------------------------------------------------
<S> <C> <C>
Small Cap Equity Value Fund -13.36% -9.76%
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Russell 2000 Value Index(2) -1.49% 11.29%
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Russell 2000 Index 21.35% 26.59%
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</TABLE>
(1) Fund inception date: December 23, 1998. All returns reflect reinvested
dividends.
(2) The Russell 2000 Value Index is an index of common stocks with dividends
reinvested, which measures the performance of those Russell 2000 Index
companies with lower price-to-book ratios and lower forecasted growth
values. The Russell 2000 Index is an unmanaged index 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. Each 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.
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>
5
<PAGE> 10
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES SMALL CAP
(EXPENSES THAT ARE DEDUCTED FROM THE VALUE EQUITY VALUE EQUITY HIGH YIELD
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 0.69% 0.61% 0.51%
----------------------------------------
Total Annual Fund Operating
Expenses (1) 1.49% 1.51% 1.16%
</TABLE>
(1) 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. This undertaking may be terminated at any time. Total
operating expenses as shown in the table above do not reflect any expense
reimbursement by PPM America.
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 $ 152 $ 154 $ 118
Three Years $ 471 $ 477 $ 368
Five Years $ 813 $ 824 $ 638
Ten Years $1,779 $1,802 $1,409
</TABLE>
6
<PAGE> 11
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.
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
7
<PAGE> 12
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 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
8
<PAGE> 13
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 $37 billion in assets.
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.
9
<PAGE> 14
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) that PPM America managed or sub-advised, 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 account(s) included in
PPM America's Diversified Large Capitalization Equity Composite have
substantially similar investment objectives, policies and strategies as PPM
America Value Equity Fund.
<TABLE>
DIVERSIFIED LARGE
CAPITALIZATION
EQUITY
COMPOSITE --
ANNUAL NET TOTAL S&P 500/BARRA
YEAR RETURNS VALUE INDEX(1)
- -------------------------------------------------------------------------
<S> <C> <C>
1999 -0.45% 12.68%
- -------------------------------------------------------------------------
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>
10
<PAGE> 15
<TABLE>
<CAPTION>
DIVERSIFIED LARGE
CAPITALIZATION
EQUITY COMPOSITE
PERIODS ENDED -- AVERAGE ANNUAL S&P 500/BARRA
DECEMBER 31, 1999 NET TOTAL RETURNS VALUE INDEX
- -------------------------------------------------------------------------
<S> <C> <C>
One year -0.45% 12.68%
- -------------------------------------------------------------------------
Three years 13.02% 18.89%
- -------------------------------------------------------------------------
Five years 20.86% 22.94%
- -------------------------------------------------------------------------
Since Inception 17.19% 18.71%
- -------------------------------------------------------------------------
</TABLE>
DIVERSIFIED SMALL CAPITALIZATION EQUITY COMPOSITE. The account(s) included in
PPM America's Diversified Small Capitalization 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 RUSSELL 2000
YEAR NET TOTAL RETURNS VALUE INDEX(3)
- ----------------------------------------------------------------------------
<S> <C> <C>
1999 -13.29% -1.49%
- ----------------------------------------------------------------------------
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>
<TABLE>
<CAPTION>
DIVERSIFIED SMALL
CAPITALIZATION EQUITY
COMPOSITE -- AVERAGE
PERIODS ENDED ANNUAL NET TOTAL RUSSELL 2000
DECEMBER 31, 1999 RETURNS VALUE INDEX
- ---------------------------------------------------------------------------
<S> <C> <C>
One year -13.29% -1.49%
- ---------------------------------------------------------------------------
Three years 5.45% 6.69%
- ---------------------------------------------------------------------------
Since Inception 12.90% 11.29%
- ---------------------------------------------------------------------------
</TABLE>
HIGH YIELD COMPOSITE. The account(s) included in PPM America's High Yield
Composite have substantially similar investment objectives, policies and
strategies as the PPM America High Yield Bond Fund.
11
<PAGE> 16
<TABLE>
<CAPTION>
HIGH YIELD COMPOSITE
-- ANNUAL NET LEHMAN HIGH YIELD
YEAR TOTAL RETURNS INDEX(5)
- -------------------------------------------------------------------------
<S> <C> <C>
1999 1.56% 2.40%
- -------------------------------------------------------------------------
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 LEHMAN HIGH YIELD
DECEMBER 31, 1999 NET TOTAL RETURNS INDEX
- --------------------------------------------------------------------------
<S> <C> <C>
One year 1.56% 2.40%
- --------------------------------------------------------------------------
Three years 6.91% 5.56%
- --------------------------------------------------------------------------
Since Inception 9.17% 7.56%
- --------------------------------------------------------------------------
</TABLE>
NOTES TO PRESENTATION OF COMPOSITE PERFORMANCE:
(1) The S&P 500/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 large companies, regarded as generally
representative of the U.S. stock market. Each 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.
(3) The Russell 2000 Value Index is an index of common stocks with dividends
reinvested, which measures the performance of those Russell 2000 Index companies
with lower price-to-book ratios and lower forecasted growth values. The Russell
2000 Index is an unmanaged index 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. Each 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.
(4) For the period April 1, 1994 (composite inception) through December 31,
1994.
12
<PAGE> 17
(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. A complete list of PPM
America's composites and copies of the presentations verified by the Funds'
independent accountants are available upon request.
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.
- ------------------------------
13
<PAGE> 18
The private accounts that are included in PPM America's composites are not
subject to the same types of expenses to which the Funds are subject, nor to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the Funds by the Investment Company Act of 1940 or
Subchapter M of the Internal Revenue Code. In fact, the expenses of the private
accounts included in the composites are lower than the Funds' expenses.
Consequently, if PPM America had included the Funds in the composites, or if the
private accounts included in the composite had been regulated as investment
companies under the federal securities and tax laws, the composites' performance
results would have been lower than what is shown above.
The investment results of PPM America's composite presented above are not
intended to predict or suggest the returns that might be experienced by the
Funds or an individual investor in the Funds. Investors should also be aware
that the use of a methodology different from that used above to calculate
performance could result in different performance data and that the methodology
used above is not the SEC standard to calculate total return for mutual funds.
As a result, the performance results may differ from the results calculated
according to the SEC's method.
SHAREHOLDER INFORMATION
HOW TO PURCHASE SHARES
Shares of the Funds are offered to (i) qualified retirement plans (including
employer, municipality, union and association and other group retirement plans),
employee-benefit trusts, foundations and endowments, (ii) certain 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
14
<PAGE> 19
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 PFPC Global Fund
Services, Inc., 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' 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 Fund Application Form should be forwarded to PPM America Funds, c/o
PFPC Global Fund Services, Inc., 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:
15
<PAGE> 20
UMB Bank K.C. NA
For: PFPC Global Fund Services, Inc.
ABA #: 10-10-00695
Account #: 98-7037-071-9
FBO: (Fund Name, Account Number, and Account Registration)
Wires must be received before 4:00 p.m. (Eastern Time) to receive that day's
price. Federal Funds purchases will be accepted only on a day on which the Funds
are open for business. See Closed Holidays.
ADDITIONAL INVESTMENTS: Additional investments may be made at any time (minimum
additional investment $5,000, although PPM America may waive the minimum
additional investment requirement) by mailing a check along with the detachable
stub from a recent account statement, payable to PPM America Funds to PFPC
Global Fund Services, Inc., P. O. Box 61767, King of Prussia, PA 19406-0903 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)
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
Fund shares may be redeemed by mail, or, if authorized, by telephone. No charge
is made for redemptions. The value of shares redeemed may be more or less than
the purchase price, depending on the net asset value at the time of redemption,
which is based on the market value of the investment securities held by a Fund.
See Closed Holidays and Valuation of the Funds' Shares.
16
<PAGE> 21
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 PFPC Global Fund Services, Inc., P. O. Box 61503, 3200
Horizon Drive, King of Prussia, PA 19406-0903.
To be in good order, redemption requests must include the following
documentation:
(a) A letter of instruction, if required, or a stock assignment specifying
the number of shares or dollar amount to be redeemed, signed by all
registered owners of the shares in the exact names in which the shares are
registered;
(b) Any required signature guarantees (see Signature Guarantees); and
(c) Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit
sharing plans and other organizations.
SIGNATURE GUARANTEES: To protect against fraud, signature guarantees are
required to enable the Funds to verify the identity of the person who has
authorized a redemption from an account. Signature guarantees are required for
(1) redemptions where the proceeds are to be sent to someone other than the
registered shareholder(s) and the registered address, and (2) share transfer
requests. Please contact PPM America Funds, c/o PFPC Global Fund Services, Inc.,
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, PFPC Global Fund
Services, Inc. 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
17
<PAGE> 22
may be up to seven days before proceeds are received by an investor. The Funds
may suspend the right of redemption or postpone the date of redemption at times
when the New York Stock Exchange ("NYSE") is closed (See Closed Holidays), when
trading on the NYSE is restricted or under any emergency circumstances as
determined by the SEC or for such other periods as the SEC may permit.
If the Board of Trustees determines that it would be detrimental to the best
interests of the remaining shareholders of a Fund to make payment wholly or
partly in cash, the Fund may pay the redemption proceeds in whole or in part by
a distribution in-kind of readily marketable securities held by the Fund in lieu
of cash in conformity with applicable rules of the SEC. Investors may incur
brokerage charges on the sale of a Fund's securities received in such payments
of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE: Shares of each Fund may be exchanged for shares of another
Fund based on the respective net asset values of the shares involved. There are
no exchange fees. Exchange requests by telephone must be placed prior to 4:00
p.m. (Eastern Time) to receive that day's price. Written exchange requests
should be sent to PPM America Funds, c/o PFPC Global Fund Services, Inc., P. O.
Box 61503, 3200 Horizon Drive, King of Prussia, PA 19406-0903.
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 PFPC Global Fund Services, Inc., P. O. Box
61503, 3200 Horizon Drive, King of Prussia, PA 19406-0903. 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.
18
<PAGE> 23
VALUATION OF THE FUNDS' SHARES
The price of the shares of each Fund is that Fund's net asset value. Net asset
value per share is determined by dividing the total market value of a Fund's
investments and other assets, less any liabilities, by the total outstanding
shares of that Fund. Net asset value per share is determined as of the close of
the NYSE (normally 4:00 p.m. Eastern Time) on each day the Funds are open for
business.
EQUITY FUNDS
Equity securities listed on a U.S. securities exchange or Nasdaq National Market
for which market quotations are available are valued at the last quoted sale
price on the day the valuation is made. Price information on listed equity
securities is taken from the exchange where the security is primarily traded.
Unlisted equity securities and listed U.S. equity securities not traded on the
valuation date or for which market quotations are not readily available
(including restricted securities), and securities, the value of which have been
materially affected by events, occurring after the close of the market on which
they principally trade, are determined in good faith at a fair value using
methods approved by the Board of Trustees.
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
19
<PAGE> 24
the net asset value will not be based on the last quoted price on the security,
but on a price which the Board of Trustees or their delegate believes reflects
the current and true price of the security.
CLOSED HOLIDAYS: Currently, the weekdays on which the Funds are closed for
business and their shares are not priced are: New Years Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. During these days, the price of foreign
securities held by the Funds may change. As a result, the Funds' net asset
values may also change during these days, but shareholders will not be able to
purchase or redeem the Funds' shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES:
DIVIDENDS AND DISTRIBUTIONS: The Funds normally distribute substantially all of
their net investment income and net realized capital gains to shareholders on an
annual basis. If any Fund does not have income available to distribute, as
determined in compliance with the appropriate 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 asset 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.
20
<PAGE> 25
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the 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 a 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, is included in the Statement of Additional Information,
which is available upon request.
<TABLE>
<CAPTION>
PPM AMERICA SMALL CAP VALUE PPM AMERICA HIGH
PPM AMERICA VALUE EQUITY FUND EQUITY FUND YIELD BOND FUND
-------------------------------- -------------------------------- -----------------
PERIOD FROM PERIOD FROM PERIOD FROM
DECEMBER 23, DECEMBER 23, JUNE 7,
YEAR ENDED 1998* TO YEAR ENDED 1998* TO 1999* TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998 1999
------------ ----------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 5.06 $ 5.00 $ 5.19 $ 5.00 $ 5.00
INCOME FROM OPERATIONS:
Net investment income.. 0.05 0.01 0.04 0.01 0.26
Net realized and
unrealized gains
(losses) on
investments.......... (0.10) 0.06 (0.73) 0.19 (0.17)
------- ------ ------- ------- -------
Total income (loss)
from operations...... (0.05) 0.07 (0.69) 0.20 0.09
------- ------ ------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income............... (0.05) (0.01) (0.04) (0.01) (0.26)
From net realized gains
on investment
transactions......... (0.13) -- (0.05) -- --
------- ------ ------- ------- -------
Total distributions.... (0.18) (0.01) (0.09) (0.01) (0.26)
------- ------ ------- ------- -------
Net increase
(decrease)........... (0.23) 0.06 (0.78) 0.19 (0.17)
------- ------ ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 4.83 $ 5.06 $ 4.41 $ 5.19 $ 4.83
======= ====== ======= ======= =======
TOTAL RETURN (A)..... (0.82%) 1.24% (13.36%) 3.86% 1.83%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of
period (in
thousands)........... $22,865 $5,163 $22,125 $10,386 $25,448
Ratio of net operating
expenses to average
net assets (b)....... 1.00% 1.00% 1.10% 1.10% 0.85%
Ratio of net investment
income to average net
assets (b)........... 1.60% 4.76% 1.18% 3.81% 9.14%
Portfolio turnover..... 45.51% -- 52.51% -- 31.54%
RATIO INFORMATION
ASSUMING NO EXPENSE
REIMBURSEMENT OR FEES
PAID INDIRECTLY
Ratio of expenses to
average net assets
(b).................. 1.49% 5.42% 1.51% 3.26% 1.16%
Ratio of net investment
income to average net
assets (b)........... 1.11% 0.34% 0.77% 1.65% 8.83%
</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 periods less than one year.
(b) Annualized for the periods less than one year.
21
<PAGE> 26
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]
Text-only versions of all Fund documents can be viewed online or downloaded from
the EDGAR Database on the SEC's internet web site at . You can also review and
copy those documents by visiting the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be obtained
by calling the SEC at 202-942-8090. Copies of the Fund's documents may be
obtained, after mailing the appropriate duplicating fee, by writing to the SEC's
Public Reference Section, at 450 5th Street, N.W., Washington, D.C. 20549-0102
or by e-mail request at [email protected].
Investment Company Act File No. 811-09001
22
<PAGE> 27
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: PFPC Global
Funds Services, Inc., ABA#: 10-10-00695, Account #: 98-7037-071-9 FBO: (PPM
America Funds and Account Registration)
- - Overnight packages should be sent to: PPM America Funds, 3200 Horizon Drive,
King of Prussia, PA 19406-0903
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
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 -----------------------------------------------------------------------------------------
NUMBER Street Address Suite No. Phone No.
---------------------------------------------------------------------
City State Zip Code
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
2.A. [ ] Individual ----------------------------------------------------------------
[ ] Joint Registration
First Name Middle Initial Last Name Soc. Sec. No.
(For first
individual)
----------------------------------------------------------------
First Name Middle Initial Last Name Soc. Sec. No.
(For joint
registrant)
Joint tenancy with rights of survivorship will be presumed unless
otherwise specified.
</TABLE>
<TABLE>
<S> <C> <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 of Employer Occupation
---------------------------------------------------------------------------------------
Address of Employer
</TABLE>
- --------------------------------------------------------------------------------
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
<TABLE>
<S> <C> <C>
$ ------------------ PPM America Value Equity Fund
$ ------------------ PPM America Small Cap Value Equity Fund
$ ------------------ PPM America High Yield Bond Fund
$ ------------------ Total Investment
</TABLE>
<PAGE> 28
PPM AMERICA FUNDS
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------
4. DIVIDEND AND Choose the way you want your dividend and capital gain
CAPITAL GAIN distributions paid. Check one box for dividends, one box for
DISTRIBUTIONS capital gains. If not specified, dividends and capital gains
will be reinvested.
[ ] Mail check to address of record.
[ ] Dividends [ ] Capital Gains
</TABLE>
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
5. TELEPHONE PRIVILEGES: You will automatically have telephone exchange privileges.
EXCHANGES AND If you would like to be able to redeem shares over the
REDEMPTIONS telephone, please check the box below.
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.
- -----------------------------------------------------------------------------------------------------
6. TAXPAYER By the signature below and under penalties of perjury, you
IDENTIFICATION certify: (1) that the number shown on this application is
NUMBER your correct Social Security or Taxpayer Number
CERTIFICATION Identification 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 preceding 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 : ___________ .
- -----------------------------------------------------------------------------------------------------
7. SIGNATURE AND I/we have read the Prospectus and application and agree to
CERTIFICATION its terms. I/we understand that 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
------------------------------------------------------------
Print name and title
</TABLE>
<PAGE> 29
PPM AMERICA FUNDS
225 WEST WACKER DRIVE, SUITE 1200
CHICAGO, IL 60606
877-PPM-FUND
[email protected]
<PAGE> 30
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
PPM AMERICA FUNDS
PPM America Value Equity Fund
PPM America Small Cap Value Equity Fund
PPM America High Yield Bond Fund
This Statement of Additional Information is not a prospectus. It
contains information in addition to and more detailed than set forth in the
Prospectus and should be read in conjunction with the PPM America Funds'
Prospectus, dated May 1, 2000. 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.
<PAGE> 31
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 ................................................ 10
TRUSTEES AND OFFICERS OF THE TRUST ................................. 11
INVESTMENT ADVISER AND OTHER SERVICES .............................. 13
Principal Underwriter ............................................ 14
Accounting Services Agreement .................................... 14
Custodian and Transfer Agent ..................................... 14
Independent Accountants .......................................... 14
Fund Transactions and Brokerage .................................. 15
PERFORMANCE ........................................................ 17
VALUATION OF THE FUNDS' SHARES ..................................... 21
Equity Funds ..................................................... 21
High Yield Bond Fund ............................................. 21
PURCHASE OF SHARES ................................................. 22
REDEMPTION OF SHARES ............................................... 22
SHAREHOLDER SERVICES ............................................... 23
Exchange Privilege ............................................... 23
Transfer of Shares ............................................... 24
ADDITIONAL INFORMATION ............................................. 24
TAX STATUS ......................................................... 24
FINANCIAL STATEMENTS ............................................... 25
Appendix -- Bond Ratings ........................................... A-1
Ratings by Moody's: .............................................. A-1
</TABLE>
i
<PAGE> 32
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 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 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.
<PAGE> 33
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.
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
2
<PAGE> 34
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 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.
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<PAGE> 35
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 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 are basically 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 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,
4
<PAGE> 36
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 net 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 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.
5
<PAGE> 37
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.
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
6
<PAGE> 38
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 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 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
- --------
(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.
7
<PAGE> 39
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 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
8
<PAGE> 40
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
vehicles, provided the Board determines that their use is consistent with the
investment objective.
When purchasing a futures contract or writing a put on a futures
contract, the High Yield Bond Fund must maintain with its custodian (or broker,
if legally permitted) cash or cash equivalents (including any margin) equal to
the market value of such contract. When writing a call option on a futures
contract, the High Yield Bond Fund similarly will maintain with its custodian
cash or cash equivalents (including any margin) equal to the amount by which
such option is in-the-money until the option expires or is closed out by the
High Yield Bond Fund.
The High Yield Bond Fund may not maintain open short positions in
futures contracts, call options written on futures contracts or call options
written on indexes if, in the aggregate, the market value of all such open
positions exceeds the current value of the securities in its portfolio, plus or
minus unrealized gains and losses on the open positions, adjusted for the
historical relative volatility of the relationship between the portfolio and the
positions. For this purpose, to the extent the High Yield Bond Fund has written
call options on specific securities in its portfolio, the value of those
securities will be deducted from the current market value of the securities
portfolio.
In order to comply with Commodity Futures Trading Commission Regulation
4.5 and thereby avoid being deemed a "commodity pool operator," the High Yield
Bond Fund will use commodity futures or commodity options contracts solely for
bona fide hedging purposes within the meaning and intent of the Regulation
1.3(z), or, with respect to positions in commodity futures and commodity options
contracts that do not come within the meaning and intent of 1.3(z), the
aggregate initial margin and premiums required to establish such positions will
not exceed 5% of the fair market value of the assets of the High Yield Bond
Fund, after taking into account unrealized profits and unrealized losses on any
such contracts it has entered into in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount (as defined in Section
190.01(x) of the Commission Regulations) may be excluded in computing such 5%.
If the High Yield Bond Fund adopts a temporary defensive position, it
will invest in cash and cash equivalents, as well as U.S. Treasury securities.
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<PAGE> 41
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.
(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
10
<PAGE> 42
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 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>
Position(s) Held With the Funds Principal Occupations During
Name (Age) Past 5 Years
- ------------------------- ------------------------------------ -----------------------------
<S> <C> <C>
Swansen, Russell W. (42)* Trustee and President President, PPM America, Inc.
Mandich, Mark B. (39)* Trustee, Chief Financial Officer and Executive Vice President, Senior
Treasurer Vice President, Vice President,
Chief Compliance Officer and
Treasurer, PPM America, Inc.
</TABLE>
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<PAGE> 43
<TABLE>
<CAPTION>
Position(s) Held With the Funds Principal Occupations During
Name (Age) Past 5 Years
- ------------------------- ------------------------------------ -----------------------------
<S> <C> <C>
Nerud, Mark D. (33) Secretary and Assistant Treasurer Chief Financial Officer, Jackson
National Financial Services, LLC;
Chief Operating Officer of Jackson
National Life Distributors, Inc.;
Vice President, National Planning
Corporation; Chief Operating Officer
and Treasurer, Jackson National
Financial Services, Inc; Vice
President, Assistant Controller and
Senior Manager, Jackson National
Life Insurance Company; Manager,
Voyageur Asset Management Company.
Brody, Richard S. (45) Vice President Executive Vice President, Senior
Vice President, PPM America, Inc.
White, James J., Jr. (40) Vice President Senior Managing Director-Marketing,
PPM America, Inc., Principal, NFJ
Investment Group
Bianco, JoAnne M. (37) Vice President Senior Managing Director - Senior
Portfolio Manager, PPM America, Inc.
Hogan, Therese M. (37) Assistant Secretary Director of State Regulation, PFPC
Global Fund Services, Inc.; Palmer & Dodge.
Pape, Arthur E. (60) Trustee Of counsel, Ottosen Trevarthen Britz
& Kelly, Ltd.; Partner, Katten Muchin & Zavis
Hannon, James R. (51) 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. For the fiscal year ended December 31,
1999, the Outside Trustees received the following fees for serving as a Trustee:
<TABLE>
<CAPTION>
TRUSTEE AGGREGATE COMPENSATION FROM TRUST
------- ---------------------------------
<S> <C>
Arthur E. Pape $4,000
James R. Hannon $4,000
</TABLE>
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<PAGE> 44
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 a
direct subsidiary of PPM Holdings, Inc., which is in turn a wholly-owned
subsidiary of Prudential plc, ("Prudential"), one of the largest life insurance
companies in the United Kingdom. As of the date of this SAI, PPM America and its
affiliates own 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 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,
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<PAGE> 45
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.
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"), 5901 Executive
Drive, Lansing, Michigan 48911 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.
PFPC Global Fund Services, Inc., 3200 Horizon Drive, King of Prussia,
Pennsylvania 19406, is the transfer agent, blue sky agent and dividend-paying
agent for the Trust.
INDEPENDENT ACCOUNTANTS
The Trust's independent accountants, PricewaterhouseCoopers LLP, 203
North LaSalle, Chicago, Illinois 60601, audit and report on the Trust's annual
financial statements, prepare
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<PAGE> 46
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 net 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.
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
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<PAGE> 47
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 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.
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<PAGE> 48
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 allocate such securities in a manner determined
in good faith to be fair and equitable.
For the year ended December 31, 1999, the Value Fund paid brokerage
commissions totaling $21,604, and the Small Cap Fund paid brokerage commissions
totaling $26,111.
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)(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.
The Yield formula is as follows: YIELD = 2[((a-b/cd)+1)(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
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<PAGE> 49
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 accuracy of such data. Newspapers and magazines
that might mention the Funds include, but are not limited to, the following:
Barron's
Boston Globe
Business Week
Changing Times
Chicago Tribune
Chicago Sun-Times
Crain's Chicago Business
Consumer Reports
Consumer Digest
Financial World
Forbes
Fortune
Global Finance
Institutional Investor
Investor's Business Daily
Kiplinger's Personal Finance
Los Angeles Times
Money
Mutual Fund Letter
Mutual Funds Magazine
Morningstar
Newsweek
The New York Times
Pensions and Investments
Personal Investor
Smart Money
Stanger Reports
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<PAGE> 50
Time
USA Today
U.S. News and World Report
The Wall Street Journal
Worth
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:
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<PAGE> 51
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 Value Index
Russell 2000 Index*
Russell 2500 Index*
Russell 2500 Value Index*
Wilshire 5000 Index
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
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<PAGE> 52
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 obtains)
very long-term (since 1926) total return data (including, for example, total
return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks; small company stocks; long-term corporate bonds; long-term government
bonds; intermediate-term government bonds; U.S. Treasury bills; and Consumer
Price Index.
VALUATION OF THE FUNDS' SHARES
As stated in the Trust's prospectus, the price of the shares of each
Fund is that Fund's net asset value. Net asset value per share is determined by
dividing the total market value of a Fund's investment and other assets, less
any liabilities, by the total outstanding shares of that Fund. Net asset value
per share is determined as of the close of the New York Stock Exchange ("NYSE")
(normally 4:00 p.m. Eastern Time) on each day the Funds are open for business.
EQUITY FUNDS
Equity securities listed on a U.S. securities exchange or Nasdaq
National Market for which market quotations are available are valued at the last
quoted sale price on the exchange or NASDAQ on the day the valuation is made.
Price information on listed equity securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed U.S.
equity securities not traded on the valuation date or for which market
quotations are not readily available (including restricted securities), and
securities, the value of which have been materially affected by events,
occurring after the close of the market on which they principally trade, are
determined in good faith at a fair value using methods approved by the Board.
HIGH YIELD BOND FUND
Bonds and other fixed-income securities which are traded over the
counter and on an exchange will be valued according to the broadest and most
representative market, and it is expected that for bonds and other fixed-income
securities this ordinarily will be the over-the-counter market. However, bonds
and other fixed-income securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair market
value of such securities. The prices provided by a pricing service are
determined without regard to bid or last sale prices but take into account
institutional size trading in similar groups of securities and any developments
related to specific securities. Bonds and other 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."
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<PAGE> 53
If any Fund holds a security that is valued using fair value pricing
because of an event that occurred after the market close, the effect of this
will be that the net asset value will not be based on the last quoted price on
the security, but on a price which the Board or their delegate believes reflects
the current and true price of the securely.
CLOSED HOLIDAYS: Currently, the weekdays on which the Funds are closed
for business and their shares are not priced are: New Years Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. During these days, the price of
foreign securities held by the Funds may change. As a result, the Funds' net
asset values may also change during these days, but shareholders will not be
able to purchase or redeem the Funds' shares.
PURCHASE OF SHARES
Shares of the Funds are offered to (i) qualified retirement plans
(including employer, municipality, union and association and other group
retirement plans), employee-benefit trusts, foundations and endowments, (ii)
certain financial institutions having sales or service agreements with the Funds
or a broker-dealer or financial institution with respect to sales of shares of
the Funds, (iii) employees and officers of PPM America and its affiliates, or
(iv) any other institution or individual, at the sole discretion of PPM America.
The minimum initial investment in shares of a Fund is $500,000. That
high minimum is intended to help the Funds control their expenses, for the
benefit of all the Funds' shareholders. Employees and officers of PPM America
and its affiliates have a minimum initial investment of $10,000. PPM America may
waive minimum initial and subsequent investments.
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.
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<PAGE> 54
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 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 by the Fund 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 PFPC Global
Fund Services, Inc., P.O. Box 61503, 3200 Horizon Drive, King of Prussia,
Pennsylvania 19406. 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.
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<PAGE> 55
TRANSFER OF SHARES
Shareholders may transfer shares of a Fund to another person by written
request to PPM America Funds, c/o PFPC Global Fund Services, Inc., P.O. Box
61503, 3200 Horizon Drive, King of Prussia, Pennsylvania 19406. 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.
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
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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 the 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.
25
<PAGE> 57
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of PPM America Funds
In our opinion, the accompanying statements 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 PPM America Value Equity Fund, PPM
America Small Cap Value Equity Fund and PPM America High Yield Bond Fund
(hereafter referred to as the "Trust") at December 31, 1999, and the results of
each of their operations, changes in each of their net assets and the financial
highlights for the periods indicated, in conformity with accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States 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, 1999, by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 4, 2000
26
<PAGE> 58
PPM AMERICA VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT 000'S
------ -----
COMMON STOCKS - 99.57%
- -----------------------
<S> <C> <C>
AEROSPACE & DEFENSE - 3.97%
Lockheed Martin Corp. 23,800 $ 521
United Technologies Corp. 6,000 390
-------------
911
APPAREL - 3.58%
Liz Claiborne Inc. 8,700 327
V.F. Corp. 16,500 495
-------------
822
AUTO MANUFACTURERS - 4.04%
Ford Motor Co. 8,900 476
General Motors Corp. 6,200 451
-------------
927
AUTO PARTS & EQUIPMENT - 3.58%
Delphi Automotive Systems Corp. 23,400 369
TRW Inc. 8,700 452
-------------
821
BANKS - 7.08%
Bank of America Corp. 10,700 537
Chase Manhattan Corp. 5,000 388
KeyCorp 21,700 480
Union Planters Corp. 5,600 221
-------------
1,626
CHEMICALS - 2.09%
Rohm & Haas Co. 11,800 480
ELECTRIC - 3.86%
FirstEnergy Corp. 19,300 438
GPU Inc. 15,000 449
-------------
887
ELECTRONICS - 2.01%
Parker Hannifin Corp. 9,000 462
FOREST PRODUCTS & PAPER - 3.80%
Fort James Corp. 16,800 460
Mead Corp. 9,500 413
-------------
873
HEALTHCARE - 2.27%
Columbia/HCA Healthcare Corp. 17,800 522
HOME FURNISHINGS - 1.65%
Maytag Corp. 7,900 379
INSURANCE - 8.63%
Aetna Inc. 9,300 519
American Financial Group Inc. 8,700 229
American General Corp. 3,000 228
</TABLE>
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT 000'S
<S> <C> <C>
Cigna Corp. 5,600 $ 451
Hartford Financial Services Group Inc. 11,700 554
-------------
1,981
IRON & STEEL - 1.96%
Nucor Corp. 8,200 450
LEISURE TIME - 1.38%
Brunswick Corp. 14,200 316
MANUFACTURING - 5.00%
Cooper Industries Inc. 7,700 311
ITT Industries Inc. 10,400 348
PPG Industries Inc. 7,800 488
-------------
1,147
METALS & MINING - 2.31%
Phelps Dodge Corp. 7,900 530
OFFICE & BUSINESS EQUIPMENT - 3.28%
Harris Corp. 12,800 342
Xerox Corp. 18,100 411
-------------
753
OIL & GAS PRODUCERS - 6.37%
Ashland Inc. 12,000 395
Chevron Corp. 2,600 225
Occidental Petroleum Corp. 20,900 452
Phillips Petroleum Co. 8,300 390
-------------
1,462
PACKAGING & CONTAINERS - 0.89%
Pactiv Corp. (a) 19,300 205
RETAIL - 6.53%
Federated Department Stores Inc. (a) 11,600 587
K Mart Corp. (a) 53,200 535
Sears, Roebuck & Co. 12,400 377
-------------
1,499
SAVINGS & LOANS - 5.88%
Charter One Financial Inc. 28,200 539
Sovereign Bancorp Inc. 43,300 323
Washington Mutual Inc. 18,800 489
-------------
1,351
SOFTWARE - 2.10%
Computer Associates International Inc. 6,900 483
TELECOMMUNICATIONS - 11.05%
Bell Atlantic Corp. 6,800 419
BellSouth Corp. 7,400 346
CenturyTel Inc. 7,000 332
GTE Corp. 6,000 423
SBC Communications Inc. 9,800 478
US West Inc. 7,500 540
-------------
2,538
</TABLE>
See notes to the financial statements.
<PAGE> 59
PPM AMERICA VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
<S> <C> <C>
TOBACCO - 2.87%
Philip Morris Cos. Inc. 16,400 $ 380
RJ Reynolds Tobacco Holdings Inc. 15,800 278
---------------
658
TRANSPORTATION - 3.39%
Burlington Northern Santa Fe Corp. 14,900 361
CSX Corp. 13,300 417
---------------
778
---------------
Total Common Stocks
(cost $25,828) 22,861
---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
<S> <C> <C>
SHORT TERM INVESTMENTS - 0.43%
MONEY MARKET FUND - 0.43%
Dreyfus Cash Management
Plus, 5.53% (b) 98,346 $ 98
------------
Total Short Term Investments
(cost $98) 98
------------
TOTAL INVESTMENTS - 100%
(cost $25,926) $22,959
============
</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, 1999.
See notes to the financial statements.
<PAGE> 60
PPM AMERICA SMALL CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT 000'S
<S> <C> <C>
COMMON STOCKS - 99.77%
AEROSPACE & DEFENSE - 5.35%
Alliant Techsystems Inc. (a) 10,300 $ 642
GenCorp Inc. 55,300 546
--------------
1,188
APPAREL - 7.00%
Columbia Sportswear Co. (a) 30,500 656
Garan Inc. 14,100 404
Nautica Enterprises Inc. (a) 43,600 493
--------------
1,553
AUTO PARTS & EQUIPMENT - 3.05%
Superior Industries International Inc. 25,200 676
BANKS - 7.81%
CCB Financial Corp. 7,100 309
GBC Bancorp 11,300 218
Hudson United Bancorp 24,205 619
Peoples Heritage Financial Group Inc. 39,000 588
--------------
1,734
BUILDING MATERIALS - 2.63%
Omnova Solutions Inc. 75,300 584
CHEMICALS - 2.56%
Ferro Corp. 25,800 568
COMMERCIAL SERVICES - 2.96%
Franklin Covey Co. (a) 87,500 656
ELECTRIC - 3.56%
Black Hills Corp. 17,500 388
Sierra Pacific Resources 23,200 402
--------------
790
ELECTRICAL COMPONENTS & EQUIPMENT - 2.94%
Lanier Worldwide Inc. (a) 168,600 653
FOOD - 2.62%
Bob Evans Farms Inc. 37,700 582
HAND & MACHINE TOOLS - 2.98%
Kennametal Inc. 19,700 662
HEALTHCARE - 2.66%
Triad Hospitals Inc. (a) 39,100 591
HOME BUILDERS - 2.56%
Champion Enterprises Inc. (a) 66,500 569
</TABLE>
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT 000'S
<S> <C> <C>
HOUSEWARES - 2.42%
National Presto Industries Inc. 15,100 $ 536
INSURANCE - 3.99%
American Financial Group Inc. 21,100 557
ReliaStar Financial Corp. 8,400 329
--------------
886
IRON & STEEL - 7.60%
AK Steel Holding Corp. 47,300 893
Cleveland-Cliffs Inc. 25,500 793
--------------
1,686
LEISURE TIME - 2.83%
Brunswick Corp. 28,200 627
MACHINERY - 10.15%
Esterline Technologies Corp. (a) 66,900 774
Flowserve Corp. 41,500 705
Tecumsah Products Co. 16,400 774
--------------
2,253
MANUFACTURING - 3.18%
Lancaster Colony Corp. 21,300 706
OFFICE & BUSINESS EQUIPMENT - 2.36%
Steelcase Inc. 43,600 523
OIL & GAS PRODUCERS - 6.69%
Peoples Energy Corp. 11,600 389
Ultramar Diamond Shamrock Corp. 32,200 731
WD-40 Co. 16,500 365
--------------
1,485
SAVINGS & LOANS - 5.23%
Astoria Financial Corp. 17,900 545
Sovereign Bancorp Inc. 82,500 615
--------------
1,160
SHIPBUILDING - 2.76%
Newport News Shipbuilding Inc. 22,300 613
TRANSPORTATION - 3.88%
Frozen Food Express Industries Inc. 57,600 223
GATX Corp. 18,900 638
--------------
861
--------------
Total Common Stocks
(cost $25,518) 22,142
--------------
</TABLE>
See notes to the financial statements.
<PAGE> 61
PPM AMERICA SMALL CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
------ -------
SHORT TERM INVESTMENTS - 0.23%
- ------------------------------
<S> <C> <C>
MONEY MARKET FUND - 0.23%
Dreyfus Cash Management
Plus, 5.53% (b) 51,470 $ 51
-----------
Total Short Term Investments
(cost $51)
51
-----------
TOTAL INVESTMENTS - 100%
------------------------
(cost $25,569) $ 22,193
===========
</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, 1999.
See notes to the financial statements.
<PAGE> 62
PPM AMERICA HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
------ -------
CORPORATE BONDS - 95.78%
- -------------------------
<S> <C> <C>
AEROSPACE & DEFENSE - 1.73%
Fairchild Corp., 10.75%, 04/14/2009 500,000 $ 427
BANKS - 0.41%
Sovereign Bancorp,
10.25%, 05/15/2004 30,000 30
10.50%, 11/15/2006 70,000 71
-----------
101
BEVERAGES - 2.05%
National Wine & Spirits Inc.,
10.125%, 500,000 504
01/15/2009
BUILDING MATERIALS - 8.88%
Brand Scaffold Services Inc.,
10.25%, 500,000 453
02/15/2008
Juno Lighting Inc., 11.875%, 400,000 368
07/01/2009
NCI Building Systems Inc., 9.25%,
05/01/2009 500,000 474
Nortek Inc., 9.125%, 09/01/2007 500,000 484
Schuff Steel Co., 10.50%, 06/01/2008 500,000 409
-----------
2,188
CHEMICALS - 2.53%
Georgia Gulf Corp., 10.375%,
11/01/2007 (c) 100,000 104
Lyondell Chemical Co., 10.875%,
05/01/2009 500,000 519
-----------
623
COMMERCIAL SERVICES - 1.94%
Marsulex Inc., 9.625%, 07/01/2008 500,000 479
DIVERSIFIED FINANCIAL SERVICES - 4.00%
DVI Inc., 9.875%, 02/01/2004 500,000 491
Knology Holdings Inc., (Step-Up
Bond), 750,000 494
11.875%, 10/15/2007 (a)
-----------
985
ELECTRICAL COMPONENTS &
EQUIPMENT - 1.99%
Integrated Circuit Systems Inc.,
11.50%, 500,000 490
05/15/2009
ENTERTAINMENT - 7.54%
Alliance Atlantis Communications
Corp., 300,000 292
13.00%, 12/15/2009
Hollywood Casino Shreveport/
Shreveport Capital Corp.,
13.00%, 08/01/2006 (c) 400,000 427
Imax Corp., 7.875%, 12/01/2005 500,000 469
Lady Luck Gaming Corp., 11.875%,
03/01/2001 190,000 190
Waterford Gaming LLC, 9.50%,
03/15/2010 (c) 489,000 480
-----------
1,858
</TABLE>
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
<S> <C> <C>
FOOD - 4.02%
Agrilink Foods Inc., 11.875%, 500,000 $ 493
11/01/2008
Canadaigua Brands Inc., 8.625%,
08/01/2006 500,000 498
-----------
991
HAND & MACHINE TOOLS - 1.98%
Applied Power Inc., 8.75%, 500,000 489
04/01/2009
HEALTHCARE - 4.01%
LifePoint Hospitals Holdings Inc.,
10.75%, 05/15/2009 500,000 522
Tenet Healthcare Corp., 8.125%, 500,000 467
12/01/2008
-----------
989
HOME FURNISHINGS - 1.99%
Windmere-Durable Holdings, Inc.,
10.00%, 07/31/2008 500,000 491
LODGING - 1.81%
HMH Properties, 7.875%, 08/01/2008 500,000 446
MANUFACTURING - 3.57%
Prestolite Electric Inc., 500,000 391
9.625%, 02/01/2008
Repap New Brunswick, 500,000 489
9.00%, 06/01/2004
-----------
880
MEDIA - 4.14%
Echostar DBS Corp., 9.375%, 500,000 501
02/01/2009
Insight Midwest LP, 9.75%, 500,000 519
10/01/2009 (c)
-----------
1,020
OFFICE & BUSINESS EQUIPMENT - 0.91%
General Binding Corp., 9.375%,
06/01/2008 500,000 224
PACKAGING & CONTAINERS - 6.23%
Packaging Corp. of America, 9.625%,
04/01/2009 500,000 514
Riverwood International Corp.,
10.25%, 500,000 509
04/01/2006
U.S. Can Corp., 10.125%, 10/15/2006 500,000 511
-----------
1,534
RETAIL - 8.93%
APCOA Inc., 9.25%, 03/15/2008 500,000 354
Buhrmann U.S. Inc., 12.25%,
11/01/2009 400,000 415
Finlay Enterprises Inc., 9.00%, 500,000 440
05/01/2008
Jo-Ann Stores, Inc., 10.375%, 500,000 489
05/01/2007
Stater Brothers Holdings Inc.,
10.75%, 500,000 501
08/15/2006
-----------
2,199
</TABLE>
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
<S> <C> <C>
SEMICONDUCTORS - 1.98%
Hadco Corp., 9.50%, 06/15/2008 500,000 $ 488
</TABLE>
See notes to the financial statements.
<PAGE> 63
PPM AMERICA HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS(continued)
<TABLE>
<S> <C> <C>
SOFTWARE - 2.09%
PSINet Inc., 11.00%, 08/01/2009 500,000 515
TELECOMMUNICATIONS - 23.05%
Adelphia Business Solutions Inc.,
12.00%, 11/01/2007 500,000 527
AT&T Canada Inc., (Step-Up Bond),
9.95%, 06/15/2008 (a) 750,000 590
Crown Castle International Corp.,
(Step-Up 750,000 470
Bond), 10.375%, 05/15/2011 (a)
KMC Telecom Holdings Inc., 13.50%,
05/15/2009 (c) 500,000 492
Metromedia Fiber Network Inc.,
10.00%, 500,000 514
12/15/2009
Nextel Communications Inc.,(Step-Up
Bond), 9.95%, 02/15/2008 (a) 750,000 530
NEXTLINK Communications Inc.,
10.75%, 500,000 516
06/01/2009
Primus Telecommunications Group
Inc., 500,000 482
11.25%, 01/15/2009
RCN Corp., 10.125%, 01/15/2010 500,000 499
Rogers Cablesystems Ltd., 10.00%,
12/01/2007 500,000 535
</TABLE>
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
Williams Communications Group Inc.,
<S> <C> <C>
10.875%, 10/01/2009 500,000 $ 524
-----------
5,679
-----------
Total Corporate Bonds
(cost $24,273) 23,600
-----------
GOVERNMENT SECURITIES - 2.02%
SOVEREIGN - 2.02%
Republic of Argentina, 11.75%,
04/07/2009 500,000 498
-----------
Total Government Securities
(cost $469) 498
-----------
SHORT TERM INVESTMENTS - 2.20%
MONEY MARKET FUND - 2.20%
Dreyfus Cash Management Plus,
5.53% (b) 543,170 543
-----------
Total Short Term Investments
(cost $543) 543
-----------
TOTAL INVESTMENTS - 100%
(cost $25,285) $ 24,641
========
</TABLE>
(a) Denotes deferred interest security that receives no current coupon payments
until a predetermined date at which time the stated coupon rate becomes
effective.
(b) Dividend yields change daily to reflect current market
conditions. Rate is the quoted yield as of December 31, 1999.
(c) 144a security. Certain conditions for public sale may exist.
See notes to the financial statements.
<PAGE> 64
PPM AMERICA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except net asset value per share)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PPM AMERICA PPM AMERICA PPM AMERICA
VALUE SMALL CAP HIGH YIELD
EQUITY FUND VALUE EQUITY FUND BOND FUND
---------------------- ----------------------- -----------------------
ASSETS
<S> <C> <C> <C>
Investments in securities, at cost $ 25,926 $ 25,569 $ 25,285
====================== ======================= =======================
Investments in securities, at value $ 22,959 $ 22,193 $ 24,641
Cash - - 277
Receivables:
Dividends and interest 48 14 556
Reimbursement from adviser 12 9 7
---------------------- ----------------------- -----------------------
TOTAL ASSETS 23,019 22,216 25,481
---------------------- ----------------------- -----------------------
LIABILITIES
Cash overdraft 121 56 -
Payable:
Advisory fees 15 17 14
Other liabilities 18 18 19
---------------------- ----------------------- -----------------------
TOTAL LIABILITIES 154 91 33
NET ASSETS $ 22,865 $ 22,125 $ 25,448
====================== ======================= =======================
NET ASSETS CONSIST OF:
Paid-in capital $ 25,834 $ 25,366 $ 26,307
Distributions in excess of net
investment income - - (7)
Accumulated net realized gain (loss)
on investments (2) 135 (208)
Net unrealized depreciation on investments (2,967) (3,376) (644)
====================== ======================= =======================
NET ASSETS $ 22,865 $ 22,125 $ 25,448
====================== ======================= =======================
TOTAL SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 4,738 5,019 5,271
====================== ======================= =======================
NET ASSET VALUE PER SHARE $ 4.83 $ 4.41 $ 4.83
====================== ======================= =======================
</TABLE>
See notes to the financial statements.
<PAGE> 65
PPM AMERICA FUNDS
STATEMENTS OF OPERATIONS
(in thousands)
FOR THE PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PPM AMERICA PPM AMERICA PPM AMERICA
VALUE SMALL CAP HIGH YIELD
EQUITY FUND VALUE EQUITY FUND BOND FUND*
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 375 $ 373 $ -
Interest 15 12 1,421
----------------------- ----------------------- -----------------------
TOTAL INVESTMENT INCOME 390 385 1,421
----------------------- ----------------------- -----------------------
EXPENSES
Advisory fees 120 152 93
Custodian fees 6 4 3
Portfolio accounting fees 33 34 21
Professional fees 20 19 17
Registration fees 10 10 10
Transfer agent fees 23 23 11
Other 12 13 10
----------------------- ----------------------- -----------------------
TOTAL OPERATING EXPENSES 224 255 165
Less reimbursement from adviser 74 69 44
----------------------- ----------------------- -----------------------
NET EXPENSES 150 186 121
----------------------- ----------------------- -----------------------
NET INVESTMENT INCOME 240 199 1,300
----------------------- ----------------------- -----------------------
REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gain (loss) on investments 616 358 (208)
Net change in unrealized appreciation
(depreciation) on investments (3,025) (3,753) (644)
----------------------- ----------------------- -----------------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) (2,409) (3,395) (852)
----------------------- ----------------------- -----------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (2,169) $ (3,196) $ 448
======================= ======================= =======================
</TABLE>
- --------------------------------------------------------------------------------
* For the period beginning June 7, 1999 (commencement of operations).
See notes to the financial statements.
<PAGE> 66
PPM AMERICA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
PPM AMERICA VALUE
EQUITY FUND
-------------------------------------
PERIOD FROM
YEAR DECEMBER 23,
ENDED 1998* TO
DECEMBER 31, DECEMBER 31,
1999 1998
------------------ -----------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 240 $ 5
Net realized gain (loss) on investments 616 -
Net change in unrealized appreciation
(depreciation) on investments (3,025) 58
----------------- -----------------
Net increase (decrease) in net assets
from operations (2,169) 63
------------------ -----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (240) (5)
From net realized gains on investments (618) -
------------------ -----------------
Total distributions to shareholders (858) (5)
------------------ -----------------
SHARE TRANSACTIONS:
Proceeds from the sale of shares 20,000 5,100
Reinvestment of distributions 729 5
Cost of shares redeemed - -
------------------ -----------------
Net increase in net assets from share
transactions 20,729 5,105
------------------ -----------------
NET INCREASE IN NET ASSETS 17,702 5,163
NET ASSETS BEGINNING OF PERIOD 5,163 -
------------------ -----------------
NET ASSETS END OF PERIOD $ 22,865 $ 5,163
================== =================
DISTRIBUTIONS IN EXCESS OF NET
INVESTMENT INCOME $ - $ -
================== =================
</TABLE>
<TABLE>
<CAPTION>
PPM AMERICA
PPM AMERICA SMALL CAP HIGH YIELD
VALUE EQUITY FUND BOND FUND
------------------------------------- -----------------
PERIOD FROM PERIOD FROM
YEAR DECEMBER 23, JUNE 7,
ENDED 1998* TO 1999* TO
DECEMBER 31, DECEMBER 31, 1998 DECEMBER 31,
1999 1999
------------------ ------------------ -----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 199 $ 8 $ 1,300
Net realized gain (loss) on investments 358 - (208)
Net change in unrealized appreciation
(depreciation) on investments (3,753) 378 (644)
------------------ ------------------ ------------------
Net increase (decrease) in net assets
from operations (3,196) 386 448
------------------ ------------------ -----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (199) (8) (1,307)
From net realized gains on investments (223) - -
------------------ ------------------ -----------------
Total distributions to shareholders (422) (8) (1,307)
------------------ ------------------ -----------------
SHARE TRANSACTIONS:
Proceeds from the sale of shares 15,000 10,000 25,000
Reinvestment of distributions 357 8 1,307
Cost of shares redeemed - - -
------------------ ------------------ -----------------
Net increase in net assets from share
transactions 15,357 10,008 26,307
------------------ ------------------ -----------------
NET INCREASE IN NET ASSETS 11,739 10,386 25,448
NET ASSETS BEGINNING OF PERIOD 10,386 - -
------------------ ------------------ -----------------
NET ASSETS END OF PERIOD $ 22,125 $ 10,386 $ 25,448
================== ================== =================
DISTRIBUTIONS IN EXCESS OF NET
INVESTMENT INCOME $ - $ - $ (7)
================== ================== =================
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
See notes to the financial statements.
<PAGE> 67
- --------------------------------------------------------------------------------
PPM AMERICA FUNDS
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
PPM America Funds (the "Trust") is an open-end management investment
company comprised of PPM America Value Equity Fund, PPM America Small Cap Value
Equity Fund and PPM America High Yield Bond 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
(the "1940 Act").
NOTE 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 that affect the reported amounts and disclosures in
the financial statements. 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. Unlisted
securities and listed securities not traded on the valuation date or for which
market quotations are not readily available, are determined in good faith at a
fair value using methods approved by the Board of Trustees. Bonds are valued on
the basis of prices furnished by pricing services which takes into account
institutional size trading in similar groups of securities. Securities with
remaining maturities of 60 days or less are valued at amortized cost, which
approximates market value.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions
are accounted for on the trade date. Dividend income is recorded on the
ex-dividend date. Interest income, including level-yield amortization of
discounts and premiums, is accrued daily. Realized gains and losses are
determined on the specific identification basis.
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 prices of related registered securities, 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.
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.
<PAGE> 68
- --------------------------------------------------------------------------------
PPM AMERICA FUNDS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 3. INVESTMENT MANAGEMENT FEES AND TRANSACTIONS WITH AFFILIATES
Each Fund has an investment advisory agreement with PPM America, Inc.
("PPM America"). Each Fund pays an advisory fee, calculated daily and paid
monthly, based on average daily net assets, at the annual rate of 0.80% for the
PPM America Value Equity Fund, 0.90% for the PPM America Small Cap Value Equity
Fund and 0.65% for the PPM America High Yield Bond Fund.
Jackson National Financial Services, LLC ("JNFS"), an affiliate, provides
fund 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 $8,000 in compensation
from the Trust for the year ended December 31, 1999.
The Trust's distributor is National Planning Corporation, an affiliate.
Prudential Plc and Jackson National Life Insurance Company, both
affiliates of PPM America, own substantially all of the outstanding shares of
the Trust.
NOTE 4. SECURITY TRANSACTIONS
During the period ended December 31, 1999, the cost of purchases and
proceeds from sales and maturities of securities, other than short-term
investments, were as follows (in thousands):
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM SALES
PURCHASES AND MATURITIES
--------- --------------
<S> <C> <C>
PPM America Value Equity Fund $ 27,054 $ 6,939
PPM America Small Cap Value Equity Fund 24,214 9,021
PPM America High Yield Bond Fund 32,460 7,639
</TABLE>
The federal income tax cost basis and gross unrealized appreciation and
depreciation on investments as of December 31, 1999, were as follows (in
thousands):
<TABLE>
<CAPTION>
TAX COST GROSS UNREALIZED GROSS UNREALIZED UNREALIZED APPRECIATION
BASIS APPRECIATION DEPRECIATION (DEPRECIATION)
<S> <C> <C> <C> <C>
PPM America Value Equity Fund $ 25,974 $ 707 $ (4,278) $ (3,571)
PPM America Small Cap Value Equity Fund 25,764 936 (3,951) (3,015)
PPM America High Yield Bond Fund 25,286 271 (916) (645)
</TABLE>
At December 31, 1999, the PPM America High Yield Bond Fund had accumulated
net realized capital loss carryovers for federal income tax purposes of $197,391
(expiring in 2007), which may be used to offset future capital gains.
<PAGE> 69
- --------------------------------------------------------------------------------
PPM AMERICA FUNDS
NOTES TO THE FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
NOTE 5. FUND TRANSACTIONS
Transactions of fund shares (in thousands) for the period ended December
31, 1999, were as follows:
<TABLE>
<CAPTION>
SHARES DISTRIBUTIONS SHARES NET
PURCHASED REINVESTED REDEEMED INCREASE
<S> <C> <C> <C> <C>
PPM America Value Equity Fund 3,565 152 - 3,717
PPM America Small Cap Value Equity Fund 2,935 82 - 3,017
PPM America High Yield Bond Fund 5,000 271 - 5,271
</TABLE>
Transactions of fund shares (in thousands) 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 1 - 1,021
PPM America Small Cap Value Equity Fund 2,000 2 - 2,002
</TABLE>
<PAGE> 70
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 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
A-1
<PAGE> 71
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 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-2
<PAGE> 72
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) Conformed Copy of Amendment Declaration of Trust of the Registrant*
(b) Copy of By-Laws of the Registrant*
(c) Not Applicable
(d) Investment Advisory Agreement**
(e) Distribution Agreement**
(f) Not Applicable
(g) Delegation, Custody and Information Services Agreement**
(h) Accounting Services Agreement; Services Agreement (Transfer
Agent)**
(i) Consent of Bell, Boyd & Lloyd
(j) Consent of PricewaterhouseCoopers, LLP
(k) Not Applicable
(l) Not Applicable
(m) Not Applicable
(n) Not Applicable
(p) Code of Ethics of PPM Holdings, Inc., PPM America, Inc., PPM
Finance, Inc. and PPM America Funds
* Incorporated by reference to the exhibit of the same letter filed
with the initial registration statement on Form N-1A, No. 333-63295, filed
September 11, 1998.
** Incorporated by reference to Post Effective Amendment No. 1 on Form
N-1A, No. 333-63295, filed April 29, 1999.
ITEM 24. Persons Controlled by or Under Common Control With Registrant.
The Registrant does not consider that there are any persons directly or
indirectly controlled by, or under common control with, the Registrant within
the meaning of this item.
ITEM 25. Indemnification.
Article VIII of Registrant's Agreement and Declaration of Trust (Exhibit (a)),
which Article is incorporated herein by reference, provides that Registrant
shall provide indemnification of its trustees and officers (including each
person who serves or has served at Registrant's request as a
<PAGE> 73
director, officer, or trustee of another organization in which Registrant has
any interest as a shareholder, creditor or otherwise ("Covered Persons") under
specified circumstances.
Section 17(h) of the Investment Company Act of 1940 ("1940 Act") provides that
neither the Agreement and Declaration of Trust nor the By-Laws of Registrant,
nor any other instrument pursuant to which Registrant is organized or
administered, shall contain any provision which protects or purports to protect
any trustee or officer or Registrant against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. In accordance with Section 17(h) of the
1940 Act, Article VIII shall not protect any person against any liability to
Registrant or its shareholders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.
Unless otherwise permitted under the 1940 Act,
(i) Article VIII does not protect any person against any liability
to Registrant or to its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office;
(ii) in the absence of a final decision on the merits by a court or
other body before whom a proceeding was brought that a Covered
Person was not liable by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office, no indemnification is
permitted under Article VIII unless a determination that such
person was not so liable is made on behalf of Registrant by
(a) the vote of a majority of the trustees who are neither
"interested persons" of Registrant, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the proceeding
("disinterested, non-party trustees"), or (b) an independent
legal counsel as express in a written opinion; and
(iii) Registrant will not advance attorneys' fees or other expenses
incurred by a Covered Person in connection with a civil or
criminal action, suit or proceeding unless Registrant receives
an undertaking by or on behalf of the Covered Person to repay
the advance (unless it is ultimately determined that he is
entitled to indemnification) and (a) the Covered Person
provides security for his undertaking, or (b) Registrant is
insured against losses arising by reason of any lawful
advances, or (c) a majority of the disinterested, non-party
trustees of Registrant or an independent legal counsel as
expressed in a written opinion, determine, based on a review
of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
Any approval of indemnification pursuant to Article VIII does not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with Article VIII as indemnification if such Covered Person is
subsequently adjudicated by a court of competent
<PAGE> 74
jurisdiction not to have acted in good faith in the reasonable belief that such
Covered Person's action was in, or not opposed to, the best interests of
Registrant or to have been liable to Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
Article VIII also provides that its indemnification provisions are not
exclusive.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1940 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the 1940 Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, its investment adviser, the other
investment companies advised by the adviser, and persons affiliated with them
are insured against certain expenses in connection with the defense of actions,
suits, or proceedings, and certain liabilities that might be imposed as a result
of such actions, suits, or proceedings. Registrant will not pay any portion of
the premiums for coverage under such insurance that would (1) protect any
trustee or officer against any liability to Registrant or its shareholders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office or (2) protect its investment adviser or principal underwriter, if
any, against any liability to Registrant or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence, in the performance or its duties, or by reason of its
reckless disregard of its duties and obligations under its contract or agreement
with the Registrant; for this purpose the Registrant will rely on an allocation
of premiums determined by the insurance company.
Registrant, its trustees, officers, employees and representatives and each
person, if any, who controls the Registrant within the meaning of Section 15 of
the Securities Act of 1933 are indemnified by the distributor of Registrant's
shares (the "distributor"), pursuant to the terms of the distribution agreement,
which governs the distribution of Registrant's shares, against any and all
losses, liabilities, damages, claims and expenses arising out of the acquisition
of any shares of the Registrant by any person which (i) may be based upon any
wrongful act by distributor or any of distributor's members, managers,
directors, officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, Statement of Additional Information,
shareholder report or other information covering Shares filed or made public by
the Registrant or any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such
<PAGE> 75
statement or omission was made in reliance upon information furnished to the
Registrant by distributor in writing. In no case does the distributor's
indemnity indemnify an indemnified party against any liability to which such
indemnified party would otherwise be subject by reason of willful misfeasance,
bad faith, or negligence in the performance of its or his duties or by reason of
its or his reckless disregard of its or his obligations and duties under the
distribution agreement.
ITEM 26. Business and Other Connections of Investment Adviser.
PPM America is an indirect, wholly-owned subsidiary of Prudential plc,
("Prudential"), the holding company to one of the largest life insurance
companies in the United Kingdom. PPM America acts as investment adviser to
pension and profit sharing plans, corporations or other business entities and
registered and unregistered investment companies.
For a two-year business history of officers and directors of PPM America, please
refer to the Form ADV of PPM America.
ITEM 27. Principal Underwriters.
Registrant's principal underwriter, National Planning Corporation ("NPC"), is an
indirect wholly-owned subsidiary of Prudential. The table below lists each
director or officer of NPC:
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------- --------------------------------------
Name and Principal Business Address Position and Offices with Principal Positions and Offices with Registrant
Underwriter
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Barrett, William Senior Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Chiulli, Allan Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Dreffein, Mary S. Senior Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Eden, Livia Assistant Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Elliot, Jay A. Senior Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Fram, Fred Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Hopping, Andrew B. Director None
- ----------------------------------------------------------------------------------------------------------------------
Jack, Clifford J. Director, President and CEO None
- ----------------------------------------------------------------------------------------------------------------------
Johnson, Peter M. Chief Financial Officer, Chief None
Operating Officer & Treasurer
- ----------------------------------------------------------------------------------------------------------------------
Kemper, Dawna Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Kinder, Douglas K. Senior Vice President None
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 76
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
McGinnis, Steven K. Senior Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Miller, James Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Nerud, Mark D. Vice President Secretary and Assistant Treasurer
- ----------------------------------------------------------------------------------------------------------------------
Peczon, Walter Assistant Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Richardson, Scott Senior Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Schab, Bonnie G. Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Simon, James L. Secretary None
- ----------------------------------------------------------------------------------------------------------------------
Steinbacher, Patricia R. Assistant Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Whaleen, Kathleen Assistant Vice President None
- ----------------------------------------------------------------------------------------------------------------------
Wells, Michael A. Vice President, Director None
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 28. Location of Accounts and Records.
Registrant maintains the records required to be maintained by it under Rules
31a-1(a), 31a-1(b) and 31a-2(a) under the Investment Company Act of 1940 at its
principal executive offices at 225 West Wacker Drive, Suite 1200, Chicago,
Illinois 60606. Certain records, including records relating to Registrant's
shareholders and the physical possession of its securities, may be maintained
pursuant to Rule 31a-3 at the main office of Registrant's transfer agent or
custodian.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
Registrant hereby undertakes to comply with the provisions of Section 16(c) of
the 1940 Act with respect to the removal of Trustees and the calling of special
shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request without charge.
<PAGE> 77
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this post-effective amendment pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Chicago and state of Illinois on April 27, 2000.
PPM America Funds
By /s/ RUSSELL W. SWANSEN
----------------------------
Russell W. Swansen
President
Pursuant to the requirements of the Securities Act of 1933,
this post-effective amendment has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ RUSSELL W. SWANSEN Trustee and President )
- ------------------------------------------- )
Russell W. Swansen )
)
/s/ MARK B. MANDICH Trustee, Chief Financial )
- -------------------------------------------Officer and Treasurer )
Mark B. Mandich )
) April 27, 2000
/s/ ARTHUR E. PAPE Trustee )
- ------------------------------------------- )
Arthur E. Pape )
)
/s/ JAMES R. HANNON Trustee )
- ------------------------------------------- )
James R. Hannon )
)
</TABLE>
<PAGE> 78
EXHIBIT INDEX
<TABLE>
<CAPTION>
N-1A ITEM 23 EXHIBIT LETTER DESCRIPTION
--------------------------- -----------
<S> <C>
(i) Consent of Bell, Boyd & Lloyd LLC
- ----------------------------------------------------------------------------------------------------------------------
(j) Consent of PricewaterhouseCoopers, LLP
- ----------------------------------------------------------------------------------------------------------------------
(p) Code of Ethics of PPM Holdings, Inc., PPM
America, Inc., PPM finance, Inc. and PPM
America Funds
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
BELL, BOYD & LLOYD LLC
70 West Madison Street, Suite 3300
Chicago, IL 60602
(312) 372-1121
Fax: (312) 372-2098
April 28, 2000
As counsel for PPM America Funds (the "Registrant"), we consent to the
incorporation by reference of our opinion filed with the Registrant's
registration statement on Form N-1A on December 2, 1998 (Securities Act file no.
333-63295).
In giving this consent we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
/s/ Bell, Boyd & Lloyd LLC
Bell, Boyd & Lloyd LLC
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-1A of our
report dated February 4, 2000, relating to the financial statements and
financial highlights of PPM America Funds, which appear in such Registration
Statement. We also consent to the references to us under the headings
"Financial Statements", "Independent Accountants" and "Financial Highlights" in
such Registration Statement.
PricewaterhouseCoopers LLP
203 North LaSalle Street
Chicago, Illinois 60601
April 28, 2000
<PAGE> 1
EXHIBIT 99(p)
PPM HOLDINGS, INC.
PPM AMERICA, INC.
PPM FINANCE, INC.
PPM AMERICA FUNDS
CODE OF ETHICS AND CONDUCT
As an investment adviser, PPM America, Inc. ("PPMA") owes its clients
and shareholders of the PPM America Funds ("PPM Funds") the highest duty of
diligence and loyalty. Accordingly, one of the fundamental policies of PPMA is
to avoid any conflict of interest. In furtherance of this fundamental policy,
this Code of Ethics and Conduct ("Code") has been adopted by PPMA, by PPMA's
immediate parent company, PPM Holdings, Inc., by PPMA's affiliated company, PPM
Finance, Inc., and by the PPM Funds. PPMA, PPM Holdings and PPM Finance are
referred to collectively in the Code as "PPM". The PPM Funds have separately
adopted a Code of Ethics for the disinterested trustees.
The Code applies to each employee of PPM, including all executive
officers of PPMA, PPM Holdings or PPM Finance, and to all access persons of the
PPM Funds (each referred to collectively in the Code as an "Employee"). Each
Employee should consult with the Chief Compliance Officer of the PPM Company
with which the Employee is affiliated regarding any question about the Code or
other issues relating to PPM's fiduciary obligations to its clients before
taking any action. Please also remember that PPM has developed Policy and
Procedures Regarding Inside Information and Chinese Walls ("Inside Information
Policy"). Please refer to the Inside Information Policy as appropriate.
I. GENERAL STANDARDS
A. FAIR DEALING. Each Employee shall act in a manner consistent with
the obligation of PPM and each person covered by the Code to deal fairly with
all clients when taking investment action. Any investment ideas developed by an
Employee in the course of the Employee's work for PPM shall be made available
for use by PPM's clients prior to any personal trading or investment by any
Employee based on such ideas, including trading or investment by an Employee
directly or indirectly.
B. PERSONAL SECURITIES TRANSACTIONS. No Employee may purchase or sell
any security in which the Employee has a beneficial interest except in
accordance with this Code. See Appendix A for examples of situations in which a
person covered by the Code will be deemed to have a beneficial interest in a
security for purposes of the Code. Specific prohibitions and reporting
requirements are contained in Sections III and IV of the Code.
C. GIFTS, FAVORS, AND GRATUITIES. An Employee may not accept any gift,
favor, gratuity or invitation offered by any broker, client, approved company
(i.e., a company whose securities are held by a PPM client, including PPM
Funds), supplier, or other person or organization with whom PPM has a business
relationship, that creates a conflict between the Employee's personal financial
interest and the interests of PPM's clients. Specifically, an Employee may not
accept any such gift, favor, gratuity or invitation except those extended as a
<PAGE> 2
customary courtesy of business life. Prohibited gifts or gratuities include the
receipt of any credit facility, personal investment opportunities or other
special treatment from any broker or dealer that is not available from that
broker or dealer to similarly situated customers not in the securities or
investment management business.
No Employee should offer any gift, favor, gratuity, or invitation that
influences decision-making or otherwise creates a conflict of interest on the
part of the intended recipient.
D. CONFIDENTIALITY. Information relating to any client's portfolio or
activities is strictly confidential and shall not be disclosed, orally or in
writing, to anyone outside PPM, unless that Employee has been specifically
authorized to release that information. For further guidance in this regard,
consult PPM's Press Policy and policy regarding Confidential Information and
Non-Competition.
E. SERVICE AS A DIRECTOR. No Employee shall serve on the board of
directors (or equivalent) of any company with a class of publicly-held
securities, unless such service has been authorized by PPM's Management
Committee. Board service increases the likelihood of possession of material,
non-public information. Please refer to PPM's Inside Information Policy.
F. EXEMPTIONS FROM THE CODE'S PROVISIONS. The purpose of the Code is to
prevent the damage that might result from a conflict between the interests of an
Employee of PPM and PPM's clients, not to impose undue financial burdens on
persons subject to the Code. For that reason, the Chief Compliance Officer has
the authority to grant an exemption, in advance of any proposed transaction,
from any provision of this Code except the provisions requiring reporting of
personal securities transactions if, in the judgment of the Chief Compliance
Officer, compliance with the provision of the Code would result in serious
financial hardship to the Employee and the requested exemption would not result
in any breach by PPM of its duties to its clients. EXEMPTION OF A PROPOSED
TRANSACTION FROM THE CODE IS EXPECTED TO BE GRANTED VERY RARELY.
II. TRANSACTIONS COVERED BY THE CODE
AND EXEMPT TRANSACTIONS
The Code regulates personal securities transactions as a part of the
effort by PPM to detect and prevent conduct that might create an actual or
potential conflict of interest with a client. The Code flatly prohibits certain
transactions and establishes reporting requirements for all transactions except
those listed as exempt in Section II.B.
A. TRANSACTIONS COVERED BY THE CODE. Every transaction in a security by
or for the benefit of an Employee is subject to the Code.
Security is defined very broadly for purposes of the Code. Transactions
involving options, warrants, and futures contracts are subject to the same
restrictions and procedures as those set forth in this Code with respect to the
underlying securities.
The Code covers transactions in the personal account of an Employee,
the account of any member of the Employee's immediate family (including spouse,
minor children or any relative living in the Employee's home), any other account
in which the Employee has a direct or indirect financial or "beneficial"
ownership interest, or in any nonclient account controlled by or under the
influence of the Employee. As required by the Securities and Exchange
Commission, beneficial interest is defined broadly; see Appendix A to the Code
for examples of ownership arrangements
<PAGE> 3
covered by the Code. Having a beneficial interest in a security for purposes of
the Code is not necessarily the same thing as ownership for other purposes
(including, for example, tax purposes).
If you have any question about whether a transaction is covered by the
Code, contact the Chief Compliance Officer before taking any action.
B. EXEMPT TRANSACTIONS. The following transactions are exempt from the
reporting provisions of this Code:
1. purchases or sales effected in any account over which
an Employee has no direct or indirect influence or
control or in any account of the Employee which is
managed on a discretionary basis by a person other
than the Employee and with respect to which the
Employee does not in fact influence or control
purchase or sale transactions;
2. purchases or sales which are involuntary on the part
of the Employee (for example, the redemption of a
debt security by the issuer);
3. purchases which are part of an automatic dividend
reinvestment plan;
4. purchases of securities by exercising rights that
were issued pro rata to all holders of a class of
securities, but only if the Employee acquired the
rights directly from the issuer (and not by purchase
from someone other than the issuer), and sales of
rights that were acquired by the Employee by pro rata
issuance directly from the issuer; and
5. transactions involving: shares of registered open-end
mutual funds; securities issued by the United States
Government; bankers' acceptances; bank certificates
of deposit; commercial paper; short-term debt
securities issued or guaranteed by any agency or
instrumentality of the United States Government; or
other money market instruments designated by PPMA.
<PAGE> 4
III. PERSONAL INVESTMENT RULES
A. PROHIBITED TRANSACTIONS. The following transactions are
prohibited:
1. FRONT-RUNNING. No Employee shall engage in
"front-running" an order or recommendation, even if
the Employee is not handling either the order or the
recommendation and even if the order or
recommendation is for someone other than a client of
PPM. Front-running consists of executing a
transaction in the same or underlying securities,
options, rights, warrants, convertible securities, or
other related securities, in advance of block or
large transactions of a similar nature likely to
affect the value of the securities, based on the
knowledge of the forthcoming transaction or
recommendation.
2. SECURITIES ON RESTRICTED LISTS; INSIDE INFORMATION
POLICY. No Employee may purchase or sell any security
prohibited by the Inside Information Policy,
including:
a. any security on the Firm Wide Restricted
List; and
b. for Employees designated in the Inside
Information Policy as members of the Private
Information Investment and Access Groups,
any security on the Private Information
Restricted List.
See the Inside Information Policy for more
information and definitions.
3. BLACKOUT PERIOD FOR CLIENT TRANSACTIONS. No Employee
may purchase or sell any security which: (a) is being
purchased or sold on behalf of a client (i.e., an
order has been entered but not executed for a
client), (b) has been purchased or sold by a client
within the prior seven calendar days, or (c) is being
planned for purchase or sale on any client's behalf
within the next seven days.
Notwithstanding the prohibition in the preceding
paragraph, no blackout period will apply to any
Exempt Transaction, as defined in Section II.B. of
the Code, or to any transaction in a security which
is being purchased or sold, has been purchased or
sold, or is being planned for purchase or sale, on
behalf of a PPMA client by a foreign affiliate of or
subadviser to PPMA.
4. PRE-APPROVAL OF PERSONAL SECURITIES TRANSACTIONS. No
Employee may initiate, recommend, or in any other way
participate in a personal securities transaction in a
security that is not an Exempt Transaction (as
defined in this Code) unless that transaction has
been pre-approved as described in III.B., below.
5. INITIAL PUBLIC OFFERINGS. No Employee may purchase
any equity security or any security convertible into
an equity security in an initial public offering
("IPO") of that security.
<PAGE> 5
6. PRIVATE PLACEMENTS. No Employee may purchase any
security in a private placement without the prior
written approval of the Chief Compliance Officer.
7. SHORT SALES. No Employee may sell short any security
that is held in any PPMA client account.
8. DEALING WITH CLIENTS. No Employee may sell or
purchase any security to or from a client portfolio.
9. BETS. No Employee shall make a wager or bet of any
kind on the change in the price of any security or
the value of any securities index.
B. PROCEDURES FOR PRE-APPROVAL OF PERSONAL SECURITIES
TRANSACTIONS.
1. TRANSACTIONS FOR WHICH PRE-APPROVAL IS REQUIRED.
Except for Exempt Transactions (as defined in Section
II.B., above), each Employee MUST obtain written
approval to initiate, recommend, or in any other way
participate in a personal securities transaction of
any kind (including purchases, sales, exercises and
exchanges) from the Chief Compliance Officer of PPMA
or any other person designated by the Chief
Compliance Officer.
2. HOW TO REQUEST PRE-APPROVAL. Requests by an Employee
for prior approval of personal securities
transactions must be made in writing on PPM's
standard Personal Trade Information form ("PTI"). A
copy of the PTI is attached as Appendix B. In
requesting pre-approval, an Employee must disclose
any relationship between the security proposed to be
purchased and any security held or planned to be
acquired by any PPM client (for example, the security
proposed to be purchased has been made available
because of purchases of the same or related
securities by PPM clients).
3. APPROVAL BY A COMPLIANCE OFFICER. The reviewing
Compliance Officer shall mark his response on the
PTI, give two copies to the Employee and give the
other copy to the Chief Compliance Officer. A
Compliance Officer will generally approve a personal
securities transaction if, in the judgment of the
Compliance Officer:
a. the transaction is not prohibited by the
Code;
b. the transaction does not violate PPM's
Inside Information Policy; and
c. the transaction does not involve a conflict
of interest or potential for a conflict of
interest.
4. EXECUTING A PRE-APPROVED TRANSACTION. Pre-approval of
a securities transaction is effective for three New
York Stock Exchange trading days
<PAGE> 6
following the date approval is granted.(1) If an
Employee becomes aware of a significant change in the
circumstances on which approval was based before the
transaction is executed, the member shall bring that
change in circumstances to the attention of the
Compliance Officer who approved the transaction to
determine whether the previously granted approval
should be revoked or modified.
If the transaction is executed, the Employee shall
submit to the Chief Compliance Officer a copy of the
completed PTI within two business days of execution
of the transaction, showing the terms of the
transaction as executed. If the transactions is not
executed, the PTI should be returned to the Chief
Compliance Officer showing that the transaction was
not completed.
5. EFFECT OF PRE-APPROVAL. The approval of any personal
securities transaction by a Compliance Officer does
not relieve an Employee of that Employee's
Responsibilities under the federal securities laws,
including those relating to insider trading, or PPM's
policies, including this Code.
C. REPORTS OF PERSONAL INVESTMENTS AND TRANSACTIONS.
1. ACCOUNT AND HOLDINGS REPORT. Upon entering employment
with PPM and annually thereafter, every Employee must
submit to the Chief Compliance Officer a Personal
Securities Accounts and Holdings Report ("Personal
Securities Report") (a copy of which is attached as
Appendix C) with respect to every security and
securities account in which the Employee has or
expects to have a beneficial interest and every
nonclient account for which he or she exercises
influence or control over investment decisions.
As to securities accounts, the Personal Securities
Report requires the Employee to identify the
brokerage firm at which each such account is
maintained, the title of the account, the account
number, and the names and addresses of all
individuals with a beneficial interest in the
account. When an Employee opens a new securities
account, closes an existing account, or no longer has
influence or control over an account, the Employee
shall promptly notify the Chief Compliance Officer in
writing.
As to securities holdings, the Personal Securities
Report requires disclosure of the name of the
security, the type of security, the number of shares
or principal amount (for debt securities), the nature
of the Employee's interest in the security, and the
brokerage firm where it is held. An Employee need not
report securities obtained in Exempt Transactions as
described in Section II.B., above.
- -----------------------
(1) Accordingly, approval for limit orders must be renewed every three
business days until the order is filled or withdrawn.
<PAGE> 7
The annual submission of the Personal Securities
Report is due by February 28 of each year, reporting
each Employee's securities accounts and holdings as
of December 31 of the prior year. The Chief
Compliance Officer shall keep a copy of all Personal
Securities Reports.
2. TRANSACTION REPORTING. Each Employee shall report all
completed personal securities transactions to the
Chief Compliance Officer by completing the PTI in
accordance with the procedures set forth in Section
III.B., above.
3. CONFIRMATIONS AND STATEMENTS. Each Employee is
responsible for arranging to have confirmations and
monthly account statements for each account listed by
the Employee in the Employee's Personal Securities
Report sent by the broker or other entity holding the
account to the Chief Compliance Officer.
IV. ADMINISTRATION OF THE CODE
A. COMMUNICATIONS.
1. INITIAL COMMUNICATION AND CERTIFICATION. Upon
adoption of the Code or the commencement of
employment, each Employee of PPM is provided with a
copy of the Code. At that time, each Employee also is
scheduled to discuss the Code with the Chief
Compliance Officer. Each Employee is required to
acknowledge his or her understanding of the Code's
prohibitions and requirements by signing a Compliance
Certificate and returning it to the Chief Compliance
Officer for retention in PPM's files.
2. ANNUAL CERTIFICATION. Each year PPM recirculates the
Code to its Employees and requires that each of them
sign a Compliance Certificate and return the executed
copy to the Chief Compliance Officer.
3. QUESTIONS. Persons subject to the Code are encouraged
to direct any questions that may arise concerning the
Code and its prohibitions to the Chief Compliance
Officer.
B. REVIEW OF PERSONAL SECURITIES TRANSACTIONS.
1. REVIEW OF CONFIRMATIONS. Within five business days
after the receipt of a confirmation, the Chief
Compliance Officer or someone under his supervision
shall match the confirmation with the appropriate
PTI, to ensure that all trades have received prior
authorization, if required.
If a confirmation discloses a securities transaction
which was required to be pre-approved, but for which
no prior written approval was obtained, or which was
executed after the prior approval expired, the Chief
Compliance Officer shall discuss the circumstances of
the transaction and the reason for the failure to
follow required procedures with the Employee and
shall make a written record of the matter. A copy of
that record shall be retained in
<PAGE> 8
that Employee's personal securities transactions
file. This action does not preclude any other
sanction for violation of the Code.
2. MONTHLY REVIEW. On a monthly basis, the Chief
Compliance Officer or someone under his supervision
shall review each Employee's personal securities
transactions, using the PTIs, confirmations, and
other account documentation to look for indications
of improper personal securities transactions. The
Chief Compliance Officer shall discuss any
questionable transactions with the Employee who
effected the trade and make such other inquiries as
the Chief Compliance Officer in his discretion deems
appropriate. The Chief Compliance Officer shall make
a written record of any determination made and the
reasons underlying that determination.
C. RECORDKEEPING. The Chief Compliance Officer or someone under his
supervision shall maintain the records listed below for a period of five years
at PPM's principal place of business in an easily accessible place:
1. LIST OF PERSONS COVERED BY THE CODE. A list of all
Employees, which shall constitute a list of all
persons subject to the Code during the period.
2. COMPLIANCE CERTIFICATES. Compliance Certificates
signed by all Employees acknowledging receipt of
copies of the Code and acknowledging that they are
subject to it, and, in the case of Employees subject
to the Code in prior periods, certifying that he or
she complied with the Code during that prior period.
3. THE CODE. A copy of each code of ethics that has been
in effect at any time during the period.
4. REPORTS. A copy of each Personal Securities Report,
PTI, confirmation and monthly statement submitted by
an Employee and a record of any known violation and
action taken as a result thereof during the period.
D. ANNUAL REVIEW OF PROCEDURES. The Code shall be reviewed by PPM's
management on an annual basis to assess its effectiveness, in conjunction with
PPM's other policies and procedures, in preventing improper and illegal personal
securities trading by PPM's Employees.
V. VIOLATIONS OF THE CODE
If the Chief Compliance Officer determines that a violation or possible
violation of any of the provisions of this Code has occurred, the Chief
Compliance Officer shall report that determination to the President of PPMA (or,
if the violation of the Code is believed to involve the President, appropriate
executive officers of PPM Limited). The Chief Compliance shall discuss the
matter with the Employee. If the President of PPMA agrees with the determination
of the Chief Compliance Officer, the Chief Compliance Officer shall promptly
report such violation to the Board of Directors of PPMA and/or to the Board of
Trustees of PPM Funds. PPMA's Board
<PAGE> 9
of Directors may impose such sanctions against the Employee as it deems
appropriate under the circumstances. Such sanctions may include unwinding a
transaction, forfeiture of any profit from a transaction, reduction in salary,
censure, suspension or termination of employment.
Violations of this Code may also violate the federal securities laws.
Sanctions for violations of the federal securities laws, particularly violations
of the antifraud provisions, include fines, money damages, injunctions,
imprisonment, and bars from certain types of employment in the securities
business.
<PAGE> 10
Appendix A
EXAMPLES OF BENEFICIAL OWNERSHIP
You will be deemed to have a beneficial interest in a security for
purposes of the Code in the circumstances listed below.
1. Securities held by you for your own benefit, whether such securities
are in bearer form, registered in your own name, or otherwise;
2. Securities held by others for your benefit (regardless of whether or
how such securities are registered), such as, for example, securities held for
you by custodians, brokers, relatives, executors, or administrators;
3. Securities held by a pledgee for your account;
4. Securities held by a trust in which you have an interest. A
remainder interest will confer beneficial ownership only if you have power to
exercise or share investment control over the trust.
5. Securities held by you as trustee or co-trustee, where either you or
any member of your immediate family (i.e., spouse, children or descendants,
stepchildren, parents and their ancestors, and stepparents, in each case
treating a legal adoption as blood relationship) has an interest in the trust.
6. Securities held by a trust of which you are the settlor, if you have
the power to revoke the trust without obtaining the consent of all the
beneficiaries and have or share investment control;
7. Securities held by any non-public partnership in which you are a
partner to the extent of your interest in partnership capital or profits;
8. Securities held by a personal holding company controlled by you
alone or jointly with others;
9. Securities held in the name of your spouse unless legally separated,
or in the name of you and your spouse jointly;
10. Securities held in the name of your minor children or in the name
of any immediate family member of you or your spouse (including an adult child)
who is presently sharing your home. This applies even if the securities were not
received from you and the income from the securities is not actually used for
the maintenance of your household;
11. Securities held in the name of any person other than you and those
listed in paragraphs (9) and (10), above, if by reason of any contract,
understanding, relationship, agreement, or other arrangement you obtain benefits
substantially equivalent to those of ownership;
12. Securities held in the name of any person other than you, even
though you do not obtain benefits substantially equivalent to those of ownership
(as described in (11), above), if you can vest or revest title in yourself.
<PAGE> 11
Appendix B
PERSONAL TRADE INFORMATION
CONFIDENTIAL
Employee Name:
-----------------------------------------------
================================================================================
PART A: PRE-CLEARANCE
Securities Description:
Buy [ ] Sell [ ]
Quantity(1):
Is this security or transaction related in any way to a security being
held, purchased or sold by PPM on behalf of a client? No [ ] Yes [ ]
Give Details
---------------------------------------------------------
PRE-APPROVAL SIGNATURE: DATE:
---------------------------- ------------
Reminder: Pre-approval is valid for only 3 NYSE trading days following the date
of pre-approval.
- --------------------------------------------------------------------------------
PART B: TRADE DETAIL
Buy [ ] Sell [ ]
Trade Date: Quantity: Price per Unit:
---------- --------
Broker:
--------------------------------------------------------------
Check here if the transaction was NOT executed: [ ]
Employee Signature: Date:
------------------------------------- ----------
================================================================================
PART C: REVIEW
Reviewer's Notes:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Reviewer's Initials: Date of Review:
-------------- -------------
- -----------------------
(1) For equity securities, enter the number of shares. For debt securities,
enter the par value.
<PAGE> 12
Appendix C
PERSONAL SECURITIES ACCOUNTS AND HOLDINGS REPORT
In accordance with PPM's Code of Ethics and Conduct (the "Code"),
please provide a list of all of your securities accounts and securities holdings
in which you have a beneficial interest. More detailed instructions are set
forth below. You will be asked to complete this report upon entering PPM's
employment and annually thereafter. In addition, during the course of the year,
if you open a new account or otherwise obtain a beneficial interest in a
securities account, the Code requires that you report that new account in
writing to the Chief Compliance Officer. If you have any question as to whether
a security account or holding should be reported on this Report, you should
consult with the Chief Compliance Officer.
1. Please provide a list identifying all securities accounts in which
you have a beneficial interest. See Appendix A to the Code for examples of
situations in which you will be deemed to have a beneficial interest in a
security. If you have any question as to whether an account should be reported,
you should consult with the Chief Compliance Officer.
<TABLE>
<CAPTION>
================================================================================================================
NAME OF ACCOUNT Account Number Name of Brokerage Firm
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
================================================================================================================
</TABLE>
NOTE: CONTINUE LISTING AS NECESSARY ON ADDITIONAL SHEETS
<PAGE> 13
2. Please provide a list of all securities in which you have a
beneficial interest. See Appendix A to the Code for examples of situations in
which you will be deemed to have a beneficial interest in a security. You need
not include securities that you obtained in Exempt Transactions as defined in
the Code. If you do not have any securities holdings to report, write NONE.
INSTEAD OF FILLING OUT THIS FORM, YOU MAY ATTACH COPIES OF THE MOST RECENT
STATEMENTS OF EACH OF THE ACCOUNTS LISTED ABOVE.
<TABLE>
<CAPTION>
==================================================================================================================
Number of
Shares or
Type of Principal(2)
NAME OF SECURITY Security(1) Amount Brokerage Firm Where Held
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
NOTE: CONTINUE LISTING AS NECESSARY ON ADDITIONAL SHEETS
I CERTIFY THAT THE STATEMENTS MADE BY ME ON THIS FORM ARE TRUE,
COMPLETE, AND CORRECT TO THE BEST OF MY KNOWLEDGE AND BELIEF AND ARE MADE IN
GOOD FAITH.
- --------------------------- ------------------------------
Date Signature
- -----------------------
(1) Insert the following symbol as pertinent to indicate the type of
security held: C-common stock, P-preferred stock, O-option, W-warrant,
D-debt security, and X-other.
(2) For Debt Securities.
<PAGE> 14
PPM AMERICA, INC.
COMPLIANCE CERTIFICATE
- -------------------------
Name (print or type)
This is to certify that the attached Code of Ethics and Conduct
("Code") was distributed and explained to me at a meeting held on
_____________________, 199___. I have read and understand the Code. I certify
that I will comply with these policies and procedures during the course of my
employment by PPM and that, since my last Compliance Certification (if any), I
have complied with the Code. Moreover, I agree to promptly report to the Chief
Compliance Officer any violation or possible violation of these policies and
procedures. I UNDERSTAND THAT VIOLATION OF THE CODE SHALL BE GROUNDS FOR
DISCIPLINARY ACTION OR DISMISSAL AND MAY ALSO BE A VIOLATION OF FEDERAL AND/OR
STATE SECURITIES LAWS.
- ------------------------------ ----------------------------------
Date Signature
