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REPUBLIC
OPPORTUNITY
FUND
PROSPECTUS
SEPTEMBER 1, 1996
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REPUBLIC OPPORTUNITY FUND
3435 STELZER ROAD, SUITE 1000, COLUMBUS, OHIO 43219
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ACCOUNT AND GENERAL INFORMATION: (888) 525-5757 (TOLL FREE)
Republic Opportunity Fund (the "Fund") is a diversified series of Republic
Funds (the "Trust"), an open-end management investment company which currently
consists of seven funds, each of which has different and distinct investment
objectives and policies. Only shares of the Fund (the "Shares") are being
offered by this Prospectus. Republic National Bank of New York ("Republic" or
the "Manager") is the investment manager of Small Cap Equity Portfolio (the
"Portfolio"). MFS Asset Management, Inc., a wholly owned subsidiary of
Massachusetts Financial Services Company (the "Sub-Adviser"), continuously
manages the investments of the Portfolio.
UNLIKE OTHER OPEN-END MANAGEMENT INVESTMENT COMPANIES (MUTUAL FUNDS) WHICH
DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO OF SECURITIES, THE TRUST SEEKS
TO ACHIEVE THE INVESTMENT OBJECTIVE OF THE FUND BY INVESTING ALL OF THE FUND'S
INVESTABLE ASSETS ("ASSETS") IN THE PORTFOLIO, WHICH HAS THE SAME INVESTMENT
OBJECTIVE AS THE FUND. THE INVESTMENT EXPERIENCE OF THE FUND WILL CORRESPOND
DIRECTLY WITH THE INVESTMENT EXPERIENCE OF THE PORTFOLIO. THE PORTFOLIO IS A
DIVERSIFIED SERIES OF REPUBLIC PORTFOLIOS, WHICH IS AN OPEN-END MANAGEMENT
INVESTMENT COMPANY. SEE "SPECIAL INFORMATION CONCERNING THE TWO-TIER FUND
STRUCTURE".
The investment objective of the Fund is to seek long-term growth of capital
by investing primarily in equity securities of small- and medium-sized
companies that are early in their life cycle but which may have potential to
become major enterprises ("Emerging Growth Companies").
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, REPUBLIC OR ANY OTHER BANK, AND THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
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Investors should read this Prospectus and retain it for future reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 1, 1996
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Shares are continuously offered for sale at net asset value with no sales
charge by BISYS Fund Services ("BISYS" or the "Distributor" or the "Sponsor")
(i) directly to the public, (ii) to customers of a financial institution, such
as a federal or state-chartered bank, trust company or savings and loan
association that has entered into a shareholder servicing agreement with the
Trust (collectively, "Shareholder Servicing Agents"), and (iii) to customers
of a securities broker that has entered into a dealer agreement with the
Distributor.
AN INVESTOR WHO IS NOT PURCHASING DIRECTLY FROM THE DISTRIBUTOR SHOULD
OBTAIN FROM HIS SECURITIES BROKER OR SHAREHOLDER SERVICING AGENT, AND SHOULD
READ IN CONJUNCTION WITH THIS PROSPECTUS, THE MATERIALS PROVIDED BY THE
SECURITIES BROKER OR SHAREHOLDER SERVICING AGENT DESCRIBING THE PROCEDURES
UNDER WHICH SHARES MAY BE PURCHASED AND REDEEMED THROUGH SUCH SECURITIES
BROKER OR SHAREHOLDER SERVICING AGENT.
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. The Trust has filed
with the Securities and Exchange Commission a Statement of Additional
Information, dated September 1, 1996, with respect to the Fund, containing
additional and more detailed information about the Fund, which is hereby
incorporated by reference into this Prospectus. An investor may obtain a copy
of the Statement of Additional Information without charge by contacting the
Fund at the address and telephone number printed above.
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HIGHLIGHTS
THE FUND PAGE 1
Republic Opportunity Fund (the "Fund") is a separate series of Republic
Funds (the "Trust"), a Massachusetts business trust organized on April 22,
1987, which currently consists of seven funds, each of which has different and
distinct investment objectives and policies.
INVESTMENT OBJECTIVE, POLICIES AND RISKS PAGES 6 AND 13
The investment objective of the Fund is to seek long-term growth of capital
by investing, under normal market conditions, at least 80% of its Assets in
equity securities of small- and medium-sized companies that are early in their
life cycle but which may have potential to become major enterprises (emerging
growth companies). The Trust seeks to achieve the investment objective of the
Fund by investing all of the Fund's Assets in Small Cap Equity Portfolio (the
"Portfolio"), which has the same investment objective as the Fund. The
Portfolio is a series of Republic Portfolios (the "Portfolio Trust"), a master
trust fund established under the law of the State of New York and organized on
November 1, 1994. There can be no assurance that the investment objective of
the Fund or the Portfolio will be achieved.
MANAGEMENT OF THE TRUST AND
THE PORTFOLIO TRUST PAGE 17
Republic acts as investment manager to the Portfolio pursuant to an
Investment Management Contract with the Portfolio Trust. For its services, the
Manager is entitled to receive from the Portfolio a fee at the annual rate of
0.25% of the Portfolio's average daily net assets. The Manager is currently
waiving this fee.
MFS Asset Management, Inc. (the "Sub-Adviser") continuously manages the
investment portfolio of the Portfolio pursuant to a Sub-Advisory Agreement
with the Manager. For its services, the Sub-Adviser is paid a fee by the
Portfolio, computed daily and based on the Portfolio's average daily net
assets, equal on an annual basis to 0.75% of assets up to $50 million and
0.60% of assets in excess of $50 million. See "Management of the Trust and the
Portfolio Trust".
BISYS acts as sponsor and as administrator of the Fund (the "Fund
Administrator"). For its services to the Fund, the Fund Administrator receives
from the Fund a fee payable monthly equal on an annual basis of up to 0.05% of
the Fund's average daily net assets up to $1 billion. In addition, BISYS Fund
Services (Ireland) Limited acts as administrator of the Portfolio (the
"Portfolio Administrator"). For its services to the Portfolio, the Portfolio
Administrator receives from the Portfolio a fee payable monthly equal on an
annual basis of up to 0.05% of the average daily net assets of the Portfolio
up to $1 billion.
The Trust also has retained BISYS to distribute shares of the Fund (the
"Shares") pursuant to a distribution plan (the "Distribution Plan") adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"). Pursuant to the terms of the Distribution Plan, the
Distributor is reimbursed from the Fund for marketing costs and payments to
other organizations for services rendered in distributing the Shares. This fee
may not exceed 0.25% of the average daily net assets of the Fund represented
by Shares outstanding and is expected to be limited to an amount such that the
aggregate fees paid to the Distributor pursuant to the Distribution Plan and
to the Shareholder Servicing Agents pursuant to the Administrative Services
Plan do not exceed 0.25% of such assets. See "Management of the Trust."
PURCHASES AND REDEMPTIONS PAGES 24 AND 28
Shares are continuously offered for sale by the Distributor at net asset
value with no sales charge (i) directly to the public, (ii) to customers of a
financial institution, such as a federal or state-chartered bank, trust
company or savings and loan association, that has entered into a shareholder
servicing agreement with the Trust (collectively, "Shareholder Servicing
Agents"), and (iii) to customers of a securities broker that has entered into
a dealer agreement with the Distributor. For investors who purchase Shares
directly from the Distributor, the minimum initial investment is $1,000 and
the minimum subsequent investment is $100. The Trust offers to buy back
(redeem) Shares from shareholders of the Fund at any time at net asset value.
See "Purchase of Shares" and "Redemption of Shares."
DIVIDENDS AND DISTRIBUTIONS PAGE 30
The Trust declares and distributes all of the Fund's net investment income
as a dividend to Fund shareholders semi-annually. Any net realized capital
gains are distributed at least annually. All Fund distributions will be
invested in additional Shares, unless the shareholder instructs the Fund
otherwise. See "Dividends and Distributions."
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FEE TABLE
The following table summarizes an investor's maximum transaction costs from
investing in the Fund and the estimated aggregate annual operating expenses of
the Fund and the Portfolio as a percentage of the average daily net assets of
the Fund during the Fund's and the Portfolio's initial fiscal period. The
fiscal year ends of the Fund and the Portfolio are both October 31. The
example illustrates the dollar cost of such estimated expenses on a $1,000
investment in the Fund. The Trustees of the Trust believe that the aggregate
per Share expenses of the Fund and the Portfolio will be less than or
approximately equal to the expenses which the Fund would incur if the Trust
retained the services of an investment adviser on behalf of the Fund and the
Assets of the Fund were invested directly in the type of securities being held
by the Portfolio.
Shareholder Transaction Expenses ............................... None
Annual Fund Operating Expenses
Investment Advisory Fee after waiver* ...................... 0.66%
Distribution Fees (Rule 12b-1 fees) ........................ 0.15%
Other Expenses ............................................. 0.74%
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-- Shareholder Servicing Fee ......................... 0.10%
-- Administrative Services Fee ....................... 0.10%
-- Other Operating Expenses........................... 0.54%
Total Operating Expenses after waiver** ........................ 1.55%
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*Reflects a waiver of the investment management fee payable to Republic and
an investment subadvisory fee payable to the Sub-Adviser equal on an annual
basis to 0.66% of the Fund's average daily net assets. Without such waiver,
the Investment Advisory Fee would be equal on an annual basis to 0.91% of
the Fund's average net assets. See "Management of the Trust and the
Portfolio Trust".
**Total Operating Expenses are shown net of investment management fee waiver.
Without such fee waiver, Total Operating Expenses would be equal on an
annual basis to 1.80% of the Fund's average net assets.
EXAMPLE
A shareholder of the Fund would pay the following expenses on a $1,000
investment in Fund Shares, assuming (1) 5% annual return and (2) redemption at
the end of:
1 year ..................................................... $16
3 years ..................................................... $49
THE EXAMPLE SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE AGGREGATE EXPENSES OF THE FUND AND THE PORTFOLIO, AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense table provided above is to assist investors in
understanding the expenses of investing in the Fund and an investor's share of
the aggregate operating expenses of the Fund and the Portfolio. The
information is based on the expenses the Fund and the Portfolio expect to
incur for the current fiscal period.* The expense table shows the expected
investment management fee, investment subadvisory fee, distribution (Rule
12b-1) fee, administrative services fee and shareholder servicing fee. For a
more detailed discussion of the costs and expenses of investing in the Fund,
see "Management of the Trust and the Portfolio Trust."
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*Assuming average daily net assets of $25 million in the Fund and $125 million
in the Portfolio for their initial fiscal year.
The fees paid from the Fund to each Shareholder Servicing Agent are
determined by a formula based upon the number of accounts serviced by such
Shareholder Servicing Agent during the period for which payment is being made,
the level of activity in such accounts during such period, and the expenses
incurred by such Shareholder Servicing Agent. Similarly, the fee from the Fund
to the Distributor is reimbursement for expenses incurred by the Distributor
in connection with the sale of Shares. The aggregate fees paid to the
Distributor pursuant to the Distribution Plan and to the Shareholder Servicing
Agents pursuant to an Administrative Services Plan adopted by the Trust may
not exceed 0.25% of the average daily net assets of the Fund represented by
Shares outstanding during the period for which payment is being made. Long-
term shareholders may pay more than the economic equivalent of the maximum
distribution charges permitted by the National Association of Securities
Dealers, Inc.
Some Shareholder Servicing Agents and securities brokers may impose certain
conditions on their customers, subject to the terms of this Prospectus, in
addition to or different from those imposed by the Trust with respect to the
Fund, such as requiring a minimum initial investment or charging their
customers a direct fee for their services. The effect of any such fees will be
to reduce the net return on the investment of customers of that Shareholder
Servicing Agent or securities broker. Each Shareholder Servicing Agent and
securities broker has agreed to transmit to shareholders who are its customers
appropriate written disclosure of any transaction fees that it may charge them
directly at least 30 days before the imposition of any such charge.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek long-term growth of capital
by investing primarily in equity securities of small- and medium-sized
companies that are early in their life cycle but which may have potential to
become major enterprises ("Emerging Growth Companies"). The investment
objective of the Portfolio is the same as the investment objective of the
Fund.
There can be no assurance that the investment objective of the Fund or the
Portfolio will be achieved. The investment objective of each of the Fund and
the Portfolio may be changed without investor approval. If there is a change
in the investment objective of the Fund, shareholders should consider whether
the Fund remains an appropriate investment in light of their then-current
financial position and needs. Shareholders of the Fund shall receive 30 days'
prior written notice of any change in the investment objective of the Fund or
the Portfolio.
Since the investment characteristics of the Fund will correspond to those of
the Portfolio, the following is a discussion of the various investment
policies of the Portfolio.
INVESTMENT POLICIES
The Portfolio seeks to achieve its objective by investing, under normal
market conditions, at least 80% of its assets in equity securities (see
"Investment Techniques -- Equity Securities" below) of Emerging Growth
Companies. Emerging Growth Companies generally have small (under $1 billion)
market capitalizations and annual gross revenues ranging from $10 million to
$1 billion, would be expected to show earnings growth over time that is well
above the growth rate of the overall economy and the rate of inflation, and
would have the products, management and market opportunities which are usually
necessary to become more widely recognized. However, the Portfolio may also
invest in more established companies whose rates of earnings growth are
expected to accelerate because of special factors, such as rejuvenated
management, new products, changes in consumer demand or basic changes in the
economic environment. The Portfolio may invest up to 20% (and generally
expects to invest between 5% and 10%) of its assets in foreign securities
(excluding American Depositary Receipts) (see "Additional Risk Factors --
Foreign Securities" below).
The Portfolio will invest primarily in common stocks, the Portfolio may, to
a limited extent, seek appreciation in other types of securities such as
foreign or convertible securities and warrants when relative values make such
purchases appear attractive either as individual issues or as types of
securities in certain economic environments.
While the Portfolio may engage in certain investment techniques as described
below under the caption "Investment Techniques". The Portfolio's investments
are subject to certain risks, as described in the above-referenced sections of
this Prospectus and the Statement of Additional Information and as described
below under the caption "Additional Risk Factors".
INVESTMENT TECHNIQUES
Consistent with the Portfolio's investment objective and policies, the
Portfolio may engage in the following investment techniques. See also
"Investment Objective, Policies and Restrictions" in the Statement of
Additional Information.
Equity Securities. The Portfolio may invest in all types of equity
securities, including the following: common stocks, preferred stocks and
preference stocks; securities such as bonds, warrants or rights that are
convertible into stocks; and depositary receipts for those securities. These
securities may be listed on securities exchanges, traded in various over-the-
counter markets or have no organized market.
Fixed Income Securities. Fixed income securities in which the Portfolio may
invest include bonds (including zero coupon bonds, deferred interest bonds and
payable in-kind bonds), debentures, mortgage securities, notes, bills,
commercial paper, obligations issued or guaranteed by a government or any of
its political subdivisions, agencies or instrumentalities, and certificates of
deposit, as well as debt obligations which may have a call on common stock by
means of a conversion privilege or attached warrants.
U.S. Government Securities. For temporary defensive reasons, the Portfolio
may invest in Government securities, including: (1) U.S. Treasury obligations,
which differ only in their interest rates, maturities and times of issuance,
including: U.S. Treasury bills (maturities of one year or less); U.S. Treasury
notes (maturities of one to ten years); and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are backed by the full
faith and credit of the U.S. Government; and (2) obligations issued or
guaranteed by U.S. Government agencies, authorities or instrumentalities, some
of which are backed by the full faith and credit of the U.S. Treasury, e.g.,
direct pass-through certificates of the Government National Mortgage
Association ("GNMA"); some of which are supported by the right of the issuer
to borrow from the U.S. Government, e.g., obligations of Federal Home Loan
Banks; and some of which are backed only by the credit of the issuer itself,
e.g., obligations of the Student Loan Marketing Association (collectively,
"U.S. Government Securities").
Repurchase Agreements. The Portfolio may enter into repurchase agreements
in order to earn income on available cash or as a temporary defensive measure.
Under a repurchase agreement, the Portfolio acquires securities subject to the
seller's agreement to repurchase at a specified time and price. If the seller
becomes subject to a proceeding under the bankruptcy laws or its assets are
otherwise subject to a stay order, the Portfolio's right to liquidate the
securities may be restricted (during which time the value of the securities
could decline). As discussed in the Statement of Additional Information, the
Portfolio has adopted certain procedures intended to minimize the risks of
investing in repurchase agreements.
Lending of Portfolio Securities. The Portfolio may seek to increase its
income by lending portfolio securities to entities deemed creditworthy by the
Adviser. Such loans will usually be made to member firms (and subsidiaries
thereof) of the New York Stock Exchange and to member banks of the Federal
Reserve System, and would be required to be secured continuously by collateral
in cash, letters of credit or U.S. Government securities maintained on a
current basis at an amount at least equal to the market value of the
securities loaned. If the Sub-Adviser determines to make securities loans, it
is intended that the value of the securities loaned would not exceed 30% of
the value of the total assets of the Portfolio.
Restricted Securities. The Portfolio may also purchase securities that are
not registered under the Securities Act of 1933 (the "1933 Act") ("restricted
securities"), including those that can be offered and sold to "qualified
institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). The Board of Trustees determines, based upon a continuing review
of the trading markets for a specific Rule 144A security, whether such
security is liquid and thus not subject to the Portfolio's limitation on
investing not more than 15% of its net assets in illiquid investments. The
Board of Trustees has adopted guidelines and delegated to the Sub-Adviser the
daily function of determining and monitoring the liquidity of Rule 144A
securities. The Board, however, will retain sufficient oversight and be
ultimately responsible for the determinations. The Board will carefully
monitor the Portfolio's investment in Rule 144A securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of decreasing the
level of liquidity in the Portfolio to the extent that qualified institutional
buyers become for a time uninterested in purchasing Rule 144A securities held
in the Portfolio's portfolio. Subject to the Portfolio's 15% limitation on
investments in illiquid investments, the Portfolio may also invest in
restricted securities that may not be sold under Rule 144A, which presents
certain risks. As a result, the Portfolio might not be able to sell these
securities when the Sub-Adviser wishes to do so, or might have to sell them at
less than fair value. In addition, market quotations are less readily
available. Therefore, the judgment of the Sub-Adviser may at times play a
greater role in valuing these securities than in the case of unrestricted
securities.
American Depositary Receipts. The Portfolio may invest in American
Depositary Receipts ("ADRs"), which are certificates issued by a U.S.
depository (usually a bank) and represent a specified quantity of shares of an
underlying non-U.S. stock on deposit with a custodian bank as collateral.
Because ADRs trade on U.S. securities exchanges, the Sub-Adviser does not
treat them as foreign securities. However, they are subject to many of the
risks of foreign securities such as exchange rates and more limited
information about foreign issuers. See "Additional Risk Factors -- Foreign
Securities" below.
Foreign Growth Securities. The Portfolio may invest in securities of
foreign growth companies, including established foreign companies, whose rates
of earnings growth are expected to accelerate because of special factors, such
as rejuvenated management, new products, changes in consumer demand, or basic
changes in the economic environment or which otherwise represent opportunities
for long-term growth. See "Additional Risk Factors -- Foreign Securities"
below. It is anticipated that these companies will primarily be in nations
with more developed securities markets, such as Japan, Australia, Canada, New
Zealand and most Western European countries, including Great Britain.
Emerging Market Securities. The Portfolio may invest in securities of
issuers located in countries or regions with relatively low gross national
product per capita compared to the world's major economies, and in countries
or regions with the potential for rapid economic growth ("Emerging Markets").
Emerging Markets include any country: (i) having an "emerging stock market" as
defined by the International Finance Corporation; (ii) with low- to middle-
income economies according to the International Bank for Reconstruction and
Development (the "World Bank"); (iii) listed in World Bank publications as
developing; or (iv) determined by the Adviser to be an emerging market as
defined above. See "Additional Risk Factors -- Emerging Markets" below. In
determining where a company's principal activities are located, the Sub-
Adviser considers such factors as its country of organization, the principal
trading market for its securities and the source of its revenues and assets.
The company's principal activities are deemed to be located in a particular
country if: (a) the company is organized under the laws of, and maintains a
principal office in that country; (b) the company has its principal securities
trading market in that country, (c) the company derives 50% or more of its
total revenues from goods sold or services performed in that country; or (d)
the company has 50% or more of its assets in that country.
Options on Securities. The Portfolio may write (sell) covered put and call
options on securities ("Options") and purchase put and call Options that are
traded on foreign or U.S. securities exchanges and over the counter. The
Portfolio will write such Options for the purpose of increasing its return
and/or protecting the value of its portfolio. In particular, where the
Portfolio writes an Option which expires unexercised or is closed out by the
Portfolio at a profit, it will retain the premium paid for the Option, which
will increase its gross income and will offset in part the reduced value of a
portfolio security in connection with which the Option may have been written
or the increased cost of portfolio securities to be acquired. In contrast,
however, if the price of the security underlying the Option moves adversely to
the Portfolio's position, the Option may be exercised and the Portfolio will
be required to purchase or sell the security at a disadvantageous price,
resulting in losses which may only be partially offset by the amount of the
premium. The Portfolio may also write combinations of put and call Options on
the same security, known as "straddles". Such transactions can generate
additional premium income but also present increased risk.
The Portfolio may purchase put or call Options in anticipation of declines
in the value of portfolio securities or increases in the value of securities
to be acquired. In the event that the expected changes occur, the Portfolio
may be able to offset the resulting adverse effect on its portfolio, in whole
or in part, through the Options purchased. The risk assumed by the Portfolio
in connection with such transactions is limited to the amount of the premium
and related transaction costs associated with the Option, although the
Portfolio may be required to forfeit such amounts in the event that the prices
of securities underlying the Options do not move in the direction or to the
extent anticipated.
Futures Contracts. The Portfolio may enter into contracts for the purchase
or sale for future delivery of fixed income securities or foreign currencies
or contracts based on indexes of securities as such instruments become
available for trading ("Futures Contracts"). Such transactions will be entered
into for hedging purposes, in order to protect the Portfolio's current or
intended investments from the effects of changes in interest or exchange
rates, or for non-hedging purposes, to the extent permitted by applicable law.
For example, in the event that an anticipated decrease in the value of
portfolio securities occurs as a result of a general increase in interest
rates or a decline in the dollar value of foreign currencies in which
portfolio securities are denominated, the adverse effects of such changes may
be offset, in whole or part, by gains on Futures Contracts sold by the
Portfolio. Conversely, the adverse effects of an increase in the cost of
portfolio securities to be acquired, occurring as a result of a decline in
interest rates or a rise in the dollar value of securities denominated in
foreign currencies, may be offset, in whole or in part, by gains on Futures
Contracts purchased by the Portfolio. The Portfolio will incur brokerage fees
when it purchases and sells Futures Contracts, and will be required to
maintain margin deposits. In addition, Futures Contracts entail risks.
Although the Portfolio believes that use of such contracts will benefit the
Portfolio, if the Sub-Adviser's investment judgment about the general
direction of interest or exchange rates is incorrect, the Portfolio's overall
performance may be poorer than if it had not entered into any such contract
and the Portfolio may realize a loss. Transactions entered into for non-
hedging purposes involve greater risk, including the risk of losses which are
not offset by gains on other portfolio assets. The Portfolio will not enter
into any Futures Contract if immediately thereafter the value of securities
and other obligations underlying all such Futures Contracts would exceed 50%
of the value of its total assets.
Options on Futures Contracts. The Portfolio may purchase and write options
on Futures Contracts ("Options on Futures Contracts") for the purpose of
protecting against declines in the value of portfolio securities or against
increases in the costs of securities to be acquired, or for non-hedging
purposes, to the extent permitted by applicable law. Purchases of Options on
Futures Contracts may present less risk in hedging the Portfolio than the
purchase or sale of the underlying Futures Contracts, since the potential loss
is limited to the amount of the premium paid for the option, plus related
transaction costs. The writing of such options, however, does not present less
risk than the trading of Futures Contracts, and will constitute only a partial
hedge, up to the amount of the premium received, less related transaction
costs. In addition, if an option is exercised, the Portfolio may suffer a loss
on the transaction. Transactions entered into for non-hedging purposes involve
greater risk, including the risk of losses which are not offset by gains on
other portfolio assets.
Forward Contracts. The Portfolio may enter into forward foreign currency
exchange contracts for the purchase and sale of a fixed quantity of a foreign
currency at a future date ("Forward Contracts"). The Portfolio may enter into
Forward Contracts for hedging purposes as well as for non-hedging purposes. By
entering into transactions in Forward Contracts, however, the Portfolio may be
required to forego the benefits of advantageous changes in exchange rates and,
in the case of Forward Contracts entered into for non-hedging purposes, the
Portfolio may sustain losses which will reduce its gross income. Forward
Contracts are traded over-the-counter and not on organized commodities or
securities exchanges. As a result, such contracts operate in a manner distinct
from exchange-traded instruments and their use involves certain risks beyond
those associated with transactions in Futures Contracts or options traded on
exchanges. The Portfolio may also enter into a Forward Contract on one
currency in order to hedge against risk of loss arising from fluctuations in
the value of a second currency (referred to as a "cross hedge") if, in the
judgment of the Sub-Adviser, a reasonable degree of correlation can be
expected between movements in the values of the two currencies. The Portfolio
has established procedures consistent with statements of the Securities and
Exchange Commission (the "SEC") and its staff regarding the use of Forward
Contracts by registered investment companies, which requires use of segregated
assets or "cover" in connection with the purchase and sale of such contracts.
Options on Stock Indices. The Portfolio may write (sell) covered call and
put options and purchase call and put options on domestic or foreign stock
indices ("Options on Stock Indices"). The Portfolio may write such options for
the purpose of increasing its current income and/or to protect its portfolio
against declines in the value of securities it owns or increases in the value
of securities to be acquired. When the Portfolio writes an option on a stock
index, and the value of the index moves adversely to the holder's position,
the option will not be exercised, and the Portfolio will either close out the
option at a profit or allow it to expire unexercised. The Portfolio will
thereby retain the amount of the premium, less related transaction costs,
which will increase its gross income and offset part of the reduced value of
portfolio securities or the increased cost of securities to be acquired. Such
transactions, however, will constitute only partial hedges against adverse
price fluctuations, since any such fluctuations will be offset only to the
extent of the premium received by the Portfolio for the writing of the option,
less related transaction costs. In addition, if the value of an underlying
index moves adversely to the Portfolio's option position, the option may be
exercised, and the Portfolio will experience a loss which may only be
partially offset by the amount of the premium received.
The Portfolio may also purchase put or call options on stock indices in
order, respectively, to hedge its investments against a decline in value or to
attempt to reduce the risk of missing a market or industry segment advance.
The Portfolio's possible loss in either case will be limited to the premium
paid for the option, plus related transaction costs.
Defensive Investments. When the Sub-Adviser believes that investing for
temporary defensive reasons is appropriate, such as during times of
international, political or economic uncertainty or turmoil, or in order to
meet anticipated redemption requests, part or all of the Portfolio's assets
may be invested in cash (including foreign currency) or cash equivalent short-
term obligations including, but not limited to, certificates of deposit,
commercial paper, short-term notes and U.S. Government Securities.
Portfolio Turnover. The Sub-Adviser manages the Portfolio generally without
regard to restrictions on portfolio turnover, except those imposed by
provisions of the federal tax laws regarding short-term trading. In general,
the Portfolio will not trade for short-term profits, but when circumstances
warrant, investments may be sold without regard to the length of time held. It
is anticipated that the portfolio turnover rate for the Portfolio will be 100%
during the Portfolio's initial fiscal year. Because the Portfolio may have a
portfolio turnover rate of 100% or more, transaction costs incurred by the
Portfolio and the realized capital gains and losses of the Portfolio may be
greater than those of a fund with a lesser portfolio turnover rate. See
"Portfolio Transactions" and "Tax Matters" below.
ADDITIONAL RISK FACTORS AND POLICIES
Foreign Securities. Transactions involving foreign equity and debt
securities or foreign currencies, and transactions entered into in foreign
countries, involve considerations and risks not typically associated with
investing in U.S. markets. These include changes in currency rates, exchange
control regulations, governmental administration or economic or monetary
policy (in the U.S. or abroad) or circumstances in dealings between nations.
Costs may be incurred in connection with conversions between various
currencies. Special considerations may also include more limited information
about foreign issuers, higher brokerage costs, different or less stringent
accounting standards and thinner trading markets. Foreign securities markets
may also be less liquid, more volatile and less subject to government
supervision than in the U.S. Investments in foreign countries could be
affected by other factors including expropriation, confiscatory taxation and
potential difficulties in enforcing contractual obligations and could be
subject to extended settlement periods. Furthermore, dividends from foreign
securities may be withheld at the source.
Emerging Markets. The risks of investing in foreign securities may be
intensified in the case of investments in emerging markets. Securities of many
issuers in emerging markets may be less liquid and more volatile than
securities of comparable domestic issuers. Emerging markets also have
different clearance and settlement procedures, and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when a portion of the
assets of the Portfolio is uninvested and no return is earned thereon. The
inability of the Portfolio to make intended security purchases due to
settlement problems could cause the Portfolio to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Portfolio due to subsequent
declines in value of the portfolio security or if the Portfolio has entered
into a contract to sell the security, in possible liability to the purchaser.
Certain markets may require payment for securities before delivery, and in
such markets the Portfolio bears the risk that the securities will not be
delivered and that the Portfolio's payment will not be returned. Securities
prices in emerging markets can be significantly more volatile than in the more
developed nations of the world, reflecting the greater uncertainties of
investing in less established markets and economies. In particular, countries
with emerging markets may have relatively unstable governments, present the
risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets, and may have less protection of
property rights than more developed countries. The economies of countries with
emerging markets may be predominantly based on only a few industries, may be
highly vulnerable to changes in local or global trade conditions, and may
suffer from extreme and volatile debt burdens or inflation rates. Local
securities markets may trade a small number of securities and may be unable to
respond effectively to increases in trading volume, potentially making prompt
liquidation of substantial holdings difficult or impossible at times.
Securities of issuers located in countries with emerging markets may have
limited marketability and may be subject to more abrupt or erratic price
movements.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The Portfolio
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the
application to the Portfolio of any restrictions on investments.
Investment in certain emerging market debt obligations may be restricted or
controlled to varying degrees. These restrictions or controls may at times
preclude investment in certain emerging market debt obligations and increase
the expenses of the Portfolio.
Fixed Income Securities. To the extent the Portfolio invests in fixed
income securities, the net asset value of the Portfolio may change as the
general levels of interest rates fluctuate. When interest rates decline, the
value of fixed income securities can be expected to rise. Conversely, when
interest rates rise, the value of fixed income securities can be expected to
decline. The Portfolio has no restrictions with respect to the maturities or
duration of the fixed income securities it holds. The Portfolio's investments
in fixed income securities with longer terms to maturity or greater duration
are subject to greater volatility than the Portfolio's shorter-term
obligations.
Options, Futures Contracts and Forward Contracts. Although the Portfolio
may enter into transactions in Options, Futures Contracts, Options on Futures
Contracts and Forward Contracts for hedging purposes, such transactions
nevertheless involve certain risks. For example, a lack of correlation between
the instrument underlying an Option or Futures Contract and the assets being
hedged, or unexpected adverse price movements, could render the Portfolio's
hedging strategy unsuccessful and could result in losses. The Portfolios also
may enter into transactions in Options, Futures Contracts, Options on Futures
Contracts and Forward Contracts for other than hedging purposes, which
involves greater risk. In particular, such transactions may result in losses
for the Portfolio which are not offset by gains on other portfolio positions,
thereby reducing gross income. In addition, foreign currency markets may be
extremely volatile from time to time. There also can be no assurance that a
liquid secondary market will exist for any contract purchased or sold, and the
Portfolio may be required to maintain a position until exercise or expiration,
which could result in losses. The Statement of Additional Information contains
a description of the nature and trading mechanics of Options, Futures
Contracts, Options on Futures Contracts and Forward Contracts, and includes a
discussion of the risks related to transactions therein.
Transactions in Forward Contracts may be entered into only in the over-the-
counter market. Futures Contracts and Options on Futures Contracts may be
entered into on U.S. exchanges regulated by the Commodity Futures Trading
Commission and on foreign exchanges. In addition, the securities and indexes
underlying Options, Futures Contracts and Options on Futures Contracts traded
by the Portfolio will include both domestic and foreign securities.
----------------
The policies described above are not fundamental and may be changed without
shareholder approval.
The Statement of Additional Information includes a discussion of investment
policies and a listing of specific investment restrictions which govern the
Portfolio's investment policies. The specific investment restrictions listed
in the Statement of Additional Information may be changed without shareholder
approval unless otherwise indicated. See "Investment Objective, Policies and
Restrictions" in the Statement of Additional Information. The Portfolio's
investment limitations and policies are adhered to at the time of purchase or
utilization of assets; a subsequent change in circumstances will not be
considered to result in a violation of policy.
SPECIAL INFORMATION CONCERNING THE TWO-TIER FUND STRUCTURE
The Trust, which is an open-end investment company, seeks to achieve the
investment objective of the Fund by investing all of the Fund's Assets in the
Portfolio, a series of a separate open-end investment company with the same
investment objective as the Fund. Other mutual funds or institutional
investors may invest in the Portfolio on the same terms and conditions as the
Fund. However, these other investors may have different sales commissions and
other operating expenses which may generate different aggregate performance
results. Information concerning other investors in the Portfolio is available
by calling the Sponsor at (614) 470-8000. The two-tier investment fund
structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.
The investment objective of the Fund may be changed without the approval of
the shareholders of the Fund and the investment objective of the Portfolio may
be changed without the approval of the investors in the Portfolio.
Shareholders of the Fund will receive 30 days prior written notice of any
change in the investment objective of the Fund or the Portfolio. For a
description of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective and Policies" above.
Except as permitted by the Securities and Exchange Commission, whenever the
Trust is requested to vote on a matter pertaining to the Portfolio, the Trust
will hold a meeting of the shareholders of the Fund and, at the meeting of
investors in the Portfolio, the Trust will cast all of its votes in the same
proportion as the votes of the Fund's shareholders even if all Fund
shareholders did not vote. Even if the Trust votes all its shares at the
Portfolio meeting, other investors with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio.
The Trust may withdraw the Fund's investment in the Portfolio as a result of
certain changes in the Portfolio's investment objective, policies or
restrictions or if the Board of Trustees of the Trust determines that it is
otherwise in the best interests of the Fund to do so. Upon any such
withdrawal, the Board of Trustees of the Trust would consider what action
might be taken, including the investment of all of the Assets of the Fund in
another pooled investment entity or the retaining of an investment adviser to
manage the Fund's Assets in accordance with the investment policies described
above with respect to the Portfolio. In the event the Trustees of the Trust
were unable to accomplish either, the Trustees will determine the best course
of action.
As with traditionally structured funds which have large investors, the
actions of such large investors may have a material affect on smaller
investors. For example, if a large investor withdraws from the Portfolio, a
small remaining fund may experience higher pro rata operating expenses,
thereby producing lower returns. Additionally, the Portfolio may become less
diverse, resulting in increased portfolio risk.
For descriptions of the management and expenses of the Portfolio, see
"Management of the Trust and the Portfolio Trust" below and in the Statement
of Additional Information.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO TRUST
The business and affairs of the Trust and the Portfolio Trust are managed
under the direction of their respective Boards of Trustees. The Trustees of
each of the Trust and the Portfolio Trust are Frederick C. Chen, Alan S.
Parsow, Larry M. Robbins and Michael Seely. Additional information about the
Trustees, as well as the executive officers of the Trust and the Portfolio
Trust, may be found in the Statement of Additional Information under the
caption "Management of the Trust and the Portfolio Trust -- Trustees and
Officers".
A majority of the disinterested Trustees have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising
from the fact that the same individuals are Trustees of the Trust and of the
Portfolio Trust. Under the conflicts of interest procedures, the Trustees will
review on a quarterly basis any potential conflicts of interests after
consulting with fund counsel, the Manager and the Fund Administrator. If a
potential conflict of interest arises, the Board of Trustees of the entity
that may be adversely affected will take such action as is reasonably
appropriate to resolve the conflict, up to and including establishing a new
Board of Trustees for such entity. See "Management of the Trust and the
Portfolio Trust" in the Statement of Additional Information for more
information about the Trustees and the executive officers of the Trust and the
Portfolio Trust.
INVESTMENT MANAGER
Republic, whose address is 452 Fifth Avenue, New York, New York 10018,
serves as investment manager to the Portfolio pursuant to an Investment
Management Contract with the Portfolio Trust. Subject to the general guidance
and the policies set by the Trustees of the Portfolio Trust, Republic provides
general supervision over the investment management functions performed by the
Sub-Adviser. For its services under the Investment Management Contract, the
Manager is entitled to receive from the Portfolio Trust a fee, payable
monthly, at the annual rate of 0.25% of the Portfolio's average daily net
assets. The Manager is currently waiving this fee.
Republic is a wholly owned subsidiary of Republic New York Corporation, a
registered bank holding company. As of December 31, 1995, Republic was the
20th largest commercial bank in the United States measured by deposits and the
19th largest commercial bank measured by shareholder equity.
Republic and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of obligations purchased for the
Portfolio, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of obligations so purchased.
Based upon the advice of counsel, Republic believes that the performance of
investment advisory and other services for the Portfolio will not violate the
Glass-Steagall Act or other applicable banking laws or regulations. However,
future statutory or regulatory changes, as well as future judicial or
administrative decisions and interpretations of present and future statutes
and regulations, could prevent Republic from continuing to perform such
services for the Portfolio. If Republic were prohibited from acting as
investment manager to the Portfolio, it is expected that the Trust's Board of
Trustees would recommend to Fund shareholders approval of a new investment
advisory agreement with another qualified investment adviser selected by the
Board or that the Board would recommend other appropriate action.
SUB-ADVISER
The Sub-Adviser continuously manages the investment portfolio of the
Portfolio pursuant to a Sub-Advisory Agreement with the Manager. For its
services, the Sub-Adviser is paid a fee by the Portfolio, computed daily and
based on the Portfolio's average daily net assets, equal on an annual basis to
0.75% of assets up to $50 million and 0.60% of assets in excess of $50
million. It is the responsibility of the Sub-Adviser not only to make
investment decisions for the Portfolio, but also to place purchase and sale
orders for the portfolio transactions of the Portfolio. See "Portfolio
Transactions."
The Sub-Adviser, together with its parent company, Massachusetts Financial
Services Company ("MFS"), is America's oldest mutual fund organization. MFS
and its predecessor organizations have a history of money management dating
from 1924 and the founding of the first mutual fund in the U.S., Massachusetts
Investors Trust. Net assets under the management of the MFS organization were
approximately $45.9 billion on behalf of approximately 2.1 million investor
accounts as of July 31, 1996. As of such date, the MFS organization managed
approximately $22.1 billion of assets invested in equity securities,
approximately $19.5 billion of assets invested in fixed income securities, and
$4.0 billion of assets invested in securities of foreign issuers and non-U.S.
dollar securities. MFS is a wholly owned subsidiary of Sun Life Assurance
Company of Canada (U.S.), which in turn is a wholly owned subsidiary of Sun
Life Assurance Company of Canada ("Sun Life"). Sun Life, a mutual life
insurance company, is one of the largest international life insurance
companies and has been operating in the U.S. since 1895, establishing a
headquarters office in the U.S. in 1973. The executive officers of MFS report
to the Chairman of Sun Life.
MFS has established a strategic alliance with Foreign & Colonial Management
Ltd. ("Foreign & Colonial"). Foreign & Colonial is a subsidiary of two of the
world's oldest financial services institutions, the London-based Foreign &
Colonial Investment Trust PLC, which pioneered the idea of investment
management in 1868, and HYPO-BANK (Bayerische Hypotheken-und Weschsel-Bank
AG), the oldest publicly listed bank in Germany, founded in 1835. As part of
this alliance, the portfolio managers and investment analysts of MFS and
Foreign & Colonial will share their views on a variety of investment-related
issues, such as the economy, securities markets, portfolio securities and
their issuers, investment recommendations, strategies and techniques, risk
analysis, trading strategies and other portfolio management matters. MFS will
have access to the extensive international equity investment expertise of
Foreign & Colonial, and Foreign & Colonial will have access to the extensive
U.S. equity investment expertise of MFS. One or more MFS investment analysts
are expected to work for an extended period with Foreign & Colonial's
portfolio managers and investment analysts at their offices in London. In
return, one or more Foreign & Colonial employees are expected to work in a
similar manner at MFS' Boston offices.
In certain instances there may be securities which are suitable for the
Portfolio as well as for portfolios of other clients of the Sub-Adviser or MFS
or clients of Foreign & Colonial. Some simultaneous transactions are
inevitable when several clients receive investment advice from MFS and Foreign
& Colonial, particularly when the same security is suitable for more than one
client. While in some cases this arrangement could have a detrimental effect
on the price or availability of the security as far as the Portfolio is
concerned, in other cases, however, it may produce increased investment
opportunities for the Portfolio.
The portfolio managers of the Portfolio are John W. Ballen and Brian Stack,
Senior Vice President and Vice President respectively, of the Sub-Adviser. Mr.
Ballen has been employed as a portfolio manager by the Sub-Adviser or MFS
since prior to 1991. Mr. Stack has been employed as a portfolio manager or
analyst by the Sub-Adviser or MFS since prior to 1991.
MFS also serves as investment adviser to the MFS Family of Funds and to MFS
Municipal Income Trust, MFS Multimarket Income Trust, MFS Government Markets
Income Trust, MFS Intermediate Income Trust, MFS Charter Income Trust, MFS
Special Value Trust, MFS Union Standard Trust, MFS Variable Insurance Trust,
MFS/Sun Life Series Trust, Sun Growth Variable Annuity Fund, Inc. and seven
variable accounts, each of which is a registered investment company
established by Sun Life of Canada (U.S.) in connection with the sale of
various fixed/variable annuity contracts. MFS and the Sub-Adviser also provide
investment advice to substantial private clients.
DISTRIBUTOR AND SPONSOR
BISYS, whose address is 3435 Stelzer Road, Suite 1000, Columbus, Ohio 43219,
acts as sponsor and principal underwriter and distributor of the Fund's shares
pursuant to a Distribution Contract with the Trust. The Distributor may, out
of its own resources, make payments to broker-dealers for their services in
distributing Shares.
Pursuant to the Distribution Plan adopted by the Trust, the Distributor is
reimbursed from the Fund monthly for costs and expenses incurred by the
Distributor in connection with the distribution of Fund Shares and for the
provision of certain shareholder services with respect to Shares. The amount
of this reimbursement may not exceed on an annual basis 0.25% of the average
daily net assets of the Fund represented by Shares outstanding during the
period for which payment is being made. Payments to the Distributor are for
various types of activities, including: (1) payments to broker-dealers who
advise shareholders regarding the purchase, sale or retention of Shares and
who provide shareholders with personal services and account maintenance
services ("service fees"), (2) payments to employees of the Distributor, and
(3) printing and advertising expenses. It is currently intended that the
aggregate fees paid to the Distributor pursuant to the Distribution Plan and
to Shareholder Servicing Agents pursuant to the Administrative Services Plan
will not exceed on an annual basis 0.25% of the Fund's average daily net
assets represented by Shares outstanding during the period for which payment
is being made. Salary expense of BISYS personnel who are responsible for
marketing shares of the various portfolios of the Trust may be allocated to
such portfolios on the basis of average net assets; travel expense is
allocated to, or divided among, the particular portfolios for which it is
incurred.
Any payment by the Distributor or reimbursement of the Distributor from the
Fund made pursuant to the Distribution Plan is contingent upon the Board of
Trustees' approval. The Fund is not liable for distribution and shareholder
servicing expenditures made by the Distributor in any given year in excess of
the maximum amount (0.25% per annum of the Fund's average daily net assets
represented by Shares outstanding) payable under the Distribution Plan in that
year.
ADMINISTRATIVE SERVICES PLAN
The Trust has adopted an Administrative Services Plan with respect to Fund
Shares which provides that the Trust may obtain the services of an
administrator, transfer agent, custodian and one or more Shareholder Servicing
Agents, and may enter into agreements providing for the payment of fees for
such services.
FUND ADMINISTRATOR AND PORTFOLIO ADMINISTRATOR
Pursuant to an Administrative Services Agreement, BISYS provides the Fund
with general office facilities and supervises the overall administration of
the Fund and the Portfolio including, among other responsibilities, assisting
in the preparation and filing of all documents required for compliance by the
Fund and the Portfolio with applicable laws and regulations and arranging for
the maintenance of books and records of the Fund and the Portfolio. For its
services to the Fund, BISYS receives from the Fund fees payable monthly equal
on an annual basis (for the Fund's then-current fiscal year) to 0.05% of the
Fund's average daily net assets up to $1 billion; 0.04% of the next $1 billion
of such assets; and 0.035% of such assets in excess of $2 billion. For
providing similar services to the Portfolio, the Portfolio Administrator
receives from the Portfolio fees payable monthly equal on an annual basis (for
the Portfolio's then-current fiscal year) to 0.05% of the first $1 billion of
the Portfolio's average daily net assets; 0.04% of the next $1 billion of such
assets; and 0.035% of such assets in excess of $2 billion.
BISYS provides persons satisfactory to the respective Boards of Trustees to
serve as officers of the Trust and the Portfolio Trust. Such officers, as well
as certain other employees of the Trust and of the Portfolio Trust, may be
directors, officers or employees of BISYS or its affiliates.
TRANSFER AGENT AND CUSTODIAN
Each of the Trust and the Portfolio Trust has entered into a Transfer Agency
Agreement with Investors Bank & Trust Company ("IBT") pursuant to which IBT
acts as transfer agent (the "Transfer Agent") for the Fund and the Portfolio.
The Transfer Agent maintains an account for each shareholder of the Fund and
investor in the Portfolio, performs other transfer agency functions, and acts
as dividend disbursing agent for the Fund. Pursuant to respective Custodian
Agreements, IBT also acts as the custodian (the "Custodian") of the assets of
the Fund and the Portfolio. The Portfolio Trust's Custodian Agreement provides
that the Custodian may use the services of sub-custodians with respect to the
Portfolio. The Custodian's responsibilities include safeguarding and
controlling the Fund's cash and the Portfolio's cash and securities, and
handling the receipt and delivery of securities, determining income and
collecting interest on the Portfolio's investments, maintaining books of
original entry for portfolio accounting and other required books and accounts,
and calculating the daily net asset value of the Portfolio. Securities held
for the Portfolio may be deposited into the Federal Reserve-Treasury
Department Book Entry System or the Depositary Trust Company. The Custodian
does not determine the investment policies of the Fund or the Portfolio or
decide which securities will be purchased or sold for the Portfolio. Assets of
the Portfolio may, however, be invested in securities of the Custodian and the
Portfolio Trust may deal with the Custodian as principal in securities
transactions for the Portfolio. For its services, IBT receives such
compensation as may from time to time be agreed upon by it and the Trust or
the Portfolio Trust.
SHAREHOLDER SERVICING AGENTS
The Trust has entered into a shareholder servicing agreement (a "Servicing
Agreement") with each Shareholder Servicing Agent, including Republic,
pursuant to which a Shareholder Servicing Agent, as agent for its customers,
among other things: answers customer inquiries regarding account status and
history, the manner in which purchases and redemptions of Shares may be
effected and certain other matters pertaining to the Fund; assists
shareholders in designating and changing dividend options, account
designations and addresses; provides necessary personnel and facilities to
establish and maintain shareholder accounts and records; assists in processing
purchase and redemption transactions; arranges for the wiring of funds;
transmits and receives funds in connection with customer orders to purchase or
redeem Shares; verifies and guarantees shareholder signatures in connection
with redemption orders and transfers and changes in shareholder-designated
accounts; furnishes (either separately or on an integrated basis with other
reports sent to a shareholder by a Shareholder Servicing Agent) monthly and
year-end statements and confirmations of purchases and redemptions; transmits,
on behalf of the Trust, proxy statements, annual reports, updated prospectuses
and other communications from the Trust to the Fund's shareholders; receives,
tabulates and transmits to the Trust proxies executed by shareholders with
respect to meetings of shareholders of the Fund or the Trust; and provides
such other related services as the Trust or a shareholder may request. For
these services, each Shareholder Servicing Agent receives a fee from the Fund,
which may be paid periodically, determined by a formula based upon the number
of accounts serviced by such Shareholder Servicing Agent during the period for
which payment is being made, the level of activity in accounts serviced by
such Shareholder Servicing Agent during such period, and the expenses incurred
by such Shareholder Servicing Agent. It is currently intended that the
aggregate fees paid to the Distributor pursuant to the Distribution Plan and
to Shareholder Servicing Agents pursuant to the Administrative Services Plan
will not exceed on an annual basis 0.25% of the Fund's average daily net
assets represented by Shares outstanding during the period for which payment
is being made.
The Trust understands that some Shareholder Servicing Agents also may impose
certain conditions on their customers, subject to the terms of this
Prospectus, in addition to or different from those imposed by the Trust, such
as requiring a different minimum initial or subsequent investment, account
fees (a fixed amount per transaction processed), compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered), or account maintenance fees (a periodic charge
based on a percentage of the assets in the account or of the dividends paid on
those assets). Each Shareholder Servicing Agent has agreed to transmit to its
customers who are holders of Shares appropriate prior written disclosure of
any fees that it may charge them directly and to provide written notice at
least 30 days prior to the imposition of any transaction fees.
The Glass-Steagall Act prohibits certain financial institutions from
engaging in the business of underwriting securities of open-end investment
companies, such as shares of the Fund. The Trust engages banks as Shareholder
Servicing Agents on behalf of the Fund only to perform administrative and
shareholder servicing functions as described above. The Trust believes that
the Glass-Steagall Act should not preclude a bank from acting as a Shareholder
Servicing Agent. There is presently no controlling precedent regarding the
performance of shareholder servicing activities by banks. Future changes in
either federal statutes or regulations relating to the permissible activities
of banks, as well as future judicial or administrative decisions and
interpretations of present and future statutes and regulations, could prevent
a bank from continuing to perform all or part of its servicing activities. If
a bank were prohibited from so acting, its shareholder customers would be
permitted to remain Fund shareholders, and alternative means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the Fund might occur and a shareholder serviced by such bank
might no longer be able to avail himself of any automatic investment or other
services then being provided by such bank. The Trustees of the Trust do not
expect that shareholders of the Fund would suffer any adverse financial
consequences as a result of these occurrences.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by the Distributor, Manager or the Sub-Adviser. See "Management of the
Trust -- Expenses and Expense Limits" in the Statement of Additional
Information. Trust expenses directly attributable to the Fund are charged to
the Fund; other expenses are allocated proportionately among all the
portfolios in the Trust in relation to the net assets of each portfolio.
PORTFOLIO TRANSACTIONS
While it is not generally the Portfolio's policy to invest or trade for
short-term profits, the Portfolio may dispose of a portfolio security whenever
the Sub-Adviser believes it is appropriate to do so without regard to the
length of time the particular asset may have been held. A high turnover rate
involves greater expenses to the Portfolio. The Portfolio engages in portfolio
trading if it believes a transaction net of costs (including custodian
charges) will help in achieving its investment objective.
The primary consideration in placing security transactions is execution at
the most favorable prices. Consistent with the foregoing primary
consideration, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and such other policies as the Trustees may
determine, the Sub-Adviser may consider sales of shares of the Fund and of the
investment company clients of MFS Fund Distributors, Inc., a wholly owned
subsidiary of MFS and the principal underwriter of certain funds in the MFS
Family of Funds, as a factor in the selection of broker-dealers to execute the
Portfolio's portfolio transactions. From time to time, the Sub-Adviser may
direct certain portfolio transactions to broker-dealer firms which, in turn,
have agreed to pay a portion of the Fund's operating expenses (e.g., fee
charged by the custodian of the Fund's and the Portfolio's assets). For a
further discussion of portfolio trading, see the Statement of Additional
Information.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Shares is determined on each day on which the New
York Stock Exchange is open for regular trading ("Fund Business Day"). This
determination is made once during each such day as of 4:00 p.m., New York
time, by dividing the value of the Fund's net assets (i.e., the value of its
investment in the Portfolio and other assets less its liabilities, including
expenses payable or accrued) by the number of Shares outstanding at the time
the determination is made.
The value of the Fund's investment in the Portfolio is also determined once
daily at 4:00 p.m., New York time, on each day the New York Stock Exchange is
open for regular trading ("Portfolio Business Day").
The determination of the value of the Fund's investment in the Portfolio is
made by subtracting from the value of the total assets of the Portfolio the
amount of the Portfolio's liabilities and multiplying the difference by the
percentage, effective for that day, which represents the Fund's share of the
aggregate beneficial interests in the Portfolio.
Values of assets held by the Portfolio are determined on the basis of their
market or other fair value, as described in the Statement of Additional
Information.
PURCHASE OF SHARES
Shares may be purchased through Shareholder Servicing Agents or through
securities brokers that have entered into a dealer agreement with the
Distributor ("Securities Brokers"). Shares may be purchased without a sales
load at their net asset value next determined after an order is transmitted to
and accepted by the Distributor or is received by a Shareholder Servicing
Agent or a Securities Broker if it is transmitted to and accepted by the
Distributor. Purchases are therefore effected on the same day the purchase
order is received by the Distributor provided such order is received prior to
4:00 p.m., New York time, on any Fund Business Day. The Trust intends the Fund
to be as fully invested at all times as is reasonably practicable in order to
enhance the yield on its assets. Each Shareholder Servicing Agent or
Securities Broker is responsible for and required to promptly forward orders
for shares to the Distributor.
While there is no sales load on purchases of Shares, the Distributor may
receive fees from the Fund. See "Management of the Trust -- Distributor and
Sponsor." Other funds which have investment objectives similar to those of the
Fund but which do not pay some or all of such fees from their assets may offer
a higher yield.
All purchase payments are invested in full and fractional Shares. The Trust
reserves the right to cease offering Shares for sale at any time or to reject
any order for the purchase of Shares.
An investor may purchase Shares through the Distributor directly or by
authorizing his Shareholder Servicing Agent or his securities broker to
purchase such Shares on his behalf through the Distributor.
Exchange Privilege. By contacting the Transfer Agent or his Shareholder
Servicing Agent or his securities broker, a shareholder may exchange some or
all of his Shares for shares of one or more of the following investment
companies (or series thereof) at net asset value without a sales charge:
Republic U.S. Government Money Market Fund, Republic New York Tax Free Money
Market Fund, Republic New York Tax Free Bond Fund, Republic Equity Fund,
Republic Overseas Equity Fund, Republic Bond Fund and such other Republic
Funds or other registered investment companies (or series thereof) for which
Republic serves as investment adviser as Republic may determine. An exchange
may result in a change in the number of Shares held, but not in the value of
such Shares immediately after the exchange. Each exchange involves the
redemption of the Shares to be exchanged and the purchase of the shares of the
other Republic Fund which may produce a gain or loss for tax purposes.
The exchange privilege (or any aspect of it) may be changed or discontinued
upon 60 days' written notice to shareholders and is available only to
shareholders in states in which such exchanges legally may be made. A
shareholder considering an exchange should obtain and read the prospectus of
the other Republic Fund and consider the differences in investment objectives
and policies before making any exchange.
DIRECTLY THROUGH THE DISTRIBUTOR
For each shareholder who purchases Shares directly through the Distributor,
the Trust, as the shareholder's agent, establishes an open account to which
all Shares purchased are credited together with any dividends and capital
gains distributions which are paid in additional Shares. See "Dividends and
Distributions." The minimum initial investment is $1,000, except the minimum
initial investment for an Individual Retirement Account is $250. The minimum
subsequent investment is $100. Initial and subsequent purchases may be made by
writing a check (in U.S. dollars) payable to the Republic Funds -- Opportunity
Fund and mailing it to:
Republic Funds
c/o Investors Bank & Trust Company
P.O. Box 1537 MFD23
Boston, Massachusetts 02205-1537
In the case of an initial purchase, the check must be accompanied by a
completed Purchase Application.
In the case of subsequent purchases, a shareholder may transmit purchase
payments by wire directly to the Fund's custodian bank at the following
address:
Investors Bank & Trust Company
Boston, Massachusetts
Attn: Transfer Agent
ABA # 011001438
Acct. # 5999-99451
For further credit to the Republic Funds
(Republic Opportunity Fund, account name, account #)
The wire order must specify the Fund, the account name, number, confirmation
number, address, amount to be wired, name of the wiring bank and name and
telephone number of the person to be contacted in connection with the order.
Automatic Investment Plan. The Trust offers a plan for regularly investing
specified dollar amounts ($25.00 minimum in monthly, quarterly, semi-annual or
annual intervals) in the Fund. If an Automatic Investment Plan is selected,
subsequent investments will be automatic and will continue until such time as
the Trust and the investor's bank are notified in writing to discontinue
further investments. Due to the varying procedures to prepare, process and
forward the bank withdrawal information to the Trust, there may be a delay
between the time of bank withdrawal and the time the money reaches the Fund.
The investment in the Fund will be made at the net asset value per share
determined on the Fund Business Day that both the check and the bank
withdrawal data are received in required form by the Transfer Agent. Further
information about the plan may be obtained from IBT at the telephone number
listed on the back cover.
For further information on how to purchase Shares from the Distributor, an
investor should contact the Distributor directly (see back cover for address
and phone number).
THROUGH A SHAREHOLDER SERVICING AGENT OR A SECURITIES BROKER
Shares are being offered to the public, to customers of a Shareholder
Servicing Agent and to customers of a securities broker that has entered into
a dealer agreement with the Distributor. Shareholder Servicing Agents and
securities brokers may offer services to their customers, including
specialized procedures for the purchase and redemption of Shares, such as pre-
authorized or automatic purchase and redemption programs. Each Shareholder
Servicing Agent and securities broker may establish its own terms, conditions
and charges, including limitations on the amounts of transactions, with
respect to such services. Charges for these services may include fixed annual
fees, account maintenance fees and minimum account balance requirements. The
effect of any such fees will be to reduce the net return on the investment of
customers of that Shareholder Servicing Agent or securities broker.
Conversely, certain Shareholder Servicing Agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding such other
fees or the fees received by the Shareholder Servicing Agent from the Fund,
which will have the effect of increasing the net return on the investment of
such customers of those Shareholder Servicing Agents.
Shareholder Servicing Agents and securities brokers may transmit purchase
payments on behalf of their customers by wire directly to the Fund's custodian
bank by following the procedures described above.
For further information on how to direct a securities broker or a
Shareholder Servicing Agent to purchase Shares, an investor should contact his
securities broker or his Shareholder Servicing Agent (see back cover for
address and phone number).
RETIREMENT PLANS
Shares are offered in connection with tax-deferred retirement plans.
Application forms and further information about these plans, including
applicable fees, are available from the Trust or the Sponsor upon request.
Recently enacted federal tax legislation has substantially affected the tax
treatment of contributions to certain retirement plans. Before investing in
the Fund through one or more of these plans, an investor should consult his or
her tax adviser.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS")
Shares may be used as a funding medium for an IRA. An Internal Revenue
Service-approved IRA plan may be available from an investor's Shareholder
Servicing Agent. In any event, such a plan is available from the Sponsor
naming IBT, as custodian. The minimum initial investment for an IRA is $250;
the minimum subsequent investment is $100. IRAs are available to individuals
who receive compensation or earned income and their spouses whether or not
they are active participants in a tax-qualified or Government-approved
retirement plan. An IRA contribution by an individual who participates, or
whose spouse participates, in a tax-qualified or Government-approved
retirement plan may not be deductible depending upon the individual's income.
Individuals also may establish an IRA to receive a "rollover" contribution of
distributions from another IRA or a qualified plan. Tax advice should be
obtained before planning a rollover.
DEFINED CONTRIBUTION PLANS
Investors who are self-employed may purchase Shares for retirement plans for
self-employed persons which are known as Defined Contribution Plans (formerly
Keogh or H.R. 10 Plans). Republic offers a prototype plan for Money Purchase
and Profit Sharing Plans.
SECTION 457 PLAN, 401(K) PLAN, 403(B) PLAN
The Fund may be used as a vehicle for certain deferred compensation plans
provided for by Section 457 of the Internal Revenue Code of 1986, as amended
(the "Code"), with respect to service for state governments, local
governments, rural electric cooperatives and political subdivisions, agencies,
instrumentalities and certain affiliates of such entities. The Fund may also
be used as a vehicle for both 401(k) plans and 403(b) plans.
REDEMPTION OF SHARES
A shareholder may redeem all or any portion of the Shares in his account at
any time at the net asset value next determined after a redemption order in
proper form is furnished by the shareholder to the Transfer Agent, with
respect to Shares purchased directly through the Distributor, or to his
securities broker or his Shareholder Servicing Agent, and is transmitted to
and received by the Transfer Agent. Redemptions are effected on the same day
the redemption order is received by the Transfer Agent provided such order is
received prior to 4:00 p.m., New York time, on any Fund Business Day. Shares
redeemed earn dividends up to and including the Fund Business Day prior to the
day the redemption is effected.
The proceeds of a redemption are normally paid from the Fund in federal
funds on the next Fund Business Day on which the redemption is effected, but
in any event within seven days. The right of any shareholder to receive
payment with respect to any redemption may be suspended or the payment of the
redemption proceeds postponed during any period in which the New York Stock
Exchange is closed (other than weekends or holidays) or trading on such
Exchange is restricted or, to the extent otherwise permitted by the 1940 Act,
if an emergency exists. To be in a position to eliminate excessive expenses,
the Trust reserves the right to redeem upon not less than 30 days' notice all
Shares in an account which has a value below $50. However, a shareholder will
be allowed to make additional investments prior to the date fixed for
redemption to avoid liquidation of the account.
Unless Shares have been purchased directly from the Distributor, a
shareholder may redeem Shares only by authorizing his securities broker or his
Shareholder Servicing Agent to redeem such Shares on his behalf (since the
account and records of such a shareholder are established and maintained by
his securities broker or his Shareholder Servicing Agent). For further
information as to how to direct a securities broker or a Shareholder Servicing
Agent to redeem Shares, a shareholder should contact his securities broker or
his Shareholder Servicing Agent (see back cover for address and phone number).
SYSTEMATIC WITHDRAWAL PLAN
Any shareholder who owns Shares with an aggregate value of $10,000 or more
may establish a Systematic Withdrawal Plan under which they redeem at net
asset value the number of full and fractional shares which will produce the
monthly, quarterly, semi-annual or annual payments specified (minimum $50.00
per payment). Depending on the amounts withdrawn, systematic withdrawals may
deplete the investor's principal. Investors contemplating participation in
this Plan should consult their tax advisers. No additional charge to the
shareholder is made for this service.
REDEMPTION OF SHARES PURCHASED DIRECTLY THROUGH THE DISTRIBUTOR
Redemption by Letter. Redemptions may be made by letter to the Transfer
Agent specifying the dollar amount or number of Shares to be redeemed, account
number and the Fund. The letter must be signed in exactly the same way the
account is registered (if there is more than one owner of the Shares all must
sign). In connection with a written redemption request, all signatures of all
registered owners or authorized parties must be guaranteed by an Eligible
Guarantor Institution, which includes a domestic bank, broker, dealer, credit
union, national securities exchange, registered securities association,
clearing agency or savings association. The Fund's transfer agent, however,
may reject redemption instructions if the guarantor is neither a member or not
a participant in a signature guarantee program (currently known as "STAMP",
"SEMP", or "NYSE MPS"). Corporations, partnerships, trusts or other legal
entities may be required to submit additional documentation.
An investor may redeem Shares in any amount by written request mailed to the
Transfer Agent at the following address:
The Republic Funds
c/o Investors Bank & Trust Company
P.O. Box 1537 MFD23
Boston, Massachusetts 02205-1537
Checks for redemption proceeds normally will be mailed within seven days,
but will not be mailed until all checks in payment for the purchase of the
Shares to be redeemed have been cleared, which may take up to 15 days or more.
Unless other instructions are given in proper form, a check for the proceeds
of a redemption will be sent to the shareholder's address of record.
Redemption by Wire or Telephone. An investor may redeem Shares by wire or
by telephone if he has checked the appropriate box on the Purchase Application
or has filed a Telephone Authorization Form with the Trust. These redemptions
may be paid from the Fund by wire or by check. The Trust reserves the right to
refuse telephone and wire redemptions and may limit the amount involved or the
number of telephone redemptions. The telephone redemption procedure may be
modified or discontinued at any time by the Trust. Instructions for wire
redemptions are set forth in the Purchase Application. The Trust employs
reasonable procedures to confirm that instructions communicated by telephone
are genuine. For instance, the following information must be verified by the
shareholder or securities broker at the time a request for a telephone
redemption is effected: (1) shareholder's account number; (2) shareholder's
social security number; and (3) name and account number of shareholder's
designated securities dealer or bank. If the Trust fails to follow these or
other established procedures, it may be liable for any losses due to
unauthorized or fraudulent instructions.
DIVIDENDS AND DISTRIBUTIONS
Dividends substantially equal to all of the Fund's net investment income
earned are distributed to Fund shareholders of record semi-annually.
Generally, the Fund's net investment income consists of the interest and
dividend income it earns, less expenses. In computing interest income,
premiums are not amortized nor are discounts accrued on long-term debt
securities in the Portfolio, except as required for federal income tax
purposes.
The Fund's net realized short-term and long-term capital gains, if any, are
distributed to shareholders annually. Additional distributions are also made
to the Fund's shareholders to the extent necessary to avoid application of the
4% non-deductible federal excise tax on certain undistributed income and net
capital gains of regulated investment companies.
Unless a shareholder elects to receive dividends in cash, dividends are
distributed in the form of additional shares of the Fund (purchased at their
net asset value without a sales charge).
TAX MATTERS
This discussion is intended for general information only. An investor should
consult with his own tax advisor as to the tax consequences of an investment
in the Fund, including the status of distributions from the Fund under
applicable state or local law.
Each year, the Trust intends to qualify the Fund and elect that the Fund be
treated as a separate "regulated investment company" under Subchapter M of the
Code. To so qualify, the Fund must meet certain income, distribution and
diversification requirements. Provided such requirements are met and all
investment company taxable income and net realized capital gains of the Fund
are distributed to shareholders in accordance with the timing requirements
imposed by the Code, generally no federal income or excise taxes will be paid
by the Fund on amounts so distributed.
Dividends and capital gains distributions, if any, paid to shareholders are
treated in the same manner for federal income tax purposes whether received in
cash or reinvested in additional shares of the Fund. Shareholders must treat
dividends, other than long-term capital gain dividends, as ordinary income.
Dividends designated by the Fund as long-term capital gain dividends are
taxable to shareholders as long-term capital gain regardless of the length of
time the shares of the Fund have been held by the shareholders. Certain
dividends declared in October, November, or December of a calendar year to
shareholders of record on a date in such a month are taxable to shareholders
(who otherwise are subject to tax on dividends) as though received on December
31 of that year if paid to shareholders during January of the following
calendar year.
Foreign Tax Withholding. Income received by the Portfolio from sources
within foreign countries may be subject to withholding and other income or
similar taxes imposed by such countries. If more than 50% of the value of the
Portfolio's total assets at the close of its taxable year consists of
securities of foreign corporations, the Fund will be eligible and intends to
elect to treat its share of any non-U.S. income and similar taxes it pays (or
which are paid by the Portfolio) as though the taxes were paid by the Fund's
shareholders. Pursuant to this election, a shareholder will be required to
include in gross income (in addition to taxable dividends actually received)
his pro rata share of the foreign taxes paid by the Fund or Portfolio, and
will be entitled either to deduct (as an itemized deduction) his pro rata
share of foreign income and similar taxes in computing his taxable income or
to use it as a foreign tax credit against his U.S. federal income tax
liability, subject to limitations. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions, but such a
shareholder may be eligible to claim the foreign tax credit. Shareholders will
be notified within 60 days after the close of the Fund's taxable year whether
the foreign taxes paid by the Fund or Portfolio will be treated as paid by the
Fund's shareholders for that year. Furthermore, foreign shareholders may be
subject to U.S. tax at the rate of 30% (or lower treaty rate) of the income
resulting from the Fund's election to treat any foreign taxes paid by it as
paid its shareholders, but will not be able to claim a credit or deduction for
the foreign taxes treated as having been paid by them.
The Fund generally will be required to withhold federal income tax at a rate
of 31% ("backup withholding") from dividends paid, capital gain distributions,
and redemption proceeds to shareholders if (1) the shareholder fails to
furnish the Fund with the shareholder's correct taxpayer identification number
("TIN") or social security number and to make such certifications as the Fund
may require, (2) the Internal Revenue Service notifies the shareholder or the
Fund that the shareholder has failed to report properly certain interest and
dividend income to the Internal Revenue Service and to respond to notices to
that effect, or (3) when required to do so, the shareholder fails to certify
that he is not subject to backup withholding. Backup withholding is not an
additional tax and any amounts withheld may be credited against the
shareholder's federal income tax liability. Dividends from the Fund
attributable to the Fund's net investment income and short-term capital gains
generally will be subject to U.S. withholding tax when paid to shareholders
treated under U.S. tax law as nonresident alien individuals or foreign
corporations, estates, partnerships or trusts.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as each series of the Trust (including the Fund)
qualifies as a "regulated investment company" under the Code.
For additional information relating to the tax aspects of investing in the
Fund and for information about the tax aspects of the Portfolio, see the
Statement of Additional Information.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (par value $0.001
per share) and to divide or combine the shares into a greater or lesser number
of shares without thereby changing the proportionate beneficial interests in
the Trust. The shares of each series participate equally in the earnings,
dividends and assets of the particular series. Currently, the Trust has seven
series of shares, each of which constitutes a separately managed fund. The
Trust reserves the right to create additional series of shares.
Each share of the Fund represents an equal proportionate interest in the
Fund with each other share. Shares have no preference, preemptive, conversion
or similar rights. Shares when issued are fully paid and non-assessable,
except as set forth below. Shareholders are entitled to one vote for each
share held on matters on which they are entitled to vote. The Trust is not
required and has no current intention to hold annual meetings of shareholders,
although the Trust will hold special meetings of Fund shareholders when in the
judgment of the Trustees of the Trust it is necessary or desirable to submit
matters for a shareholder vote. Shareholders of each series generally vote
separately, for example, to approve investment advisory agreements or changes
in fundamental investment policies or restrictions, but shareholders of all
series may vote together to the extent required under the 1940 Act, such as in
the election or selection of Trustees, principal underwriters and accountants
for the Trust. Under certain circumstances the shareholders of one or more
series could control the outcome of these votes.
The series of the Portfolio Trust will vote separately or together in the
same manner as the series of the Trust. Under certain circumstances, the
investors in one or more series of the Portfolio Trust could control the
outcome of these votes.
Shareholders of the Fund have under certain circumstances (e.g., upon
application and submission of certain specified documents to the Trustees by a
specified number of shareholders) the right to communicate with other
shareholders of the Trust in connection with requesting a meeting of
shareholders of the Trust for the purpose of removing one or more Trustees.
Shareholders of the Trust also have the right to remove one or more Trustees
without a meeting by a declaration in writing subscribed to by a specified
number of shareholders. Upon liquidation or dissolution of the Fund,
shareholders of the Fund would be entitled to share pro rata in the net assets
of the Fund available for distribution to shareholders.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business
trust may, under certain circumstances, be held personally liable as partners
for its obligations. However, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Portfolio Trust is organized as a master trust fund under the laws of
the State of New York. The Portfolio is a separate series of the Portfolio
Trust, which currently has two other series. The Portfolio Trust's Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and
common and commingled trust funds) are each liable for all obligations of the
Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the investment of all of
the Assets of the Fund in the Portfolio.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each Portfolio Business Day. At 4:00 p.m., New
York time on each Portfolio Business Day, the value of each investor's
beneficial interest in the Portfolio is determined by multiplying the net
asset value of the Portfolio by the percentage, effective for that day, which
represents that investor's share of the aggregate beneficial interests in the
Portfolio. Any additions or withdrawals, which are to be effected on that day,
are then effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio is then recomputed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of 4:00 p.m., New York time on such day plus or minus, as
the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
4:00 p.m., New York time on such day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate investments
in the Portfolio by all investors in the Portfolio. The percentage so
determined is then applied to determine the value of the investor's interest
in the Portfolio as of 4:00 p.m., New York time on the following Portfolio
Business Day.
PERFORMANCE INFORMATION
Yield and total return data for the Fund may from time to time be included
in advertisements about the Trust. "Total return" is expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years. All total return figures reflect the
deduction of a proportional share of Fund expenses on an annual basis, and
assume that all dividends and distributions are reinvested when paid. "Yield"
refers to the income generated by an investment in the Fund over the 30-day
(or one month) period ended on the date of the most recent balance sheet of
the Fund included in the Trust's registration statement with respect to the
Fund.
The following table sets forth the average annual total returns of MFS
Institutional Emerging Equities Fund (the "MFS Fund"), a mutual fund managed
by the Sub-Adviser with investment objectives, policies and restrictions
substantially similar to the Fund and the Portfolio and which has been managed
as the Portfolio is expected to be managed. The data is provided to illustrate
the past performance of the Sub-Adviser in managing a substantially similar
account as measured against specified market indices and does not represent
the performance of the Fund. Investors should not consider this performance
data as an indication of future performance of the Fund or of the Sub-Adviser.
Returns for each period are adjusted to assume that all charges, expenses and
fees of the Fund and the Portfolio which are presently in effect were deducted
during such periods. The investment results of the MFS Fund presented below
are unaudited and are not intended to predict or suggest the returns that
might be experienced by the Fund or an individual in the Fund. Investors
should also be aware that the use of a methodology different from that used to
calculate the performance data set forth below could result in different
performance data.
AVERAGE ANNUAL
TOTAL RETURNS
--------------------------------
RUSSELL 2000
MFS FUND INDEX (3)
-------- -------------
1 Year (1) ............................... 17.01% 6.91%
3 Years (1) .............................. 27.03% 11.82%
Since Inception of MFS Fund (1)(2)........ 27.69% 12.29%
----------
(1) Through July 31, 1996.
(2) Commencement of investment operations is June 16, 1993.
(3) The Russell 2000 Index is a broad index of equity securities of
small capitalization U.S. companies, with an average market
capitalization of $421 million as of July 31, 1996.
See the Statement of Additional Information for further information concerning
the calculation of yield and total return data.
Since these total return and yield quotations are based on historical
earnings and since the Fund's total return and yield fluctuate from day to
day, these quotations should not be considered as an indication or
representation of the Fund's total return or yield in the future. Any
performance information should be considered in light of the Fund's investment
objective and policies, characteristics and quality of the Fund's portfolio
and the market conditions during the time period indicated, and should not be
considered to be representative of what may be achieved in the future. From
time to time the Trust may also use comparative performance information in
such advertisements, including the performance of unmanaged indices, the
performance of the Consumer Price Index (as a measure for inflation), and data
from Lipper Analytical Services, Inc. and other industry publications.
A Shareholder Servicing Agent or a securities broker may charge its
customers direct fees in connection with an investment in the Fund, which will
have the effect of reducing the net return on the investment of customers of
that Shareholder Servicing Agent or that securities broker. Such customers may
be able to obtain through their Shareholder Servicing Agent or securities
broker quotations reflecting such decreased return.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Trust, 3435 Stelzer
Road, Suite 1000, Columbus, Ohio 43219.
GENERAL AND ACCOUNT INFORMATION (888) 525-5757 (TOLL FREE)
--------------------
The Trust's Statement of Additional Information, dated September 1, 1996,
with respect to the Fund contains more detailed information about the Fund,
including information related to (i) the Fund's investment restrictions, (ii)
the Trustees and officers of the Trust and the Manager, Sub-Adviser and
Sponsor of the Fund, (iii) portfolio transactions, (iv) the Fund's shares,
including rights and liabilities of shareholders, and (v) additional yield
information, including the method used to calculate the total return and yield
of the Fund.
<PAGE>
REPUBLIC
OPPORTUNITY
FUND
INVESTMENT ADVISER
Republic National Bank of New York
452 Fifth Avenue
New York, NY 10018
ADMINISTRATOR, DISTRIBUTOR AND SPONSOR
BISYS Fund Services
3435 Stelzer Road, Suite 1000
Columbus, OH 43219
(614) 470-8000
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
(800) 782-8183
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
99 High Street
Boston, MA 02110
LEGAL COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
SHAREHOLDER SERVICING AGENTS:
FOR REPUBLIC CLIENTS
Republic National Bank of New York
452 Fifth Avenue
New York, NY 10018
Toll-Free Customer Service (888) 525-5757
FOR NON-REPUBLIC CLIENTS
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
(800) 782-8183
