<PAGE>
[Graphic Omitted]
REPUBLIC
BOND FUND
REPUBLIC
NEW YORK TAX-FREE BOND FUND
REPUBLIC
EQUITY FUND
REPUBLIC
OVERSEAS EQUITY FUND
REPUBLIC
OPPORTUNITY FUND
PROSPECTUS
November 3, 1998
[LOGO]
<PAGE>
REPUBLIC FUNDS:
BOND FUND
NEW YORK TAX-FREE BOND FUND
EQUITY FUND
OVERSEAS EQUITY FUND
OPPORTUNITY FUND
3435 STELZER ROAD, COLUMBUS, OHIO 43219-3035
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ACCOUNT AND GENERAL INFORMATION: (888) 525-5757 (TOLL FREE)
The Republic Funds (the "Trust") is an open-end management investment
company (a mutual fund) that currently offers a selection of seven portfolios,
each of which has different and distinct investment objectives and policies.
This prospectus describes five investment portfolios offered by the Trust (the
"Funds"), each of which is advised or managed by Republic National Bank of New
York ("Republic," "Manager" or "Advisor"):
REPUBLIC BOND FUND
REPUBLIC NEW YORK TAX-FREE BOND FUND
REPUBLIC EQUITY FUND
REPUBLIC OVERSEAS EQUITY FUND
REPUBLIC OPPORTUNITY FUND
This Prospectus sets forth concisely the information concerning the Funds
that a prospective investor should know before investing. Investors should
read this Prospectus and retain it for future reference. The Trust has filed
with the Securities and Exchange Commission a Statement of Additional
Information, dated November 3, 1998, with respect to each Fund, containing
additional and more detailed information about each respective Fund, which is
hereby incorporated by reference into this Prospectus. An investor may obtain
a copy of a Statement of Additional Information without charge by contacting
the Fund at the address and telephone number printed above.
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. SHARES OF THE FUNDS 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 FUNDS IS
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
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 OBJECTIVES OF THE BOND FUND, OVERSEAS EQUITY FUND
AND OPPORTUNITY FUND BY INVESTING ALL OF EACH FUND'S INVESTABLE ASSETS
("ASSETS") IN THE FIXED INCOME PORTFOLIO, INTERNATIONAL EQUITY PORTFOLIO AND
SMALL CAP EQUITY PORTFOLIO, RESPECTIVELY, WHICH HAVE THE SAME INVESTMENT
OBJECTIVE AS EACH RESPECTIVE FUND. THE INVESTMENT EXPERIENCE OF EACH FUND WILL
CORRESPOND DIRECTLY WITH THE INVESTMENT EXPERIENCE OF THE CORRESPONDING
PORTFOLIO. THE PORTFOLIOS ARE DIVERSIFIED SERIES OF THE REPUBLIC PORTFOLIOS
(THE "PORTFOLIO TRUST"), WHICH IS AN OPEN-END MANAGEMENT INVESTMENT COMPANY.
SEE "SPECIAL INFORMATION CONCERNING THE TWO-TIER FUND STRUCTURE".
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 NOVEMBER 3, 1998
<PAGE>
Only Class A shares (the "Investor Shares"), Class B shares (the "Class B
Shares") and Class C shares (the "Class C Shares") of the Bond Fund, New York
Tax-Free Bond Fund, Equity Fund, Overseas Equity Fund and Opportunity Fund
(collectively, the "Shares"), are being offered by this Prospectus. The Trust
offers one other class of shares of the New York Tax-Free Bond Fund and Equity
Fund pursuant to a separate prospectus.
Republic is the investment manager of the Fixed Income Portfolio,
International Equity Portfolio, Small Cap Equity Portfolio (collectively, the
"Portfolios") and the Equity Fund. Republic is also the investment advisor to
the New York Tax-Free Bond Fund. Miller Anderson & Sherrerd ("MAS"), Capital
Guardian Trust Company ("CGTC"), and MFS Institutional Advisors, Inc.
("MFSI"), a wholly owned subsidiary of Massachusetts Financial Services
Company, continuously manage the investment portfolios of the Fixed Income
Portfolio, the International Equity Porfolio and the Small Cap Equity
Portfolio, respectively. Alliance Capital Management L.P. ("Alliance") and
Brinson Partners, Inc. ("Brinson") continuously manage the investment
portfolio of the Equity Fund (MAS, CGTC, MFSI, Alliance and Brinson are
collectively, the "Sub-Advisers").
Investment in Shares of the Funds is subject to risk, and potential loss of
investment, due to a variety of factors. Shares of the Republic Equity Fund, the
Republic Overseas Equity Fund and Republic Opportunity Fund are subject to risk
due to changes in the stock market in general, changes in the stock prices of
particular companies and perceptions about particular industries. Shares of the
Republic Overseas Equity Fund are also subject to currency exchange risk and
risk arising from economic and political conditions in other countries. Shares
of the Republic Bond Fund and Republic New York Tax-Free Bond Fund are subject
to risks due to changing interest rate levels, the quality of the instruments in
the Fund's investment portfolio, national and international economic conditions,
and general market conditions.
Shares of each Fund are continuously offered for sale by BISYS Fund Services
("BISYS", 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. Investor Shares of the
Equity Fund, Overseas Equity Fund and Opportunity Fund are offered at net
asset value plus a maximum sales charge of 3.50%. Investor Shares of the Bond
Fund and the New York Tax-Free Bond Fund are offered at net asset value plus a
maximum sales charge of 2.75%. Class B Shares and Class C Shares are offered
at net asset value without a sales charge. Although Class B Shares and Class C
Shares of the Funds are not subject to a sales charge when purchased, they may
be subject to a contingent deferred sales charge when redeemed.
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, MATERIALS DESCRIBING THE PROCEDURES
UNDER WHICH SHARES MAY BE PURCHASED AND REDEEMED THROUGH SUCH SECURITIES
BROKER OR SHAREHOLDER SERVICING AGENT.
HIGHLIGHTS
THE FUNDS PAGE 1
Republic Bond Fund, Republic New York Tax-Free Bond Fund, Republic Equity
Fund, Republic Overseas Equity Fund and Republic Opportunity Fund (the
"Funds") are separate series of Republic Funds (the "Trust"), a Massachusetts
business trust organized on April 22, 1987, which currently consists of seven
portfolios, each of which has different and distinct investment objectives and
policies.
INVESTMENT OBJECTIVES, POLICIES AND
RISK FACTORS PAGES 17, 18 AND 28
The investment objective of the Bond Fund is to realize above-average total
return over a market cycle of three to five years, consistent with reasonable
risk, through investment primarily in a diversified portfolio of U.S.
Government securities, corporate bonds, mortgage-backed securities and other
fixed-income securities. The Trust seeks to achieve the investment objective
of the Bond Fund by investing all of the Fund's investible assets in the Fixed
Income Portfolio, which has the same investment objective as the Fund. The
Fixed Income Portfolio's average weighted maturity will ordinarily exceed five
years.
The investment objective of the New York Tax-Free Bond Fund is to provide
shareholders of the Fund with monthly dividends exempt from regular federal,
New York State and New York City personal income taxes as well as to protect
the value of its shareholders' investments. The Trust seeks to achieve the
investment objective of the New York Tax-Free Bond Fund by investing the
assets of the Fund primarily in a non-diversified portfolio of municipal bonds
and notes and other debt instruments the interest on which is exempt from
regular federal, New York State and New York City personal income taxes. The
potential risks of investing in New York Municipal obligations are discussed
in "Additional Risk Factors and Policies -- Risk Factors Affecting Investments
in New York Municipal Obligations".
In seeking its investment objective, the New York Tax-Free Bond Fund may
invest in variable rate instruments and "when-issued" municipal obligations.
The potential risks of investing in these derivative instruments are discussed
in "Additional Risk Factors and Policies -- Variable Rate Instruments" and
"Additional Risk Factors and Policies -- Firm Commitment Agreements and When-
Issued Securities and Municipal Obligations".
The investment objective of the Equity Fund is long-term growth of capital
and income without excessive fluctuations in market value. The Equity Fund
will normally invest in equity securities of large, seasoned companies in
sound financial condition with large or intermediate capitalization which are
expected to show above-average price appreciation.
The investment objective of the Overseas Equity Fund is to seek long-term
growth of capital and future income through investment primarily in securities
of non-U.S. issuers (including American Depository Receipts ("ADRs") and U.S.
registered securities) and securities whose principal markets are outside of
the United States. The Trust seeks to achieve the investment objective of the
Overseas Equity Fund by investing all of the Fund's investible assets in the
International Equity Portfolio, which has the same investment objective as the
Fund.
The investment objective of the Opportunity Fund is to seek long-term growth
of capital by investing, under normal market conditions, at least 80% of its
investible 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 Opportunity Fund by investing all of the
Fund's investible assets in the Small Cap Equity Portfolio, which has the same
investment objective as the Fund.
The Fixed Income Portfolio, International Equity Portfolio, and Small Cap
Equity Portfolio are series of Republic Portfolios (the "Portfolio Trust"), a
master trust fund established under the laws of the State of New York and
organized on November 1, 1994.
There can be no assurance that the investment objectives of the Funds or the
Portfolios will be achieved.
MANAGEMENT OF THE TRUST AND
THE PORTFOLIO TRUST PAGE 51
Republic acts as investment manager to the Portfolios pursuant to Investment
Management Contracts with the Portfolio Trust. For its services, the Manager
is entitled to receive from the Fixed Income Portfolio a fee at the annual
rate of 0.20% of the Portfolio's average daily net assets and from each of the
International Equity Portfolio and the Small Cap Equity Portfolio a fee at the
annual rate of 0.25% of each Portfolio's average daily net assets.
Republic also acts as investment adviser to the New York Tax-Free Bond Fund
and as investment manager to the Equity Fund. For its services, each of these
Funds pays the Manager a fee at the annual rate of 0.25% of the New York Tax-
Free Bond Fund's average daily net assets and a fee at the annual rate of
0.175% of the Equity Fund's average daily net assets. Republic is currently
waiving the fee for the New York Tax-Free Bond Fund. See "Management of the
Trust and the Portfolio Trust".
MAS continuously manages the investment portfolio of the Fixed Income
Portfolio pursuant to a Sub-Advisory Agreement with the Manager. For its
services, MAS is paid a fee by the Fixed Income Portfolio, computed daily and
based on the Portfolio's average daily net assets, equal on an annual basis to
0.375% on net assets of the Portfolio, subject to certain breakpoints on
assets in excess of $50 million. See "Management of the Trust and the
Portfolio Trust".
Alliance and Brinson each continuously manage a portion of the investment
portfolio of the Equity Fund pursuant to a Sub-Advisory Agreement with the
Manager. The Manager determines the allocation of the Equity Fund's assets
between Alliance and Brinson. For its services, Alliance and Brinson are each
paid a fee by the Equity Fund, computed daily and based on the Fund's average
daily net assets, equal on an annual basis to 0.325% of the average daily net
assets of the Fund allocated to each Sub-Adviser for management, subject to
certain breakpoints on assets allocated to each Sub-Adviser in excess of $50
million. See "Management of the Trust and the Portfolio Trust".
CGTC continuously manages the investment portfolio of the International
Equity Portfolio pursuant to a Sub-Advisory Agreement with the Manager. For
its services, CGTC is paid a fee by the International Equity Portfolio,
computed daily and based on the Portfolio's average daily net assets, equal on
an annual basis to 0.70% of the average daily net assets of the Portfolio,
subject to certain breakpoints on assets in excess of $25 million. See
"Management of the Trust and the Portfolio Trust".
MFSI continuously manages the investment portfolio of the Small Cap Equity
Portfolio pursuant to a Sub-Advisory Agreement with the Manager. For its
services, MFSI is paid a fee by the Small Cap Equity Portfolio, computed daily
and based on the Portfolio's average daily net assets, equal on an annual
basis to 0.75% of average daily net assets of the Portfolio, subject to
certain breakpoints on assets in excess of $50 million. See "Management of the
Trust and the Portfolio Trust".
BISYS acts as sponsor and as administrator of the Funds (the "Fund
Administrator") and distributor of the Shares of each Fund. For its services
to the New York Tax-Free Bond Fund and the Equity Fund, the Fund Administrator
receives a fee from each Fund equal on an annual basis to 0.10% of each Fund's
average daily net assets, subject to certain breakpoints on assets in excess
of $1 billion. For its services to the Bond Fund, Overseas Equity Fund and
Opportunity Fund, the Fund Administrator receives from each Fund a fee payable
monthly equal on an annual basis to 0.05% of each Fund's average daily net
assets, subject to certain breakpoints on assets in excess of $1 billion.
BISYS Fund Services (Ireland) Limited ("BISYS Ireland") acts as administrator
of the Portfolios (the "Portfolios Administrator"). For its services to the
Portfolios, the Portfolios Administrator receives from each Portfolio a fee
payable monthly equal on an annual basis to 0.05% of each Portfolio's average
daily net assets subject to certain breakpoints on assets in excess of $1
billion. See "Management of the Trust and the Portfolio Trust".
The Trust also has retained BISYS to distribute Shares of the Funds pursuant
to distribution plans adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") with respect to the Investor
Shares of each Fund (the "Class A Plan"), the Class B Shares of each Fund (the
"Class B Plan") and the Class C Shares of each Fund (the "Class C Plan" and,
with the Class A Plan and Class B Plan, the "Distribution Plans"). Pursuant
to the terms of the Distribution Plans, the Distributor is reimbursed from
each Fund for marketing costs and payments to other organizations for services
rendered in distributing the Shares. Pursuant to the Class A Plan, this fee
may not exceed 0.25% of the average daily net assets of each Fund represented
by Investor Shares outstanding. Pursuant to both the Class B Plan and the
Class C Plan, the portion of this fee which may be paid for distribution
related activities may not exceed 0.75% of the average daily net assets of
each Fund represented by Class B Shares and Class C Shares, respectively,
outstanding and is expected to be limited to an amount such that the aggregate
fee paid to the Distributor pursuant to the Class B Plan and Class C Plan,
respectively, and to the Shareholder Servicing Agents pursuant to the
Administrative Service Plan do not exceed on an annual basis, 1.00% of each
Fund's average daily net assets represented by Class B Shares and Class C
Shares, respectively. See "Management of the Trust and the Portfolio Trust".
PURCHASE AND REDEMPTION OF SHARES PAGES 64 AND 76
Shares of the Funds are continuously offered for sale by the Distributor at
net asset value, plus the applicable sales charge for Investor Shares, (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. Investor Shares of the Funds are sold subject to a sales charge
under most conditions. See "Sales Charge -- Investor Shares." 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 Funds at any time
at net asset value. See "Purchase of Shares" and "Redemption of Shares." Class
B Shares and Class C Shares of the Funds may be subject to a contingent
deferred sales charge at the time of redemption. See "Contingent Deferred Sales
Charge -- Class B Shares," and "Level Load Alternative -- Class C Shares."
Shares of the Bond Fund, Equity Fund, Overseas Equity Fund and Opportunity Fund
are offered in connection with tax-deferred retirement plans. See "Retirement
Plans".
DIVIDENDS AND DISTRIBUTIONS PAGE 77
For the Bond Fund and New York Tax-Free Bond Fund, the Trust declares all of
each Fund's net investment income daily as a dividend to each Fund's
shareholders and distributes all such dividends monthly. For the Equity Fund,
dividends equal to all the Fund's net investment income earned are distributed
quarterly to the Fund's shareholders of record. For the Overseas Equity Fund
and Opportunity Fund, such dividends are distributed annually and semi-
annually, respectively. For all of the Funds, any net realized capital gains
are distributed at least annually. All distributions by a Fund will be
invested in additional shares of the Fund, unless the shareholder instructs
the Fund otherwise. See "Dividends and Distributions."
<PAGE>
FEE TABLE
The following tables provide a summary of estimated expenses relating to
purchases and sales of Investor (Class A) Shares, Class B Shares and Class C
Shares of each Fund, and the aggregate annual operating expenses of each Fund
and their corresponding Portfolio, as appropriate, as a percentage of the
average daily net assets of each Fund. The fiscal year end of the Funds and
the Portfolios is October 31. The examples illustrate the dollar cost of such
estimated expenses on a $1,000 investment in each Fund. The Trustees of the
Trust believe that the aggregate per share expenses of the Bond Fund, Overseas
Equity Fund and Opportunity Fund and the corresponding Portfolios will be less
than or approximately equal to the expenses which the Funds would incur if the
Trust retained the services of an investment adviser on behalf of the Funds
and the Assets of each Fund were invested directly in the type of securities
being held by the corresponding Portfolio. Information in the expense table
regarding investment advisory/management fees and expenses reflects expected fee
waivers and expenses for the current fiscal year.
<TABLE>
INVESTOR (CLASS A) SHARES
<CAPTION>
NEW YORK OVERSEAS
BOND TAX-FREE EQUITY EQUITY OPPORTUNITY
FUND BOND FUND FUND FUND FUND
---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge ................... 2.75% 2.75% 3.50% 3.50% 3.50%
Annual Fund Operating Expenses
Investment Advisory/Management Fees
after waiver* ........................ 0.48% 0.00% 0.50% 0.72% 0.89%
Distribution Fees (Rule 12b-1 fees) .... 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expenses ......................... 0.62% 0.95% 0.80% 1.18% 0.81%
---- ---- ---- ---- ----
-- Shareholder Servicing Fee ........... 0.25% 0.25% 0.25% 0.25% 0.25%
-- Administrative Services Fee 0.10% 0.10% 0.10% 0.10% 0.10%
-- Other Operating Expenses ............ 0.27% 0.60% 0.45% 0.83% 0.46%
Total Fund Operating Expenses after fee
waivers and expense reimbursements** ... 1.10% 0.95% 1.30% 1.90% 1.70%
==== ==== ==== ==== ====
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* The Investment Advisory/Management Fees for the New York Tax-Free Bond Fund are shown net of waivers.
Without such waivers, the Investment Advisory/ Management Fees would be equal on an annual basis to 0.25% of
the average net assets of the New York Tax-Free Bond Fund. See "Management of the Trust and the Portfolio
Trust" for a description of the Investment Advisory/ Management Fees payable to the Manager and each of the
Sub-Advisers. There can be no assurance that fees will be waived in the future. The Manager anticipates that
it will reduce or eliminate its fee waiver during the current fiscal year if it can do so without materially
increasing Total Fund Operating Expenses as a percentage of average daily net assets.
** With the exception of the Equity Fund and Opportunity Fund, Total Fund Operating Expenses are shown net of
fee waivers and expense reimbursements. Without such fee waivers and expense reimbursements, the Total Fund
Operating Expenses would be equal on an annual basis to 2.05% of the Bond Fund's average daily net assets,
1.30% of the New York Tax-Free Bond Fund's average daily net assets, and 2.15% of the Overseas Equity Fund's
average daily net assets. There can be no assurance that fees will be waived or expenses reimbursed in the
future.
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment in Investor Shares, assuming (1) 5% annual
return and (2) redemption at the end of each period:
INVESTOR (CLASS A) SHARES (WITH SALES CHARGE)
<CAPTION>
NEW YORK OVERSEAS
BOND TAX-FREE EQUITY EQUITY OPPORTUNITY
FUND BOND FUND FUND FUND FUND
---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1 year ............................. $ 38 $ 37 $ 48 $ 54 $ 52
3 years ............................ $ 61 $ 57 $ 75 $ 93 $ 87
5 years ............................ $ 86 $ 79 $104 $134 $124
10 years ............................ $158 $141 $186 $250 $229
THE EXAMPLES SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE AGGREGATE EXPENSES OF THE
FUNDS AND THE PORTFOLIOS, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CLASS B SHARES
<CAPTION>
NEW YORK OVERSEAS
BOND TAX-FREE EQUITY EQUITY OPPORTUNITY
FUND BOND FUND FUND FUND FUND
---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge ................... None None None None None
Maximum Contingent Deferred Sales Charge 3.00% 3.00% 4.00% 4.00% 4.00%
Annual Fund Operating Expenses
Investment Advisory/Management Fees
after waiver* ........................ 0.48% 0.00% 0.50% 0.72% 0.89%
Distribution Fees (Rule 12b-1 fees)** 0.75% 0.75% 0.75% 0.75% 0.75%
Other Expenses ......................... 0.62% 0.95% 0.80% 1.18% 0.81%
---- ---- ---- ---- ----
-- Shareholder Servicing Fee ........... 0.25% 0.25% 0.25% 0.25% 0.25%
-- Administrative Services Fee 0.10% 0.10% 0.10% 0.10% 0.10%
-- Other Operating Expenses ............ 0.27% 0.60% 0.45% 0.83% 0.46%
Total Fund Operating Expenses after fee
waivers and expense reimbursements*** 1.85% 1.70% 2.05% 2.65% 2.45%
==== ==== ==== ==== ====
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* The Investment Advisory/Management Fees for the New York Tax-Free Bond Fund are shown net of waivers.
Without such waivers, the Investment Advisory/ Management Fees for the New York Tax-Free Bond Fund would be
equal on an annual basis to 0.25%, of the average net assets of the New York Tax-Free Bond Fund. See
"Management of the Trust and the Portfolio Trust" for a description of the Investment Advisory/Management
Fees payable to the Manager and each of the Sub-Advisers. There can be no assurance that fees will be
waived in the future. The Manager anticipates that it will reduce or eliminate its fee waiver during the
current fiscal year if it can do so without materially increasing Total Fund Operating Expenses as a
percentage of average daily net assets.
** Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
*** With the exception of the Equity Fund and Opportunity Fund, Total Fund Operating Expenses are shown net of
fee waivers and expense reimbursements. Without such fee waivers and expense reimbursements, the Total Fund
Operating Expenses would be equal on an annual basis to 2.80% of the Bond Fund's average daily net assets,
2.05% of the New York Tax-Free Bond Fund's average daily net assets, and 2.90% of the Overseas Equity
Fund's average daily net assets. There can be no assurance that fees will be waived or expenses reimbursed
in the future.
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment in Class B Shares, assuming (1) 5% annual
return and (2) redemption at the end of each period, and (3) no redemption at the end of each period.
CLASS B SHARES (REDEMPTION)
<CAPTION>
NEW YORK OVERSEAS
BOND TAX-FREE EQUITY EQUITY OPPORTUNITY
FUND BOND FUND FUND FUND FUND
---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1 year ............................. $ 49 $ 47 $ 61 $ 67 $ 65
3 years ............................ $ 68 $ 64 $ 84 $102 $ 96
5 years ............................ $ 83 $ 75 $102 $132 $122
10 years ............................ $155 $135 $182 $244 $224
CLASS B SHARES (NO REDEMPTION)
<CAPTION>
NEW YORK OVERSEAS
BOND TAX-FREE EQUITY EQUITY OPPORTUNITY
FUND BOND FUND FUND FUND FUND
---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1 year ............................. $ 19 $ 17 $ 21 $ 27 $ 25
3 years ............................ $ 58 $ 54 $ 64 $ 82 $ 76
5 years ............................ $ 83 $ 75 $102 $132 $122
10 years ............................ $155 $135 $182 $244 $224
THE EXAMPLES SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE AGGREGATE EXPENSES OF THE
FUNDS AND THE PORTFOLIOS, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CLASS C SHARES
<CAPTION>
NEW YORK OVERSEAS
BOND TAX-FREE EQUITY EQUITY OPPORTUNITY
FUND BOND FUND FUND FUND FUND
---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge ................... None None None None None
Maximum Contingent Deferred Sales Charge 1.00% 1.00% 1.00% 1.00% 1.00%
Annual Fund Operating Expenses
Investment Advisory/Management Fees
after waiver* ........................ 0.48% 0.00% 0.50% 0.72% 0.89%
Distribution Fees (Rule 12b-1 fees)** 0.75% 0.75% 0.75% 0.75% 0.75%
Other Expenses ......................... 0.62% 0.95% 0.80% 1.18% 0.81%
---- ---- ---- ---- ----
-- Shareholder Servicing Fee ........... 0.25% 0.25% 0.25% 0.25% 0.25%
-- Administrative Services Fee 0.10% 0.10% 0.10% 0.10% 0.10%
-- Other Operating Expenses ............ 0.27% 0.60% 0.45% 0.83% 0.46%
Total Fund Operating Expenses after fee
waivers and expense reimbursements*** 1.85% 1.70% 2.05% 2.65% 2.45%
==== ==== ==== ==== ====
- ------------
* The Investment Advisory/Management Fees for the New York Tax-Free Bond Fund are shown net of waivers.
Without such waivers, the Investment Advisory/ Management Fees for the New York Tax-Free Bond Fund would be
equal on an annual basis to 0.25%, of the average net assets of the New York Tax-Free Bond Fund. See
"Management of the Trust and the Portfolio Trust" for a description of the Investment Advisory/Management
Fees payable to the Manager and each of the Sub-Advisers. There can be no assurance that fees will be
waived in the future. The Manager anticipates that it will reduce or eliminate its fee waiver during the
current fiscal year if it can do so without materially increasing Total Fund Operating Expenses as a
percentage of average daily net assets.
** Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
*** There were no outstanding Class C Shares prior to the date of this prospectus. Accordingly, "Total Fund
Operating Expenses," as shown above is an estimate based upon the sum of Management Fees, Distribution Fees
and estimated "Other Expenses." With the exception of the Equity Fund and Opportunity Fund, Total Fund
Operating Expenses are shown net of fee waivers and expense reimbursements. Without such fee waivers and
expense reimbursements, the Total Fund Operating Expenses would be equal on an annual basis to 2.80% of the
Bond Fund's average daily net assets, 2.05% of the New York Tax-Free Bond Fund's average daily net assets,
and 2.90% of the Overseas Equity Fund's average daily net assets. There can be no assurance that fees will
be waived or expenses reimbursed in the future.
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment in Class C Shares, assuming (1) 5% annual
return and (2) redemption at the end of each period, and (3) no redemption at the end of each period.
CLASS C SHARES (REDEMPTION)
<CAPTION>
NEW YORK OVERSEAS
BOND TAX-FREE EQUITY EQUITY OPPORTUNITY
FUND BOND FUND FUND FUND FUND
---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1 year ............................. $ 29 $ 27 $ 31 $ 37 $ 35
3 years ............................ $ 58 $ 54 $ 64 $ 82 $ 76
5 years ............................ $100 $ 92 $110 $141 $131
10 years ............................ $217 $201 $238 $298 $279
CLASS C SHARES (NO REDEMPTION)
<CAPTION>
NEW YORK OVERSEAS
BOND TAX-FREE EQUITY EQUITY OPPORTUNITY
FUND BOND FUND FUND FUND FUND
---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1 year ............................. $ 19 $ 17 $ 21 $ 27 $ 25
3 years ............................ $ 58 $ 54 $ 64 $ 82 $ 76
5 years ............................ $100 $ 92 $110 $141 $131
10 years ............................ $217 $201 $238 $296 $279
THE EXAMPLES SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE AGGREGATE EXPENSES OF THE
FUNDS AND THE PORTFOLIOS, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
</TABLE>
The purpose of the expense tables provided above is to assist investors in
understanding the expenses of investing in a Fund and an investor's share of
the aggregate operating expenses of the Funds and the Portfolios, if
applicable. The information is based on the expenses the Funds, and their
corresponding Portfolios, if applicable, expect to incur for the current
fiscal year. The expense table shows the expected investment advisory/
management 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 Funds, see "Management of the Trust and the
Portfolio Trust."
The fees paid from the Funds 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 each
Fund to the Distributor is in anticipation of, or as reimbursement for,
expenses incurred by the Distributor in connection with the sale of Shares.
The aggregate fees paid to the Distributor pursuant to the Class B Plan and
Class C Plan respectively, and to the Shareholder Servicing Agents pursuant to
the Administrative Services Plan may not exceed 1.00% of the average daily net
assets of each Fund represented by Class B Shares and Class C Shares,
respectively, outstanding during the period for which payment is being made.
Long-term shareholders of Class B Shares and Class C Shares may pay more than
the economic equivalent of the maximum front-end sales charge 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
Funds, 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.
FINANCIAL HIGHLIGHTS
The financial data shown below is to assist investors in evaluating the
performance of the Funds' Investor (Class A) Shares and Class B Shares since
commencement of operations through April 30, 1998. Financial data for the
Class C Shares is not shown because they were not offered by the Funds prior
to November 3, 1998. The information shown in the following schedule for the
years or periods ended October 31, 1997 and 1996 has been audited by KPMG Peat
Marwick LLP, independent auditors, whose report on each Fund's financial
statements is incorporated by reference into the Statement of Additional
Information from the Funds' Annual Report dated October 31, 1997. The
information for the six-month period ended April 30, 1998 is unaudited. The
Annual Report also includes management's discussion of Fund performance, and may
be obtained without charge upon request. This information should be read in
conjunction with the financial statements.
The information for the Funds for the periods ended October 31, 1995 was
audited by the Funds' former independent auditors who expressed an unqualified
opinion thereon.
<PAGE>
<TABLE>
REPUBLIC BOND FUND
SELECTED DATA FOR AN INVESTOR (CLASS A) SHARE
OUTSTANDING THROUGHOUT THE INDICATED PERIOD:
<CAPTION>
FOR THE PERIOD
FOR THE SIX AUGUST 26, 1996
MONTHS ENDED FOR THE (COMMENCEMENT
APRIL 30, 1998 YEAR ENDED OF OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1997 OCTOBER 31, 1996
------------------ ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ....... $10.50 $10.26 $10.00
------ ------ ------
Income from investment operations:
Net investment income .................... 0.32 0.57 0.10
Net realized and unrealized gain (loss) on
investments ............................ 0.04 0.30 0.26
------ ------ ------
Total from investment operations ........... 0.36 0.87 0.36
------ ------ ------
Less dividends:
From net investment income ............... (0.32) (0.57) --
From net realized gains .................. 0.00 (0.06) (0.10)
------ ------ ------
Total distributions ...................... (0.32) (0.63) (0.18)
------ ------ ------
Net asset value, end of period ............. $10.54 $10.50 $10.26
====== ====== ======
Total return(a) ............................ 3.20%(b) 8.71% 3.61%(b)
Ratios/supplemental data:
Net assets, end of period (in 000's) ..... $4,742 $2,442 $ 21
Ratio of expenses to average net assets .. 1.10%(c) 1.10% 1.04%(c)
Ratio of net investment income to average
net assets ............................. 5.57%(c) 5.32% 5.23%(c)
Ratio of expenses to average net assets(d) 1.78%(c) 5.16% 280.50%(c)
Ratio of net investment income to average
net assets(d) .......................... 4.89%(c) 1.27% (274.18)%(c)
Portfolio turnover rate(e) ............... 349% 152%
- -------------------------------------------------------------------------------------------------------
(a) For the year or period indicated.
(b) Not annualized.
(c) Annualized.
(d) During each year or period, certain fees were voluntarily reduced and expenses reimbursed. If such
voluntary fee reductions and expense reimbursements had not occurred, the ratios would have been
as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund (or, where applicable, the Portfolio in
which the Fund invests) as a whole, without distinguishing between classes of shares issued.
</TABLE>
<PAGE>
<TABLE>
REPUBLIC NEW YORK TAX-FREE
BOND FUND
SELECTED DATA FOR AN INVESTOR (CLASS A) SHARE
OUTSTANDING THROUGHOUT THE INDICATED PERIOD:
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE FOR THE MAY 1, 1995
PERIOD ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OF OPERATIONS) TO
(UNAUDITED) 1997 1996 OCTOBER 31, 1995
----------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $10.64 $10.30 $10.38 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income .......................... 0.22 0.45 0.54 0.25
Net realized and unrealized gain (loss) on
investments .................................. 0.01 0.36 (0.01) 0.38
------ ------ ------ ------
Total from investment operations 0.23 0.81 0.53 0.63
------ ------ ------ ------
Less dividends:
From net investment income ..................... (0.22) (0.45) (0.54) (0.25)
From net realized gains ........................ (0.04) (0.02) (0.07) --
------ ------ ------ ------
Total distributions ............................ (0.26) (0.47) (0.61) (0.25)
------ ------ ------ ------
Net asset value, end of period ................... $10.61 $10.64 $10.30 $10.38
====== ====== ====== ======
Total return(a) .................................. 2.26%(b) 8.22% 4.75% 6.39%(b)
Ratios/supplemental data:
Net assets, end of period (in 000's) ........... $20,863 $20,794 $ 6,353 $ 6,908
Ratio of expenses to average net assets ........ 0.95% 0.92% 0.58% 0.50%(c)
Ratio of net investment income to average net
assets ....................................... 4.42%(c) 4.46% 4.78% 4.91%(c)
Ratio of expenses to average net assets(d) ..... 1.17%(b) 1.55% 2.21% 2.40%(c)
Ratio of net investment income to average net
assets(d) .................................... 4.20%(b) 3.83% 3.15% 3.01%(c)
Portfolio turnover rate(e) ..................... 61.60% 163% 178% 130%
- --------------------------------------------------------------------------------------------------------------------
(a) For the year or period indicated.
(b) Not annualized.
(c) Annualized.
(d) During each year or period, certain fees were voluntarily reduced and expenses reimbursed. If such voluntary fee
reductions and expense reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund (or, where applicable, the Portfolio in which the Fund
invests) as a whole, without distinguishing between classes of shares issued.
</TABLE>
<PAGE>
<TABLE>
REPUBLIC EQUITY FUND
SELECTED DATA FOR AN INVESTOR (CLASS A) SHARE
OUTSTANDING THROUGHOUT THE INDICATED PERIOD:
<CAPTION>
FOR THE FOR THE PERIOD
PERIOD ENDED FOR THE FOR THE AUGUST 1, 1995
APRIL 30, YEAR ENDED YEAR ENDED (COMMENCEMENT
1998 OCTOBER 31, OCTOBER 31, OF OPERATIONS) TO
(UNAUDITED) 1997 1996 OCTOBER 31, 1995
----------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $15.00 $11.93 $10.24 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income .......................... 0.02 0.07 0.19 0.04
Net realized and unrealized gain (loss) on
investments .................................. 3.07 3.32 1.67 0.24
------ ------ ------ ------
Total from investment operations 3.09 3.39 1.86 0.28
------ ------ ------ ------
Less dividends:
From net investment income ..................... (0.02) (0.10) (0.17) (0.04)
From net realized gains ........................ (0.85) (0.22) -- --
------ ------ ------ ------
Total distributions ............................ (0.87) (0.32) (0.17) (0.04)
------ ------ ------ ------
Net asset value, end of period ................... $17.22 $15.00 $11.93 $10.24
====== ====== ====== ======
Total return(a) .................................. 21.66% 28.92% 18.30% 2.75%(b)
Ratios/supplemental data:
Net assets, end of period (in 000's) ........... $19,295 $12,363 $ 3,918 $22,092
Ratio of expenses to average net assets ........ 1.05%(c) 1.21% 1.28% 1.47%(c)
Ratio of net investment income to average net
assets ....................................... 0.31%(c) 0.48% 1.83% 1.59%(c)
Ratio of expenses to average net assets(d) ..... 1.05%(c) 1.28% 1.59% 2.44%(c)
Ratio of net investment income to average net
assets(d) .................................... 0.31%(c) 0.41% 1.51% 0.62%(c)
Portfolio turnover rate(e) ..................... 16.70% 99% 86% 2%
Average commission rate(e)(f) .................... $0.0451 $0.0438 $0.0599 NA
- ---------------------------------------------------------------------------------------------------------------------
(a) For the year or period indicated.
(b) Not annualized.
(c) Annualized.
(d) During each year or period, certain fees were voluntarily reduced and expenses reimbursed. If such voluntary fee
reductions and expense reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover and average commission is calculated on the basis of the Fund (or, where applicable, the
Portfolio in which the Fund invests) as a whole, without distinguishing between classes of shares issued.
(f) Represents the total amount of commissions paid on security transactions divided by the total number of shares
purchased and sold by the Fund (or, where applicable, the Portfolio in which the Fund invests) for which
commissions were charged.
</TABLE>
<PAGE>
<TABLE>
REPUBLIC OVERSEAS EQUITY FUND
SELECTED DATA FOR AN INVESTOR (CLASS A) SHARE
OUTSTANDING THROUGHOUT THE INDICATED PERIOD:
<CAPTION>
FOR THE FOR THE PERIOD
PERIOD ENDED AUGUST 26, 1996
APRIL 30, FOR THE (COMMENCEMENT
1998 YEAR ENDED OF OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1997 OCTOBER 31, 1996
------------------ ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.57 $10.15 $10.00
------ ------ ------
Income from investment operations:
Net investment income ..................... 0.03 (0.00)(g) 0.00
Net realized and unrealized gain (loss) on
investments ............................. 1.83 1.43 0.15
------ ------ ------
Total from investment operations ............ 1.86 1.43 0.15
------ ------ ------
Less dividends:
From net investment income ................ (0.08) (0.01) --
From net realized gains ................... (0.07) (0.00)(g) --
------ ------ ------
Total distributions ....................... (0.15) (0.01) 0.00
------ ------ ------
Net asset value, end of period .............. $13.28 $11.57 $10.15
====== ====== ======
Total return(a) ............................. 16.32%(b) 14.08% 1.50%(b)
Ratios/supplemental data:
Net assets, end of period (in 000's) ...... $5,887 $3,660 $ 142
Ratio of expenses to average net assets ... 1.79%(c) 1.70% 1.69%(c)
Ratio of net investment income to average
net assets .............................. 0.37%(c) (0.15)% 0.05%(c)
Ratio of expenses to average net assets(d) 1.99%(c) 4.10% 33.34%(c)
Ratio of net investment income to average
net assets(d) ........................... 0.17%(c) (2.55)% (31.65)%(c)
Portfolio turnover rate(e) ................ 30% 23%
Average commission rate(e)(f) ............... $0.0020 $0.0030
- -----------------------------------------------------------------------------------------------------
(a) For the year or period indicated.
(b) Not annualized.
(c) Annualized.
(d) During each year or period, certain fees were voluntarily reduced and expenses reimbursed.
If such voluntary fee reductions and expense reimbursements had not occurred, the ratios
would have been as indicated.
(e) Portfolio turnover and average commission is calculated on the basis of the Fund (or, where
applicable, the Portfolio in which the Fund invests) as a whole, without distinguishing
between classes of shares issued.
(f) Represents the total amount of commissions paid on security transactions divided by the
total number of shares purchased and sold by the Fund (or, where applicable, the Portfolio
in which the Fund invests) for which commissions were charged.
(g) Less than $.005 per share.
</TABLE>
<PAGE>
<TABLE>
REPUBLIC OPPORTUNITY FUND
SELECTED DATA FOR AN INVESTOR (CLASS A) SHARE
OUTSTANDING THROUGHOUT THE INDICATED PERIOD:
<CAPTION>
FOR THE FOR THE PERIOD
PERIOD ENDED FOR THE SEPTEMBER 23, 1996
APRIL 30, YEAR ENDED (COMMENCEMENT
1998 OCTOBER 31, OF OPERATIONS) TO
(UNAUDITED) 1997 OCTOBER 31, 1996
------------------ ---------------- ----------------------
<S> <C> <C> <C>
Net asset value, beginning of period .... $12.37 $ 9.80 $10.00
------ ------ ------
Income from investment operations:
Net investment income ................. (0.07) (0.07) --
Net realized and unrealized gain (loss)
on investments ...................... 1.96 2.64 (0.20)
------ ------ ------
Total from investment operations ........ 1.89 2.57 (0.20)
------ ------ ------
Less dividends:
From net realized gains ............... (0.45) (0.00)(g) --
------ ------ ------
Total distributions ................... (0.45) (0.00) --
------ ------ ------
Net asset value, end of period .......... $13.81 $12.37 $ 9.80
====== ====== ======
Total return(a) ......................... 16.08%(b) 26.28% (2.00)%(b)
Ratios/supplemental data:
Net assets, end of period (in 000's) .. $13,940 $9,983 $3,184
Ratio of expenses to average net assets 1.62%(c) 1.55% 1.22%(c)
Ratio of net investment income to
average net assets .................. (1.20)%(c) (1.05)% (0.28)%(c)
Ratio of expenses to net assets(d) 1.63%(c) 2.01% 2.90%(c)
Ratio of net investment loss to average
net assets(d) ....................... (1.21%)(c) (1.51)% (2.06)%(c)
Portfolio turnover rate(e) ............ 92% 51%
Average commission rate(f)............... $0.0566 $0.0093
- -----------------------------------------------------------------------------------------------------
(a) For the year or period indicated.
(b) Not annualized.
(c) Annualized.
(d) During each year or period, certain fees were voluntarily reduced and expenses reimbursed. If such
voluntary fee reductions and expense reimbursements had not occurred, the ratios would have been as
indicated.
(e) Portfolio turnover and average commission is calculated on the basis of the Fund (or, where applicable, the
Portfolio in which the Fund invests) as a whole, without distinguishing between classes of shares issued.
(f) Represents the total amount of commissions paid on security transactions divided by the total number of
shares purchased and sold by the Fund (or, where applicable, the Portfolio in which the Fund invests) for
which commissions were charged.
(g) Less than $.005 per share.
</TABLE>
<PAGE>
REPUBLIC BOND FUND
SELECTED DATA FOR A CLASS B SHARE
OUTSTANDING THROUGHOUT THE INDICATED PERIOD:
FOR THE PERIOD
JANUARY 6,
1998
(DATE OF
INITIAL
OFFERING) TO
APRIL 30, 1998
(UNAUDITED)
--------------
Net asset value, beginning of period ......................... $10.63
Income from investment operations:
Net investment income ...................................... 0.18
Net realized and unrealized gain (loss) on investments ..... (0.08)
------
Total from investment operations ............................. 0.10
------
Less dividends:
From net investment income ................................. (0.18)
From net realized gains .................................... (0.00)
------
Total distributions ........................................ (0.18)
------
Net asset value, end of period ............................... $10.55
======
Total return(a) .............................................. 0.77%(b)
Ratios/supplemental data:
Net assets, end of period (in 000's) ....................... $ 219
Ratio of expenses to average net assets .................... 1.85%(c)
Ratio of net investment income to average net assets ....... 5.22%(c)
Ratio of expenses to average net assets(d) ................. 2.53%(c)
Ratio of net investment income to average net assets(d) .... 4.54%(c)
Portfolio turnover rate(e) .................................
- --------------------------------------------------------------------------------
(a) For the year or period indicated.
(b) Not annualized.
(c) Annualized.
(d) During each year or period, certain fees were voluntarily reduced and
expenses reimbursed. If such voluntary fee reductions and expense
reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund (or, where
applicable, the Portfolio in which the Fund invests) as a whole, without
distinguishing between classes of shares issued.
<PAGE>
REPUBLIC NEW YORK TAX-FREE
BOND FUND
SELECTED DATA FOR A CLASS B SHARE
OUTSTANDING THROUGHOUT THE INDICATED PERIOD:
FOR THE PERIOD
JANUARY 6,
1998
(DATE OF
INITIAL
OFFERING) TO
APRIL 30, 1998
(UNAUDITED)
--------------
Net asset value, beginning of period ......................... $10.81
Income from investment operations:
Net investment income ...................................... 0.09
Net realized and unrealized gain (loss) on investments ..... (0.20)
------
Total from investment operations ............................. (0.11)
------
Less dividends:
From net investment income ................................. (0.09)
From net realized gains .................................... --
------
Total distributions ........................................ (0.09)
------
Net asset value, end of period ............................... $10.61
======
Total return(a) .............................................. (0.35)%(b)
Ratios/supplemental data:
Net assets, end of period (in 000's) ....................... $85
Ratio of expenses to average net assets .................... 1.70%(c)
Ratio of net investment income to average net assets ....... 3.67%(c)
Ratio of expenses to average net assets(d) ................. 1.95%(c)
Ratio of net investment income to average net assets(d) .... 3.40%
Portfolio turnover rate(e) ................................. 61.60%
- --------------------------------------------------------------------------------
(a) For the year or period indicated.
(b) Not annualized.
(c) Annualized.
(d) During each year or period, certain fees were voluntarily reduced and
expenses reimbursed. If such voluntary fee reductions and expense
reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund (or, where
applicable, the Portfolio in which the Fund invests) as a whole, without
distinguishing between classes of shares issued.
<PAGE>
REPUBLIC EQUITY FUND
SELECTED DATA FOR A CLASS B SHARE
OUTSTANDING THROUGHOUT THE INDICATED PERIOD:
FOR THE PERIOD
JANUARY 6,
1998
(DATE OF
INITIAL
OFFERING) TO
APRIL 30, 1998
(UNAUDITED)
--------------
Net asset value, beginning of period ......................... $14.88
Income from investment operations:
Net investment income ...................................... (0.01)
Net realized and unrealized gain (loss) on investments ..... 2.36
------
Total from investment operations ............................. 2.35
------
Less dividends:
From net investment income ................................. (0.02)
From net realized gains .................................... 0.00
------
Total distributions ........................................ (0.02)
------
Net asset value, end of period ............................... $17.21
======
Total return(a) .............................................. $14.24%(b)
Ratios/supplemental data:
Net assets, end of period (in 000's) ....................... $495
Ratio of expenses to average net assets .................... 1.80%(c)
Ratio of net investment income to average net assets ....... 0.44%(c)
Ratio of expenses to average net assets(d) ................. 1.80%(c)
Ratio of net investment income to average net assets(d) .... 0.44%(c)
Portfolio turnover rate(e) ................................. 16.70%
Average commission rate(e)(f) ................................ $0.0451
- --------------------------------------------------------------------------------
(a) For the year or period indicated.
(b) Not annualized.
(c) Annualized.
(d) During each year or period, certain fees were voluntarily reduced and
expenses reimbursed. If such voluntary fee reductions and expense
reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund (or, where
applicable, the Portfolio in which the Fund invests) as a whole, without
distinguishing between classes of shares issued.
(f) Represents the total amount of commissions paid on security transactions
divided by the total number of shares purchased and sold by the Fund (or,
where applicable, the Portfolio in which the Fund invests) for which
commissions were charged.
<PAGE>
REPUBLIC OVERSEAS EQUITY FUND
SELECTED DATA FOR A CLASS B SHARE
OUTSTANDING THROUGHOUT THE INDICATED PERIOD:
FOR THE PERIOD
JANUARY 6,
1998
(DATE OF
INITIAL
OFFERING) TO
APRIL 30, 1998
(UNAUDITED)
--------------
Net asset value, beginning of period ......................... $11.45
Income from investment operations:
Net investment income ...................................... (0.01)
Net realized and unrealized gain (loss) on investments ..... 1.83
------
Total from investment operations ............................. 1.82
------
Less dividends:
From net investment income ................................. 0.00
From net realized gains .................................... 0.00
------
Total distributions ........................................ 0.00
------
Net asset value, end of period ............................... $13.27
======
Total return(a) .............................................. 15.90%(b)
Ratios/supplemental data:
Net assets, end of period (in 000's) ....................... $2
Ratio of expenses to average net assets .................... 2.54%(c)
Ratio of net investment income to average net assets ....... 0.76%(c)
Ratio of expenses to average net assets(d) ................. 2.74%(c)
Ratio of net investment income to average net assets(d) .... 0.56%(c)
Portfolio turnover rate(e) .................................
Average commission rate(e)(f) ................................
- --------------------------------------------------------------------------------
(a) For the year or period indicated.
(b) Not annualized.
(c) Annualized.
(d) During each year or period, certain fees were voluntarily reduced and
expenses reimbursed. If such voluntary fee reductions and expense
reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund (or, where
applicable, the Portfolio in which the Fund invests) as a whole, without
distinguishing between classes of shares issued.
(f) Represents the total amount of commissions paid on security transactions
divided by the total number of shares purchased and sold by the Fund (or,
where applicable, the Portfolio in which the Fund invests) for which
commissions were charged.
(g) Less than $.005 per share.
<PAGE>
REPUBLIC OPPORTUNITY FUND
SELECTED DATA FOR A CLASS B SHARE
OUTSTANDING THROUGHOUT THE INDICATED PERIOD:
FOR THE PERIOD
JANUARY 6,
1998
(DATE OF
INITIAL
OFFERING) TO
APRIL 30, 1998
(UNAUDITED)
--------------
Net asset value, beginning of period ......................... $11.65
Income from investment operations:
Net investment income ...................................... (0.03)
Net realized and unrealized gain (loss) on investments ..... 2.21
------
Total from investment operations ............................. 2.18
------
Less dividends:
From net investment income ................................. 0.00
From net realized gains .................................... 0.00
------
Total distributions ........................................ 0.00
------
Net asset value, end of period ............................... $13.83
======
Total return(a) .............................................. $18.71%(b)
Ratios/supplemental data:
Net assets, end of period (in 000's) ....................... $185
Ratio of expenses to average net assets .................... 2.37%(c)
Ratio of net investment income to average net assets ....... (2.17)%(c)
Ratio of expenses to average net assets(d) ................. 2.38%(c)
Ratio of net investment income to average net assets(d) .... (2.18)%(c)
Portfolio turnover rate(e) .................................
Average commission rate(e)(f) ................................
- --------------------------------------------------------------------------------
(a) For the year or period indicated.
(b) Not annualized.
(c) Annualized.
(d) During each year or period, certain fees were voluntarily reduced and
expenses reimbursed. If such voluntary fee reductions and expense
reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund (or, where
applicable, the Portfolio in which the Fund invests) as a whole, without
distinguishing between classes of shares issued.
(f) Represents the total amount of commissions paid on security transactions
divided by the total number of shares purchased and sold by the Fund (or,
where applicable, the Portfolio in which the Fund invests) for which
commissions were charged.
(g) Less than $.005 per share.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
The investment objective of the Bond Fund is to realize above-average total
return over a market cycle of three to five years, consistent with reasonable
risk, through investment in a diversified portfolio of U.S. Government
securities, corporate bonds (including bonds rated below investment grade
commonly referred to as "junk bonds"), foreign fixed income securities,
mortgage-backed securities of domestic issuers and other fixed-income
securities. The Fixed Income Portfolio's average weighted maturity will
ordinarily exceed five years. The investment objective of the Fixed Income
Portfolio is the same as the investment objective of the Bond Fund.
The investment objective of the New York Tax-Free Bond Fund is to provide
shareholders of the Fund with monthly dividends exempt from regular federal,
New York State and New York City personal income taxes as well as to protect
the value of its shareholders' investments.
The investment objective of the Equity Fund is to seek long-term growth of
capital and income without excessive fluctuations in market value. The Equity
Fund will normally invest in equity securities of large, seasoned companies
with large or intermediate capitalization in sound financial condition which
are expected to show above-average price appreciation.
The investment objective of the Overseas Equity Fund is to seek long-term
growth of capital and future income through investment primarily in securities
of non-U.S. issuers (including ADRs and U.S. registered securities) and
securities whose principal markets are outside of the United States. The
investment objective of the International Equity Portfolio is the same as the
investment objective of the Overseas Equity Fund.
The investment objective of the Opportunity 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 Small Cap Equity Portfolio is the same as the
investment objective of the Opportunity Fund.
There can be no assurance that the investment objectives of the Funds will
be achieved. The investment objectives of each of the Funds and the
Portfolios, if applicable, may be changed without investor approval. If there
is a change in the investment objective of a Fund, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current financial position and needs. Shareholders of the Funds shall
receive 30 days' prior written notice of any change in the investment
objectives of the Funds or the Portfolios, if applicable.
INVESTMENT POLICIES
Since the investment characteristics of the Bond Fund, Overseas Equity Fund
and Opportunity Fund will correspond to those of their respective Portfolio,
the following also includes a discussion of the various investment policies of
the Portfolios.
BOND FUND. The investment characteristics of the Bond Fund correspond to
those of the Fixed Income Portfolio. The Fixed Income Portfolio will normally
invest at least 65% of its total assets in fixed income securities. The Fixed
Income Portfolio may invest in the following securities, which may be issued
by domestic or foreign entities and denominated in U.S. dollars or foreign
currencies: securities issued, sponsored or guaranteed by the U.S. government,
its agencies or instrumentalities (U.S. Government securities); corporate debt
securities; corporate commercial paper; mortgage pass-throughs, mortgage-
backed bonds, collateralized mortgage obligations ("CMOs") and other asset-
backed securities; variable and floating rate debt securities; obligations of
foreign governments or their subdivisions, agencies and instrumentalities;
obligations of international agencies or supranational entities; and foreign
currency exchange-related securities.
MAS (the "Fixed Income Sub-Adviser") will seek to achieve the Fixed Income
Portfolio's objective by investing at least 80% of the Portfolio's assets in
investment grade debt or fixed income securities. Investment grade debt
securities are those rated by one or more nationally recognized statistical
rating organizations ("NRSROs") within one of the four highest quality grades
at the time of purchase (e.g., AAA, AA, A or BBB by Standard & Poor's Ratings
Group, Inc. ("S&P") or Fitch Investors Service, Inc. ("Fitch") or Aaa, Aa, A
or Baa by Moody's Investors Service, Inc. ("Moody's")), or in the case of
unrated securities, determined by the Fixed Income Sub-Adviser to be of
comparable quality. Securities rated by a NRSRO in the fourth highest rating
category have speculative characteristics and are subject to greater credit
and market risks than higher-rated bonds. See Appendix A to this Prospectus
for a description of the ratings assigned by Moody's, S&P, and Fitch.
Up to 20% of the Fixed Income Portfolio's assets may be invested in
preferred stock, convertible securities, and in fixed income securities that
at the time of purchase are rated Ba or B by Moody's or BB or B by S&P or
rated comparably by another NRSRO (or, if unrated, are deemed by the Fixed
Income Sub-Adviser to be of comparable quality). Securities rated below
"investment grade," i.e., rated below Baa by Moody's or BBB by S&P, are
described as "speculative" by both Moody's and S&P. Such securities are
sometimes referred to as "junk bonds," and may be subject to greater market
fluctuations, less liquidity and greater risk. For a complete discussion of
the special risks associated with investments in lower rated securities, see
"Additional Risk Factors and Policies -- High Yield/High Risk Securities."
From time to time, the Fixed Income Sub-Adviser may invest more than 50% of
the Fixed Income Portfolio's assets in mortgage-backed securities including
mortgage pass-through securities, mortgage-backed bonds and CMOs, that carry a
guarantee from a U.S. government agency or a private issuer of the timely
payment of principal and interest. For a description of the risks associated
with mortgage-backed securities, see "Additional Risk Factors and Policies --
Mortgage Related Securities." When investing in mortgage-backed securities, it
is expected that the Fixed Income Portfolio's primary emphasis will be in
mortgage-backed securities issued by governmental and government-related
organizations such as the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Association ("FHLMC"). However, the Fixed Income Portfolio may invest
without limit in mortgage-backed securities of private issuers when the Fixed
Income Sub-Adviser determines that the quality of the investment, the quality
of the issuer, and market conditions warrant such investments. Mortgage-
backed securities issued by private issuers will be rated investment grade by
Moody's or S&P or, if unrated, deemed by the Fixed Income Sub-Adviser to be of
comparable quality.
A mortgage-backed bond is a collateralized debt security issued by a thrift
or financial institution. The bondholder has a first priority perfected
security interest in collateral consisting usually of agency mortgage pass-
through securities, although other assets including U.S. Treasury securities
(including zero coupon Treasury bonds), agency securities, cash equivalent
securities, whole loans and corporate bonds may qualify. The amount of
collateral must be continuously maintained at levels from 115% to 150% of the
principal amount of the bonds issued, depending on the specific issue
structure and collateral type. For a complete discussion of mortgage-backed
securities, see "Additional Risk Factors and Policies -- Mortgage-Related
Securities."
A portion of the Fixed Income Portfolio's assets may be invested in bonds
and other fixed income securities denominated in foreign currencies if, in the
opinion of the Fixed Income Sub-Adviser, the combination of current yield and
currency value offer attractive expected returns. These holdings may be in as
few as one foreign currency bond market (such as the United Kingdom gilt
market), or may be spread across several foreign bond markets. The Fixed
Income Portfolio may also purchase securities of developing countries;
however, the Portfolio does not intend to invest in the securities of Eastern
European countries. When the total return opportunities in a foreign bond
market appear attractive in local currency terms, but where, in the Fixed
Income Sub-Adviser's judgment, unacceptable currency risk exists, currency
futures, forwards and options and swaps may be used to hedge the currency
risk. See "Additional Risk Factors and Policies -- Foreign Securities" below
and the Statement of Additional Information.
The Fixed Income Portfolio may invest in Eurodollar bank obligations and
Yankee bank obligations. See "Additional Risk Factors and Policies --
Eurodollar and Yankee Bank Obligations" below. The Fixed Income Portfolio may
also invest in Brady Bonds, which are issued as a result of a restructuring of
a country's debt obligations to commercial banks under the "Brady Plan". See
"Additional Risk Factors and Policies -- Brady Bonds" below. The Portfolio may
also invest in the following instruments on a temporary basis when economic or
market conditions are such that the Fixed Income Sub-Adviser deems a temporary
defensive position to be appropriate: time deposits, certificates of deposit
and bankers' acceptances issued by a commercial bank or savings and loan
association; commercial paper rated at the time of purchase by one or more
NRSRO in one of the two highest categories or, if not rated, issued by a
corporation having an outstanding unsecured debt issue rated high-grade by a
NRSRO; short-term corporate obligations rated high-grade by a NRSRO; U.S.
Government obligations; Government agency securities issued or guaranteed by
U.S. Government-sponsored instrumentalities and federal agencies; and
repurchase agreements collateralized by the securities listed above. The Fixed
Income Portfolio may also purchase securities on a when-issued basis, lend its
securities to brokers, dealers, and other financial institutions to earn
income and borrow money for temporary or emergency purposes.
NEW YORK TAX-FREE BOND FUND. The Adviser seeks to achieve the investment
objective of the New York Tax-Free Bond Fund by investing the assets of the
Fund primarily in municipal bonds and notes and other debt obligations issued
by or on behalf of the State of New York, other states, territories and
possessions of the United States, and their authorities, agencies,
instrumentalities and political subdivisions, the interest on which is exempt
from regular federal income taxes. (Such obligations, whether or not the
interest thereon is subject to the federal alternative minimum tax, are
referred to herein as "Municipal Obligations".) The Adviser invests on behalf
of the New York Tax-Free Bond Fund in certain Municipal Obligations of the
State of New York and its authorities, agencies, instrumentalities and
political subdivisions, and of Puerto Rico, other U.S. territories and their
authorities, agencies, instrumentalities and political subdivisions, the
interest on which is exempt from regular federal, New York State and New York
City personal income taxes ("New York Municipal Obligations"). In determining
the tax status of interest on Municipal Obligations and New York Municipal
Obligations, the Adviser relies on opinions of bond counsel who may be counsel
to the issuer of those obligations.
Although under normal circumstances, the Adviser attempts to invest 100%,
and does invest at least 65%, of the New York Tax-Free Bond Fund's assets in
New York Municipal Obligations, market conditions may from time to time limit
the availability of such obligations. To the extent that acceptable New York
Municipal Obligations are not available for investment, the Adviser may
purchase on behalf of the New York Tax-Free Bond Fund Municipal Obligations
issued by other states, their authorities, agencies, instrumentalities and
political subdivisions, the interest income on which is exempt from regular
federal income tax but is subject to New York State and New York City personal
income taxes. As a fundamental policy the Adviser will invest at least 80% of
the New York Tax-Free Bond Fund's net assets in tax exempt obligations. As a
temporary defensive measure, the Adviser may invest up to 20% of the New York
Tax-Free Bond Fund's total assets in obligations the interest income on which
is subject to regular federal, New York State and New York City personal
income taxes or the federal alternative minimum tax. Also, as a temporary
defensive measure during times of adverse market conditions, assets of the New
York Tax-Free Bond Fund may be held in cash or invested in the short-term
obligations described below, the interest income on which is taxable to
shareholders as ordinary income for federal and New York State and New York
City personal income tax purposes.
All of the investments of the New York Tax-Free Bond Fund are made in:
(1) Municipal bonds that at the date of purchase are rated Aaa, Aa, A or
Baa by Moody's, AAA, AA, A or BBB by S&P or AAA, AA, A or BBB by Fitch or,
if not rated by any of these rating agencies, are of comparable quality as
determined by the Adviser;
(2) Municipal notes that at the date of purchase are rated MIG
1/VMIG 1 or MIG 2/VMIG 2 by Moody's, SP-1+, SP-1 or SP-2 by S&P or
F-1+, F-1 or F-2 by Fitch or, if not rated by any of these rating agencies,
are of comparable quality as determined by the Adviser;
(3) Obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities; and
(4) Commercial paper that at the date of purchase is rated Prime-1 or
Prime-2 by Moody's, A-1+, A-1 or A-2 by S&P or F-1+, F-1 or F-2 by Fitch or,
if not rated by any of these rating agencies, is of comparable quality as
determined by the Adviser, obligations (including certificates of deposit,
bankers' acceptances and repurchase agreements) of banks with at least $1
billion of assets, and cash.
Municipal bonds rated Baa by Moody's or BBB by S&P or Fitch may have some
speculative elements. In evaluating the creditworthiness of an issue, whether
rated or unrated, the Adviser takes into consideration, among other factors,
the issuer's financial resources, its sensitivity to economic conditions and
trends, the operating history of and the community support for the facility
financed by the issue, the quality of the issuer's management, and legal and
regulatory matters. For an explanation of the ratings of Municipal Obligations
by Moody's, S&P and Fitch, see Appendix A. For a comparison of yields on such
Municipal Obligations and taxable securities, see the Taxable Equivalent Yield
Tables in Appendix B. For a general discussion of Municipal Obligations and
the risks associated with an investment therein, see Appendix A to the
Statement of Additional Information.
The maximum maturity of any debt security held for the New York Tax-Free
Bond Fund is 35 years.
Although higher quality Municipal Obligations may produce lower yields, they
generally are easier to sell or trade than lower quality Municipal
Obligations. To protect the value of its shareholders' investment under
adverse market conditions, the Adviser from time to time may deem it prudent
to purchase higher quality Municipal Obligations or taxable obligations for
the New York Tax-Free Bond Fund, with a resultant decrease in yield or
increase in the proportion of taxable income.
The net asset value of the New York Tax-Free Bond Fund's shares changes as
interest rates fluctuate. When interest rates decline, the value of the New
York Tax-Free Bond Fund's portfolio can be expected to rise. Conversely, when
interest rates rise, the value of the Fund's portfolio can be expected to
decline. Such changes in the value of the New York Tax-Free Bond Fund's
portfolio are reflected in the net asset value of shares of the New York Tax-
Free Bond Fund but do not affect the income received by the Fund from its
portfolio securities. Municipal Obligations with longer maturities, such as
those in which the New York Tax-Free Bond Fund is invested, generally produce
higher yields and are subject to greater market fluctuation as a result of
changes in interest rates than such securities with shorter maturities.
Dividends distributed to shareholders rise or fall in direct relation to the
New York Tax-Free Bond Fund's net income. Since available yields vary, no
specific level of income can be assured.
As a non-diversified investment company, the Trust is not subject to any
statutory restriction under the 1940 Act with respect to limiting the
investment of the New York Tax-Free Bond Fund's assets in one or relatively
few issuers. Since the Adviser may invest a relatively high percentage of the
New York Tax-Free Bond Fund's assets in the obligations of a limited number of
issuers, the value of shares of the Fund may be more susceptible to any single
economic, political or regulatory occurrence than the value of shares of a
diversified investment company would be.
The Adviser may invest the assets of the New York Tax-Free Bond Fund in a
relatively high percentage of Municipal Obligations to be paid from revenue
streams of similar types of projects. This may make the New York Tax-Free Bond
Fund more susceptible to any single economic, political or regulatory
occurrence, particularly since most or all such issuers would likely be
located in New York State. As the similarity in issuers increases, the
potential for fluctuation of the net asset value of the New York Tax-Free Bond
Fund's shares also increases. The Adviser may invest more than 25% of the
assets of the New York Tax-Free Bond Fund in industrial revenue bonds (i.e.,
bonds issued by various state and local agencies to finance various industrial
projects). Certain investors in the New York Tax-Free Bond Fund may be
required to pay a federal alternative minimum tax on Fund dividends
attributable to interest on certain industrial revenue bonds. The Adviser also
may invest more than 25% of the assets of the Fund in revenue bonds issued for
housing, electric utilities and hospitals (subject to the restriction that it
may not invest more than 25% of the Fund's assets in any one such industry) at
times when the relative value of issues of such a type is considered by the
Adviser to be more favorable than that of other available types of issues.
Therefore, investors should also be aware of the risks which these investments
may entail.
Housing revenue bonds typically are issued by a state, county or local
housing authority and are secured only by the revenues of mortgages originated
by the authority using the proceeds of the bond issue. Because of the
impossibility of precisely predicting demand for mortgages from the proceeds
of such an issue, there is a risk that the proceeds of the issue will be in
excess of demand, which would result in early retirement of the bonds by the
issuer. Moreover, such housing revenue bonds depend for their repayment upon
the cash flow from the underlying mortgages, which cannot be precisely
predicted when the bonds are issued. Any difference in the actual cash flow
from such mortgages from the assumed cash flow could have an adverse impact
upon the ability of the issuer to make scheduled payments of principal and
interest on the bonds, or could result in early retirement of the bonds.
Additionally, such bonds depend in part for scheduled payments of principal
and interest upon reserve funds established from the proceeds of the bonds,
assuming certain rates of return on investment of such reserve funds. If the
assumed rates of return are not realized because of changes in interest rate
levels or for other reasons, the actual cash flow for scheduled payments of
principal and interest on the bonds may be adversely affected.
Electric utilities face problems in financing large and lengthy construction
programs, such as cost increases and delay occasioned by regulatory and
environmental considerations (particularly with respect to nuclear
facilities), difficulty in obtaining sufficient rate increases, the effect of
energy conservation and difficulty of the capital markets to absorb utility
debt.
Hospital bond ratings are often based on feasibility studies containing
projections of expenses, revenues and occupancy levels. A hospital's gross
receipts and net income available to service its debt are influenced by demand
for hospital services, the ability of the hospital to provide the services
required, management capabilities, economic developments in the service area,
efforts by insurers and government agencies to limit rates and expenses,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding levels, possible federal or state legislation limiting the
rates of increase of hospital charges, and weakened state finances which limit
and/or delay aid payments.
EQUITY FUND. The Equity Fund will normally invest at least 65% of its total
assets in equity securities of seasoned companies in sound financial condition
with large or intermediate capitalization which are expected to show above-
average price appreciation. The Equity Fund may invest in a broad range of
equity securities, including common and preferred stocks, debt securities
convertible into or exchangeable for common stock and securities such as
warrants or rights that are convertible into common stock.
The Manager will allocate the Equity Fund's assets between Alliance and
Brinson ("the Equity Sub-Advisers"). While the Manager maintains complete
discretion regarding the allocation of the Equity Fund's assets, the Manager
anticipates that it typically will allocate the Fund's assets evenly between
the Equity Sub-Advisers, each of which pursues the Fund's investment objective
in the manner described below.
Alliance. Alliance seeks the Equity Fund's investment objective by pursuing
a "growth" style of investing in marketable equity securities, primarily of
U.S. companies. However, the Equity Fund may purchase foreign, as well as
domestic, equity securities. Alliance normally will invest substantially all
of the Equity Fund's assets allocated to it in common stocks which Alliance
believes will appreciate in value.
Alliance generally seeks to invest the Equity Fund's assets in financially
secure firms with established operating histories that are proven leaders in
their industry or market sector. Such companies may demonstrate
characteristics such as participation in expanding markets, increasing unit
sales volume, growth in revenues and earnings per share, and increasing return
on investments. However, Alliance may invest the Equity Fund's assets in
companies that do not demonstrate such characteristics if it expects such
companies to undergo an acceleration in growth of earnings because of special
factors such as new management, new products, changes in consumer demand or
basic changes in the economic environment.
Alliance analyzes each company considered for investment, using internal
fundamental research analysts, to determine its source of earnings,
competitive edge, management strength, and level of industry dominance as
measured by market share. At the same time, Alliance conducts an analysis of
the financial condition of each company and selects those prospects that
demonstrate the greatest potential for above-average capital appreciation and
growth in earnings. Alliance's philosophy is to seek the best available
combination of relative earnings growth and attractive valuation.
Brinson. Brinson seeks the Equity Fund's investment objective by pursuing a
"value" style of investment management. Brinson's approach to investing for
the Equity Fund is to invest in the equity securities of U.S. companies
believed to be undervalued based upon internal research and proprietary
valuation systems. Investment decisions are based on fundamental research,
internally developed valuation systems and seasoned judgment. Brinson's
research focuses on several levels of analysis, first, on understanding wealth
shifts that occur within the equity market, and second, on individual company
research. At the company level, Brinson quantifies expectations of a company's
ability to generate profit and to grow business into the future.
For each stock under analysis, Brinson discounts to the present all of the
future cash flows that it believes will accrue to the Equity Fund from the
investment in order to calculate a present or intrinsic value. This value
estimate generated by Brinson's proprietary valuation model is compared to
observed market price and ranked against other stocks accordingly. The
rankings, in combination with Brinson's investment judgment, determine which
securities are included in the portfolio.
Brinson monitors and assesses the degree to which the portfolio becomes
concentrated in industry or common types of stocks, and adjusts the portfolio
to balance the price/value opportunities with their concentrations. Brinson
imposes limits on the degree of concentration, as the Equity Fund does not
intend to concentrate its investments in a particular industry.
General. The Equity Fund also may (a) invest in options on securities,
securities indices or foreign currencies, (b) invest in futures contracts and
options on futures contracts, (c) enter into forward foreign currency exchange
contracts, (d) invest up to 10% of its net assets (at the time of investment)
in debt and equity securities which are traded in developed foreign countries,
and (e) invest up to 35% in bonds and other debt securities, including lower
rated, high-yield bonds, commonly referred to as "junk bonds." The Equity Fund
does not intend to write covered call options with respect to securities with
an aggregate market value of more than 10% of its total assets at the time an
option is written. The Equity Fund will not invest more than 5% of its net
assets (at the time of investment) in lower rated (BB/Ba or lower), high-yield
bonds. The Equity Fund may retain any bond whose rating drops below investment
grade if its is in the best interest of the Fund's shareholders. Securities
rated BB/Ba by a nationally recognized statistical rating organization are
considered to have speculative characteristics.
The Equity Fund may lend its portfolio securities. These loans may not
exceed 30% of the value of the Fund's total assets.
The Equity Fund will not purchase securities for trading purposes. Pending
investment in equity and debt and also for temporary defensive purposes, the
Fund may invest without limit in short-term debt and other high-quality,
fixed-income securities and cash equivalents, which may include, but are not
limited to: (i) short-term obligations of the U.S. and foreign sovereign
governments and their agencies and instrumentalities, (ii) interest bearing
savings deposits, certificates of deposit and bankers' acceptances of U.S. and
foreign banks, (iii) high-quality rated commercial paper of U.S. or foreign
issuers, and (iv) repurchase agreements related to the foregoing. The Equity
Fund may invest up to 15% of its net assets in illiquid securities.
OVERSEAS EQUITY FUND. The investment characteristics of the Overseas Equity
Fund correspond to those of the International Equity Fund. The International
Equity Portfolio will normally invest at least 80% of its total assets in
equity securities of foreign corporations, consisting of common stocks, and
other securities with equity characteristics, including preferred stock,
warrants, rights, securities convertible into common stock ("convertible
securities"), trust certificates, limited partnership interests and equity
participations. The common stock in which the International Equity Portfolio
may invest includes the common stock of any class or series or any similar
equity interest, such as trust or limited partnership interests. These equity
investments may or may not pay dividends and may or may not carry voting
rights. The principal investments of the International Equity Portfolio will
be in equity securities of companies organized and domiciled in developed
nations outside the United States or for which the principal trading market is
outside the United States, including Europe, Canada, Australia and the Far
East, although the Portfolio may invest up to 20% of its assets in equity
securities of companies in emerging markets. See "Additional Risk Factors and
Policies -- Foreign Securities -- Emerging Markets." The International Equity
Portfolio intends to have at least three different countries represented in
its portfolio. It is the current intention of the International Equity
Portfolio to invest primarily in companies with large market capitalizations.
The International Equity Portfolio seeks to outperform the Morgan Stanley
Capital International EAFE (Europe, Australasia and Far East) Index, a
capitalization-weighted index containing approximately 1,100 equity securities
of companies located outside the United States. The International Equity
Portfolio invests in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter
markets, and may invest in certain restricted or unlisted securities.
Under exceptional conditions abroad or when, in the opinion of CGTC (the
"International Equity Sub-Adviser"), economic or market conditions warrant,
the International Equity Portfolio may temporarily invest part or all of its
assets in fixed income securities denominated in foreign currencies,
obligations of domestic or foreign governments and their political
subdivisions ("Government Securities"), and nonconvertible preferred stock, or
hold its assets in cash or equivalents. Debt securities purchased by the
International Equity Portfolio will be limited to those rated, at the time of
investment, in the four highest rating categories by a nationally recognized
statistical rating organization ("NRSRO") or, if unrated, determined by the
International Equity Sub-Adviser to be of comparable quality. Securities rated
by a NRSRO in the fourth highest rating category are considered to have some
speculative characteristics. When the total return opportunities in a foreign
bond market appear attractive in local currency terms, but, in the
International Equity Sub-Adviser's judgment, unacceptable currency risk
exists, currency futures, forwards and options may be used to hedge the
currency risk. See "Additional Risk Factors and Policies -- Forward Foreign
Currency Contracts and Options on Foreign Currencies."
As described under "Management of the Trust and the Portfolio Trust--Sub-
Advisers," CGTC, the International Equity Portfolio's Sub-Adviser, uses a
system of multiple portfolio managers pursuant to which the Portfolio is
divided into segments which are assigned to individual portfolio managers.
Within investment guidelines, each portfolio manager makes individual
decisions as to company, country, industry, timing and percentage based on
extensive field research and direct company contact.
Because of the risks associated with common stocks and other equity
investments, the International Equity Portfolio is intended to be a long-term
investment vehicle and is not designed to provide investors with a means of
speculating on short-term stock market movements. The International Equity
Sub-Adviser seeks to reduce these risks by diversifying the portfolio as well
as by monitoring broad economic trends and corporate and legislative
developments.
OPPORTUNITY FUND. The investment characteristics of the Opportunity Fund
correspond to those of the Small Cap Equity Portfolio. The Small Cap Equity
Portfolio seeks to achieve its objective by investing, under normal market
conditions, at least 80% of its assets in equity securities (consisting of
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) of emerging growth companies. Emerging growth
companies generally would have small (under $1 billion) market capitalizations
and would have 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 Small Cap Equity 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 Small Cap Equity Portfolio may invest up to 20% (and
generally expects to invest between 5% and 10%) of its assets in foreign
securities (excluding ADRs) (see "Additional Risk Factors and Policies --
Foreign Securities" below).
Although the Small Cap Equity 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.
In addition to the above, the Small Cap Equity Portfolio may engage in
certain investment techniques as described below under the caption "Additional
Risk Factors and Policies". The Small Cap Equity 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 and Policies".
When MFSI (the "Small Cap Equity 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 Small Cap Equity
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. U.S. Government Securities that the Small Cap Equity
Portfolio may invest in includes: (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; 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.
ADDITIONAL RISK FACTORS
AND POLICIES
DERIVATIVES
The Fixed Income Portfolio and International Equity Portfolio may invest in
various instruments that are commonly known as derivatives. Generally, a
derivative is a financial arrangement the value of which is based on, or
"derived" from, a traditional security, asset, or market index. A mutual fund,
of course, derives its value from the value of the investments it holds and so
might even be called a "derivative." Some "derivatives" such as mortgage-
related and other asset-backed securities are in many respects like any other
investment, although they may be more volatile or less liquid than more
traditional debt securities. There are, in fact, many different types of
derivatives and many different ways to use them. There is a range of risks
associated with those uses. Futures and options are commonly used for
traditional hedging purposes to attempt to protect a fund from exposure to
changing interest rates, securities prices, or currency exchange rates and for
cash management purposes as a low cost method of gaining exposure to a
particular securities market without investing directly in those securities.
The Fixed Income and International Equity Portfolios may use derivatives for
hedging purposes, cash management purposes, as a substitute for investing
directly in fixed income instruments, and to enhance return when their Sub-
Advisers believe the investment will assist the Portfolios in achieving their
investment objectives. A description of the derivatives that the Fixed Income
and International Equity Portfolios may use and some of their associated risks
follows.
OPTIONS AND FUTURES TRANSACTIONS
The Fixed Income Portfolio, Small Cap Equity Portfolio and Equity Fund may
invest in financial futures contracts, options on futures contracts and
options on securities (collectively, "futures and options"). In addition, the
Fixed Income Portfolio, International Equity Portfolio, Small Cap Equity
Portfolio and Equity Funds may invest in foreign currency futures contracts and
options on foreign currencies and foreign currency futures. The International
Equity Portfolio may only do so for hedging purposes. The Small Cap Equity
Portfolio may also enter into contracts based on indices of securities and
write covered call and put options and purchase call and put options on
domestic or foreign stock indices. The New York Tax-Free Bond Fund may enter
into transactions in futures contracts on any fixed income securities and
indices of municipal securities. The New York Tax-Free Bond Fund may only do
so for hedging purposes and not for speculation. Futures contracts provide for
the sale by one party and purchase by another party of a specified amount of a
specific security at a specified future time and price. An option is a legal
contract that gives the holder the right to buy or sell a specified amount of
the underlying security, currency or futures contract at a fixed or
determinable price upon the exercise of the option. A call option conveys the
right to buy and a put option conveys the right to sell a specified quantity
of the underlying instrument.
The use of options and futures is a highly specialized activity which
involves investment strategies and risks different from those associated with
ordinary portfolio securities transactions, and there can be no guarantee that
their use will increase the return of the Portfolios and the Funds. While the
use of these instruments by the Portfolios and the Funds may reduce certain
risks associated with owning its portfolio securities, these techniques
themselves entail certain other risks. If the Sub-Advisers apply a strategy at
an inappropriate time or judge market conditions or trends incorrectly,
options and futures strategies may lower a Portfolio's or Fund's return.
Certain strategies limit the potential of the Portfolios or the Funds to
realize gains as well as limit their exposure to losses. The Portfolios and the
Funds could also experience losses if the prices of their options and futures
positions were poorly correlated with their other investments. There can be no
assurance that a liquid market will exist at a time when the Portfolios or the
Funds seek to close out a futures contract or a futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. In addition, certain of these instruments are
relatively new and without a significant trading history. As a result, there
is no assurance that an active secondary market will develop or continue to
exist. Lack of a liquid market for any reason may prevent the Portfolios and
the Funds from liquidating an unfavorable position and the Portfolios or the
Funds would remain obligated to meet margin requirements until the position is
closed. In addition, the Portfolios and the Funds will incur transaction
costs, including trading commissions and options premiums, in connection with
their futures and options transactions, and these transactions could
significantly increase a Portfolio's or Fund's turnover rate.
The Fixed Income Portfolio will not enter into futures contracts or options
thereon to the extent that its outstanding obligations to purchase securities
under these contracts in combination with its outstanding obligations with
respect to options transactions would exceed 35% of its total assets. The
Fixed Income Portfolio will use financial futures contracts and related
options only for "bona fide hedging" purposes, as such term is defined in
applicable regulations of the Commodity Futures Trading Commission, or, with
respect to positions in financial futures and related options that do not
qualify as "bona fide hedging" positions, will enter such non-hedging
positions only to the extent that assets committed to initial margin deposits
on such instruments, plus premiums paid for open futures options positions,
less the amount by which any such positions are "in-the-money," do not exceed
5% of the Fixed Income Portfolio's net assets. The Portfolio will segregate
assets or "cover" its positions consistent with requirements under the 1940 Act.
The Fixed Income Portfolio may also purchase and write put and call options on
foreign currencies for the purpose of protecting against declines in the dollar
value of foreign portfolio securities and against increases in the U.S. dollar
cost of foreign securities to be acquired.
The Small Cap Equity Portfolio may enter into futures contracts for hedging
purposes, in order to protect the Portfolio's current or intended investments
from the effects of changes in interest or exchange rates and for non-hedging
purposes, to the extent permitted by applicable law. However, the Small Cap
Equity Portfolio will not enter into any futures contracts 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. The Small
Cap Equity Portfolio may also purchase and write options on futures contracts
for the purpose of protecting against declines in the value of portfolio
securities or against increases in the cost of securities to be acquired, or for
non-hedging purposes. The Small Cap Equity Portfolio may write options on
domestic or foreign stock indices 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.
The Equity Fund may write covered call options (which are considered
derivatives) which are traded on a national securities exchange with respect
to securities in the portfolio in an attempt to increase its income and to
provide greater flexibility in the disposition of its portfolio securities.
The Small Cap Equity Portfolio may write covered put and call options on
securities and purchase put and call options on securities that are traded on
foreign or U.S. securities exchanges and over the counter. The Small Cap
Equity Portfolio will write options on securities for the purpose of
increasing its return and/or protecting the value of its portfolio. A "call
option" is a contract sold for a price (the "premium") giving its holder the
right to buy a specific number of shares of stock at a specific price prior to
a specified date. A "covered call option" is a call option issued on
securities already owned by the writer of the call option for delivery to the
holder upon the exercise of the option. During the period of the option, the
option writer forgoes the opportunity to profit from any increase in the
market price of the underlying security above the exercise price of the option
(to the extent that the increase exceeds the net premium). The Equity Fund
also may enter into "closing purchase transactions" in order to terminate its
obligation to deliver the underlying security (this may result in a short-term
gain or loss). A closing purchase transaction is the purchase of a call option
(at a cost which may be more or less than the premium received for writing the
original call option) on the same security, with the same exercise price and
call period as the option previously written. If the Equity Fund is unable to
enter into a closing purchase transaction, it may be required to hold a
security that it might otherwise have sold to protect against depreciation.
The Equity Fund does not intend to write covered call options with respect to
securities with an aggregate market value of more than 10% of its total assets
at the time an option is written. This percentage limitation will not be
increased without prior disclosure in the current Prospectus.
The Small Cap Equity 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.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES
Forward foreign currency exchange contracts ("forward contracts") are
intended to minimize the risk of loss to the Fixed Income, International
Equity and Small Cap Equity Portfolios and the Equity Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies.
The Fixed Income Portfolio and International Equity Portfolio may not enter
into such contracts for speculative purposes. The Fixed Income Portfolio has
no specific limitation on the percentage of assets it may commit to forward
contracts, subject to its stated investment objective and policies, except
that the Portfolio will not enter into a forward contract if the amount of
assets set aside to cover the contract would impede portfolio management. The
Small Cap Equity Portfolio may enter into such contracts for hedging purposes
or for non-hedging purposes, to the extent permitted by applicable law. By
entering into transactions in Forward Contracts, however, the Portfolios 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 Portfolios 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.
A forward contract is an obligation to purchase or sell a specific currency
for an agreed price at a future date which is individually negotiated and
privately traded by currency traders and their customers. A forward contract
may be used, for example, when the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency in order to
"lock in" the U.S. dollar price of the security.
The Fixed Income and International Equity Portfolios may also purchase and
write put and call options on foreign currencies for the purpose of protecting
against declines in the dollar value of foreign portfolio securities and
against increases in the U.S. dollar cost of foreign securities to be
acquired.
The Small Cap Equity 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 Small Cap Equity Sub-Adviser, a reasonable degree of
correlation can be expected between movements in the values of the two
currencies.
The Fixed Income Portfolio may also combine forward contracts with
investments in securities denominated in other currencies in order to achieve
desired credit and currency exposures. Such combinations are generally
referred to as synthetic securities. For example, in lieu of purchasing a
foreign bond, the Fixed Income Portfolio may purchase a U.S. dollar-
denominated security and at the same time enter into a forward contract to
exchange U.S. dollars for the contract's underlying currency at a future date.
By matching the amount of U.S. dollars to be exchanged with the anticipated
value of the U.S. dollar-denominated security, the Fixed Income Portfolio may
be able to lock in the foreign currency value of the security and adopt a
synthetic investment position reflecting the credit quality of the U.S.
dollar-denominated security.
There is a risk in adopting a synthetic investment position to the extent
that the value of a security denominated in U.S. dollars or other foreign
currency is not exactly matched with the Fixed Income Portfolio's obligation
under the forward contract. On the date of maturity the Fixed Income Portfolio
may be exposed to some risk of loss from fluctuations in that currency.
Although the Fixed Income Sub-Adviser will attempt to hold such mismatching to
a minimum, there can be no assurance that the Sub-Adviser will be able to do
so. When the Fixed Income Portfolio enters into a forward contract for
purposes of creating a synthetic security, it will generally be required to
hold high-grade, liquid securities or cash in a segregated account with a
daily value at least equal to its obligation under the forward contract.
FOREIGN SECURITIES
The Fixed Income Portfolio, Equity Fund, International Equity Portfolio and
Small Cap Equity Portfolio may invest in foreign securities. Investing in
securities issued by companies whose principal business activities are outside
the United States may involve significant risks not present in domestic
investments. For example, there is generally less publicly available information
about foreign companies, particularly those not subject to the disclosure and
reporting requirements of the U.S. securities laws. Foreign issuers are
generally not bound by uniform accounting, auditing, and financial reporting
requirements and standards of practice comparable to those applicable to
domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, other taxes imposed by the foreign
country on the Fund's earnings, assets, or transactions, limitation on the
removal of cash or other assets of the Portfolios, political or financial
instability, or diplomatic and other developments which could affect such
investments. Further, economies of particular countries or areas of the world
may differ favorably or unfavorably from the economy of the United States.
Changes in foreign exchange rates will affect the value of securities
denominated or quoted in currencies other than the U.S. dollar. For example,
significant uncertainty surrounds the proposed introduction of the euro (a
common currency for the European Union) in January 1999 and its effect on the
value of securities denominated in local European currencies. These and other
currencies in which a Fund's assets are denominated may be devalued against the
U.S. dollar, resulting in a loss to the Fund. Foreign securities often trade
with less frequency and volume than domestic securities and therefore may
exhibit greater price volatility. Furthermore, dividends and interest payments
from foreign securities may be withheld at the source. Additional costs
associated with an investment in foreign securities may include higher custodial
fees than apply to domestic custodial arrangements, and transaction costs of
foreign currency conversions.
The Small Cap Equity Portfolio may invest in securities of foreign growth
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. The Small Cap Equity
Portfolio may also invest in securities of issuers located in countries 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. Investing in emerging market countries presents greater
risk than investing in foreign issuers in general. A number of emerging
markets restrict foreign investment in stocks. Repatriation of investment
income, capital, and the proceeds of sales by foreign investors may require
governmental registration and/or approval in some emerging market countries. A
number of the currencies of developing countries have experienced significant
declines against the U.S. dollar in recent years, and devaluation may occur
subsequent to investments in these currencies by the Portfolio. Inflation and
rapid fluctuations in inflation rates have had and may continue to have
negative effects on the economies and securities markets of certain emerging
market countries. Many of the emerging securities markets are relatively
small, have low trading volumes, suffer periods of relative illiquidity, and
are characterized by significant price volatility. There is the risk that a
future economic or political crisis could lead to price controls, forced
mergers of companies, expropriation or confiscatory taxation, seizure,
nationalization, or creation of government monopolies, any of which could have
a detrimental effect on the Portfolio's investments.
Investing in formerly communist East European countries involves the
additional risk that the government or other executive or legislative bodies
may decide not to continue to support the economic reform programs implemented
since the fall of communism and could follow radically different political
and/or economic policies to the detriment of investors, including non-market
oriented policies such as the support of certain industries at the expense of
other sectors or a return to a completely centrally planned economy. The
International Equity Portfolio does not currently intend to invest a
significant portion of its assets in formerly communist East European
countries.
With respect to the International Equity Portfolio, "emerging markets"
include any country which in the opinion of the International Equity Sub-
Adviser is generally considered to be an emerging or developing country by the
International Bank for Reconstruction and Development (the World Bank) and the
International Monetary Fund. Currently, these countries generally include
every country in the world except Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland,
United Kingdom and United States. The International Equity Portfolio may
invest up to 20% of its assets in the equity securities of companies based in
emerging markets.
With respect to the Small-Cap Equity Portfolio, "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.
With respect to the International Equity Portfolio, a company in an emerging
market is one that: (i) is domiciled and has its principal place of business
in an emerging market or (ii) (alone or on a consolidated basis) derives or
expects to derive at least 50% of its total revenue from either goods
produced, sales made or services performed in emerging markets. With respect
to the Small Cap Equity Fund, 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.
Sovereign and Supranational Debt Obligations. Debt instruments issued or
guaranteed by foreign governments, agencies, and supranational organizations
("sovereign debt obligations"), especially sovereign debt obligations of
developing countries, may involve a high degree of risk, and may be in default
or present the risk of default. The issuer of the obligation or the
governmental authorities that control the repayment of the debt may be unable
or unwilling to repay principal and interest when due, and may require
renegotiation or rescheduling of debt payments. In addition, prospects for
repayment of principal and interest may depend on political as well as
economic factors.
DEPOSITARY RECEIPTS
The International Equity Portfolio may invest in American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary
Receipts ("GDRs"), and International Depositary Receipts ("IDRs"), or other
similar securities convertible into securities of foreign issuers. The Small
Cap Equity Portfolio may invest in ADRs. ADRs (sponsored or unsponsored) are
receipts typically issued by a U.S. bank or trust company evidencing the
deposit with such bank or company of a security of a foreign issuer, and are
publicly traded on exchanges or over-the-counter in the United States. In
sponsored programs, an issuer has made arrangements to have its securities
trade in the form of ADRs. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from
an issuer that has participated in the creation of a sponsored program.
EDRs, which are sometimes referred to as Continental Depositary Receipts,
are receipts issued in Europe typically by foreign bank and trust companies
that evidence ownership of either foreign or domestic underlying securities.
IDRs are receipts typically issued by a European bank or trust company
evidencing ownership of the underlying foreign securities. GDRs are receipts
issued by either a U.S. or non-U.S. banking institution evidencing ownership
of the underlying foreign securities.
HIGH YIELD/HIGH RISK SECURITIES
Securities rated lower than Baa by Moody's or lower than BBB by S&P are
sometimes referred to as "high yield" or "junk" bonds. In addition, securities
rated Baa (Moody's) and BBB (S&P) are considered to have some speculative
characteristics.
Investing in high yield securities involves special risks in addition to the
risks associated with investments in higher rated debt securities. High yield
securities may be regarded as predominately speculative with respect to the
issuer's continuing ability to meet principal and interest payments. Analysis
of the creditworthiness of issuers of high yield securities may be more
complex than for issuers of higher quality debt securities, and the ability of
the Fixed Income Portfolio to achieve its investment objective may, to the
extent of its investments in high yield securities, be more dependent upon
such creditworthiness analysis than would be the case if the Fixed Income
Portfolio were investing in higher quality securities.
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade securities. The
prices of high yield securities have been found to be less sensitive to
interest rate changes than more highly rated investments, but more sensitive
to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates,
for example, could cause a decline in high yield security prices because the
advent of a recession could lessen the ability of a highly leveraged company
to make principal and interest payments on its debt securities. If the issuer
of high yield securities defaults, the Fixed Income Portfolio may incur
additional expenses to seek recovery. In the case of high yield securities
structured as zero coupon or payment-in-kind securities, the market prices of
such securities are affected to a greater extent by interest rate changes and,
therefore, tend to be more volatile than securities which pay interest
periodically and in cash.
The secondary markets on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading markets could adversely affect and cause large fluctuations
in the daily net asset value of the Fixed Income Portfolio. Adverse publicity
and investor perceptions, whether or not based on fundamental analysis, may
decrease the values and liquidity of high yield securities, especially in a
thinly traded market.
The use of credit ratings as the sole method of evaluating high yield
securities can involve certain risks. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of high
yield securities. Also, credit rating agencies may fail to change credit
ratings in a timely fashion to reflect events since the security was last
rated. The Sub-Adviser does not rely solely on credit ratings when selecting
securities for the Fixed Income Portfolio, and develops its own independent
analysis of issuer credit quality. If a credit rating agency changes the
rating of a security held by the Fixed Income Portfolio, the Portfolio may
retain the security if the Sub-Adviser deems it in the best interest of
investors.
FIXED INCOME SECURITIES
To the extent a Fund or Portfolio invests in fixed income securities, the
net asset value of the Fund or 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
Small Cap Equity Portfolio has no restrictions with respect to the maturities
or duration of the fixed income securities it holds. A Fund's or Portfolio's
investments in fixed income securities with longer terms to maturity or
greater duration are subject to greater volatility than a Fund's or
Portfolio's shorter-term obligations. Fixed income securities in which the
Small Cap Equity 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.
ZERO COUPON OBLIGATIONS
The Fixed Income Portfolio may invest in zero coupon obligations, which are
fixed-income securities that do not make regular interest payments. Instead,
zero coupon obligations are sold at substantial discounts from their face
value. The Fixed Income Portfolio accrues income on these investments for tax
and accounting purposes, which is distributable to shareholders and which,
because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities to satisfy the Fixed Income
Portfolio's distribution obligations, in which case the Portfolio will forego
the purchase of additional income-producing assets with these funds. The
difference between a zero coupon obligation's issue or purchase price and its
face value represents the imputed interest an investor will earn if the
obligation is held until maturity. Zero coupon obligations may offer investors
the opportunity to earn higher yields than those available on ordinary
interest-paying obligations of similar credit quality and maturity. However,
zero coupon obligation prices may also exhibit greater price volatility than
ordinary fixed-income securities because of the manner in which their
principal and interest are returned to the investor.
CONVERTIBLE SECURITIES
Although the Equity Fund's and International Equity Portfolio's equity
investments consist primarily of common and preferred stocks, the Fund and the
Portfolio may buy securities convertible into common stock if, for example,
the Sub-Advisers believe that a company's convertible securities are
undervalued in the market. Convertible securities eligible for purchase by the
International Equity Portfolio and the Equity Fund consist of convertible
bonds, convertible preferred stocks, warrants and rights. See "Additional Risk
Factors and Policies -- Warrants" below and the Statement of Additional
Information for a discussion of these instruments.
WARRANTS
The International Equity Portfolio and the Equity Fund each may invest up to
10% of their net assets in warrants, except that this limitation does not
apply to warrants acquired in units or attached to securities. A warrant is an
instrument issued by a corporation which gives the holder the right to
subscribe to a specific amount of the corporation's capital stock at a set
price for a specified period of time. Warrants do not represent ownership of
the securities, but only the right to buy the securities. The prices of
warrants do not necessarily move parallel to the prices of underlying
securities. Warrants may be considered speculative in that they have no voting
rights, pay no dividends, and have no rights with respect to the assets of a
corporation issuing them. With respect to the International Equity Portfolio,
warrant positions will not be used to increase the leverage of the Portfolio.
Consequently, warrant positions are generally accompanied by cash positions
equivalent to the required exercise amount.
MORTGAGE-RELATED SECURITIES
Mortgage-Backed Securities. The Fixed Income Portfolio may invest in
mortgage-backed certificates and other securities representing ownership
interests in mortgage pools, including CMOs. Interest and principal payments
on the mortgages underlying mortgage-backed securities are passed through to
the holders of the mortgage-backed securities. Mortgage-backed securities
currently offer yields higher than those available from many other types of
fixed-income securities, but because of their prepayment aspects, their price
volatility and yield characteristics will change based on changes in
prepayment rates. Generally, prepayment rates increase if interest rates fall
and decrease if interest rates rise. For many types of mortgage-backed
securities, this can result in unfavorable changes in price and yield
characteristics in response to changes in interest rates and other market
conditions. For example, as a result of their prepayment aspects, the Fixed
Income Portfolio's mortgage-backed securities may have less potential for
capital appreciation during periods of declining interest rates than other
fixed income securities of comparable maturities, although such obligations
may have a comparable risk of decline in market value during periods of rising
interest rates.
Mortgage-backed securities have yield and maturity characteristics that are
dependent on the mortgages underlying them. Thus, unlike traditional debt
securities, which may pay a fixed rate of interest until maturity when the
entire principal amount comes due, payments on these securities include both
interest and a partial payment of principal. In addition to scheduled loan
amortization, payments of principal may result from the voluntary prepayment,
refinancing or foreclosure of the underlying mortgage loans. Such prepayments
may significantly shorten the effective durations of mortgage-backed
securities, especially during periods of declining interest rates. Similarly,
during periods of rising interest rates, a reduction in the rate of
prepayments may significantly lengthen the effective durations of such
securities.
Investment in mortgage-backed securities poses several risks, including
prepayment, market, and credit risk. Prepayment risk reflects the risk that
borrowers may prepay their mortgages faster than expected, thereby affecting
the investment's average life and perhaps its yield. Whether or not a mortgage
loan is prepaid is almost entirely controlled by the borrower. Borrowers are
most likely to exercise prepayment options at the time when it is least
advantageous to investors, generally prepaying mortgages as interest rates
fall, and slowing payments as interest rates rise. Besides the effect of
prevailing interest rates, the rate of prepayment and refinancing of mortgages
may also be affected by home value appreciation, ease of the refinancing
process and local economic conditions.
Market risk reflects the risk that the price of the security may fluctuate
over time. The price of mortgage-backed securities may be particularly
sensitive to prevailing interest rates, the length of time the security is
expected to be outstanding, and the liquidity of the issue. In a period of
unstable interest rates, there may be decreased demand for certain types of
mortgage-backed securities, and a fund invested in such securities wishing to
sell them may find it difficult to find a buyer, which may in turn decrease
the price at which they may be sold.
Credit risk reflects the risk that the Fixed Income Portfolio may not
receive all or part of its principal because the issuer or credit enhancer has
defaulted on its obligations. Obligations issued by U.S. government-related
entities are guaranteed as to the payment of principal and interest, but are
not backed by the full faith and credit of the U.S. government. The
performance of private label mortgage-backed securities, issued by private
institutions, is based on the financial health of those institutions.
For further information, see the Statement of Additional Information.
Stripped Mortgage-Backed Securities. The Fixed Income Portfolio may invest
in Stripped Mortgage-Backed Securities ("SMBS") which are derivative multi-
class mortgage securities. SMBS may be issued by agencies or instrumentalities
of the U.S. Government and private originators of, or investors in, mortgage
loans, including savings and loan associations, mortgage banks, commercial
banks, investment banks and special purpose entities of the foregoing. The
Fixed Income Portfolio's investments in SMBS will be limited to 10% of net
assets.
SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. One type of SMBS will have one class receiving some of the interest
and most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In some
cases, one class will receive all of the interest (the interest-only or IO
class), while the other class will receive all of the principal (the
principal-only or PO class). The cash flows and yields on IO and PO classes
can be extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets. For example, a rapid
or slow rate of principal payments may have a material adverse effect on the
yield to maturity of IOs or POs, respectively. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, an
investor may fail to recoup fully its initial investment in an IO class of a
stripped mortgage-backed security. Conversely, if the underlying mortgage
assets experience slower than anticipated prepayments of principal, the yield
on a PO class will be affected more severely than would be the case with a
traditional mortgage-backed security.
Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these
securities were only recently developed. As a result, established trading
markets have not yet developed and, accordingly, certain of these securities
may be deemed illiquid and subject to the Fixed Income Portfolio's limitations
on investment in illiquid securities. For further information on these
securities, see the Statement of Additional Information.
Other Asset-Backed Securities. The Fixed Income Portfolio may invest in
securities representing interests in other types of financial assets, such as
credit card receivables, automobile loan and lease receivables, aircraft lease
receivables, home equity loan receivables, manufactured housing receivables,
equipment loan and lease receivables, and student loan receivables. Such
securities are subject to many of the same risks as are mortgage-backed
securities, including prepayment risks and risks of foreclosure. They may or
may not be secured by the receivables themselves or may be unsecured
obligations of their issuers. For further information on these securities, see
the Statement of Additional Information.
EURODOLLAR AND YANKEE BANK OBLIGATIONS
The Fixed Income Portfolio may invest in Eurodollar bank obligations and
Yankee bank obligations. Eurodollar bank obligations are dollar-denominated
certificates of deposit and time deposits issued outside the U.S. capital
markets by foreign branches of U.S. banks and by foreign banks. Yankee bank
obligations are dollar-denominated obligations issued in the U.S. capital
markets by foreign banks. Eurodollar and Yankee obligations are subject to the
same risks that pertain to domestic issues, notably credit risk, market risk
and liquidity risk. Additionally, Eurodollar (and to a limited extent Yankee
bank) obligations are subject to certain sovereign risks. One such risk is the
possibility that a sovereign country might prevent capital, in the form of
dollars, from freely flowing across its borders. Other risks include: adverse
political and economic developments, the extent and quality of government
regulation of financial markets and institutions, the imposition of foreign
withholding taxes, and the expropriation or nationalization of foreign
issuers.
REPURCHASE AGREEMENTS
The Fixed Income Portfolio, New York Tax-Free Bond Fund, Equity Fund,
International Equity Portfolio and Small Cap Equity Portfolio may invest in
repurchase agreements. The Fixed Income Portfolio may invest in repurchase
agreements collateralized by U.S. Government securities, certificates of
deposit and certain bankers' acceptances. With respect to the New York Tax-
Free Bond Fund, Equity Fund and International Equity Portfolio, the Adviser is
authorized to enter into repurchase agreements on behalf of the Fund only with
member banks of the Federal Reserve System or "primary dealers" (as designated
by the Federal Reserve Bank of New York). The Equity Fund may also enter into
repurchase agreements with sellers who are member firms (or a subsidiary
thereof) of the New York Stock Exchange, recognized domestic or foreign
securities dealers or institutions which an Equity Sub-Adviser has determined
to be of comparable credit worthiness. The Small Cap Equity Portfolio may enter
into repurchase agreements in order to earn income or available cash or as a
temporary defensive measure. Repurchase agreements are transactions by which a
Portfolio or Fund purchases a security and simultaneously commits to resell
that security to the seller (a bank or securities dealer) at an agreed upon
price on an agreed upon date (usually within seven days of purchase). The
resale price reflects the purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or date of maturity of the
purchased security. The Advisor or Sub-Advisers will continually monitor the
value of the underlying securities to ensure that their value, including
accrued interest, always equals or exceeds the repurchase price. Repurchase
agreements are considered to be loans collateralized by the underlying
security under the 1940 Act, and therefore will be fully collateralized.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreements defaults on its obligation to repurchase the
underlying securities at a time when the value of these securities has
declined, the Portfolio or Fund may incur a loss upon disposition of them. If
the seller of the agreement becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a bankruptcy court may
determine that the underlying securities are collateral not within the control
of the Portfolio or Fund and therefore subject to sale by the trustee in
bankruptcy. Finally, it is possible that the Portfolio or Fund may not be
able to substantiate its interest in the underlying securities. While the
managements of the Trust and the Portfolio Trust acknowledge these risks, it
is expected that they can be controlled through stringent security selection
criteria and careful monitoring procedures. As discussed in the Statements of
Additional Information, the Fixed Income, International Equity and Small Cap
Equity Portfolios and the New York Tax-Free Bond and Equity Funds have adopted
certain procedures to minimize the risks of investing in repurchase
agreements.
ILLIQUID INVESTMENTS
The Equity Fund, Fixed Income Portfolio, International Equity Portfolio and
Small Cap Equity Portfolio may invest up to 15% of their net assets in
securities that are illiquid by virtue of the absence of a readily available
market, or because of legal or contractual restrictions on resale. This policy
does not limit the acquisition of securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933
or, in the case of the Fixed Income Portfolio only, commercial paper issued
pursuant to Section 4(2) under the Securities Act of 1933 that are determined
to be liquid in accordance with guidelines established by the Portfolio
Trust's Board of Trustees. There may be delays in selling these securities and
sales may be made at less favorable prices. The New York Tax-Free Bond Fund
may invest up to 10% of its net assets in securities which are subject to
legal or contractual restrictions on resale (other than fixed time deposits
and repurchase agreements maturing in not more than seven days). This policy
does not apply to any security if the holder is permitted to receive payment
upon a specified number of days' notice of the unpaid principal balance plus
accrued interest or the investment by the Trust of all or substantially all of
the Fund's assets in another registered investment company having the same
investment objective and policies and substantially the same investment
restrictions as the Fund. The International Equity Portfolio has a separate
policy that no more than 10% of its net assets may be invested in restricted
securities which are restricted as to resale, including Rule 144A and Section
4(2) securities. The Fixed Income Portfolio has a policy that no more than 25%
of its net assets may be invested in restricted securities which are
restricted as to resale, including Rule 144A and Section 4(2) securities.
Each Sub-Adviser may determine that a particular Rule 144A security is
liquid and thus not subject to the Fixed Income Portfolio's, International
Equity Portfolio's, Small Cap Equity Portfolio's or Equity Fund's limits on
investment in illiquid securities, pursuant to guidelines adopted by the Board
of Trustees. Factors that a Sub-Adviser must consider in determining whether a
particular Rule 144A security is liquid include the frequency of trades and
quotes for the security, the number of dealers willing to purchase or sell the
security and the number of other potential purchasers, dealer undertakings to
make a market in the security, and the nature of the security and the nature
of the market for the security (i.e., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of transfer).
Investing in Rule 144A securities could have the effect of increasing the
level of a Portfolio's or Fund's illiquidity to the extent that qualified
institutions might become, for a time, uninterested in purchasing these
securities.
BRADY BONDS
A portion of the Fixed Income Portfolio's assets may be invested in certain
debt obligations customarily referred to as Brady Bonds, which are created
through the exchange of existing commercial bank loans to foreign entities for
new obligations in connection with debt restructuring under a plan introduced
by former Treasury Secretary Nicholas F. Brady (the "Brady Plan"). Brady Bonds
have been issued only recently and, accordingly, do not have a long payment
history. They may be collateralized or uncollateralized and issued in various
currencies (although most are dollar-denominated) and are actively traded in
the over-the-counter secondary market. Brady Bonds have been issued by the
governments of Argentina, Costa Rica, Mexico, Nigeria, Uruguay, Venezuela,
Brazil and the Philippines, as well as other emerging markets countries. Most
Brady Bonds are currently rated below BBB by S&P or Baa by Moody's. In light
of the risk characteristics of Brady Bonds (including uncollateralized
repayment of principal at maturity for some instruments) and, among other
factors, the history of default with respect to commercial bank loans by
public and private entities of countries issuing Brady Bonds, investments in
Brady Bonds should be viewed as speculative. For further information on these
securities, see the Statement of Additional Information.
FLOATING AND VARIABLE RATE OBLIGATIONS
Certain obligations that the Fixed Income Portfolio may purchase may have a
floating or variable rate of interest, i.e., the rate of interest varies with
changes in specified market rates or indices, such as the prime rates, and at
specified intervals. Certain floating or variable rate obligations that may be
purchased by the Portfolio may carry a demand feature that would permit the
holder to tender them back to the issuer of the underlying instrument, or to a
third party, at par value prior to maturity. The demand features of certain
floating or variable rate obligations may permit the holder to tender the
obligations to foreign banks, in which case the ability to receive payment
under the demand feature will be subject to certain risks, as described under
"Foreign Securities," above.
VARIABLE RATE INSTRUMENTS
Variable rate instruments that the Adviser may purchase on behalf of the New
York Tax-Free Bond Fund provide for a periodic adjustment in the interest rate
paid on the instrument and permit the holder to receive payment upon a
specified number of days' notice of the unpaid principal balance plus accrued
interest either from the issuer or by drawing on a bank letter of credit, a
guarantee or an insurance policy issued with respect to such instrument or by
tendering or "putting" such instrument to a third party.
Because of the variable rate nature of the instruments, during periods when
prevailing interest rates decline, the New York Tax-Free Bond Fund's yield
will decline and its shareholders will forgo the opportunity for capital
appreciation. On the other hand, during periods when prevailing interest rates
increase, the New York Tax-Free Bond Fund's yield will increase and its
shareholders will have reduced risk of capital depreciation. In certain cases,
the interest rate index on which an instrument's yield is based may not rise
and fall to the same extent or as quickly as the general market for Municipal
Obligations. These instruments are considered derivitives and the value of
such instruments may be more volatile than other floating rate Municipal
Obligations.
For additional information concerning variable rate instruments, see
"Investment Objective, Policies and Restrictions -- Variable Rate Instruments"
in the Statement of Additional Information.
INVERSE FLOATING RATE OBLIGATIONS
The Fixed Income Portfolio may invest in inverse floating rate obligations
("inverse floaters"). Inverse floaters have coupon rates that vary inversely
at a multiple of a designated floating rate, such as LIBOR (London Inter-Bank
Offered Rate). Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in the coupon rate
while any drop in the reference rate of an inverse floater causes an increase
in the coupon rate. In addition, like most other fixed-income securities, the
value of inverse floaters will generally decrease as interest rates increase.
Inverse floaters may exhibit substantially greater price volatility than fixed
rate obligations having similar credit quality, redemption provisions and
maturity, and inverse floater CMOs exhibit greater price volatility than the
majority of mortgage pass-through securities or CMOs. In addition, some
inverse floater CMOs exhibit extreme sensitivity to changes in prepayments. As
a result, the yield to maturity of an inverse floater CMO is sensitive not
only to changes in interest rates, but also to changes in prepayment rates on
the related underlying mortgage assets.
BANKING INDUSTRY AND SAVINGS AND LOAN INDUSTRY OBLIGATIONS
As a temporary defensive measure, the Fixed Income Portfolio may invest in
certificates of deposit, time deposits, bankers' acceptances, and other short-
term debt obligations issued by commercial banks and savings and loan
associations ("S&Ls"). Certificates of deposit are receipts from a bank or S&L
for funds deposited for a specified period of time at a specified rate of
return. Time deposits in banks or S&Ls are generally similar to certificates
of deposit but are uncertificated. Bankers' acceptances are time drafts drawn
on commercial banks by borrowers, usually in connection with international
commercial transactions. The Fixed Income Portfolio may not invest in time
deposits maturing in more than seven days. The Portfolio will limit its
investment in time deposits maturing from two business days through seven
calendar days to 15% of its total assets.
The Fixed Income Portfolio will not invest in any obligation of a commercial
bank unless (i) the bank has total assets of at least $1 billion, or the
equivalent in other currencies or, in the case of domestic banks which do not
have total assets of at least $1 billion, the aggregate investment made in any
one such bank is limited to $100,000 and the principal amount of such
investment is insured in full by the Federal Deposit Insurance Corporation
(the "FDIC"), (ii) in the case of U.S. banks, it is a member of the FDIC and
(iii) in the case of foreign branches of U.S. banks, the security is deemed by
the Sub-Adviser to be of an investment quality comparable with other debt
securities which may be purchased by the Fixed Income Portfolio.
The Fixed Income Portfolio may also invest in obligations of U.S. banks,
foreign branches of U.S. banks (Eurodollars) and U.S. branches of foreign
banks (Yankee dollars) as a temporary defensive measure. Euro and Yankee
dollar investments will involve some of the same risks as investing in foreign
securities, as described above and in the Statement of Additional Information.
LOANS OF PORTFOLIO SECURITIES
The International Equity and Small Cap Equity Portfolios and the Equity Fund
may lend securities to qualified brokers, dealers, banks and other financial
institutions for the purpose of realizing additional income. Loans of
securities will be collateralized by cash, letters of credit, or securities
issued or guaranteed by the U.S. Government or its agencies. The collateral
will equal at least 100% of the current market value of the loaned securities.
In addition, the International Equity and Small Cap Equity Portfolios will not
lend their portfolio securities to the extent that greater than one-third of
each Portfolios total assets, at fair market value, would be committed to
loans at that time. The Equity Fund will not lend its portfolio securities to
the extent that greater than 30% of its total assets, at fair market value,
would be committed to loans at that time.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES AND MUNICIPAL
OBLIGATIONS
The Fixed Income Portfolio and International Equity Portfolio may purchase
and sell securities on a when-issued or firm-commitment basis, in which a
security's price and yield are fixed on the date of the commitment but payment
and delivery are scheduled for a future date. On the settlement date, the
market value of the security may be higher or lower than its purchase or sale
price under the agreement. If the other party to a when-issued or firm-
commitment transaction fails to deliver or pay for the security, the Fixed
Income Portfolio and International Equity Portfolio could miss a favorable
price or yield opportunity or suffer a loss. The Portfolios will not earn
interest on securities until the settlement date. The Fixed Income Portfolio
and International Equity Portfolio will maintain in a segregated account with
the custodian cash or liquid securities equal (on a daily marked-to-market
basis) to the amount of its commitment to purchase the securities on a when-
issued basis.
New issues of Municipal Obligations may be offered on a "when-issued" or
"forward delivery" basis. The payment obligation and the interest rate that
will be received on the Municipal Obligations offered on this basis are each
fixed at the time the Trust commits to the purchase for the New York Tax-Free
Bond Fund, although settlement, i.e., delivery of and payment for the
Municipal Obligations, takes place beyond customary settlement time (but
normally within 45 days of the commitment). Between the time the Trust commits
to purchase the "when-issued" or "forward delivery" Municipal Obligation for
the New York Tax-Free Bond Fund and the time delivery and payment are made,
the "when-issued" or "forward delivery" Municipal Obligation is treated as an
asset of the Fund and the amount which the Fund is committed to pay for that
Municipal Obligation is treated as a liability of the Fund. No interest on a
"when-issued" or "forward delivery" Municipal Obligation is accrued for the
New York Tax-Free Bond Fund until delivery occurs. Although the Trust only
makes commitments to purchase "when-issued" or "forward delivery" Municipal
Obligations for the New York Tax-Free Bond Fund with the intention of actually
acquiring them, the Trust may sell these obligations before the settlement
date if deemed advisable by the Adviser. Purchasing Municipal Obligations on a
"when-issued" or "forward delivery" basis can involve a risk that the yields
available in the market on the settlement date may actually be higher (or
lower) than those obtained in the transaction itself and, as a result, the
"when-issued" or "forward delivery" Municipal Obligation may have a lesser (or
greater) value at the time of settlement than the New York Tax-Free Bond
Fund's payment obligation with respect to that Municipal Obligation.
Furthermore, if the Trust sells the "when-issued" or "forward delivery"
Municipal Obligation before the settlement date or if the Trust sells other
obligations from the New York Tax-Free Bond Fund's portfolio in order to meet
the payment obligations, the Fund may realize a capital gain, which is not
exempt from federal, New York State or New York City income taxation.
For additional information concerning "when-issued" or "forward delivery"
Municipal Obligations, see "Investment Objective, Policies and Restrictions --
"When-Issued" Municipal Obligations" in the Statement of Additional
Information.
SWAPS, CAPS, FLOORS AND COLLARS
The Fixed Income Portfolio may enter into swap contracts and other similar
instruments in accordance with its policies. A swap is an agreement to
exchange the return generated by one instrument for the return generated by
another instrument. The payment streams are calculated by reference to a
specified index and agreed upon notional amount. The term specified index
includes currencies, fixed interest rates, prices and total return on interest
rate indices, fixed-income indices, stock indices and commodity indices (as
well as amounts derived from arithmetic operations on these indices). For
example, the Fixed Income Portfolio may agree to swap the return generated by
a fixed-income index for the return generated by a second fixed-income index.
The currency swaps in which the Fixed Income Portfolio may enter will
generally involve an agreement to pay interest streams calculated by reference
to interest income linked to a specified index in one currency in exchange for
a specified index in another currency. Such swaps may involve initial and
final exchanges that correspond to the agreed upon notional amount.
The swaps in which the Fixed Income Portfolio may engage also include rate
caps, floors and collars under which one party pays a single or periodic fixed
amount(s) (or premium) and the other party pays periodic amounts based on the
movement of a specified index.
The Fixed Income Portfolio will usually enter into swaps on a net basis,
i.e., the two return streams are netted out in a cash settlement on the
payment date or dates specified in the instrument, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
returns. The Fixed Income Portfolio's obligations under a swap agreement will
be accrued daily (offset against any amounts owing to the Portfolio) and any
accrued but unpaid net amounts owed to a swap counterparty will be covered by
the maintenance of a segregated account consisting of cash, U.S. Government
securities, or other liquid securities, to avoid any potential leveraging.
The Fixed Income Portfolio will not enter into any swap agreement unless the
unsecured commercial paper, senior debt or the claims-paying ability of the
counterparty is rated AA or A-1 or better by S&P or Aa or P-1 or better by
Moody's, rated comparably by another NRSRO or determined by the Sub-Adviser to
be of comparable quality.
Interest rate swaps do not involve the delivery of securities, other
underlying assets or principal. Accordingly, the risk of loss with respect to
interest rate swaps is limited to the net amount of interest payments that the
Fixed Income Portfolio is contractually obligated to make. If the other party
to an interest rate swap defaults, the Fixed Income Portfolio's risk of loss
consists of the net amount of interest payments that the Portfolio is
contractually entitled to receive. In contrast, currency swaps usually involve
the delivery of the entire principal value of one designated currency in
exchange for the other designated currency. Therefore, the entire principal
value of a currency swap is subject to the risk that the other party to the
swap will default on its contractual delivery obligations. If there is a
default by the counterparty, the Fixed Income Portfolio may have contractual
remedies pursuant to the agreements related to the transaction. The swap
market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Sub-Adviser is incorrect in its forecasts of
market values, interest rates and currency exchange rates, the investment
performance of the Fixed Income Portfolio would be less favorable than it
would have been if this investment technique were not used.
RISK FACTORS AFFECTING INVESTMENTS IN NEW YORK MUNICIPAL OBLIGATIONS
The Adviser intends to invest a high proportion of the New York Tax-Free
Bond Fund's assets in New York Municipal Obligations. Payment of interest and
preservation of principal is dependent upon the continuing ability of New York
issuers and/or obligors of state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors should consider
the greater risk inherent in the New York Tax-Free Bond Fund's concentration
in such obligations versus the safety that comes with a less geographically
concentrated investment portfolio and should compare the yield available on a
portfolio of New York issues with the yield of a more diversified portfolio
including out-of-state issues before making an investment decision. The
Adviser believes that by maintaining the New York Tax-Free Bond Fund's
investment portfolio in liquid, shorter-term Municipal Obligations, the Fund
is somewhat insulated from the credit risks that may exist for long-term New
York Municipal Obligations.
New York State and other issuers of New York Municipal Obligations have
historically experienced periods of financial difficulties which have caused the
credit ratings of certain of their obligations to be downgraded by certain
rating agencies. Beginning in 1975, New York State, New York City and other
State entities faced serious financial difficulties which jeopardized the credit
standing and impaired the borrowing abilities of such entities and contributed
to high interest rates on, and lower market prices for, debt obligations issued
by them. In the early 1990s, New York faced additional financial difficulties
which resulted in a lowering by Moody's and S&P of their credit ratings on
certain New York Municipal Obligations. Recurrence of such financial
difficulties could result in defaults or declines in the market values of
various New York Municipal Obligations in which the Fund may invest. There can
be no assurance that credit ratings on obligations of New York State and New
York City and other New York Municipal Obligations will not be downgraded
further. See "Investment Objective, Policies and Restrictions -- Special Factors
Affecting New York" in the Statement of Additional Information.
PORTFOLIO TURNOVER
The Sub-Advisers manage the Fixed Income Portfolio, Equity Fund,
International Equity Portfolio and Small Cap Equity 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 Portfolios and the Fund will not trade for short-term profits, but when
circumstances warrant, investments may be sold without regard to the length of
time held. For the year ended October 31, 1997, the portfolio turnover rate
for the Fixed Income Portfolio was 349%. It is expected that the annual
turnover rate for the Fixed Income Portfolio will not exceed 250% in
subsequent fiscal years. For the year ended October 31, 1997, the portfolio
turnover rate for the Equity Fund was 99% and it is expected that in
subsequent years that the annual turnover rate for the Fund will not exceed
100%. The portfolio turnover rate for the International Equity Portfolio was
30% for the year ended October 31, 1997 and it is expected that in subsequent
years the annual turnover rate for the Portfolio will not exceed 40%. The
portfolio turnover rate for the Small Cap Equity Portfolio for fiscal year
ended October 31, 1997 was 92%. It is anticipated that in subsequent years the
portfolio turnover rate for the Small Cap Equity Portfolio will not exceed
100%. Because the Fixed Income Portfolio has 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.
The Adviser fully manages the New York Tax-Free Bond Fund's portfolio by
buying and selling securities, as well as by holding selected securities to
maturity. In managing the New York Tax-Free Bond Fund's portfolio, the Trust
seeks to take advantage of market developments, yield disparities and
variations in the creditworthiness of issuers. For a description of the
strategies which are used in managing the New York Tax-Free Bond Fund's
portfolio, which include adjusting the average maturity of the New York Tax-
Free Bond Fund's portfolio in anticipation of a change in interest rates, see
"Investment Objective, Policies and Restrictions -- Portfolio Management" in
the Statement of Additional Information.
For the year ended October 31, 1997, the portfolio turnover rate for the New
York Tax-Free Bond Fund was 163%. The Adviser anticipates that in subsequent
years the annual turnover rate of the New York Tax-Free Bond Fund's assets
generally will not exceed 300%. The Trust engages in portfolio trading for the
New York Tax-Free Bond Fund if it believes a transaction net of costs
(including custodian charges) will help achieve the investment objective of
the Fund. Expenses to the New York Tax-Free Bond Fund, including brokerage
commissions, and the realization of capital gains which are taxable to the
Fund's shareholders tend to increase as the portfolio turnover increases.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. For a further discussion of portfolio transactions, see "Investment
Objective, Policies and Restrictions -- Portfolio Transactions" in the
Statements of Additional Information.
The Trust may, in the future, seek to achieve the investment objectives of
the New York Tax-Free Bond Fund or Equity Fund by investing all of its assets
in a no-load, open-end management investment company having the same
investment objective and policies and substantially the same investment
restrictions as those applicable to the Funds. In such event, the Funds'
Investment Advisory Contracts or Investment Management Contracts would be
terminated and the administrative services fees paid by the Funds would be
reduced. Such investment would be made only if the Trustees of the Trust
believe that the aggregate per share expenses of the Funds and such other
investment companies will be less than or approximately equal to the expenses
which the Funds would incur if the Trust were to continue to retain the
services of investment advisers for the Funds and the assets of the Funds
were to continue to be invested directly in portfolio securities.
The investment policies of the Funds and the Portfolios are described above.
Except as otherwise stated, these investment policies may be changed by the
Board of Trustees of the Trust without approval by the shareholders of the
Funds. The Statement of Additional Information includes a further discussion
of investment policies, including the investment of the New York Tax-Free Bond
Fund's assets in participation interests and the use of futures contracts to
protect the Fund to some extent from fluctuations in interest rates, and a
listing of the specific investment restrictions which govern the investment
policies of the Fund, including a restriction that not more than 10% of the
Fund's net assets may be invested in securities that are not readily
marketable, such as repurchase agreements maturing in more than seven days.
Although the Trust currently does not borrow money on behalf of the New York
Tax-Free Bond Fund for the purpose of leveraging, these restrictions permit
the Trust to borrow money on behalf of the Fund for certain other purposes in
amounts up to 33 1/3% of the Fund's net assets (although no securities will be
purchased for the Fund at any time at which borrowings exceed 5% of the Fund's
total assets taken at market value). These specific investment restrictions
and the fundamental policy described above may not be changed without the
approval of New York Tax-Free Bond Fund shareholders. If a percentage
restriction (other than a restriction as to borrowing) or a rating restriction
on investment or utilization of assets is adhered to at the time an investment
is made, or assets are so utilized, a later change in percentage resulting
from changes in the value of the New York Tax-Free Bond Fund's portfolio
securities or a later change in the rating of a portfolio security are not
considered a violation of policy.
INVESTMENT RESTRICTIONS
Each of the Funds and the Portfolios has adopted certain investment
restrictions designed to reduce exposure to specific situations (except that
none of these investment restrictions shall prevent the Funds from investing
all of their Assets in a registered investment company with substantially the
same investment objective). These investment restrictions are set forth in the
Statements of Additional Information.
Certain limitations described in the Statements of Additional Information
are fundamental and may be changed only with the approval of the holders of a
"majority of the outstanding voting securities" (as defined in the 1940 Act)
of the respective Portfolio or Fund, as the case may be. The other investment
restrictions described in the Statements of Additional Information are not
fundamental policies meaning that the Board of Trustees of the Portfolio Trust
may change them without investor approval. If a percentage limitation on
investment or utilization of assets as set forth in the Statements of
Additional Information is adhered to at the time an investment is made, a
later change in percentage resulting from changes in the value or total cost
of a Fund's or Portfolio's assets will not be considered a violation of the
restriction, and the sale of securities will not be required.
SPECIAL INFORMATION CONCERNING THE TWO-TIER FUND STRUCTURE
The Trust, which is an open-end investment company, seeks to achieve the
investment objectives of the Bond Fund, Overseas Equity Fund and Opportunity
Fund by investing all of each Fund's investable assets in the Fixed Income
Portfolio, International Equity Portfolio, and the Small Cap Equity Portfolio,
respectively, series of a separate open-end investment company with the same
investment objectives as each respective Fund. Other mutual funds or
institutional investors may invest in the Portfolios on the same terms and
conditions as the Funds. 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
Portfolios is available by calling the Sponsor at (888) 525-5757. The two-tier
investment fund structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
The investment objectives of the Funds may be changed without the approval
of the shareholders of the Funds and the investment objectives of the
Portfolios may be changed without the approval of the investors in the
Portfolios. Shareholders of the Funds shall receive 30 days prior written
notice of any change in the investment objective of a Fund or a Portfolio. For
a description of the investment objectives, policies and restrictions of the
Portfolios, see "Investment Objectives and Policies" above.
Except as permitted by the Securities and Exchange Commission, whenever the
Trust is requested to vote on a matter pertaining to a Portfolio, the Trust
will hold a meeting of the shareholders of the corresponding 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 a Fund's investment in its corresponding 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 corresponding 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 effect on smaller
investors. For example, if a large investor withdraws from a Portfolio, a
small remaining fund may experience higher pro rata operating expenses,
thereby producing lower returns. Additionally, a Portfolio may become less
diverse, resulting in increased portfolio risk.
For descriptions of the management and expenses of the Portfolios, see
"Management of the Trust and the Portfolio Trust" below and in the Statements
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 Statements 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 Statements of Additional Information for more
information about the Trustees and the executive officers of the Trust and the
Portfolio Trust.
INVESTMENT MANAGER/ADVISER
Republic, whose address is 452 Fifth Avenue, New York, New York 10018,
serves as investment manager to the Portfolios pursuant to Investment
Management Contracts 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-Advisers. For its services under the Investment Management Contracts, the
Manager is entitled to receive from the Portfolio Trust fees, payable monthly,
at the annual rate of 0.20% of the Fixed Income Portfolio's average daily net
assets and at the annual rate of 0.25% of each of the International Equity
Portfolio's and Small Cap Equity Portfolio's average daily net assets.
Republic also serves as investment adviser to the New York Tax-Free Bond
Fund. The Adviser manages the investment and reinvestment of the assets of the
New York Tax-Free Bond Fund and continuously reviews, supervises and
administers the Fund's investments pursuant to an Investment Advisory
Contract. Subject to such policies as the Board of Trustees may determine, the
Adviser places orders for the purchase and sale of the New York Tax-Free Bond
Fund's investments directly with brokers or dealers selected by it in its
discretion. The Adviser does not place orders with the Distributor. Peter J.
Loftus, Senior Portfolio Manager, is the individual who is primarily
responsible for the day-to-day management of the New York Tax-Free Bond Fund's
portfolio. Prior to joining Republic in 1997, Mr. Loftus was a Senior Vice
President at Dillon, Read & Co. for five years where he managed tax-exempt
trading and hedging for the firm. He also spent seven years at Paine Webber as
a Vice President involved in the trading and distribution of tax-exempt
securities. For its services under the Investment Advisory Contract, the
Adviser receives from the New York Tax-Free Bond Fund a fee, payable monthly,
at the annual rate of 0.25% of the Fund's average daily net assets. Republic
is currently waiving this fee.
Republic also serves as investment manager to the Equity Fund pursuant to an
Investment Management Contract with the Trust. For its services to the Equity
Fund, the Manager is paid a fee by the Equity Fund, computed daily and based
on the Fund's average daily net assets, equal on an annual basis to 0.175% of
the Fund's average daily net assets.
Republic is a wholly owned subsidiary of Republic New York Corporation, a
registered bank holding company. As of June 30, 1997, Republic was the 16th
largest commercial bank in the United States measured by deposits. Republic or
an affiliate of Republic serves as investment adviser to the other series of
the Trust. Republic currently provides investment advisory services for
individuals, trusts, estates and institutions.
Republic and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of obligations purchased for the Funds
or Portfolios, including outstanding loans to such issuers which may be repaid
in whole or in part with the proceeds of obligations so purchased. With
respect to the New York Tax-Free Bond Fund, Republic and its affiliates deal,
trade and invest for their own accounts in Municipal Obligations and are
dealers of various types of Municipal Obligations. Republic and its affiliates
may sell Municipal Obligations to, and purchase them from, other investment
companies sponsored by BISYS. The Adviser will not invest any New York Tax-
Free Bond Fund assets in any Municipal Obligation purchased from itself or any
affiliate, although under certain circumstances such obligations may be
purchased from other members of an underwriting syndicate in which Republic or
an affiliate is a non-principal member. This restriction should not limit the
amount or type of Municipal Obligations available to be purchased for the
Fund.
Republic has informed the Trust that, in making its investment decisions, it
does not obtain or use material inside information in the possession of any
division or department of Republic or in the possession of any affiliate of
Republic.
Based upon the advice of counsel, Republic believes that the performance of
investment advisory and other services for the Funds and Portfolios 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 Funds and Portfolios. If Republic were
prohibited from acting as investment manager to the Funds and Portfolios, 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-ADVISERS
Bond Fund. MAS continuously manages the investment portfolio of the Fixed
Income Portfolio pursuant to a Sub-Advisory Agreement with the Manager. For
its services, the Fixed Income 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 0.375% of net assets up to $50 million, 0.25% of net assets
over $50 million up to $95 million, $300,000 in total when net assets go over
$95 million up to $150 million, 0.20% of net assets over $150 million up to
$250 million, and 0.15% of net assets over $250 million. It is the
responsibility of the Fixed Income Sub-Adviser not only to make investment
decisions for the Fixed Income Portfolio, but also to place purchase and sale
orders for the portfolio transactions of the Portfolio. See "Portfolio
Transactions."
MAS, whose address is One Tower Bridge, West Conshohocken, Pennsylvania
19428, is a Pennsylvania limited partnership founded in 1969. MAS provides
investment services to employee benefit plans, endowment funds, foundations
and other institutional investors. As of September 30, 1997, MAS had in excess
of $55.7 billion in assets under management.
On January 3, 1996, Morgan Stanley Group Inc. acquired MAS in a transaction
in which Morgan Stanley Asset Management Holdings Inc., an indirect wholly
owned subsidiary of Morgan Stanley Group Inc., became the sole general partner
of MAS. Morgan Stanley Asset Management Holdings Inc. and two other wholly
owned subsidiaries of Morgan Stanley Group Inc. became the limited partners of
MAS. Morgan Stanley Group Inc. and various of its directly or indirectly owned
subsidiaries are engaged in a wide range of financial services.
Kenneth B. Dunn, whose business experience for the past five years is
provided below, is the individual portfolio manager responsible for management
of the Fixed Income Portfolio.
Partner, MAS, since prior to 1991. Portfolio Manager, MAS
Fixed Income and MAS Domestic Fixed Income Portfolios, since
1987; MAS Fixed Income II Portfolio, since 1990; MAS Mortgage-
Backed Securities and Special Purpose Fixed Income Portfolios,
since 1992; and, MAS Municipal and PA Municipal Portfolios,
since 1994.
Equity Fund. Alliance and Brinson each continuously manages a portion of the
investment portfolio of the Equity Fund, subject to the supervision and
direction of the Manager, pursuant to a Sub-Advisory Agreement with the
Manager. The Manager determines the allocation of the Equity Fund's assets
between Alliance and Brinson. For their services, Alliance and Brinson are
each paid a fee by the Equity Fund, computed daily and based on the Fund's
average daily net assets allocated to such Equity Sub-Adviser for management,
equal on an annual basis to 0.325% of net assets up to $50 million, 0.25% of
net assets over $50 million up to $100 million, 0.20% of net assets over $100
million up to $200 million, and 0.15% of net assets over $200 million. It is
the responsibility of each Equity Sub-Adviser not only to make investment
decisions for the Equity Fund, but also to place purchase and sale orders for
the Portfolio transactions of the Fund.
Alliance, a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, is a leading international
investment manager supervising client accounts with assets as of September 30,
1997 totalling approximately $217 billion. Alliance has six offices in the
United States, and subsidiaries of Alliance operate out of offices in Bahrain,
Istanbul, London, Luxembourg, Mumbai (Bombay), Paris, Singapore, Sao Paulo,
Sydney, Tokyo and Toronto. Alliance and its subsidiaries employ over 1,300
persons worldwide.
Alliance's clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies, foundations and
endowment funds. The 54 registered investment companies managed by Alliance
comprising 116 separate investment portfolios currently have over two million
shareholders. There are 20 other non-U.S. investment companies comprising 20
separate investment portfolios also managed by Alliance. As of September 30,
1997, Alliance was retained as an investment manager of employee benefit fund
assets for 29 of the Fortune 100 companies.
Alliance Capital Management Corporation ("ACMC") is the general partner of
Alliance and conducts no other active business. Units representing assignment
of beneficial ownership of limited partnership interests of Alliance are
publicly traded on the New York Stock Exchange. As of September 30, 1997, The
Equitable Life Assurance Society of the United States ("Equitable"), ACMC,
Inc. and Equitable Capital Management Corporation ("ECMC") were the beneficial
owners of approximately 57% of the outstanding units of Alliance. ACMC, ECMC,
and ACMC, Inc. are wholly owned subsidiaries of Equitable. Equitable, a New
York life insurance company. Equitable is a wholly owned subsidiary of The
Equitable Companies Incorporated, a Delaware corporation ("ECI"), whose shares
are publicly traded on the New York Stock Exchange. As of March 1, 1996, AXA,
a French insurance holding company, owned 59% of the issued and outstanding
shares of the common stock of ECI.
John L. Blundin, an Executive Vice President and Portfolio Manager, and
Christopher Toub, a Senior Vice President and Equity Portfolio Manager, have
primary portfolio management responsibility for the Equity Fund's assets
allocated to Alliance. Mr. Blundin has 32 years of investment experience,
including 24 years of experience as a portfolio manager at Alliance. Mr. Toub
has 16 years of investment experience, including five years of experience as a
portfolio manager at Alliance. Prior to joining Alliance in 1992, Mr. Toub was
a Portfolio Manager at Marcus, Schloss, & Co.
Brinson, a Delaware corporation, is an investment management firm managing, as
of June 30, 1996, approximately $58 billion, primarily for pension and profit
sharing institutional accounts. Brinson was organized in 1989 when it acquired
the institutional asset management business of The First National Bank of
Chicago and First Chicago Investment Advisors, N.A. Brinson and its predecessor
entities have managed domestic and international investment assets since 1974
and global investment assets since 1982. Brinson has offices in Basel, London,
Melbourne, New York, Paris, Singapore, Sydney and Tokyo, in addition to its
principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson is
an indirect wholly owned subsidiary of Union Swiss Bank Corporation which is an
internationally diversified organization headquartered in Basel, Switzerland,
with operations in many aspects of the financial services industry. Brinson also
serves as the investment advisor to seven other investment companies.
Jeffrey J. Diermeier, Managing Partner-U.S. Equities at Brinson, has primary
portfolio management responsibility for the Fund's assets allocated to
Brinson. Mr. Diermeier has 21 years of investment experience at Brinson.
Overseas Equity Fund. CGTC continuously manages the investment portfolio of
the International Equity Portfolio pursuant to a Sub-Advisory Agreement with
the Manager. For its services, the International Equity Sub-Adviser is paid a
fee by the International Equity Portfolio, computed daily and based on the
Portfolio's average daily net assets, equal on an annual basis to 0.70% of net
assets up to $25 million, 0.55% of net assets over $25 million up to $50
million, 0.425% of net assets over $50 million up to $250 million, and 0.375%
of net assets over $250 million. It is the responsibility of the International
Equity Sub-Adviser not only to make investment decisions for the International
Equity Portfolio, but also to place purchase and sale orders for the portfolio
transactions of the Portfolio. See "Portfolio Transactions."
CGTC, which was founded in 1968, is a wholly owned subsidiary of The Capital
Group Companies, Inc., both of which are located at 333 South Hope Street, Los
Angeles, California 90071. As of September 30, 1997 CGTC managed in excess of
$70 billion of assets primarily for large institutional clients. CGTC's
research activities are conducted by affiliated companies with offices in Los
Angeles, San Francisco, New York, Washington, D.C., Atlanta, London, Geneva,
Singapore, Hong Kong and Tokyo.
Capital Research and Management Company ("CRMC"), another wholly owned
subsidiary of The Capital Group Companies, Inc., provides investment advisory
services to the following mutual funds, which are know collectively as the
American Funds Group: AMCAP Fund, American Balanced Fund, American High Income
Municipal Bond Fund, American High Income Trust, American Mutual Fund, The
Bond Fund of America, The Cash Management Trust of America, Capital Income
Builder, Inc., Capital World Bond Fund, EuroPacific Growth Fund, Fundamental
Investors, The Growth Fund of America, Income Fund of America, Intermediate
Bond Fund of America, The Investment Company of America, Limited Term Tax-
Exempt Bond Fund of America, The New Economy Fund, New Perspective Fund,
Smallcap World Fund, The Tax-Exempt Bond Fund of America, The American Funds
Tax-Exempt Series I, The American Funds Tax-Exempt Series II, The Tax-Exempt
Money Fund of America, The American Funds Income Series, The U.S. Treasury
Money Fund of America, Washington Mutual Investors Fund, and Capital World
Growth and Income Fund. CRMC also provides investment advisory services to:
American Variable Insurance Series and Anchor Pathway Fund, which are used
exclusively as underlying investment vehicles for variable insurance contracts
and policies, and to Endowments, Inc. and Bond Portfolio for Endowments, Inc.,
whose shares may be owned only by tax-exempt organizations. Capital
International, Inc., an indirect wholly owned subsidiary of The Capital Group
Companies, Inc., provides investment advisory services to Emerging Markets
Growth Fund, Inc., which is a closed-end investment company.
The following persons are primarily responsible for portfolio management of
the International Equity Portfolio: David Fisher, Vice Chairman of CGTC, has
had 32 years experience as an investment professional (28 years with CGTC or
its affiliates); Harmut Giesecke, Senior Vice President and Director of
Capital International, Inc., has had 26 years experience as an investment
professional (24 years with CGTC or its affiliates); Nancy Kyle, Senior Vice
President of CGTC, has had 24 years experience as an investment professional
(7 years with CGTC or its affiliates; from 1980 to 1990, Ms. Kyle was managing
director of J. P. Morgan Investment Management, Inc.); John McIlwraith, Senior
Vice President of CGTC, has had 28 years experience as an investment
professional (14 years with CGTC or its affiliates); Robert Ronus, President
of CGTC, has had 29 years experience as an investment professional (23 years
with CGTC or its affiliates); and Nilly Sikorsky, Director of The Capital
Group Companies, Inc., has had 35 years experience as an investment
professional, all of which was with CGTC or its affiliates.
Opportunity Fund. MFSI continuously manages the investment portfolio of the
Small Cap Equity Portfolio pursuant to a Sub-Advisory Agreement with the
Manager. For its services, the Small Cap Equity Sub-Adviser is paid a fee by
the Small Cap Equity 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 Small Cap Equity Sub-Adviser not only to make investment
decisions for the Small Cap Equity Portfolio, but also to place purchase and
sale orders for the portfolio transactions of the Portfolio. See "Portfolio
Transactions."
The Small Cap Equity 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 $69.4 billion on behalf of
approximately 2.7 million investor accounts as of November 30, 1997. As of
such date, the MFS organization managed approximately $44.2 billion of assets
invested in equity securities, approximately $20.1 billion of assets invested
in fixed income securities, and $4.1 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 is a
subsidiary of Sun Life of Canada (U.S.) Holdings, Inc., 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.
The portfolio managers of the Small Cap Equity Portfolio are John W. Ballen
and Brian Stack, Executive Vice President and Vice President respectively, of
the Small Cap Equity Sub-Adviser. Mr. Ballen has been employed as a portfolio
manager by the Small Cap Equity Sub-Adviser or MFS since 1984. Mr. Stack has
been employed as a portfolio manager or analyst by the Small Cap Equity Sub-
Adviser or MFS since 1993.
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 Institutional Trust, MFS/Sun Life Series Trust 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 Small Cap Equity 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 Shares of the
Funds 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. Such compensation may include financial assistance to
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising campaigns regarding one or
more Funds, and/or other dealer-sponsored special events. In some instances,
this compensation will be made available only to certain dealers whose
representatives have sold a significant amount of such Shares. Compensation
may include payment for travel expenses, including lodging, incurred in
connection with trips taken by invited registered representatives and members
of their registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. None of the aforementioned compensation is paid by any Fund or its
Shareholders.
Pursuant to the Distribution Plans adopted by the Trust, the Distributor is
reimbursed from the Funds monthly for costs and expenses incurred by the
Distributor in connection with the distribution of Shares of the Funds and for
the provision of certain shareholder services with respect to the Shares.
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.
Pursuant to the Class A Plan, the amount of their reimbursement from each Fund
may not exceed on an annual basis 0.25% of the average daily net assets of the
Fund represented by Investor Shares outstanding during the period for which
payment is being made. Pursuant to both the Class B Plan and the Class C Plan,
the amount of this reimbursement from each Fund for distribution related
activities (other than service fees) may not exceed on an annual basis 0.75%
of the average daily net assets of each Fund represented by Class B Shares and
Class C Shares, respectively, outstanding during the period for which payment
is being made. The aggregate fees paid to the Distributor pursuant to the
Class B Plan and Class C Plan, respectively, and to Shareholder Servicing
Agents pursuant to the Administrative Services Plan will not exceed on an
annual basis 1.00% of each Fund's average daily net assets represented by
Class B Shares and Class C Shares, respectively, 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
Funds made pursuant to the Distribution Plans is contingent upon the Board of
Trustees' approval. The Funds are not liable for distribution and shareholder
servicing expenditures made by the Distributor in any given year in excess of
the maximum amount payable under the Distribution Plans in that year.
ADMINISTRATIVE SERVICES PLAN
The Trust has adopted an Administrative Services Plan with respect to Shares
of the Funds 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 Administration Agreement, BISYS provides the Funds with
general office facilities and supervises the overall administration of the
Funds and the Portfolios including, among other responsibilities, assisting in
the preparation and filing of all documents required for compliance by the
Funds and the Portfolios with applicable laws and regulations and arranging
for the maintenance of books and records of the Funds and the Portfolios. For
its services to the New York Tax-Free Bond Fund and Equity Fund, BISYS
receives from each Fund fees payable monthly equal on an annual basis (for the
Fund's then-current fiscal year) to 0.10% of the Fund's average daily net
assets up to $1 billion; 0.08% of the next $1 billion of such assets; and
0.07% of such assets in excess of $2 billion. For its services to the Bond
Fund, Overseas Equity Fund and Opportunity Fund, BISYS receives from each 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 Portfolios, BISYS
(Ireland) receives from each 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 a 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
The Trust has entered into Transfer Agency Agreements with each of Investors
Bank & Trust Company ("IBT") and BISYS pursuant to which IBT acts as transfer
agent for the Funds with respect to the Investor Shares and BISYS acts as
transfer agent for the Funds with respect to the Class B Shares and the Class
C Shares (the "Transfer Agents"), and the Portfolio Trust has entered into a
Transfer Agent Agreement with Investors Fund Services (Ireland) Limited (also
a "Transfer Agent"). The Transfer Agents maintain an account for each
shareholder of the Funds and investor in the Portfolios, perform other
transfer agency functions, and act as dividend disbursing agent for the Funds.
Pursuant to respective Custodian Agreements, IBT also acts as the custodian of
the foreign assets of the Funds and the Portfolios and Republic acts as
custodian of the domestic assets of the Funds and the Portfolios (the
"Custodians"). The Portfolio Trust's Custodian Agreements provide that the
Custodians may use the services of sub-custodians with respect to the
Portfolios. The Custodians' responsibilities include safeguarding and
controlling each Fund's cash and each Portfolio's cash and securities, and
handling the receipt and delivery of securities, determining income and
collecting interest on each 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 each Portfolio. Securities held for
the Portfolios may be deposited into the Federal Reserve-Treasury Department
Book Entry System or the Depositary Trust Company. The Custodians do not
determine the investment policies of the Funds or the Portfolios or decide which
securities will be purchased or sold for the Portfolios. Assets of the
Portfolios may, however, be invested in securities of the Custodians and the
Portfolio Trust may deal with the Custodians as principal in securities
transactions for the Portfolios. For their services, IBT and Republic receive
such compensation as may from time to time be agreed upon by them 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 Funds; 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 shareholders of the Funds;
receives, tabulates and transmits to the Trust proxies executed by
shareholders with respect to meetings of shareholders of the Funds 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 each 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. The aggregate fees
paid to the Distributor pursuant to the Class B Plan and Class C Plan,
respectively, and to Shareholder Servicing Agents pursuant to the
Administrative Services Plan will not exceed on an annual basis 1.00% of each
Fund's average daily net assets represented by Class B Shares and Class C
Shares, respectively, 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 Funds. The Trust engages banks as Shareholder
Servicing Agents on behalf of the Funds 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 Funds 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 Funds would suffer any adverse financial
consequences as a result of these occurrences.
OTHER EXPENSES
The Funds bear all costs of their operations other than expenses
specifically assumed by the Distributor, Manager, Advisor or the Sub-Advisers.
See "Management of the Trust and the Portfolio Trust -- Expenses and Expense
Limits" in the Statements of Additional Information. Expenses attributable to
the Investor Shares, Class B Shares or Class C Shares of the Funds shall be
attributed, respectively, to the Investor Shares, Class B Shares or Class C
Shares of the Funds only. Investor Share Expenses, Class B Share Expenses or
Class C Share Expenses must include payments made pursuant to their respective
Distribution Plan and shareholder servicing agent fees paid pursuant to the
Administrative Services Plan. Trust expenses directly attributable to a Fund
are charged to that Fund; other expenses are allocated proportionately among
all the portfolios in the Trust in relation to the net assets of each
portfolio.
PORTFOLIO TRANSACTIONS
To the extent consistent with applicable legal requirements, the Sub-
Advisers may place orders for the purchase and sale of portfolio investments
for the Portfolios with Republic New York Securities Corporation, subject to
obtaining best price and execution for a particular transaction. See the
Statements of Additional Information.
CLASSES OF SHARES
In addition to the Investor Shares, Class B Shares and Class C Shares of the
New York Tax-Free Bond Fund and Equity Fund, the Trust currently offers one
other class of shares of these Funds, the Class Y shares (the "Adviser
Shares"), pursuant to a separate prospectus. Adviser Shares may have different
class expenses, which may affect performance. Investors may obtain information
concerning other classes of shares of the New York Tax-Free Bond Fund and
Equity Fund directly from their Shareholder Servicing Agent or securities
broker, or by calling 1-800-782-8183.
The Investor Shares, Class B Shares and Class C Shares each have exclusive
voting rights with respect to the Class A Plan, the Class B Plan and Class C
Plan, respectively.
DETERMINATION OF NET ASSET VALUE
The net asset value of a particular share in a Fund 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 each Fund's net assets
(i.e., the value of its investment in its corresponding Portfolio, if
applicable, 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 each Fund's investment in its corresponding Portfolio, if
applicable, 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 a Fund's investment in its corresponding
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 in a Fund's portfolio or held by a 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
Distibutor ("Securities Brokers"). Shares may be purchased at their net asset
value next determined after an order is transmitted to and accepted by the
Transfer Agent or is received by a Shareholder Servicing Agent or a Securities
Broker if it is transmitted to and accepted by the Transfer Agent plus a
maximum sales charge of 3.50% for Investor Shares of the Equity Fund, Overseas
Equity Fund and Opportunity Fund or 2.75% for Investor Shares of the Bond Fund
and New York Tax-Free Bond Fund. Investor Shares of the Funds are sold subject
to a sales charge under most conditions. See "Sales Charges -- Investor
Shares" below. Class B Shares and Class C Shares of the Funds are not subject
to a sales charge when they are purchased. Class B Shares and Class C Shares,
however, may be subject to a contingent deferred sales charge when they are
redeemed. See "Contingent Deferred Sales Charge -- Class B Shares" and "Level
Load Alternative -- Class C Shares" below.
Purchases are effected on the same day the purchase 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. The Trust intends the Funds to be as fully
invested at all times as is reasonably practicable in order to enhance the
yield on their assets. Each Shareholder Servicing Agent or Securities Broker
is responsible for and required to promptly forward orders for shares to the
Transfer Agent.
While there is no sales load on purchases of Class B Shares and Class C
Shares, the Distributor may receive fees from the Funds. See "Management of
the Trust -- Distributor and Sponsor." Other funds which have investment
objectives similar to those of the Funds 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 Transfer Agent.
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 at net asset value without a sales charge for Shares of the
same class offered with the same or lower sales charge by any of the Trust's
other Funds. Exchanges for Shares with a higher sales charge may be made upon
payment of the sales charge differential. An exchange of Class B Shares or
Class C Shares will not affect the holding period of the Class B Shares or
Class C Shares for purposes of determining the CDSC, if any, upon redemption,
or, with respect to Class B Shares, the time of conversion to Investor Shares.
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 -- [name of
the 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 custodian bank of the Funds 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
([name of the Fund], account name, account #)
The wire order must specify which 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 minimum in monthly, quarterly, semi-annual or
annual intervals) in a 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 a 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 each 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 a 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).
SALES CHARGES
INVESTOR SHARES
The public offering price of the Investor Shares of the Funds equals net
asset value plus the applicable sales charge. BISYS receives this sales charge
as distributor and may reallow it as dealer discounts and brokerage
commissions as follows:
<TABLE>
<CAPTION>
EQUITY FUND, OVERSEAS EQUITY FUND
AND OPPORTUNITY FUND
---------------------------------------------------------
SALES CHARGE AS:
---------------------------------------------------------
DISCOUNT TO
SELECTED
DEALERS AS
A PERCENTAGE
SIZE OF TRANSACTION % OF % OF NET OF OFFERING
AT OFFERING PRICE OFFERING PRICE AMOUNT INVESTED PRICE
- ----------------- -------------- --------------- -----
<S> <C> <C> <C>
Less than $50,000 3.50% 3.63% 3.00%
$50,000 but less than $100,000 2.50% 2.56% 2.00%
$100,000 but less than $250,000 1.50% 1.52% 1.15%
$250,000 but less than $500,000 1.00% 1.01% 0.75%
$500,000 and over 0.00% 0.00% 0.00%
<CAPTION>
BOND FUND AND
NEW YORK TAX-FREE BOND FUND
---------------------------------------------------------
SALES CHARGE AS:
---------------------------------------------------------
DISCOUNT TO
SELECTED
DEALERS AS
A PERCENTAGE
SIZE OF TRANSACTION % OF % OF NET OF OFFERING
AT OFFERING PRICE OFFERING PRICE AMOUNT INVESTED PRICE
- ----------------- -------------- --------------- -----
<S> <C> <C> <C>
Less than $50,000 2.75% 2.83% 2.25%
$50,000 but less than $100,000 1.75% 1.78% 1.40%
$100,000 but less than $250,000 1.25% 1.27% 1.00%
$250,000 but less than $500,000 1.00% 1.01% 0.75%
$500,000 and over 0.00% 0.00% 0.00%
</TABLE>
An investor may obtain reduced sales charges on Investor Shares under the
circumstances described below under "Reduced Sales Charges -- Investor
Shares."
Existing Shareholders. Shareholders of the Funds who are shareholders as of
December 31, 1997 will be grandfathered with respect to the Funds and will be
exempt from paying sales charges on future purchases of Investor Shares of the
Funds.
CLASS B SHARES
Class B Shares of the Funds may be purchased for individual accounts only in
amounts of less than $500,000. There is no sales charge imposed upon purchases
of Class B Shares, but investors may be subject to a CDSC of up to 4.0% when
Class B Shares of the Equity Fund, Overseas Equity Fund and Opportunity Fund
are redeemed less than four years after purchase, or of up to 3.0% when Class
B Shares of the Bond Fund and New York Tax Free Bond Fund are redeemed less
than three years after purchase. See "Contingent Deferred Sales Charge
("CDSC") - Class B Shares" below.
CLASS C SHARES
Class C Shares are sold at net asset value with no initial sales charge but
are subject to a CDSC of 1.0% on redemptions made within one year after
purchase. This CDSC may be waived for certain redemptions. Class C Shares are
subject to an annual 12b-1 fee of up to 0.75% of the average daily net assets of
the Class C Shares. The Class C Shares' distribution fee may cause that Class to
have higher expenses and pay lower dividends than Investor Shares. See "Level
Load Alternative -- Class C Shares."
REDUCED SALES CHARGES - INVESTOR SHARES
Discount for Customers of Republic National Bank of New York.
Customers of Republic National Bank of New York and its affiliates meeting
certain criteria may purchase shares of the Funds at a discounted sales
charge. The maximum sales charge, in the case of the Equity Fund, Overseas
Equity Fund and Opportunity Fund, will be 3.25% of the public offering price
of the Investor Shares and, in the case of the Bond Fund and New York Tax-Free
Bond Fund, will be 2.50% of the public offering price.
<TABLE>
<CAPTION>
EQUITY FUND, OVERSEAS EQUITY FUND
AND OPPORTUNITY FUND
---------------------------------------------------------
SALES CHARGE AS:
---------------------------------------------------------
DISCOUNT TO
SELECTED
DEALERS AS
A PERCENTAGE
SIZE OF TRANSACTION % OF % OF NET OF OFFERING
AT OFFERING PRICE OFFERING PRICE AMOUNT INVESTED PRICE
- ----------------- -------------- --------------- -----
<S> <C> <C> <C>
Less than $50,000 3.25% 3.36% 2.75%
$50,000 but less than $100,000 2.25% 2.30% 1.75%
$100,000 but less than $250,000 1.25% 1.27% 0.90%
$250,000 but less than $500,000 0.75% 0.76% 0.50%
$500,000 and over 0.00% 0.00% 0.00%
<CAPTION>
BOND FUND AND
NEW YORK TAX-FREE BOND FUND
---------------------------------------------------------
SALES CHARGE AS:
---------------------------------------------------------
DISCOUNT TO
SELECTED
DEALERS AS
A PERCENTAGE
SIZE OF TRANSACTION % OF % OF NET OF OFFERING
AT OFFERING PRICE OFFERING PRICE AMOUNT INVESTED PRICE
- ----------------- -------------- --------------- -----
<S> <C> <C> <C>
Less than $50,000 2.50% 2.56% 2.00%
$50,000 but less than $100,000 1.50% 1.52% 1.15%
$100,000 but less than $250,000 1.00% 1.01% 0.75%
$250,000 but less than $500,000 0.75% 0.76% 0.50%
$500,000 and over 0.00% 0.00% 0.00%
</TABLE>
Sales Charge Waivers. The Distributor may waive sales charges for the
purchase of Investor Shares by or on behalf of (1) purchasers for whom
Republic or one of its affiliates acts in a fiduciary, advisory, custodial or
similar capacity, (2) employees and retired employees (including spouses,
children and parents of employees and retired employees) of Republic, BISYS
and any affiliates thereof, (3) Trustees of the Trust, (4) directors and
retired directors (including spouses and children of directors and retired
directors) of Republic and any affiliates thereof, (5) purchasers who use
proceeds from an account for which Republic or one of its affiliates acts in a
fiduciary, advisory, custodial or similar capacity, to purchase Investor
Shares of a Fund, (6) brokers, dealers and agents who have a sales agreement
with the Distributor, and their employees (and the immediate family members of
such individuals), (7) investment advisers or financial planners that have
entered into an agreement with the Distributor and that place trades for their
own accounts or the accounts of eligible clients and that charge a fee for
their services, and clients of such investment advisers or financial planners
who place trades for their own accounts if such accounts are linked to the
master account of the investment adviser or financial planner on the books and
records of a broker or agent that has entered into an agreement with the
Distributor, and (8) orders placed on behalf of other investment companies
distributed by BISYS, The BISYS Group, Inc., or their affiliated companies. In
addition, the Distributor may waive sales charges for the purchase of a Fund's
Investor Shares with the proceeds from the recent redemption of shares of a
non-money market mutual fund (except one of the other funds of the Trust) sold
with a sales charge. The purchase must be made within 60 days of the
redemption, and the Distributor must be notified in writing by the investor,
or by his or her financial institution, at the time the purchase is made. A
copy of the investor's account statement showing such redemption must
accompany such notice. To receive a sales charge waiver in conjunction with
any of the above categories, Shareholders must, at the time of purchase, give
the Transfer Agent or the Distributor sufficient information to permit
confirmation of qualification.
Concurrent Purchases. For purposes of qualifying for a lower sales charge,
investors have the privilege of combining "concurrent purchases" of Investor
Shares of the Funds. For example, if a Shareholder concurrently purchases
Investor Shares in one of the Funds of the Trust sold with a sales charge at
the total public offering price of $25,000 and Investor Shares in another Fund
sold with a sales charge at the total public offering price of $75,000, the
sales charge would be that applicable to a $100,000 purchase as shown in the
appropriate table above. The investor's "concurrent purchases" described above
shall include the combined purchases of the investor, the investor's spouse
and children under the age of 21 and the purchaser's retirement plan accounts.
To receive the applicable public offering price pursuant to this privilege,
Shareholders must, at the time of purchase, give the Transfer Agent or the
Distributor sufficient information to permit confirmation of qualification.
This privilege, however, may be modified or eliminated at any time or from
time to time by the Trust without notice.
Letters of Intent. An investor may obtain a reduced sales charge by means
of a written Letter of Intent which expresses the intention of such investor
to purchase Investor Shares of the Funds at a designated total public offering
price within a designated 13-month period. Each purchase of Investor Shares
under a Letter of Intent will be made at the net asset value plus the sales
charge applicable at the time of such purchase to a single transaction of the
total dollar amount indicated in the Letter of Intent (the "Applicable Sales
Charge"). A Letter of Intent may include purchases of Investor Shares made not
more than 90 days prior to the date such investor signs a Letter of Intent;
however, the 13-month period during which the Letter of Intent is in effect
will begin on the date of the earliest purchase to be included. An investor
will receive as a credit against his/her purchase(s) of Investor Shares during
this 90-day period at the end of the 13-month period, the difference, if any,
between the sales load paid on previous purchases qualifying under the Letter
of Intent and the Applicable Sales Charge.
A Letter of Intent is not a binding obligation upon the investor to purchase
the full amount indicated. The minimum initial investment under a Letter of
Intent is 5% of such amount. Investor Shares purchased with the first 5% of
such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
Investor Shares actually purchased if the full amount indicated is not
purchased, and such escrowed Investor Shares will be involuntarily redeemed to
pay the additional sales charge, if necessary. Dividends on escrowed Investor
Shares, whether paid in cash or reinvested in additional Investor Shares, are
not subject to escrow. The escrowed Investor Shares will not be available for
disposal by the investor until all purchases pursuant to the Letter of Intent
have been made or the higher sales charge has been paid. When the full amount
indicated has been purchased, the escrow will be released. To the extent that
an investor purchases more than the dollar amount indicated in the Letter of
Intent and qualifies for a further reduced sales charge, the sales charge will
be adjusted for the entire amount purchased at the end of the 13-month period.
The difference in sales charge will be used to purchase additional Investor
Shares of such Fund at the then current public offering price subject to the
rate of sales charge applicable to the actual amount of the aggregate
purchases. For further information about Letters of Intent, interested
investors should contact the Trust at 1-888-525-5757. This program, however,
may be modified or eliminated at any time or from time to time by the Trust
without notice.
Rights of Accumulation. Pursuant to the right of accumulation, investors
are permitted to purchase Investor Shares of the Funds at the public offering
price applicable to the total of (a) the total public offering price of the
Investor Shares of the Funds then being purchased plus (b) an amount equal to
the then current net asset value of the "purchaser's combined holdings" of the
Investor Shares of all of the Funds of the Trust sold with a sales charge.
Investor Shares sold to purchasers for whom Republic or one of its affiliates
acts in a fiduciary, advisory, custodial (other than retirement accounts),
agency, or similar capacity are not presently subject to a sales charge. The
"purchaser's combined holdings" described above shall include the combined
holdings of the purchaser, the purchaser's spouse and children under the age
of 21 and the purchaser's retirement plan accounts. To receive the applicable
public offering price pursuant to the right of accumulation, Shareholders
must, at the time of purchase, give the Transfer Agent or the Distributor
sufficient information to permit confirmation of qualification. This right of
accumulation, however, may be modified or eliminated at any time or from time
to time by the Trust without notice.
CONTINGENT DEFERRED SALES CHARGE ("CDSC") - CLASS B SHARES
Class B Shares of the Bond Fund and New York Tax-Free Bond Fund (the "Income
Funds") which are redeemed less than three years after purchase will be
subject to a declining CDSC. Class B Shares of the Equity Fund, Overseas
Equity Fund and Opportunity Fund (the "Equity Funds") which are redeemed less
than four years after purchase will be subject to such a charge. The CDSC
levied upon redemptions of Class B Shares will be as follows:
INCOME FUNDS
CDSC AS PERCENTAGE OF
THE LESSER OF NET
ASSET VALUE AT THE
HOLDING PERIOD TIME OF PURCHASE
SINCE PURCHASE DATE OR REDEMPTION
- ------------------- ---------------
1 year or less 3.00%
More than 1 year up to 2 years 2.00%
More than 2 years up to 3 years 1.00%
More than 3 years none
EQUITY FUNDS
CDSC AS PERCENTAGE OF
THE LESSER OF NET
ASSET VALUE AT THE
HOLDING PERIOD TIME OF PURCHASE
SINCE PURCHASE DATE OR REDEMPTION
- ------------------- ---------------
1 year or less 4.00%
More than 1 year up to 2 years 3.00%
More than 2 years up to 3 years 2.00%
More than 3 years up to 4 years 1.00%
More than 4 years none
The CDSC will be based on the lesser of the net asset value at the time of
purchase of the Class B Shares being redeemed or the net asset value of such
Shares at the time of redemption. Accordingly, a CDSC will not be imposed on
amounts representing increases in net asset value above the net asset value at
the time of purchase. In addition, a CDSC will not be assessed on Class B
Shares purchased through reinvestment of dividends or capital gains
distributions, or that are purchased by "Institutional Investors" such as
corporations, pension plans, foundations, charitable institutions, insurance
companies, banks and other banking institutions, and non-bank fiduciaries.
Solely for purposes of determining the amount of time which has elapsed from
the time of purchase of any Class B Shares, all purchases during a month will
be aggregated and deemed to have been made on the last day of the month. In
determining whether a CDSC is applicable to a redemption, the calculation will
be made in the manner that results in the lowest possible charge being
assessed. In this regard, it will be assumed that the redemption is first of
Class B Shares held for more than three years for Income Funds or four years
for Equity Funds or Class B Shares acquired pursuant to reinvestment of
dividends or distributions.
For example, assume an investor purchased 100 Class B Shares with a net
asset value of $10 per share (i.e., at an aggregate net asset value of $1,000)
and in the eleventh month after purchase, the net asset value per share is $12
and, during such time, the investor has acquired five additional Class B
Shares through dividend reinvestment. If at such time the investor makes this
first redemption of 50 Class B Shares (producing proceeds of $600), five of
such Shares will not be subject to the charge because of dividend
reinvestment. With respect to the remaining 45 Class B Shares being redeemed,
the charge will be applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share.
The CDSC is waived on redemptions of Class B Shares (i) following the death
or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a Shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an IRA or a Custodial Account
under Code Section 403(b)(7) to a Shareholder who has reached age 70 1/2, and
(iii) to the extent the redemption represents the minimum distribution from
retirement plans under Code Section 401(a) where such redemptions are
necessary to make distributions to plan participants.
LEVEL LOAD ALTERNATIVE -- CLASS C SHARES
Class C Shares are sold at net asset value without an initial sales charge
but are subject to a CDSC of 1.0% on most redemptions made within one year
after purchase (calculated from the last day of the month in which the shares
were purchased). The CDSC will be assessed on an amount equal to the lesser of
the current market value or the cost of the shares being redeemed. The CDSC
will not be imposed in the circumstances set forth above in the section
"Contingent Deferred Sales Charge ("CDSC") -- Class B Shares" except that the
references to three years and four years in the first paragraph of that
section shall mean one year in the case of Class C Shares. Class C Shares are
subject to an annual 12b-1 fee of up to 0.75% of the average daily net assets
of the Class. Unlike Class B Shares, Class C Shares have no conversion feature
and, accordingly, an investor that purchases Class C Shares will be subject to
12b-1 fees applicable to Class C Shares for an indefinite period subject to
annual approval by each Fund's Board of Trustees and regulatory limitations.
The higher fees mean a higher expense ratio, so Class C Shares pay
correspondingly lower dividends and may have a lower net asset value than
Investor Shares. A Fund will not normally accept any purchase of Class C Shares
in the amount of $500,000 or more. Broker-dealers and other financial
intermediaries whose clients have purchased Class C Shares may receive a
trailing commission up to 1.00% of the average daily net asset value of such
shares on an annual basis held by their clients more than one year from the date
of purchase. Trailing commissions will commence immediately with respect to
shares eligible for exemption from the CDSC normally applicable to Class C
Shares.
FACTORS TO CONSIDER WHEN SELECTING INVESTOR SHARES, CLASS B SHARES OR CLASS C
SHARES OF THE FUNDS
Before purchasing Investor Shares, Class B Shares or Class C Shares of a
Fund, investors should consider whether, during the anticipated life of their
investment in the Fund, the accumulated Rule 12b-1 fees and potential CDSC on
Class B Shares or Class C Shares would be less than the initial sales charge
and accumulated Rule 12b-1 fees on Investor Shares purchased at the same time,
and to what extent such differential would be offset by the higher yield of
Investor Shares. In this regard, to the extent that the sales charge for the
Investor Shares is waived or reduced by one of the methods described above,
investments in Investor Shares become more desirable. The Trust will refuse
all purchase orders for individual accounts for Class B Shares and Class C
Shares of over $500,000.
Although Investor Shares are subject to Rule 12b-1 fees, they are not
subject to the higher Rule 12b-1 fees applicable to Class B Shares and Class C
Shares. For this reason, Investor Shares can be expected to pay
correspondingly higher dividends per share. However, because initial sales
charges are deducted at the time of purchase, purchasers of Investor Shares
that do not qualify for waivers of or reductions in the initial sales charge
would have less of their purchase price initially invested in a Fund than
purchasers of Class B Shares or Class C Shares.
EXCHANGE PRIVILEGE
The exchange privilege enables Shareholders of Investor Shares, Class B
Shares or Class C Shares of the Funds (including Shares acquired through
reinvestment of dividends and distributions on such Shares) to exchange those
Shares at net asset value without any sales charge for Shares of the same
class offered with the same or lower sales charge by any of the Trust's other
Funds, provided that the amount to be exchanged meets the applicable minimum
investment requirements and the exchange is made in states where it is legally
authorized. Exchanges for Shares of one of the Trust's other Funds with a
higher sales charge may be made upon payment of the sales charge differential.
An exchange of Class B Shares or Class C Shares will not affect the holding
period of the Class B Shares or Class C Shares for purposes of determining the
CDSC, if any, upon redemption or, in the case of Class B Shares, the time of
conversion to Investor Shares, both of which, in the case of Class B Shares,
shall be determined in accordance with the schedule applicable to the Class B
Shares originally purchased.
An exchange is considered a sale of Shares and may result in a capital gain
or loss for federal income tax purposes.
A Shareholder wishing to exchange his or her Shares may do so by contacting
the Trust at 888-525-5757, by contacting their broker-dealer or by providing
written instructions to the Distributor.
CONVERSION FEATURE
Five years after purchase for the Income Funds and six years after purchase
for the Equity Funds, Class B Shares will convert automatically to Investor
Shares. The purpose of the conversion is to relieve a holder of Class B Shares
of the higher ongoing expenses charged to those Shares, after enough time has
passed to allow the Distributor to recover approximately the amount it would
have received if a front-end sales charge had been charged. The conversion
from Class B Shares to Investor Shares takes place at net asset value, as a
result of which an investor receives dollar-for-dollar the same value of
Investor Shares as he or she had of Class B Shares. For the Income Funds, the
conversion occurs five years after the beginning of the calendar month in
which the Class B Shares are purchased. For the Equity Funds, the conversion
occurs six years after the beginning of the calendar month in which the Class
B Shares are purchased. As a result of the conversion, the converted Shares
are relieved of the Rule 12b-1 fees borne by Class B Shares, although they are
subject to the Rule 12b-1 fees borne by Investor Shares.
RETIREMENT PLANS
Shares of the Funds, with the exception of the New York Tax-Free Bond Fund,
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. The tax law
governing tax-deferred plans is complex and changes frequently. Before
investing in the Funds through one or more of these plans, an investor should
consult his or her tax adviser.
INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Funds, with the exception of the New York Tax-Free Bond Fund,
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, in whole or in part, 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 of the Funds, with the
exception of the New York Tax-Free Bond Fund, 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 Funds, with the exception of the New York Tax-Free Bond Fund, may be
used as vehicles 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 Funds may also be used as
vehicles 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. Investor Shares may be redeemed without
charge while Class B Shares and Class C Shares may be subject to a contingent
deferred sales charge. See "Contingent Deferred Sales Charge (CDSC) -- Class B
Shares" and "Level Load Alternative -- Class C Shares" above. 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 a Fund in federal funds
on the next Fund Business Day following the date 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 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. A 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 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 applicable 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
For the Bond Fund and the New York Tax-Free Bond Fund the Trust declares all
of each Fund's net investment income daily as a dividend to the Fund
shareholders. Dividends substantially equal to all of each Fund's net
investment income earned during the month are distributed in that month to
each Fund's shareholders of record. For the Equity Fund, dividends equal to
all of the Fund's net investment income earned are distributed quarterly to
the Fund's shareholders of record. For the Overseas Equity Fund and the
Opportunity Fund, such dividends are distributed annually and semi-annually,
respectively. 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.
Each Fund's net realized 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).
With respect to the Bond Fund, certain mortgage-backed securities may
provide for periodic or unscheduled payments of principal and interest as the
mortgages underlying the securities are paid or prepaid. However, such
principal payments (not otherwise characterized as ordinary discount income or
bond premium expense) will not normally be considered as income to the Fixed
Income Portfolio and therefore will not be distributed as dividends to the
Bond Fund shareholders. Rather, these payments on mortgage-backed securities
generally will be reinvested by the Fixed Income Portfolio in accordance with
its investment objective and policies.
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 Funds, including the status of distributions from the Funds under
applicable state or local law and, with respect to the New York Tax-Free Bond
Fund, the possible applicability of a federal alternative minimum tax to a
portion of the distributions of the Fund.
Each year, the Trust intends to qualify the Funds and elect that the Funds
be treated as a separate "regulated investment company" under Subchapter M of
the Code. To so qualify, the Funds 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 Funds
are distributed to shareholders in accordance with the timing requirements
imposed by the Code, generally no federal (or, in the case of the New York
Tax-Free Bond Fund, New York State and New York City) income or excise taxes
will be paid by the Funds on amounts so distributed.
Dividends and capital gains distributions, if any, paid to shareholders are
treated in the same manner for federal and, in the case of the New York Tax-
Free Bond Fund, New York State and New York City income tax purposes whether
received in cash or reinvested in additional shares of the Funds. Shareholders
must treat dividends, other than long-term capital gain dividends, as ordinary
income. Distributions of net capital gain (other than short-term capital
gain), whether received in cash or reinvested in Fund shares, will be taxable
to shareholders at the applicable capital gains rate (generally a maximum rate
of 20% or 28%, depending upon the Fund's holding period in the assets sold),
regardless of how long a shareholder has held fund shares. 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.
NEW YORK TAX-FREE BOND FUND
Federal Income Taxes. After the end of each calendar year, each shareholder
receives a statement setting forth the federal, New York State and New York
City personal income tax status of all dividends and capital gains
distributions, if any, made during that calendar year.
In accordance with the New York Tax-Free Bond Fund's investment objective,
it is expected that most of the Fund's net income will be attributable to
interest from Municipal Obligations and, as a result, most of the dividends to
Fund shareholders will be designated by the Trust as "exempt-interest
dividends" under the Code, which may be treated as items of interest
excludible from a shareholder's gross income for purposes of the regular
federal income tax. Since the preservation of capital and liquidity are
important aspects of the New York Tax-Free Bond Fund's investment objective,
the Adviser may from time to time invest a portion of the Fund's assets in
obligations the interest on which is not exempt from regular federal income
taxes. Moreover, dividends attributable to interest on certain Municipal
Obligations which may be purchased for the New York Tax-Free Bond Fund may be
treated as a tax preference item for shareholders potentially subject to an
alternative minimum tax and all exempt-interest dividends may increase a
corporate shareholder's alternative minimum tax or environmental tax. Although
it is not intended, it is possible that the New York Tax-Free Bond Fund may
realize short-term or long-term capital gains or losses from its portfolio
transactions.
Any short-term capital loss realized upon the redemption of shares within
six months from the date of their purchase will be disallowed to the extent of
any exempt-interest dividends received during such period. In addition, any
short-term capital loss realized upon the redemption of shares within six
months from the date of their purchase will be treated as long-term capital
loss (rather than short-term) to the extent of the long-term capital gain
allocable to the redeemed shares.
Shareholders redeeming shares after tax-exempt income has been accrued but
not declared as a dividend should know that the portion of redemption proceeds
representing such income may be subject to taxation as a capital gain even
though it would have been tax-exempt had it been declared as a dividend prior
to redemption. Redemption of shares of the New York Tax-Free Bond Fund can be
effected with the least adverse tax consequences immediately after the first
business day of any month (the time at which the dividend representing
substantially all the income accrued for the previous month is declared).
The Code provides that interest on indebtedness incurred, or continued, to
purchase or carry shares of the New York Tax-Free Bond Fund is not deductible.
Further exempt-interest dividends are taken into account in calculating the
amount of social security and railroad retirement benefits that may be subject
to federal income tax. Finally, entities or persons who may be "substantial
users" (or persons related to "substantial users") of facilities financed by
industrial development or private activity bonds should consult their tax
advisors before purchasing shares of the New York Tax-Free Bond Fund.
State and Local Taxes. The exemption for federal income tax purposes of
dividends derived from interest on Municipal Obligations does not necessarily
result in an exemption under the income or other tax laws of any state or
local taxing authority. However, to the extent that dividends are derived from
interest on New York Municipal Obligations, the dividends will also be
excluded from the gross income of a New York individual resident shareholder
for New York State and New York City personal income tax purposes.
DIVIDENDS FROM THE NEW YORK TAX-FREE BOND FUND ARE NOT EXCLUDED IN
DETERMINING NEW YORK STATE OR NEW YORK CITY FRANCHISE TAXES ON CORPORATIONS
AND FINANCIAL INSTITUTIONS.
OTHER FUNDS
Foreign Tax Withholding. Income received by the Funds or Portfolios from
sources within foreign countries may be subject to withholding and other
income or similar taxes imposed by such countries. In the case of the Bond
Fund, Overseas Equity Fund and Opportunity Fund, if more than 50% of the value
of a Portfolio's total assets at the close of its taxable year consists of
securities of foreign corporations, the corresponding 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 taxable years for the Bond
Fund, Overseas Equity Fund and Opportunity Fund whether the foreign taxes paid
by the Funds or Portfolios will be treated as paid by the shareholders of each
Fund 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 a
Fund's election to treat any foreign taxes paid by it as paid by 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 Funds 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 Funds may require, (2) the Internal Revenue Service
notifies the shareholder or the Funds 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 a Fund attributable to that 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 Funds)
qualifies as a "regulated investment company" for purposes of Massachusetts
law.
For additional information relating to the tax aspects of investing in the
Funds, see the Statements 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. Currently, the
Bond Fund, Overseas Equity Fund and Opportunity Fund are divided into three
classes of shares and the New York Tax-Free Bond Fund and Equity Fund are
divided into four classes of shares.
Each share of each class, if applicable, of a 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. Shares of each class of a series represent an equal pro rata
interest in such series and, generally, have identical voting, dividend,
liquidation, and other rights, preferences, powers, terms and conditions,
except that: (a) each class shall have a different designation; (b) each class
of shares shall bear any class expenses; and (c) each class shall have
exclusive voting rights on any matter submitted to shareholders that relates
solely to its distribution arrangement, and each class shall have separate
voting rights on any matter submitted to shareholders in which the interests
of one class differ from the interests of any other class.
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 Funds 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 a 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's Declaration of Trust provides that, at any meeting of
shareholders of the Funds or the Trust, a Shareholder Servicing Agent may vote
any shares as to which such Shareholder Servicing Agent is the agent of record
and which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares
otherwise represented at the meeting in person or by proxy as to which such
Shareholder Servicing Agent is the agent of record. Any shares so voted by a
Shareholder Servicing Agent will be deemed represented at the meeting for
purposes of quorum requirements.
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 Portfolios are separate series of the Portfolio
Trust, which currently has only these three series. The Portfolio Trust's
Declaration of Trust provides that the Bond Fund, Overseas Equity Fund and
Opportunity 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 their
respective Portfolio. However, the risk of a 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 Bond Fund,
Overseas Equity Fund and Opportunity Fund nor their shareholders will be
adversely affected by reason of the investment of all of the Assets of the
Funds in their corresponding Portfolios.
Each investor in the Portfolios, including the Bond Fund, Overseas Equity
Fund and Opportunity Fund, may add to or reduce its investment in the
Portfolios 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 Portfolios is determined by multiplying the net asset value of each
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
Total return and yield data for the Funds may from time to time be included
in advertisements about the Trust. The Trust may also include tax equivalent
yield data for the New York Tax-Free Bond Fund. "Total return" is expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in a 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 a 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 "tax equivalent yield" refers to the yield that a
fully taxable bond fund would have to generate, given a stated aggregate state
and local income tax rate, in order to produce an after-tax yield equivalent
to that of the New York Tax-Free Bond Fund. The use of a tax equivalent yield
allows investors to compare the yield of the New York Tax-Free Bond Fund, all
or a significant portion of which is exempt from regular federal, New York
State and New York City personal income taxes, with yields of funds which are
not so tax exempt. See the Statement of Additional Information for further
information concerning the calculation of yield and total return data.
Historical total return information for any period or portion thereof prior
to the establishment of the Bond Fund, Overseas Equity Fund or Opportunity
Fund will be that of its corresponding Portfolio, adjusted to assume that all
charges, expenses and fees of the Fund and its respective Portfolio which are
presently in effect were deducted during such period.
Since these total return, yield and tax equivalent yield quotations are
based on historical earnings and since a Fund's total return yield and tax
equivalent yield fluctuate from day to day, these quotations should not be
considered as an indication or representation of a Fund's total return, yield
or tax equivalent yield, if applicable, in the future. Any performance
information should be considered in light of a 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.
PRIOR PERFORMANCE
The following table sets forth performance information for the Bond Fund,
Equity Fund, Overseas Equity Fund and Opportunity Fund, and information on the
prior performance of the Sub-Advisers for those Funds and, where applicable, the
corresponding Portfolios. The Sub-Adviser prior performance information is a
composite of the average annual total returns of all institutional separate
accounts managed by the Sub-Advisers that have investment objectives, policies
and restrictions substantially similar to the Funds (and corresponding
Portfolios), and which have been managed as the Funds (and corresponding
Portfolios) have been managed. In the case of the International Equity
Sub-Adviser, the composite also includes all institutional private accounts and
collective investment vehicles managed by the International Equity Sub-Adviser
that have investment objectives, policies and restrictions substantially similar
to the International Equity Portfolio, and which have been managed as the
International Equity Portfolio has been managed.
The composite data is provided to illustrate the past performance of the
Sub-Advisers in managing substantially similar accounts with substantially
similar investment objectives, strategies and policies as measured against the
specified market index and does not represent the performance of the Bond
Fund, Equity Fund, Overseas Equity Fund or Opportunity Fund or the Fixed
Income Portfolio, International Equity Portfolio or Small Cap Equity
Portfolio.
The institutional separate accounts and, in the case of the Overseas Equity
Fund, institutional private accounts and collective investment vehicles that
are included in each Sub-Adviser's composite are not subject to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the Fund and the Portfolio by the 1940 Act or the Code.
Consequently, the performance results of each Sub-Adviser's composite could
have been adversely affected if the institutional separate accounts included
in the composite had been regulated as investment companies under the federal
securities laws.
Returns for each period assume reinvestment of all net investment income,
are adjusted to assume that all charges, expenses and fees of each Fund and
each Portfolio which are currently in effect (as measured by the current
expense ratios of the Fund and the Portfolio before any expense
reimbursements) were deducted during such periods, and are calculated in
accordance with Securities and Exchange Commission guidelines. The investment
results of each Sub-Adviser's composite presented below are unaudited and are
not intended to predict or suggest the returns that might be experienced by
the Bond Fund, Equity Fund, Overseas Equity Fund and Opportunity Fund or an
individual investing in the Funds.
<PAGE>
FIXED INCOME SUB-ADVISOR
----------------------------------------
ANNUALIZED RETURNS
----------------------------------------
BOND FUND SUB-ADVISER SALOMON BIG
PERFORMANCE COMPOSITE+ INDEX(2)
----------- ---------- --------
1 Year(1) ............................ 7.62% 6.85% 11.53%
Since Portfolio Inception (1/9/95) ... 9.59% N/A* 10.65%
5 Years(1) ........................... N/A 5.40% 7.23%
10 Years(1) .......................... N/A 7.97% 9.35%
- ------------
(1) Through September 30, 1998.
(2) The Salomon Broad Investment Grade Bond Index is a market-capitalization-
based total return index containing U.S. fixed rate issues having a
maturity of greater than one year and at least $25 million outstanding.
The Salomon BIG Index includes Treasury, Government-sponsored, mortgage-
backed, and investment grade corporate issues.
+ If the expense ratio of the Fund after expense reimbursements were used as
the basis for adjustment, the Sub-Adviser composite average annual returns
would be 7.83% for one year, 6.36% for 5 years and 8.95% for 10 years.
* Sub-Advisor performance information is not available for this time period.
EQUITY SUB-ADVISORS
---------------------------------------------------------------
RUSSELL RUSSELL
EQUITY FUND ALLIANCE 1000 BRINSON 1000 RUSSELL
PERFORMANCE COMPOSITE GROWTH(2) COMPOSITE VALUE(3) 1000(4)
----------- --------- --------- --------- -------- -------
1 Year(1) ..... 4.30% 7.69% 11.11% 0.48% 3.60% 7.36%
Since
Inception+ ... 18.74% 23.24% 22.98% 20.65% 20.96% 22.00%
5 Years(1) .... N/A 19.11% 20.80% 18.01% 17.13% 18.99%
Since
12/31/87 ..... N/A 17.22% 17.57% 18.01% 16.68% 17.17%
- ------------
(1) Through September 30, 1998.
(2) The Russell 1000 Growth Index is an unmanaged index of those companies in
the Russell 1000 Index with higher price-to-book ratios and higher
forecasted growth values.
(3) The Russell 1000 Value Index is an unmanaged index of those companies in
the Russell 1000 Index with lower price-to-book ratios and lower
forecasted growth values.
(4) The Russell 1000 Index is an unmanaged index of the 1000 largest U.S.
companies (representing approximately 90% of the total market
capitalization) in the Russell 3000 Index, which represents approximately
98% of the U.S. equity market by capitalization.
+ Since Fund inception (8/1/95).
INTERNATIONAL EQUITY SUB-ADVISOR
----------------------------------------
ANNUALIZED RETURNS
----------------------------------------
OVERSEAS
EQUITY FUND SUB-ADVISOR EAFE
PERFORMANCE COMPOSITE+ INDEX(2)
----------- ---------- --------
1 Year(1) ............................ -14.16% -11.94% -8.12%
Since Portfolio Inception (1/9/95) ... 6.83% N/A* 5.73%
5 Years(1) ........................... N/A 7.67% 5.64%
10 Years(1) .......................... N/A 8.41% 5.40%
- ------------
(1) Through September 30, 1998.
(2) The EAFE Index includes 1,112 companies in twenty countries representing
the stock markets of Europe, Australia, New Zealand and the Far East. The
combined market capitalization of these companies represents approximately
60% of the aggregate market value of the stock exchanges. The EAFE Index
is capitalization weighted in U.S. dollars and includes dividends.
+ If the expense ratio of the Fund after expense reimbursements were used as
the basis for adjustment, the Sub-Adviser composite average annual returns
would be -11.72% for one year, 7.94% for 5 years and 8.68% for 10 years.
* Sub-Advisor performance information is not available for this time period.
SMALL CAP EQUITY SUB-ADVISOR
----------------------------------------
ANNUALIZED RETURNS
----------------------------------------
OPPORTUNITY
FUND SUB-ADVISOR RUSSELL 2000
PERFORMANCE COMPOSITE INDEX(2)
----------- --------- --------
1 Year(1) ............................ -14.26% -14.11% -19.02%
Since Portfolio Inception (9/4/96) ... 8.97% N/A* 5.73%
3 Years(1) ........................... N/A 10.89% 6.86%
- ------------
(1) Through September 30, 1998.
(2) The Russell 2000 Small Stock Index is an unmanaged index of the 2000
smallest companies (representing approximately 10% of the total market
capitalization) in the Russell 3000 Index, which represents approximately
98% of the U.S. equity market by capitalization.
* Sub-Advisor Performance information is not available for this time period.
Any performance information should be considered in light of each 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 Funds, 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, Columbus, Ohio 43219-3035.
THE YEAR 2000 ISSUE
The Funds rely extensively on various computer systems in carrying out their
business activities, including the computer systems employed by the Adviser, the
Sub-Advisers, the Administrator and Distributor, the Transfer Agents, and the
Custodians (collectively, the "Service Providers"). In this connection, the
Funds are aware of the so-called "Year 2000 Issue" which involves the potential
problems that may be confronted by computer systems users the day after December
31, 1999, when computers using date-sensitive software must be able to properly
identify the Year 2000 in their systems. In the event that a computer system
fails to make the proper identification of the Year 2000, this could result in a
system failure or miscalculations causing disruptions of operations such as
pricing errors and account maintenance failures. The Funds are working with the
Service Providers to take steps that are reasonably designed to address the Year
2000 Issue with respect to the computer systems relied upon by the Funds. The
Funds have no reason to believe that these steps will not be sufficient to avoid
any material adverse impact on the Funds, although there can be no assurances of
this. The costs or consequences of incomplete or untimely resolution of the Year
2000 Issue are unknown to the Funds and the Service Providers at this time but
could have a material adverse impact on the operations of the Funds and the
Service Providers.
GENERAL AND ACCOUNT INFORMATION (888/525-5757) (TOLL FREE)
--------------------
The Trust's Statement of Additional Information, dated November 3, 1998, with
respect to each 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, Adviser, Sub-Adviser
and Sponsor of the Fund, as applicable, (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, yield and tax equivalent yield, if applicable, of the Fund.
<PAGE>
APPENDIX A
The characteristics of corporate debt obligations rated by Moody's are
generally as follows:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements. The
future of such bonds cannot be considered as well assured.
B -- Bonds which are rated B generally lack characteristics of a desirable
investment.
Caa -- Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds rated Ca are speculative to a high degree.
C -- Bonds rated C are the lowest rated class of bonds and are regarded as
having extremely poor prospects.
The characteristics of corporate debt obligations rated by S&P are generally
as follows:
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA -- Bonds rated AA also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debts in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB -- Debt rated BB is predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with terms of the obligation.
BB indicates the lowest degree of speculation; CC indicates the highest degree
of speculation.
BB, B, CCC AND CC -- Debt in these ratings is predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with
terms of the obligation. BB indicates the lowest degree of speculation and CC
the highest.
A bond rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or
obtained by the rating services from other sources which they consider
reliable. The ratings may be changed, suspended or withdrawn as a result of
changes in or unavailability of, such information, or for other reasons.
The characteristics of corporate debt obligations rated by Fitch are
generally as follows:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated
in the AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short term debt of these issuers is generally rated "-/
+".
A -- Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB -- Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B -- Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payments of principal and interest reflects the obligor's limited
margin of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC -- Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC -- Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C -- Bonds are in imminent default in payment of interest or principal.
DDD, DD AND D-- Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the obligor.
DDD represents the highest potential for recovery on these bonds, and D
represents the lowest potential for recovery.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the DDD, DD, or D categories.
RATINGS OF COMMERCIAL PAPER
Commercial paper rated A-1 by S&P has the following characteristics:
liquidity ratios are adequate to meet cash requirements; the issuer's long-
term debt is rated A or better; the issuer has access to at least two
additional channels of borrowing; and basic earnings and cash flow have an
upward trend with allowances made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry.
Commercial paper rated Prime-1 by Moody's is the highest commercial paper
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and consumer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determine how the issuer's
commercial paper is rated with various categories.
<PAGE>
APPENDIX B
TAXABLE EQUIVALENT YIELD TABLES
The tables below show the approximate taxable yields which are equivalent
to tax-exempt yields, for the ranges indicated, under (i) federal and New York
State personal income tax laws, and (ii) federal, New York State and New York
City personal income tax laws, in each case based upon the applicable 1997
rates. Such yields may differ under the laws applicable to subsequent years if
the effect of any such law is to change any tax bracket or the amount of
taxable income which is applicable to a tax bracket. Separate calculations,
showing the applicable taxable income brackets, are provided for investors who
file single returns and for those investors who file joint returns. For cases
in which two or more state (or city) brackets fall within a federal bracket,
the highest state (or city) bracket is combined with the federal bracket. The
combined income tax brackets shown reflect the fact that state and city income
taxes are currently deductible as an itemized deduction for federal tax
purposes (however, a taxpayer's itemized deductions may be subject to an
overall limitation, the effect of which has not been taken into account in
preparing these tables).
<TABLE>
FEDERAL AND NEW YORK STATE TABLE
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TAXABLE INCOME* TAX-EXEMPT YIELD
- ------------------------------------------ INCOME -----------------------------------------------------------------------
SINGLE JOINT TAX 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
RETURN RETURN BRACKET** EQUIVALENT TAXABLE YIELD
- --------------------- ------------------- ------------ -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-$ 24,650 $ 0-$ 41,200 20.82% 3.79% 4.42% 5.05% 5.68% 6.31% 6.95% 7.58% 8.21%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 32.93% 4.47% 5.22% 5.96% 6.71% 7.45% 8.20% 8.95% 9.69%
$ 59,751-$124,650 $ 99,601-$151,750 35.73% 4.67% 5.45% 6.22% 7.00% 7.78% 8.56% 9.33% 10.11%
$124,651-$271,050 $151,751-$271,050 40.38% 5.03% 5.87% 6.71% 7.55% 8.39% 9.23% 10.06% 10.90%
Over $271,050 Over $271,050 43.74% 5.33% 6.22% 7.11% 8.00% 8.89% 9.78% 10.66% 11.55%
- ----------
* Net amount subject to federal and New York State personal income tax after deductions and exemptions.
** Effective combined federal and state tax bracket.
This table does not take into account: (i) any taxes other than the regular federal income tax and the regular New York State
personal income tax; or (ii) the New York State tax table benefit recapture tax. Also, it is assumed that: (i) there are no
federal or New York State minimum taxes applicable; (ii) a shareholder has no net capital gain; and (iii) a shareholder's taxable
income for federal income tax purposes is the same as his or her taxable income for New York State income tax purposes. Also,
this table does not reflect the fact that, due to factors including the federal phase-out of personal exemptions and reduction of
certain itemized deductions for taxpayers whose adjusted gross income exceed specified thresholds, a shareholder's effective
marginal tax rate may differ from his or her tax bracket rate.
</TABLE>
<PAGE>
<TABLE>
FEDERAL, NEW YORK STATE AND NEW YORK CITY TABLE
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TAXABLE INCOME* TAX-EXEMPT YIELD
- ------------------------------------------ INCOME -----------------------------------------------------------------------
SINGLE JOINT TAX 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
RETURN RETURN BRACKET** EQUIVALENT TAXABLE YIELD
- --------------------- ------------------- ------------ -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 25,000 $ 0-$ 45,000 36.09% 4.69% 5.48% 6.26% 7.04% 7.82% 8.61% 9.39% 10.17%
$ 25,001-$ 59,750 $ 45,001-$ 99,600 36.10% 4.69% 5.48% 6.26% 7.04% 7.82% 8.61% 9.39% 10.17%
$ 59,751-$124,650 $ 96,601-$151,750 38.80% 4.90% 5.72% 6.54% 7.35% 8.17% 8.99% 9.80% 10.62%
$124,651-$271,050 $151,751-$271,050 43.24% 5.29% 6.17% 7.05% 7.93% 8.81% 9.69% 10.57% 11.45%
Over $271,050 Over $271,050 46.43% 5.60% 6.53% 7.47% 8.40% 9.33% 10.27% 11.20% 12.13%
- ----------
* Net amount subject to federal, New York State and New York City personal income tax after deductions and exemptions.
** Effective combined federal, state and city tax bracket.
This table does not take into account: (i) any taxes other than the regular federal income tax, the regular New York State
personal income tax, and the regular New York City personal income tax (including the temporary tax surcharge and the additional
tax); or (ii) the New York State tax table benefit recapture tax. Also, it is assumed that: (i) there are no federal, state or
city minimum taxes applicable; (ii) a shareholder has no net capital gain; and (iii) a shareholder's taxable income for federal
income tax purposes is the same as his or her income for state and city tax purposes. Also, this table does not reflect the fact
that, due to factors including the federal phase-out of personal exemptions and reduction of certain itemized deductions for
taxpayers whose adjusted gross income exceed specified thresholds, a shareholder's effective marginal tax rate may differ from
his or her tax bracket rate.
</TABLE>
While it is expected that most of the dividends paid to the shareholders
of the New York Tax-Free Bond Fund will be exempt from federal, New York State
and New York City personal income taxes, portions of such dividends from time
to time may be subject to such taxes.
<PAGE>
REPUBLIC BOND FUND
REPUBLIC NEW YORK TAX-FREE BOND FUND
REPUBLIC EQUITY FUND
REPUBLIC OVERSEAS EQUITY FUND
REPUBLIC OPPORTUNITY FUND
REPUBLIC FAMILY OF FUNDS: SUB-ADVISERS
CUSTOMER SERVICE REPUBLIC BOND FUND
Republic National Bank of New York Miller Anderson & Sherrerd
452 Fifth Avenue One Tower Bridge
New York, NY 10018 West Conshohocken, PA 19428
(888) 525-5757 (Toll Free)
REPUBLIC EQUITY FUND
INVESTMENT ADVISER, CUSTODIAN Alliance Capital Management, L.P.
Republic National Bank of New York 1345 Avenue of the Americas
452 Fifth Avenue New York, NY 10105
New York, NY 10018
Brinson Partners, Inc.
ADMINISTRATOR, TRANSFER AGENT, 209 South LaSalle Street
DISTRIBUTOR AND SPONSOR Chicago, IL 60604
BISYS Fund Services
3435 Stelzer Road REPUBLIC OVERSEAS EQUITY FUND
Columbus, OH 43219 Capital Guardian Trust Company
(614) 470-8000 11100 Santa Monica Boulevard
Los Angeles, CA 90025
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company REPUBLIC OPPORTUNITY FUND
200 Clarendon St. MFS Institutional Advisors, Inc.
Boston, MA 02111 500 Boylston Street
(800) 782-8183 Boston, MA 02116
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
99 High Street
Boston, MA 02110
LEGAL COUNSEL
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
RFFRC (1/98)
