<PAGE> 1
PERFORMANCE FUNDS TRUST
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- INVESTMENT ADVISER
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
THE MONEY MARKET FUND
The Money Market Fund (the "Fund") is managed by Trustmark National Bank
and is a separate investment fund of Performance Funds Trust (the "Trust"), a
Delaware business trust and registered management investment company. This
Prospectus relates only to the "Institutional Class" of the Fund's shares which
only certain investors are qualified to purchase. The Fund also has a "Consumer
Service Class" of shares. See, "Other Information -- Capitalization."
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN THE VALUE OF ITS SHARES AT A CONSTANT
$1.00 PER SHARE, ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL ALWAYS BE ABLE
TO DO SO. SHARES OF THE FUND ARE NOT AN OBLIGATION OF OR GUARANTEED BY TRUSTMARK
NATIONAL BANK OR ITS AFFILIATES, AND THE SHARES ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund.
A Statement of Additional Information (the "SAI"), dated September 27,
1996, containing additional and more detailed information about the Fund, has
been filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Fund at the address and
information number printed above.
------------------------
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.
------------------------
September 27, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Fund Expenses........................................................................... 3
Fee Table............................................................................... 3
Financial Highlights.................................................................... 4
Prospectus Summary...................................................................... 5
The Investment Policies and Practices of the Fund....................................... 6
Description of Securities and Investment Practices...................................... 7
Investment Restrictions................................................................. 9
Management of the Fund.................................................................. 9
Fund Share Valuation.................................................................... 12
Purchase of Fund Shares................................................................. 12
Individual Retirement Accounts.......................................................... 14
Exchange Privilege...................................................................... 14
Redemption of Fund Shares............................................................... 15
Dividends, Distributions and Federal Income Tax......................................... 17
Other Information....................................................................... 18
</TABLE>
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
2
<PAGE> 3
FUND EXPENSES
The following expense table lists the estimated costs and expenses that an
investor in the Institutional Class may incur either directly or indirectly as a
shareholder of the Fund based on expenses for the period ended May 31, 1996.
Actual expenses in the future may be greater or less than those shown.
Shareholders in the Consumer Service Class of the Fund may be subject to Rule
12b-1 Plan distribution fees (annually up to 0.35% of the average net assets of
the Fund) to which the Institutional Class is not subject. The Institutional
Class of shares is only available to certain qualified shareholders.
FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a percentage price)................... none
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering
price).......................................................................... none
Deferred Sales Load (as a percentage of redemption proceeds)...................... none
Redemption Fees................................................................... none
Exchange Fees..................................................................... none
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets annualized)
Investment Advisory Fees (After Waiver)(3)........................................ 0.10%
12b-1 Fees(1)..................................................................... none
Other Expenses(4)................................................................. 0.14%
-----
Total Fund Operating Expenses (After Waiver)(3)................................... 0.24%
=====
</TABLE>
(1) The Consumer Service Class of shares may be subject to Rule 12b-1 Plan
distribution fees (annually equal to 0.35% of average net assets of the
Fund) to which the Institutional Class is not subject.
(2) Shares of the Institutional Class of the Fund may be available through
trust, investment management or other fiduciary accounts managed or
administered by the Adviser, its affiliates or correspondents. Such
institutions may provide a variety of services at varying fees to customers
and, although such fees are not fund-related, the fees must be paid by
customers in order to purchase Fund shares.
(3) Reflects a voluntary reduction (which will remain in effect until further
notice) in contractual fee. Had this reduction not been in effect, the
investment advisory fee would have been 0.30% and Total Fund Operating
Expenses would have been 0.44%.
(4) Certain Service Organizations may receive additional fees from the Fund in
amounts up to an annual rate of 0.35% of the daily net asset value of the
Fund's shares owned by shareholders with whom the Service Organization has a
servicing relationship. See "Management of the Fund -- Service
Organizations" on Page 11.
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Fund might bear.
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming 5% gross
annual return and redemption at the end of each time period:
<TABLE>
<S> <C>
1 year...................................................... $ 3
3 years..................................................... $ 8
5 years..................................................... $14
10 years..................................................... $32
</TABLE>
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual returns. Actual return may be greater or less than the assumed amount.
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<PAGE> 4
FINANCIAL HIGHLIGHTS
The financial data shown below is to assist investors in evaluating the
performance of the Fund since commencement of operations through May 31, 1996.
The financial highlights have been audited by Price Waterhouse LLP, independent
accountants, whose report on the financial statements, including this data,
appears in the Fund's 1996 Annual Report to Shareholders. This financial data
should be read in conjunction with the related financial statements and notes
thereto.
SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
MONEY MARKET FUND
------------------------------------------------------------
INSTITUTIONAL CLASS
------------------------------------------------------------
YEAR ENDED YEAR ENDED FOR THE PERIOD SEPTEMBER 30, 1993
MAY 31, MAY 31, (COMMENCEMENT OF OPERATIONS)
1996 1995 THROUGH MAY 31, 1994
---------- ---------- ---------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period...... $ 1.00 $ 1.00 $ 1.00
---------- ---------- -----------
Income from Investment Operations:
Net investment income................... 0.05 0.05 0.02
---------- ---------- -----------
Less Distributions:
Dividends from net investment income.... (0.05) (0.05) (0.02)
---------- ---------- -----------
Net Asset Value, End of Period............ $ 1.00 $ 1.00 $ 1.00
========== ========== ========================
Total Return.............................. 5.60% 5.27% 2.17%
Ratios/Supplemental Data:
Net Assets, End of Period (in
thousands)........................... $366,966 $324,942 $ 139,157
Ratio of Expenses to Average Net
Assets............................... 0.24% 0.23% 0.15%*
Effect of waivers/reimbursements on
expense ratio........................ 0.30% 0.36% 0.53%*
Ratio of Net Investment Income to
Average Net Assets................... 5.42% 5.27% 3.30%*
</TABLE>
- ---------------
* Annualized
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PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
This Prospectus describes The Money Market Fund (the "Fund"), managed by
Trustmark National Bank. The investment objective of the Fund is to provide
investors with as high a level of current income as is consistent with
preservation of capital and liquidity. The Fund pursues its objective by
investing its assets in a broad range of high quality, short-term, money market
instruments which have remaining maturities not exceeding 397 days. The Fund is
required to maintain a dollar-weighted average portfolio maturity of 90 days or
less. Money market instruments in which the Fund may invest include: U.S.
Government securities, bank obligations, commercial paper, corporate debt
securities, variable rate demand notes and repurchase agreements. Generally,
securities in which the Fund invests will not earn as high a yield as securities
of longer maturity, and/or of lesser quality which are subject to greater market
volatility. The Fund attempts to maintain the value of its shares at a constant
$1.00 per share, although there can be no assurance that the Fund will always be
able to do so.
MANAGEMENT OF THE FUND
Trustmark National Bank ("Trustmark" or the "Adviser") acts as investment
adviser to the Fund. Trustmark's Trust Department, has assets in excess of $1
billion under management. It was founded in 1890 and is the second largest
commercial bank headquartered in Mississippi. For its services, the Adviser
receives from the Fund fees at annual rates of the Fund's average daily net
assets. Trustmark has been advising the Trust's Short Term Government Income
Fund, Intermediate Term Government Income Fund and Equity Fund since June of
1992. Trustmark has also been managing trust monies for over 40 years. See "Fee
Table" and "Management of the Fund" in this Prospectus.
Furman Selz LLC ("Furman Selz") acts as Administrator to the Fund and
provides certain management and administrative services to the Fund, for which
the Fund pays a fee at an annual rate based upon the Fund's average daily net
assets. Performance Funds Distributor, Inc. ("PFD") is the Sponsor and
Distributor for the Trust and distributes the Fund's shares and may be
reimbursed for certain of its distribution related expenses.
PURCHASES
Shares of the Institutional Class of the Funds are offered at net asset
value without a sales load. Shares of the Consumer Service Class of the Funds
are also offered at net asset value but may be subject to 12b-1 fees to which
the Institutional Class shares are not subject. See "Fund Share Valuation," and
"Purchase of Fund Shares." Purchases of Institutional Class shares may only be
made by one of the following types of "Institutional Investors": trusts, or
investment management and other fiduciary accounts managed or administered by
Trustmark or its affiliates or correspondents pursuant to a written agreement
(except asset allocation or "wrap" accounts), Trustees of the Trust (and family
members), Directors of Trustmark (and family members), employees of Trustmark
(and family members), the Distributor, Administrator, and affiliates and
correspondents and any persons purchasing shares with the proceeds of a
distribution from a trust, investment management and other fiduciary account
managed or administered by Trustmark or its affiliates or correspondents
pursuant to a written agreement, who make an initial investment of one million
dollars or more or who, at the time of purchase have a balance of one million
dollars or more in the Funds. Purchases may be made through an authorized broker
or financial institution, including the Fund, by mail or by wire.
SERVICE ORGANIZATIONS
The Fund may pay fees to various banks (including Trustmark), trust
companies, broker-dealers and other financial organizations ("Service
Organizations") for providing administrative services for the Fund,
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<PAGE> 6
such as maintaining shareholder accounts and records. Institutional investors
are required to purchase Fund shares through a Service Organization.
REDEMPTIONS
Shares may be redeemed at their next determined net asset value. See
"Redemption of Fund Shares" and "Fund Share Valuation." Redemptions may be made
by letter or, if previously authorized, by telephone. The Fund reserves the
right to redeem upon not less than 30 days' written notice all shares in a Fund
account which, as a result of shareholder redemption, has a value below $500
($250 for Individual Retirement Accounts ("IRAs")).
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays its net investment income to shareholders of
record in accordance with the schedule set forth under "Dividends, Distributions
and Federal Income Tax." Any net realized long-term capital gains will be
distributed annually. All dividends and distributions will be automatically
reinvested at net asset value in additional shares of the Fund unless cash
payment is requested.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND
The investment objective of the Fund is to provide investors with a high
level of current income as is consistent with preservation of capital and
liquidity. The Fund pursues its objective by investing its assets in a broad
range of high quality, short-term, money market instruments which have remaining
maturities not exceeding 397 days. The Fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less. Generally,
securities in which the Fund invests will not earn as high a yield as securities
of longer maturity, and/or of lesser quality which are subject to greater market
volatility. The Fund attempts to maintain the value of its shares at a constant
$1.00 per share, although there can be no assurance that the Fund will always be
able to do so.
This Prospectus and the SAI contain specific investment restrictions which
govern the Fund's investments. Those restrictions and the Fund's investment
objective are fundamental policies, which means that they may not be changed
without a majority vote of shareholders of the Fund. Except for the objective
and those restrictions specifically identified as fundamental, all other
investment policies and practices described in this Prospectus and in the SAI
are not fundamental and may be changed by the Board of Trustees without
shareholder approval.
The Adviser selects investments and makes investment decisions based on the
investment objective and policies of the Fund.
The Adviser selects only those U.S. dollar-denominated debt instruments
which meet the high quality and credit risk standards established by the Board
of Trustees. The Fund will purchase commercial paper which, at the time of
investment, is rated in the top category by at least two Nationally Recognized
Statistical Rating Organizations, or, if not rated, are, in the opinion of the
Adviser and the Board of Trustees, of an investment quality comparable to rated
commercial paper in which the Fund may invest. Corporate debt securities (bonds,
debentures, notes and other similar debt instruments) in which the Fund may
invest, have 397 days or less to maturity and are rated AA or better by Standard
& Poor Corporation ("S&P") or Aa or better by Moody's Investors Service
("Moody's"). The Fund will invest no more than 5% of its total assets in debt
securities which are rated below the top rating category or if unrated are of
comparable investment quality as determined by the Adviser and the Board of
Trustees.
6
<PAGE> 7
The following describes in greater detail different types of securities and
investment practices used by the Fund.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury bills, which have a maturity of up to one year, are direct
obligations of the United States and are the most frequently issued marketable
U.S. Government security. The U.S. Treasury also issues securities with longer
maturities in the form of notes and bonds.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates,
which may be guaranteed by the Government National Mortgage Association; others,
such as obligations of the Federal Home Loan Banks, Federal Farm Credit Bank,
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal Land
Bank, are guaranteed by the right of the issuer to borrow from the U.S.
Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.
Bank Obligations. These obligations include negotiable certificates of
deposit and bankers' acceptances. The Fund limits its bank investments to
dollar-denominated obligations of U.S. banks which have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency, or whose deposits are
insured by the FDIC.
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by U.S. banks and bank holding companies, U.S. corporations and
financial institutions, as well as similar taxable and tax-exempt instruments
issued by government agencies and instrumentalities. The Fund establishes
standards of creditworthiness for issuers of such investments.
Corporate Debt Securities. The Fund's investments in U.S. corporate debt
securities are limited to corporate bonds, debentures, notes and other similar
corporate debt instruments which meet the previously disclosed minimum ratings
and maturity criteria established for the Fund under the direction of the Board
of Trustees and the Fund's Adviser or, if unrated, are in the Adviser's opinion
comparable in quality to corporate debt securities in which the Fund may invest.
See "The Investment Policies and Practices of the Fund."
Repurchase Agreements. Securities held by the Fund may be subject to
repurchase agreements. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed upon time and price. These
agreements may be considered to be loans by the purchaser collateralized by the
underlying securities. These agreements will be fully collateralized and the
collateral will be marked-to-market daily. The Fund will enter into repurchase
agreements only with dealers, domestic banks or recognized financial
institutions which, in the opinion of the Adviser and in accordance with
guidelines adopted by the Board of Trustees present minimal credit risks. While
the maturity of the underlying securities in a repurchase agreement transaction
may be more than one year, the term of the repurchase agreement will, as a
fundamental policy, always be seven days or less. See
7
<PAGE> 8
"Investment Restrictions." In the event of default by the seller under the
repurchase agreement, the Fund may have problems in exercising its rights to the
underlying securities and may experience time delays in connection with the
disposition of such securities.
Loans of Portfolio Securities. To increase current income, the Fund may
lend its portfolio securities in an amount up to 5% of its total assets to
brokers, dealers and financial institutions, provided certain conditions are
met, including the condition that each loan is secured continuously by
collateral maintained on a daily mark-to-market basis in an amount at least
equal to the current market value of the securities loaned. For further
information, see the SAI.
Variable and Floating Rate Demand and Master Demand Notes. The Fund may,
from time to time, purchase variable or floating rate demand notes issued by
corporations, bank holding companies and financial institutions and similar
taxable and tax exempt instruments issued by government agencies and
instrumentalities. These securities will typically have a maturity over one year
but carry with them the right of the holder to put the securities to a
remarketing agent or other entity at designated time intervals and on specified
notice. The obligation of the issuer of the put to repurchase the securities may
be backed up by a letter of credit or other obligation issued by a financial
institution. The purchase price is ordinarily par plus accrued and unpaid
interest. Generally, the remarketing agent will adjust the interest rate every
seven days (or at other specified intervals) in order to maintain the interest
rate at the prevailing rate for securities with a seven-day or other designated
maturity. The Fund will only purchase demand instruments which provide that the
Fund may receive the principal amount of the note upon not more than seven days'
notice. The Fund's investment in demand instruments which provide that the Fund
will not receive the principal note amount within seven days' notice, in
combination with the Fund's other investments in illiquid instruments, will be
limited to an aggregate total of 10% of the Fund's net assets.
The Fund may also buy variable rate master demand notes. The terms of these
obligations permit the Fund to invest fluctuating amounts at varying rates of
interest pursuant to direct arrangements between the Fund, as lender, and the
borrower. These instruments permit weekly and, in some instances, daily changes
in the amounts borrowed. The Fund has the right to increase the amount under the
note at any time up to the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the full amount of the
note without penalty. The notes may or may not be backed by bank letters of
credit. Because the notes are direct lending arrangements between the Fund and a
borrower, it is not generally contemplated that they will be traded, and there
is no secondary market for them, although they are redeemable (and, thus,
immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. In connection with any such purchase and on an ongoing
basis, the Board of Trustees will consider the earning power, cash flow and
other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
make demand simultaneously. While master demand notes, as such, are not
typically rated by credit rating agencies, the Fund may, under its minimum
rating standards, invest in them only if at the time of an investment, the
issuer meets the criteria set forth in this Prospectus for commercial paper
obligations.
Illiquid Investments. It is the policy of the Fund that restricted
securities and other illiquid securities (including variable and floating rate
demand and master demand notes not requiring receipt of the principal note
amount within seven days' notice and securities of foreign issuers that are not
listed on a recognized domestic or foreign securities exchange) may not
constitute, at the time of purchase or at any time, more than 10% of the value
of the total net assets of the Fund.
Notwithstanding the above, the Fund may purchase securities which are
eligible for purchase and sale under Rule 144A under the Securities Act of 1933
(the "1933 Act"). Rule 144A permits certain qualified institutional buyers, such
as the Fund, to trade in privately placed securities even though such securities
are
8
<PAGE> 9
not registered under the 1933 Act. The Adviser, under the supervision of the
Board of Trustees, will consider whether securities purchased under Rule 144A
are illiquid and thus subject to the Fund's restriction of investing no more
than 10% of its assets in illiquid securities. A determination of whether a Rule
144A security is liquid or not is a question of fact. In making this
determination the Adviser will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security. In
addition, the Adviser could consider the (1) frequency of trades and quotes, (2)
number of dealers and potential purchasers, (3) dealer undertakings to make a
market, and (4) the nature of the security and of marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities would be monitored
and, if as a result of changed conditions, it is determined that a Rule 144A
security is no longer liquid, the Fund's holdings of illiquid securities would
be reviewed to determine what, if any, steps are required to assure that the
Fund does not invest more than 10% of its assets in illiquid securities.
Investing in 144A securities could have the effect of increasing the amount of
the Fund's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
INVESTMENT RESTRICTIONS
(1) The Fund may not borrow money or pledge or mortgage its assets, except
from banks up to 10% of the current value of its total net assets for temporary
or emergency purposes and those borrowings may be secured by the pledge of not
more than 15% of the current value of the Fund's total net assets (but
investments may not be purchased by the Fund while any such borrowings exist).
(2) The Fund may not make loans, except loans of portfolio securities and
except that the Fund may enter into repurchase agreements with respect to its
portfolio securities.
(3) In addition, the Fund is a diversified fund. As such, it will not
invest more than 5% of its total assets in the securities of any single issuer
(except for U.S. Government securities) or purchase more than 10% of the
outstanding voting securities of any such issuer. Also, the Fund will invest
less than 25% of its total assets in the securities of any one industry but may
invest more than 25% of its total assets in instruments issued by domestic
banks. For this purpose, U.S. Government securities (and repurchase agreements
related thereto) are not considered securities of a single industry.
The foregoing investment restrictions and those described in the SAI are
fundamental policies of the Fund which may be changed only when permitted by law
and approved by the holders of a majority of the Fund's outstanding voting
securities as described under "Other Information -- Voting".
If a percentage restriction on investment policies or the investment or use
of assets set forth in this Prospectus is adhered to at the time a transaction
is effected, later changes in percentage resulting from changing values will not
be considered a violation.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. Additional information about the Trustees, as well as the
Trust's executive officers, may be found in the SAI under the heading
"Management -- Trustees and Officers."
The Investment Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201, serves as investment adviser to the Fund. Trustmark
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments.
Trustmark is
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<PAGE> 10
responsible for placing orders for the purchase and sale of the Fund's
investments directly with brokers and dealers selected by it in its discretion.
Trustmark's Trust Department, has assets in excess of $1 billion under
management. It was founded in 1890 and is the second largest commercial bank
headquartered in Mississippi. Trustmark has been advising the Trust's Short Term
Government Income Fund, Intermediate Term Government Income Fund and Equity Fund
since June 1992. Trustmark has also been managing trust monies for over 40
years. Shares of the Fund are not guaranteed by Trustmark, its parent or
affiliates, nor are they insured by the FDIC, the Federal Reserve Board or any
other agency.
For the advisory services it provides to the Funds, Trustmark is entitled
to receive monthly fees, based on average daily net assets, up to 0.30% annually
for the Fund.
Based upon the advice of its counsel, Trustmark believes that the
performance of investment advisory services for the Fund 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 Trustmark from continuing to perform such services
for the Fund. If Trustmark were prohibited from acting as investment adviser to
the Fund, it is expected that the Board of Trustees would recommend to
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.
The Sponsor, Distributor and Administrator. Furman Selz LLC, 230 Park
Avenue, New York, New York 10169, acts as the Sponsor and Administrator of the
Fund. Performance Funds Distributor, Inc., an affiliate of Furman Selz, acts as
the Distributor of the Fund's shares. Furman Selz is primarily an institutional
brokerage firm with membership on the New York, American, Boston, Midwest,
Pacific and Philadelphia Stock Exchanges. Furman Selz also serves as
administrator and distributor of other mutual funds.
Administrative Services. The Fund has entered into an Administrative
Services Contract with Furman Selz pursuant to which Furman Selz provides
certain management and administrative services necessary for the Fund's
operations including: (i) general supervision of the operation of the Fund
including coordination of the service performed by the Fund's Adviser, transfer
agent, custodian, independent accountants and legal counsel, regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions, and
preparation of proxy statements and shareholder reports for the Fund, (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Fund's officers and Board of
Trustees, and (iii) furnishing office space and certain facilities required for
conducting the business of the Fund. For these services, Furman Selz receives
from the Fund a monthly fee at the annual rate of 0.15% of the average daily net
assets of the Fund. Pursuant to a Shareholder Servicing Agreement between the
Trust and the Administrator, Furman Selz receives a fee of $15.00 per account
per year plus out-of-pocket expenses. Pursuant to a Fund Accounting Agreement
between the Trust and the Administrator, the Administrator assists the Trust in
calculating net asset values and provides certain other accounting services for
the Fund described therein, for an annual fee of $30,000 per Fund plus
out-of-pocket expenses.
On June 28, 1996, Furman Selz and BISYS Group, Inc. ("BISYS") announced a
definitive agreement which provides that by the end of 1996 Furman Selz will
exit the mutual funds business and recommend BISYS to Furman Selz's existing
fund clients to replace Furman Selz for mutual fund administration,
distribution, fund accounting and transfer agency services.
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<PAGE> 11
BISYS, headquartered in Little Falls, N.J., supports more than 5,000
financial institutions and corporate clients through two strategic business
units. BISYS Information Services Group provides image and data processing
outsourcing, and pricing analysis to more than 600 banks nationwide. BISYS
Investment Services Group designs, administers, and distributes over 30 families
of proprietary mutual funds consisting of more than 365 portfolios, and provides
401(k) marketing support, administration, and recordkeeping services in
partnership with 18 of the nation's leading bank and investment management
companies. BISYS trades on NASDAQ under the symbol BISYS.
As of the date of this prospectus the Board of Trustees of the Fund is
considering alternatives to Furman Selz LLC as service provider to the Fund. The
Board will decide on Furman Selz's replacement by January 1, 1997. Shareholders
of the Fund will be notified of such decision.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services for the Fund, such as maintaining shareholder accounts
and records. The Fund may pay fees to Service Organizations (which vary
depending upon the services provided) in amounts up to an annual rate of 0.35%
of the daily net asset value of the Fund's shares owned by shareholders with
whom the Service Organization has a servicing relationship. Institutional Class
shareholders are required to purchase shares through a Service Organization.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the Fund's
minimum initial or subsequent investments or charging a direct fee for
servicing. A Service Organization or broker or other sales-person within such
Service Organization may be compensated at varying rates for the sale of one
class of Fund shares as opposed to another. If imposed, these fees would be in
addition to any amounts which might be paid to the Service Organization by the
Fund. Each Service Organization has agreed to transmit to its clients a schedule
of any such fees. Shareholders using Service Organizations are urged to consult
with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. In addition, state
securities law on this issue may differ from interpretations of Federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
OTHER EXPENSES. The Fund bears all costs of its operations other than
expenses specifically assumed by Furman Selz or the Adviser. The costs borne by
the Fund include legal and accounting expenses; Trustees' fees and expenses;
insurance premiums; custodian and transfer agent fees and expenses; expenses
incurred in acquiring or disposing of the Fund's portfolio securities; expenses
of registering and qualifying the Fund's shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Fund's portfolio securities and pricing of the Fund's shares; expenses of
maintaining the Fund's legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders
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<PAGE> 12
of reports, proxies and prospectuses. The Fund bears its own expenses associated
with its establishment as a series of Performance Funds Trust; these expenses
are amortized over a five-year period from the commencement of the Fund's
operations. See "Management" in the SAI. Trust expenses directly attributable to
the Fund are charged to the Fund; other expenses are allocated proportionately
among all of the Funds in the Trust in relation to the net assets of such Fund
which are allocated to each share class based on the net assets of such share
class. Class specific expenses are charged directly to the share class which
bears such expense.
Portfolio Transactions. Pursuant to the Investment Advisory Contract, the
Adviser places orders for the purchase and sale of portfolio investments for the
Fund's accounts with brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Adviser will seek the best execution of the Fund's orders.
Purchases and sales of portfolio debt securities for the Fund are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter. Purchases and sales of common stocks are generally placed by
the Adviser with broker-dealers which, in the Adviser's judgment, provide prompt
and reliable execution at favorable security prices and reasonable commission
rates. Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Adviser. The Adviser may cause the Fund to pay
commissions higher than another broker-dealer would have charged if the Adviser
believes the commission paid is reasonable in relation to the value of the
brokerage and research services received on behalf of the Fund.
FUND SHARE VALUATION
The net asset value per share of the Fund is calculated at 12 noon (Eastern
time) Monday through Friday, on each day the New York Stock Exchange is open for
trading a "Business Day", which excludes the following business holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share of the
Fund is computed by dividing the value of each share class of the Fund's net
assets (i.e., the value of the assets less the liabilities) by the total number
of each share class of the Fund's outstanding shares. All expenses, including
fees paid to the Adviser, Furman Selz and class specific, are accrued daily and
taken into account for the purpose of determining the net asset value.
The Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there is no assurance that a net asset value of $1.00 per share can be
maintained. The amortized cost method involves valuing a security at its cost
and amortizing any discount or premium over the period until maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. See the SAI for a more complete description of the amortized cost
method.
PURCHASE OF FUND SHARES
Orders for purchases of shares of the Fund will be executed at the net
asset value per share next determined after an order has been received. All
monies received by the Fund are invested in full and fractional shares of the
Fund. Certificates for shares are not issued. Furman Selz maintains records of
each shareholder's holdings of Fund shares, and each shareholder receives a
statement of transactions, holdings and dividends. The Fund reserves the right
to reject any purchase. The Fund does not accept third party checks.
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<PAGE> 13
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisers and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment adviser or Service Organization with instructions as to
the amount you wish to invest. Your broker will then contact the Fund to place
the order on your behalf on that day.
Orders received by your broker or Service Organization for the Fund in
proper order prior to the determination of net asset value and transmitted to
Furman Selz prior to the close of its business day (which is currently 12:00
noon., eastern time), will become effective that day. Brokers who receive orders
are obligated to transmit them promptly. You should receive written confirmation
of your order within a few days of receipt of instructions from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the Fund. In most cases, your bank will either be a member of the
Federal Reserve Banking System or have a relationship with a bank that is. Your
bank will normally charge you a fee for handling the transaction. To purchase
shares by a Federal funds wire, please first contact the Fund. The Fund will
establish a record of information for the wire to insure the correct processing
of funds. You can reach the Wire Desk at 1-800-737-3676.
Then, have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, Missouri 64105
ABA #1010-0362-1
Account #751-2996
Further Credit to: The Performance Money Market Fund
As long as you have received the Prospectus, you may establish a new
regular account through the Wire Desk; IRAs may not be opened in this way. When
new accounts are established by wire, the distribution options will be set to
reinvest all distributions and the social security or tax identification number
("TIN") will not be certified until a signed application is received. Completed
applications should be forwarded immediately to the Fund. With the application,
the shareholder can specify other distribution options and add any special
features offered by the Fund. Should any dividend distributions or redemptions
be paid before the TIN is certified, they will be subject to 31% Federal tax
withholding.
By Automatic Investment. Investors may participate in the Automatic
Investment Program, which is an investment plan that automatically debits money
from the shareholder's designated bank account and invests it in the Fund
through the use of electronic fund transfers or automatic bank drafts.
Shareholders may elect to make investments by transfers of a minimum of $50.00
on either the fifth or twentieth day of each month into their established Fund
Account. No minimum initial investment applies when an account is established
through the Automatic Investment Program. Contact the Fund for more information
about the Automatic Investment Program.
By Payroll Direct Deposit. Investors may set up a payroll direct deposit
arrangement for amounts to be automatically invested in the Fund. Participants
in the Payroll Direct Deposit Program may make periodic investments of at least
$20 per pay period. Contact the Fund for more information about Payroll Direct
Deposits.
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<PAGE> 14
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment for new or existing IRAs. Shares may
also be purchased for IRAs established with Trustmark or other authorized
custodians. In addition, an IRA may be established through a custodial account
with Investors Fiduciary Trust Company. Completion of a special application is
required in order to create such an account, and the minimum initial investment
for an IRA is $250.00. Contributions to IRAs are subject to prevailing amount
limits set by the Internal Revenue Service. A $5.00 establishment fee and an
annual $12.00 maintenance and custody fee is payable with respect to each
shareholder; in addition, there will be charged a $10.00 termination fee when
the account is closed. For more information and IRA information, call the Fund
toll free at 1-800-737-3676.
EXCHANGE PRIVILEGES
The Fund offers two convenient ways to exchange shares in one of the
Performance Funds for shares in another Performance Fund. Before engaging in an
exchange transaction, a shareholder should read carefully the portions of this
Prospectus describing the Fund into which the exchange will be made. A
shareholder may not exchange shares of one Fund for shares of another Fund if
both or either are not qualified for sale in the state of the shareholder's
residence. The minimum amount for an initial exchange is $1,000 and the minimum
amount for subsequent exchanges is $100. The Trust may terminate or amend the
terms of the exchange privilege at any time upon 60 days' written notice to
shareholders.
A new account opened by exchange must be established with the same name(s),
address and social security number or TIN as the existing account. All exchanges
will be made based on the net asset value next determined following receipt of
the request by a Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized but such gains are not expected to occur since the Fund seeks to
maintain a stable net asset value of $1.00 per share. Shareholders should
receive written confirmation of the exchange within a few days of the completion
of the transaction.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to Furman Selz. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which you wish to exchange
your investment; (iii) the dollar or share amount you wish to exchange; and (iv)
the signatures of all registered owners or authorized parties. All signatures
must be guaranteed by a member of a national securities exchange or by a
commercial bank or trust company.
Exchange by Telephone. To exchange Fund shares by telephone or if you have
any questions, simply call the Fund toll free at 1-800-737-3676. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security number or TIN and account registration;
(ii) the name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The
conversation may be recorded to protect you and the Fund. Telephone exchanges
are available to the shareholder unless otherwise indicated by the shareholder
by checking the box on the Purchase Application. See "Redemption of Fund Shares
- -- By Telephone" below for a discussion of telephone transactions generally.
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<PAGE> 15
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any Business
Day. Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received and accepted by the Fund. See
"Fund Share Valuation." A redemption may be a taxable transaction on which gain
or loss may be recognized. Generally, however, gain or loss is not expected to
be realized on a redemption of shares because the Fund seeks to maintain a
constant net asset value per share of $1.00.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day,
although the Fund may take up to seven days to make payment. Also, if the New
York Stock Exchange is closed (or when trading is restricted) for any reason
other than the customary weekend or holiday closing or if an emergency condition
as determined by the SEC merits such action, the Fund may suspend redemptions or
postpone payment dates.
Redemption Methods. To ensure acceptance of your redemption request, it is
important to follow the procedures described below. Although the Fund has no
present intention to do so, the Fund reserves the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Fund's services and their provisions may
be modified or terminated at any time by the Fund. If the Fund terminates any
particular service, it will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your broker or
investment adviser and instructing him to redeem your shares. He will then
contact the Fund and place a redemption trade on your behalf. You will receive
the next determined net asset value per share after receipt of such request by
your broker or investment adviser. It will be the responsibility of such broker
or investment adviser to transmit your redemption request to the Fund in a
timely manner. Such broker or investment adviser may charge you a fee for this
service.
By Mail. You may redeem your shares by sending a letter directly to the
Fund. To be accepted, a letter requesting redemption must include: (i) the Fund
name and account registration from which you are redeeming shares, (ii) your
account number, (iii) the amount to be redeemed, (iv) the signatures of all
registered owners, and (v) a signature guarantee by a member of a national
securities exchange or a commercial bank or trust company (a signature guarantee
by a savings bank or a notary public is not acceptable). Corporations,
partnerships, trusts or other legal entities will be required to submit
additional documentation.
By Telephone. You may redeem your shares by calling the Fund toll free at
1-800-737-3676. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number or TIN
and account registration, (ii) the Fund name from which you are redeeming
shares, and (iii) the amount to be redeemed. The Fund employs reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Fund fails to employ such reasonable procedures, it may be liable for any
loss, damage or expense arising out of any telephone transactions purporting to
be on a
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<PAGE> 16
shareholder's behalf. In order to assure the accuracy of instructions received
by telephone, the Fund requires some form of personal identification prior to
acting upon instructions received by telephone, records telephone instructions
and provides written confirmation to investors of such transactions. Telephone
redemptions are available to the shareholder unless otherwise indicated by
checking the box on the Purchase Application.
By Wire. You may redeem your shares by contacting the Fund by mail or
telephone and instructing it to send a wire transmission to your personal bank.
Proceeds of wire redemption for the Fund generally will be transferred to the
designated account on the day the request is received provided that it is
received by 12:00 Noon (Eastern time).
Your instructions should include: (i) your account number, social security
number or TIN and account registration, (ii) the Fund name, and (iii) the amount
to be redeemed. Wire redemptions are available to the shareholder unless
otherwise indicated by checking the box on the Purchase Application. Please
attach a copy of a void check of account where proceeds are to be wired. Your
bank may charge you a fee for receiving a wire payment on your behalf.
Check Writing. A check redemption ($100 minimum, no maximum) feature is
available. Checks are free and may be obtained from the Fund. It is not possible
to use a check to close out your account since additional shares accrue daily.
The above mentioned services "Telephone," "Wire" and "Check Writing" are
not available for IRAs and trust clients of Trustmark.
Systematic Withdrawal Plan. An owner of $25,000 or more of shares of the
Fund may elect to have periodic redemptions from his account to be paid on a
monthly, quarterly, semi-annual or annual basis. The minimum periodic payment is
$100. A sufficient number of shares to make the scheduled redemption will
normally be redeemed on the date selected by the shareholder. Depending on the
size of the payment requested and fluctuation in the net asset value, if any, of
the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Fund reserves the right to redeem, on not less
than 30 days' notice, an account in the Fund that has been reduced as a result
of shareholder redemption of the account to $500 ($250 for IRA) or less.
However, if during the 30-day notice period the shareholder purchases sufficient
shares to bring the value of the account above $500 ($250 for an IRA), this
restriction will not apply.
Redemption in Kind. All redemptions of shares of the Fund shall be made in
cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of the Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of the Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy that may not be changed
without shareholder approval. In the case of redemption requests by shareholders
in excess of such amounts, the Board of Trustees reserves the right to have the
Fund make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of
the Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
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<PAGE> 17
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund has qualified and intends to continue to qualify annually to be
treated as a regulated investment company pursuant to the provisions of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying and electing, the Fund generally will not be subject to Federal
income tax to the extent that it distributes investment company taxable income
and net capital gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains over net
long-term capital losses). The Fund will declare distributions of such income
daily and pay those dividends monthly. The Fund intends to distribute, at least
annually, substantially all net capital gains (the excess of net long-term
capital gains over net short-term capital losses). In determining amounts of
capital gains to be distributed, any capital loss carryovers from prior years
will be applied against capital gains.
Shareholders may elect to receive distributions in additional Fund shares
based on the net asset value at the close of business on the payment date of the
distribution or receive such distributions in cash. If no election is made,
distributions will be automatically reinvested in additional shares of the Fund.
Dividends declared in, and attributable to, the preceding month will be paid
within five business days after the end of each month.
Shares purchased will begin earning dividends on the day the purchase order
is executed and shares redeemed will earn dividends through the previous day.
Net investment income for a Saturday, Sunday or a holiday will be declared as a
dividend on the previous business day.
Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of investment income (regardless of whether derived from
dividends, interest or short-term capital gains) will be taxable to shareholders
as ordinary income. Distributions of net long-term capital gains designated by
the Fund as capital gain dividends will be taxable as long-term capital gains,
regardless of how long a shareholder has held his Fund shares. Distributions are
taxable in the same manner whether received in additional shares or in cash.
A distribution will be treated as paid on December 31 of the calendar year
if it is declared by the Fund during October, November, or December of that year
to shareholders of record in such a month and paid by the Fund during January of
the following calendar year. Such distributions will be taxable to shareholders
in the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares.
The dividends paid by the Fund are not expected to qualify for the
dividend-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders
17
<PAGE> 18
and certain other shareholders specified in the Code are exempt from backup
withholding. Backup withholding is not an additional tax. Any amount withheld
may be credited against the shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund. Depending on the residence of the
shareholder for tax purposes, distributions also may be subject to state and
local taxes, including withholding taxes. Foreign shareholders may, for example,
be subject to special withholding requirements. Special tax treatment, including
a penalty on certain pre-retirement distributions, is accorded to accounts
maintained as IRAs. Shareholders should consult their own tax advisers as to the
Federal, state and local tax consequences of ownership of shares of the Fund in
their particular circumstances.
OTHER INFORMATION
CAPITALIZATION
Performance Funds Trust was organized as a Delaware business trust on March
11, 1992, and consists of multiple separately managed portfolios or series. The
Board of Trustees may establish additional series in the future. The
capitalization of the Trust consists solely of an unlimited number of shares of
beneficial interest with a par value of $0.001 each. When issued, shares of the
Fund are fully paid and non-assessable.
This Prospectus relates to the Institutional Class of the Fund's shares.
The Fund also offers Consumer Service Class shares which are offered to public
investors at the net asset value. Call 1-800-737-3676, or contact your sales
representative, broker-dealer or bank to obtain more information about the
Fund's classes of shares. Purchases may be made through an authorized broker or
financial institution, including the Fund, by mail or by wire. Institutional
Class shares and Consumer Service Class shares are identical in all respects
with the exception that the Consumer Service Class shares may be subject to Rule
12b-1 fees to which the Institutional Class shares are not subject.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of each series of the Trust and requires that
notice of the disclaimer be given in each contract or obligation entered into or
executed by the Trust or the Trustees. The risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations and should be
considered remote and is limited to the amount of the shareholder's investment
in the Fund.
VOTING
Shareholders have the right to vote in the election of Trustees when
elections are required by law and on any and all matters on which, by law or
under the provisions of the Declaration of Trust, they may be entitled to vote.
The Trust is not required to hold regular annual meetings of the Fund's
shareholders and does not intend to do so. The Fund may vote separately on items
which affect only the Fund and each class within the Fund may vote separately on
matters which affect only that class. For example, only Consumer Service Class
shareholders will vote on matters related to the Fund's Distribution Plan under
Rule 12b-1. See "Other Information -- Voting Rights" in the SAI.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting of shareholders for the
purpose of considering the
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<PAGE> 19
removal of a person serving as Trustee if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust or Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of a Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of the Fund.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and/or total return in
advertisements or reports to shareholders or prospective investors. The methods
used to calculate the yield and total return of the Fund are mandated by the
SEC.
Quotations of "yield" for the Fund will be based on the income received by
a hypothetical investment (less a pro rata share of Fund expenses) over a
particular seven-day period, which is then "annualized" (i.e., assuming that the
seven-day yield would be received for 52 weeks, stated in terms of an annual
percentage return on the investment).
"Effective yield" for the Fund is calculated in a manner similar to that
used to calculate yield, but includes the compounding effect of earnings on
reinvested dividends. Quotations of yield and effective yield reflect only the
Fund's performance during the particular seven-day period on which the
calculations are based. Yield and effective yield for the Fund will vary based
on changes in market conditions, the level of interest rates and the level of
the Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
Performance information for the Fund may be compared to various appropriate
unmanaged indices, indices prepared by Lipper Analytical Services and other
entities or organizations which track the performance of investment companies.
Any performance information should be considered in light of the Fund's
investment objectives and policies, characteristics and quality of the Fund 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. For a
description of the methods used to determine yield and total return for the
Fund, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Fund has been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
Furman Selz acts as the Trust's transfer agent. The Trust compensates
Furman Selz, the Trust's administrator, for providing personnel and facilities
to perform shareholder servicing and transfer agency related services for the
Trust at a rate of $15 per account per year plus certain out-of-pocket expenses.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust,
c/o Furman Selz Mutual Funds Department, 237 Park Avenue, New York, New York
10017.
General and Account Information: (800) PERFORM (737-3676).
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[LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
SPONSOR AND DISTRIBUTOR
Performance Funds Distributor, Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
PFMMIC0995
[LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MONEY MARKET FUND
INSTITUTIONAL CLASS
PROSPECTUS
SEPTEMBER 27, 1996
Performance Funds'
Investment Adviser
<PAGE> 21
PERFORMANCE FUNDS TRUST
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- INVESTMENT ADVISER
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
THE MONEY MARKET FUND
The Money Market Fund (the "Fund") is managed by Trustmark National Bank
and is a separate investment fund of Performance Funds Trust (the "Trust"), a
Delaware business trust and registered management investment company with
multiple investment portfolios, including the Fund. This Prospectus relates only
to the "Consumer Service Class" of the Fund's shares. Certain investors may
qualify to invest in the Fund's "Institutional Class," which is not offered
hereby. See, "Other Information -- Capitalization." The Fund pays certain
expenses related to the distribution of its shares, calculated at an annual rate
and based on a percentage of the average daily net assets.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN THE VALUE OF ITS SHARES AT A CONSTANT
$1.00 PER SHARE, ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL ALWAYS BE ABLE
TO DO SO. SHARES OF THE FUND ARE NOT AN OBLIGATION OF OR GUARANTEED BY TRUSTMARK
NATIONAL BANK OR ITS AFFILIATES AND THE SHARES ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund.
A Statement of Additional Information (the "SAI"), dated September 27,
1996, containing additional and more detailed information about the Fund, has
been filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Fund at the address and
information number printed above.
------------------------
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.
------------------------
September 27, 1996
<PAGE> 22
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fund Expenses........................................................................... 3
Fee Table............................................................................... 3
Financial Highlights.................................................................... 4
Prospectus Summary...................................................................... 4
The Investment Policies and Practices of the Fund....................................... 5
Description of Securities and Investment Practices...................................... 6
Investment Restrictions................................................................. 8
Management of the Fund.................................................................. 9
Fund Share Valuation.................................................................... 12
Purchase of Fund Shares................................................................. 12
Individual Retirement Accounts.......................................................... 13
Exchange Privileges..................................................................... 14
Redemption of Fund Shares............................................................... 14
Dividends, Distributions and Federal Income Tax......................................... 16
Other Information....................................................................... 18
</TABLE>
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
2
<PAGE> 23
FUND EXPENSES
The following expense table lists estimated costs and expenses that an
investor in the Consumer Service Class may incur either directly or indirectly
as a shareholder of the Fund based on expenses for the fiscal year ended May 31,
1996. Actual expenses in the future may be greater or less than those shown.
Shareholders in the Consumer Service Class of the Fund may be subject to Rule
12b-1 Plan distribution fees (annually up to 0.35% of the average net assets of
the Fund), to which the Institutional Class is not subject. The Institutional
Class of shares is only available to certain qualified investors.
FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)..... none
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering
price)........................................................................ none
Deferred Sales Load (as a percentage of redemption proceeds).................... none
Redemption Fees................................................................. none
Exchange Fees................................................................... none
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets annualized)
Investment Advisory Fees (after waiver)(3)...................................... 0.10%
12b-1 Fees(1)................................................................... 0.25%
Other Expenses(4)............................................................... 0.15%
------
Total Fund Operating Expenses (after waiver)(3)................................. 0.50%
======
</TABLE>
(1) The Consumer Service Class of shares may be subject to certain Rule 12b-1
Plan distribution fees (annually equal to 0.35% of average net assets of
each Fund) to which the Institutional Class is not subject.
(2) Shares of the Consumer Service Class of the Fund may be available through
banks or other financial institutions which have entered into a dealer
agreement with PFD. Such institutions may provide a variety of services at
varying fees to customers and, although such fees are not fund-related, the
fees must be paid by customers in order to purchase Fund shares.
(3) Reflects a voluntary reduction (which will remain in effect until further
notice) in contractual fee. Had this reduction and 12b-1 waivers not been in
effect, the investment advisory fee would have been 0.30% and Total Fund
Operating Expenses would have been 0.80%.
(4) Certain Service Organizations may receive additional fees from the Fund in
amounts up to an annual rate of 0.35% of the daily net asset value of the
Fund's shares owned by shareholders with whom the Service Organization has a
servicing relationship. See "Management of the Fund -- Service
Organizations" herein.
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Fund might bear.
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming 5% gross
annual return and redemption at the end of each time period:
<TABLE>
<S> <C>
1 year........................................................ $5
3 years....................................................... $16
5 years....................................................... $27
10 years...................................................... $62
</TABLE>
* This example should not be considered a representation of actual expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of future annual
returns. Actual return may be greater or less than the assumed amount.
3
<PAGE> 24
FINANCIAL HIGHLIGHTS
The financial data shown below is to assist investors in evaluating the
performance of the Fund since commencement of operations through May 31, 1996.
The Financial Highlights for the periods ended May 31, 1996 have been audited by
Price Waterhouse LLP, independent accountants, whose report on the financial
statements, including this data, appears in the Fund's 1995 Annual Report to
Shareholders. This financial data should be read in conjunction with the related
financial statements and notes thereto.
SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
MONEY MARKET FUND
-----------------------------------------------
CONSUMER SERVICE CLASS
-----------------------------------------------
FOR THE PERIOD
YEAR YEAR SEPTEMBER 30, 1993
ENDED ENDED (COMMENCEMENT OF
MAY MAY OPERATIONS)
31, 31, THROUGH MAY 31,
1996 1995 1994
------- ------ --------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 1.00 $ 1.00 $ 1.00
------- ------ -------
Income from Investment Operations:
Net investment income............................ 0.05 0.05 0.02
------- ------ -------
Less Distributions:
Dividends from net investment income............. (0.05) (0.05) (0.02)
------- ------ -------
Net Asset Value, End of Period..................... $ 1.00 $ 1.00 $ 1.00
======= ====== =====================
Total Return....................................... 5.33% 5.02% 2.03%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)......... $25,216 $3,564 $ 797
Ratio of Expenses to Average Net Assets.......... 0.49% 0.48% 0.40%*
Effect of waivers/reimbursements on expense
ratio......................................... 0.30% 0.36% 0.53%*
Ratio of Net Investment Income to Average Net
Assets........................................ 5.17% 5.02% 3.05%*
</TABLE>
- ---------------
* Annualized
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
This Prospectus describes The Money Market Fund (the "Fund"), managed by
Trustmark National Bank. The investment objective of the Fund is to provide
investors with as high a level of current income as is consistent with
preservation of capital and liquidity. The Fund pursues its objective by
investing its assets in a broad range of high quality, short-term, money market
instruments which have remaining maturities not exceeding 397 days. The Fund is
required to maintain a dollar-weighted average portfolio maturity of 90 days or
less. Money market instruments in which the Fund may invest include: U.S.
Government securities, bank obligations, commercial paper, corporate debt
securities, variable rate demand notes and repurchase agreements. Generally,
securities in which the Fund invests will not earn as high a yield as securities
of longer maturity, and/or of lesser quality which are more subject to greater
market volatility. The Fund attempts to maintain the value of its shares at a
constant $1.00 per share, although there can be no assurance that the Fund will
always be able to do so.
4
<PAGE> 25
MANAGEMENT OF THE FUND
Trustmark National Bank ("Trustmark" or the "Adviser") acts as investment
adviser to the Fund. Trustmark's Trust Department, has assets in excess of $1
billion under management. It was founded in 1890 and is the second largest
commercial bank headquartered in Mississippi. For its services, the Adviser
receives from the Fund fees at annual rates of the Fund's average daily net
assets. Trustmark has been advising the Trust's Short Term Government Income
Fund, Intermediate Term Government Income Fund and Equity Fund since June of
1992. Trustmark has also been managing trust monies for over 40 years. See "Fee
Table" and "Management of the Fund" in this Prospectus.
Furman Selz LLC ("Furman Selz") acts as Administrator to the Fund and
provides certain management and administrative services to the Fund, for which
the Fund pays a fee at an annual rate based upon the Fund's average daily net
assets. Performance Funds Distributor, Inc. ("PFD") is the Sponsor and
Distributor for the Trust and distributes the Fund's shares and may be
reimbursed for certain of its distribution related expenses.
PURCHASES
Shares of the Consumer Service Class and the Institutional Class of the
Fund are offered at net asset value without a sales load. However, Consumer
Service Class Shares may be subject to certain Rule 12b-1 distribution fees to
which the Institutional Class is not subject. Only certain investors are
eligible to invest in the "Institutional Class" of the Fund's shares. See
"Purchase of Fund Shares" and "Other Information -- Capitalization." Purchases
may be made through an authorized broker or financial institution, including the
Fund, by mail or by wire. Purchases may only be made in cash with a minimum
initial investment for any Fund of $1,000 which may be waived for certain
accounts. Subsequent investments must be at least $100.
SERVICE ORGANIZATIONS
The Fund may pay fees to various banks (including Trustmark), trust
companies, broker-dealers and other financial organizations ("Service
Organizations") for providing administrative services for the Fund, such as
maintaining shareholder accounts and records. Investors are not required to
purchase Fund shares through or maintain an account with a Service Organization.
REDEMPTIONS
Shares may be redeemed at their next determined net asset value. See
"Redemption of Fund Shares" and "Fund Share Valuation." Redemptions may be made
by letter or, if previously authorized, by telephone. The Fund reserves the
right to redeem upon not less than 30 days' notice all shares in a Fund account
which, as a result of shareholder redemption, has a value below $500 ($250 for
Individual Retirement Accounts ("IRAs")).
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays its net investment income to shareholders of
record in accordance with the schedule set forth under "Dividends, Distributions
and Federal Income Tax." Any net realized long-term capital gains will be
distributed annually. All dividends and distributions will be automatically
reinvested at net asset value in additional shares of the Fund unless cash
payment is requested.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND
The investment objective of the Fund is to provide investors with as high a
level of current income as is consistent with preservation of capital and
liquidity. The Fund pursues its objective by investing its assets in a
5
<PAGE> 26
broad range of high quality, short-term, money market instruments which have
remaining maturities not exceeding 397 days. The Fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less. Generally,
securities in which the Fund invests will not earn as high a yield as securities
of longer maturity, and/or of lesser quality which are subject to greater market
volatility. The Fund attempts to maintain the value of its shares at a constant
$1.00 per share, although there can be no assurance that the Fund will always be
able to do so.
This Prospectus and the SAI contain specific investment restrictions which
govern the Fund's investments. Those restrictions and the Fund's investment
objectives are fundamental policies, which means that they may not be changed
without a majority vote of shareholders of the Fund. Except for the objectives
and those restrictions specifically identified as fundamental, all other
investment policies and practices described in this Prospectus and in the SAI
are not fundamental and may be changed by the Board of Trustees without
shareholder approval.
The Adviser selects investments and makes investment decisions based on the
investment objective and policies of the Fund.
The Adviser selects only those U.S. dollar-denominated debt instruments
which meet the high quality and credit risk standards established by the Board
of Trustees. The Fund will purchase commercial paper which, at the time of
investment, is rated in the top category by at least two Nationally Recognized
Statistical Rating Organizations, or, if not rated, are, in the opinion of the
Adviser and the Board of Trustees, of an investment quality comparable to rated
commercial paper in which the Fund may invest. Corporate debt securities (bonds,
debentures, notes and other similar debt instruments) in which the Fund may
invest have 397 days or less to maturity and are rated AA or better by Standard
& Poors Corporation ("S&P") or Aa or better by Moody's Investors Service
("Moody's"). The Fund will invest no more than 5% of its total assets in debt
securities which are rated below the top rating category or if unrated are of
comparable investment quality as determined by the Adviser and the Board of
Trustees.
The following describes in greater detail different types of securities and
investment practices used by the Fund.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury bills, which have a maturity of up to one year, are direct
obligations of the United States and are the most frequently issued marketable
U.S. Government security. The U.S. Treasury also issues securities with longer
maturities in the form of notes and bonds.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates,
which may be guaranteed by the Government National Mortgage Association; others,
such as obligations of the Federal Home Loan Banks, Federal Farm Credit Bank,
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal Land
Bank, are guaranteed by the right of the issuer to borrow from the U.S.
Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.
6
<PAGE> 27
Bank Obligations. These obligations include negotiable certificates of
deposit and bankers' acceptances. The Fund limits its bank investments to
dollar-denominated obligations of U.S. banks which have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency, or whose deposits are
insured by the FDIC.
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by U.S. banks and bank holding companies, U.S. corporations and
financial institutions, as well as similar taxable and tax-exempt instruments
issued by government agencies and instrumentalities. The Fund establishes its
own standards of creditworthiness for issuers of such investments.
Corporate Debt Securities. The Fund's investments in U.S. corporate debt
securities are limited to corporate bonds, debentures, notes and other similar
corporate debt instruments which meet the previously disclosed minimum ratings
and maturity criteria established for the Fund under the direction of the Board
of Trustees and the Fund's Adviser or, if unrated, are in the Adviser's opinion
comparable in quality to corporate debt securities in which the Fund may invest.
See "The Investment Policies and Practices of the Fund."
Repurchase Agreements. Securities held by the Fund may be subject to
repurchase agreements. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed upon time and price. These
agreements may be considered to be loans by the purchaser collateralized by the
underlying securities. These agreements will be fully collateralized and the
collateral will be marked-to-market daily. The Fund will enter into repurchase
agreements only with dealers, domestic banks or recognized financial
institutions which, in the opinion of the Adviser and in accordance with
guidelines adopted by the Board of Trustees, present minimal credit risks. While
the maturity of the underlying securities in a repurchase agreement transaction
may be more than one year, the term of the repurchase agreement will, as a
fundamental policy, always be seven days or less. See "Investment Restrictions."
In the event of default by the seller under the repurchase agreement, the Fund
may have problems in exercising its rights to the underlying securities and may
experience time delays in connection with the disposition of such securities.
Loans of Portfolio Securities. To increase current income, the Fund may
lend its portfolio securities in an amount up to 5% of its total assets to
brokers, dealers and financial institutions, provided certain conditions are
met, including the condition that each loan is secured continuously by
collateral maintained on a daily mark-to-market basis in an amount at least
equal to the current market value of the securities loaned. For further
information, see the SAI.
Variable and Floating Rate Demand and Master Demand Notes. The Fund may,
from time to time, purchase variable or floating rate demand notes issued by
corporations, bank holding companies and financial institutions and similar
taxable and tax exempt instruments issued by government agencies and
instrumentalities. These securities will typically have a maturity over one year
but carry with them the right of the holder to put the securities to a
remarketing agent or other entity at designated time intervals and on specified
notice. The obligation of the issuer of the put to repurchase the securities may
be backed up by a letter of credit or other obligation issued by a financial
institution. The purchase price is ordinarily par plus accrued and unpaid
interest. Generally, the remarketing agent will adjust the interest rate every
seven days (or at other specified intervals) in order to maintain the interest
rate at the prevailing rate for securities with a seven-day or other designated
maturity. The Fund will only purchase demand instruments which provide that the
Fund may receive the principal amount of the note upon not more than seven days'
notice. The Fund's investment in demand instruments which provide that the Fund
will not receive the principal note amount within seven days' notice, in
combination with the Fund's other investments in illiquid instruments, will be
limited to an aggregate total of 10% of the Fund's net assets.
7
<PAGE> 28
The Fund may also buy variable rate master demand notes. The terms of these
obligations permit the Fund to invest fluctuating amounts at varying rates of
interest pursuant to direct arrangements between the Fund, as lender, and the
borrower. These instruments permit weekly and, in some instances, daily changes
in the amounts borrowed. The Fund has the right to increase the amount under the
note at any time up to the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the full amount of the
note without penalty. The notes may or may not be backed by bank letters of
credit. Because the notes are direct lending arrangements between the Fund and a
borrower, it is not generally contemplated that they will be traded, and there
is no secondary market for them, although they are redeemable (and, thus,
immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. In connection with any such purchase and on an ongoing
basis, the Board of Trustees will consider the earning power, cash flow and
other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
make demand simultaneously. While master demand notes, as such, are not
typically rated by credit rating agencies, the Fund may, under its minimum
rating standards, invest in them only if at the time of an investment, the
issuer meets the criteria set forth in this Prospectus for commercial paper
obligations.
Illiquid Investments. It is the policy of the Fund that restricted
securities and other illiquid securities (including variable and floating rate
demand and master demand notes not requiring receipt of the principal note
amount within seven days' notice and securities of foreign issuers that are not
listed on a recognized domestic or foreign securities exchange) may not
constitute, at the time of purchase or at any time, more than 10% of the value
of the total net assets of the Fund.
Notwithstanding the above, the Fund may purchase securities which are
eligible for purchase and sale under Rule 144A under the Securities Act of 1933
(the "1933 Act"). Rule 144A permits certain qualified institutional buyers, such
as the Fund, to trade in privately placed securities even though such securities
are not registered under the 1933 Act. The Adviser, under the supervision of the
Board of Trustees, will consider whether securities purchased under Rule 144A
are illiquid and thus subject to the Fund's restriction of investing no more
than 10% of its assets in illiquid securities. A determination of whether a Rule
144A security is liquid or not is a question of fact. In making this
determination the Adviser will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security. In
addition, the Adviser could consider the (1) frequency of trades and quotes, (2)
number of dealers and potential purchasers, (3) dealer undertakings to make a
market, and (4) the nature of the security and of marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities would be monitored
and, if as a result of changed conditions, it is determined that a Rule 144A
security is no longer liquid, the Fund's holdings of illiquid securities would
be reviewed to determine what, if any, steps are required to assure that the
Fund does not invest more than 10% of its assets in illiquid securities.
Investing in 144A securities could have the effect of increasing the amount of
the Fund's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
INVESTMENT RESTRICTIONS
(1) The Fund may not borrow money or pledge or mortgage its assets, except
from banks up to 10% of the current value of its total net assets for temporary
or emergency purposes and those borrowings may be secured by the pledge of not
more than 15% of the current value of the Fund's total net assets (but
investments may not be purchased by a Fund while any such borrowings exist).
(2) The Fund may not make loans, except loans of portfolio securities and
except that a Fund may enter into repurchase agreements with respect to its
portfolio securities.
8
<PAGE> 29
(3) In addition, the Fund is a diversified fund. As such, it will not
invest more than 5% of its total assets in the securities of any one issuer
(except for U.S. Government securities) or purchase more than 10% of the
outstanding voting securities of any single issuer. Also, the Fund will invest
less than 25% of its total assets in the securities of any one industry but may
invest more than 25% of its total assets in instruments issued by domestic
banks. For this purpose, U.S. Government securities (and repurchase agreements
related thereto) are not considered securities of a single industry.
The foregoing investment restrictions and those described in the SAI are
fundamental policies of the Fund which may be changed only when permitted by law
and approved by the holders of a majority of the Fund's outstanding voting
securities as described under "Other Information -- Voting."
If a percentage restriction on investment policies or the investment or use
of assets set forth in this Prospectus is adhered to at the time a transaction
is effected, later changes in percentage resulting from changing values will not
be considered a violation.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. Additional information about the Trustees, as well as the
Trust's executive officers, may be found in the SAI under the heading
"Management -- Trustees and Officers."
The Investment Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201, serves as investment adviser to the Fund. Trustmark
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments.
Trustmark is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
Trustmark's Trust Department, has assets in excess of $1 billion under
management. It was founded in 1890 and is the second largest commercial bank
headquartered in Mississippi. Trustmark has been advising the Trust's Short Term
Government Income Fund, Intermediate Term Government Income Fund and Equity Fund
since June 1992. Trustmark has been managing trust monies for over 40 years.
Shares of the Fund are not guaranteed by Trustmark, its parent or affiliates,
nor are they insured by the FDIC, the Federal Reserve Board or any other agency.
For the advisory services it provides to the Funds, Trustmark is entitled
to receive monthly fees up to 0.30% of the average daily net assets of the Fund.
Based upon the advice of its counsel, Trustmark believes that the
performance of investment advisory services for the Fund 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 Trustmark from continuing to perform such services
for the Fund. If Trustmark were prohibited from acting as investment adviser to
the Fund, it is expected that the Board of Trustees would recommend to
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.
The Sponsor, Distributor and Administrator. Furman Selz LLC, 230 Park
Avenue, New York, New York 10169, acts as Administrator of the Fund. Performance
Funds Distributor, Inc., an affiliate of Furman Selz, acts as the Distributor of
the Fund's shares. Furman Selz is primarily an institutional brokerage firm with
membership on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds.
9
<PAGE> 30
Under the Distribution Plan (the "Plan") adopted by the Trust, the Fund may
pay directly or reimburse PFD monthly (subject to a limit of 0.35% per annum of
the Fund's average daily net assets, for costs and expenses of PFD in connection
with the distribution of Fund shares. These costs and expenses include (i)
advertising by radio, television, newspapers, magazines, brochures, sales
literature, direct mail or any other form of advertising, (ii) expenses of sales
employees or agents of PFD, including salary, commissions, travel and related
expenses, (iii) payments to broker-dealers and financial institutions for
services in connection with the distribution of shares, including promotional
incentives and fees calculated with reference to the average daily net asset
value of shares held by shareholders who have a brokerage or other service
relationships with the broker-dealer or other institution receiving such fees,
(iv) costs of printing prospectuses and other materials to be given or sent to
prospective investors and (v) such other similar services as the Trustees
determine to be reasonably calculated to result in the sale of shares of the
Fund. The Fund will pay all costs and expenses in connection with the
preparation, printing and distribution of its Prospectus to current shareholders
and the operation of its Plan, including related legal and accounting fees. The
Fund will not be liable for distribution expenditures made by PFD in any given
year in excess of the maximum amount payable under the Plan for the Fund in that
year.
Administrative Services. The Fund has entered into an Administrative
Services Contract with Furman Selz pursuant to which Furman Selz provides
certain management and administrative services necessary for the Fund's
operations including: (i) general supervision of the operation of the Fund
including coordination of the service performed by the Fund's Adviser, transfer
agent, custodian, independent accountants and legal counsel, regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with the SEC and state securities commissions; and
preparation of proxy statements and shareholder reports for the Fund, (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Trust's officers and Board of
Trustees, and (iii) furnishing office space and certain facilities required for
conducting the business of the Fund. Furman Selz is entitled to receive monthly
fees up to 0.15% of average daily net assets of the Fund.
Pursuant to a Shareholder Servicing Agreement between the Trust and the
Administrator, Furman Selz receives a fee of $15.00 per account per year plus
out-of-pocket expenses. Pursuant to the Fund Accounting Agreement between the
Trust and the Administrator, the Administrator assists the Trust in calculating
net assets values and provides certain other accounting services for the Fund
described therein, for an annual fee of $30,000 plus out-of-pocket expenses.
On June 28, 1996, Furman Selz and BISYS Group, Inc. ("BISYS") announced a
definitive agreement which provides that by the end of 1996 Furman Selz will
exit the mutual funds business and recommend BISYS to Furman Selz's existing
fund clients to replace Furman Selz for mutual fund administration,
distribution, fund accounting and transfer agency services. BISYS, headquartered
in Little Falls, N.J., supports more than 5,000 financial institutions and
corporate clients through two strategic business units. BISYS Information
Services Group provides image and data processing outsourcing, and pricing
analysis to more than 600 banks nationwide. BISYS Investment Services Group
designs, administers, and distributes over 30 families of proprietary mutual
funds consisting of more than 365 portfolios, and provides 401(k) marketing
support, administration, and recordkeeping services in partnership with 18 of
the nation's leading bank and investment management companies. BISYS trades on
NASDAQ under the symbol BISYS.
As of the date of this prospectus the Board of Trustees of the Fund is
considering alternatives to Furman Selz LLC as service provider to the Fund. The
Board will decide on Furman Selz's replacement by January 1, 1997. Shareholders
of the Fund will be notified of such decision.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
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<PAGE> 31
administrative services for the Fund, such as maintaining shareholder accounts
and records. The Fund may pay fees to Service Organizations (which vary
depending upon the services provided) in amounts up to an annual rate of 0.35%
of the daily net asset value of the Fund's shares owned by shareholders with
whom the Service Organization has a servicing relationship. Investors are not
required to purchase shares through or maintain an account with a Service
Organization.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the Fund's
minimum initial or subsequent investments or charging a direct fee for
servicing. A Service Organization or broker or other sales-person within such
Service Organization may be compensated at varying rates for the sale of one
class of Fund shares as opposed to another. If imposed, these fees would be in
addition to any amounts which might be paid to the Service Organization by the
Fund. Each Service Organization has agreed to transmit to its clients a schedule
of any such fees. Shareholders using Service Organizations are urged to consult
with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. In addition, state
securities law on this issue may differ from interpretations of Federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD or the Adviser. The costs borne by the Fund include
legal and accounting expenses; Trustees' fees and expenses; insurance premiums;
custodian and transfer agent fees and expenses; expenses incurred in acquiring
or disposing of the Fund's portfolio securities; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of obtaining quotations on the Fund's portfolio
securities and pricing of the Fund's shares; expenses of maintaining the Fund's
legal existence and of shareholders' meetings; and expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses. The
Fund bears its own expenses associated with its establishment as a series of
Performance Funds Trust; these expenses are being amortized over a five-year
period from the commencement of the Fund's operations. See "Management" in the
SAI. Trust expenses directly attributable to the Fund are charged to the Fund;
other expenses are allocated proportionately among all of the Funds in the Trust
in relation to the net assets of each such Fund, and are in turn allocated to
each Share Class based on net assets of each share class. Class specific
expenses directly attributable to a specific share class are charged to such
class.
Portfolio Transactions. Pursuant to the Investment Advisory Contract, the
Adviser places orders for the purchase and sale of portfolio investments for the
Fund's accounts with brokers or dealers selected by it in its discretion.
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<PAGE> 32
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Adviser will seek the best execution of the Fund's orders.
Purchases and sales of portfolio debt securities for the Fund are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter. Purchases and sales of common stocks are generally placed by
the Adviser with broker-dealers which, in the Adviser's judgment, provide prompt
and reliable execution at favorable security prices and reasonable commission
rates. Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Adviser. The Adviser may cause the Fund to pay
commissions higher than another broker-dealer would have charged if the Adviser
believes the commission paid is reasonable in relation to the value of the
brokerage and research services received on behalf of the Fund.
FUND SHARE VALUATION
The net asset value per share of the Fund is calculated at 12 noon (Eastern
time) Monday through Friday, on each day the New York Stock Exchange is open for
trading (a "Business Day"), which includes the following business holidays: New
Years' Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share of the
Fund is computed by dividing the value of each share class of the Fund's net
assets (i.e., the value of the assets less the liabilities) by the total number
of each share class of the Fund's outstanding shares. All expenses, including
fees paid to the Adviser, Furman Selz and class specific, are accrued daily and
taken into account for the purpose of determining the net asset value.
The Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there is no assurance that a net asset value of $1.00 per share can be
maintained. The amortized cost method involves valuing a security at its cost
and amortizing any discount or premium over the period until maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. See the SAI for a more complete description of the amortized cost
method.
PURCHASE OF FUND SHARES
Orders for purchases of shares of the Fund will be executed at the net
asset value per share next determined after an order has been received. All
monies received by the Fund are invested in full and fractional shares of the
Fund. Certificates for shares are not issued. Furman Selz maintains records of
each shareholder's holdings of Fund shares, and each shareholder receives a
statement of transactions, holdings and dividends. The Fund reserves the right
to reject any purchase. The Fund does not accept third party checks.
Minimum Purchase Requirements. The minimum initial investment in the Fund
is $1,000, except that the minimum is $250 for an IRA for which Trustmark serves
as trustee. Subsequent investments must be at least $100, or $50 for an IRA. All
initial investments should be accompanied by a completed Purchase Application. A
Purchase Application accompanies this Prospectus. Different minimums apply, and
a separate application is required for IRA investments. The Fund reserves the
right to reject purchase orders.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisers and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and contact
your broker,
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<PAGE> 33
investment adviser or Service Organization with instructions as to the amount
you wish to invest. Your broker will then contact the Fund to place the order on
your behalf on that day.
Orders received by your broker or Service Organization for the Fund in
proper order prior to the determination of net asset value and transmitted to
the Fund prior to the close of its business day (which is currently 12 Noon
Eastern time), will become effective that day. Orders for the Fund received
prior to 12 Noon, Eastern time, will become effective that day. Brokers who
receive orders are obligated to transmit them promptly. You should receive
written confirmation of your order within a few days of receipt of instructions
from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the Fund. In most cases, your bank will either be a member of the
Federal Reserve Banking System or have a relationship with a bank that is. Your
bank will normally charge you a fee for handling the transaction. To purchase
shares by a Federal funds wire, please first contact the Fund. The Fund will
establish a record of information for the wire to insure the correct processing
of funds. You can reach the Wire Desk at 1-800-737-3676.
Then, have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, Missouri 64105
ABA #1010-0362-1
Account #751-2996
Further Credit to: The Performance Money Market
Fund
As long as you have received the Prospectus, you may establish a new
regular account through the Wire Desk; IRAs may not be opened in this way. When
new accounts are established by wire, the distribution options will be set to
reinvest all distributions and the social security or tax identification number
("TIN") will not be certified until a signed application is received. Completed
applications should be forwarded immediately to the Fund. With the application,
the shareholder can specify other distribution options and add any special
features offered by the Fund. Should any dividend distributions or redemptions
be paid before the TIN is certified, they will be subject to 31% Federal tax
withholding.
By Automatic Investment. Investors may participate in the Automatic
Investment Program, which is an investment plan that automatically debits money
from the shareholder's designated bank account and invests it in the Fund
through the use of electronic fund transfers or automatic bank drafts.
Shareholders may elect to make investments by transfers of a minimum of $50 on
either the fifth or twentieth day of each month into their established Fund
Account. No minimum initial investment applies when an account is established
through the Automatic Investment Program. Contact the Fund for more information
about the Automatic Investment Program.
By Payroll Direct Deposits. Investors may set up a payroll direct deposit
arrangement for amounts to be automatically invested in the Fund. Participants
in the Payroll Direct Deposit program may make periodic investments of at least
$20 per pay period. Contact the Fund for more information about Payroll Direct
Deposits.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment for new or existing IRAs. Shares may
also be purchased for IRAs established with Trustmark or other authorized
custodians. In addition, an IRA may be established through a custodial account
with Investors Fiduciary Trust Company. Completion of a special application is
required in order to create such an account, and the minimum initial investment
for an IRA is $250.
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<PAGE> 34
Contributions to IRAs are subject to prevailing amount limits set by the
Internal Revenue Service. A $5.00 establishment fee and an annual $12.00
maintenance and custody fee is payable with respect to each shareholder; in
addition, there will be charged a $10.00 termination fee when the account is
closed. For more information and IRA information, call the Fund toll free at
1-800-737-3676.
EXCHANGE PRIVILEGES
The Fund offers two convenient ways to exchange shares in one of the
Performance Funds for shares in another Performance Fund. Before engaging in an
exchange transaction, a shareholder should read carefully the portions of this
Prospectus describing the Fund into which the exchange will be made. A
shareholder may not exchange shares of one Fund for shares of another Fund if
both or either are not qualified for sale in the state of the shareholder's
residence. The minimum amount for an initial exchange is $1,000 and the minimum
amount for subsequent exchanges is $100. The Trust may terminate or amend the
terms of the exchange privilege at any time upon 60 days' written notice to
shareholders.
A new account opened by exchange must be established with the same name(s),
address and social security number or TIN as the existing account. All exchanges
will be made based on the net asset value next determined following receipt of
the request by the Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized but such gains are not expected to occur since the Fund seeks to
maintain a stable net asset value of $1.00 per share. Shareholders should
receive written confirmation of the exchange within a few days of the completion
of the transaction.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to Furman Selz. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which you wish to exchange
your investment; (iii) the dollar or share amount you wish to exchange; and (iv)
the signatures of all registered owners or authorized parties. All signatures
must be guaranteed by a member of a national securities exchange or by a
commercial bank or trust company.
Exchange by Telephone. To exchange Fund shares by telephone or if you have
any questions, simply call the Fund toll free at 1-800-737-3676. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security number or TIN and account registration;
(ii) the name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The
conversation may be recorded to protect you and the Fund. Telephone exchanges
are available to the shareholder unless otherwise indicated by the shareholder
by checking the box on the Purchase Application. See "Redemption of Fund Shares
- -- By Telephone" below for a discussion of telephone transactions generally.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any Business
Day. Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received and accepted by the Fund. See
"Fund Share Valuation." A redemption may be a taxable transaction on which gain
or loss may be recognized. Generally, however, gain or loss is not expected to
be realized on a redemption of shares because the Fund seeks to maintain a net
constant asset value per share of $1.00.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed,
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<PAGE> 35
dividends on the shares will continue to accrue and be payable and the
shareholder will be entitled to exercise all other beneficial rights of
ownership.
Once the shares are redeemed, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day,
although the Fund may take up to seven days to make payment. Also, if the New
York Stock Exchange is closed (or when trading is restricted) for any reason
other than the customary weekend or holiday closing or if an emergency condition
as determined by the SEC merits such action, the Fund may suspend redemptions or
postpone payment dates.
Redemption Methods. To ensure acceptance of your redemption request, it is
important to follow the procedures described below. Although the Fund has no
present intention to do so, the Fund reserves the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Fund's services and their provisions may
be modified or terminated at any time by the Fund. If the Fund terminates any
particular service, it will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your broker or
investment adviser and instructing him to redeem your shares. He will then
contact the Fund and place a redemption trade on your behalf. You will receive
the next determined net asset value per share after receipt of such request by
your broker or investment adviser. It will be the responsibility of such broker
or investment adviser to transmit your redemption request to the Fund in a
timely manner. Such broker or investment adviser may charge you a fee for this
service.
By Mail. You may redeem your shares by sending a letter directly to the
Fund. To be accepted, a letter requesting redemption must include: (i) the Fund
name and account registration from which you are redeeming shares, (ii) your
account number, (iii) the amount to be redeemed, (iv) the signatures of all
registered owners, and (v) a signature guarantee by a member of a national
securities exchange or a commercial bank or trust company (a signature guarantee
by a savings bank or a notary public is not acceptable). Corporations,
partnerships, trusts or other legal entities will be required to submit
additional documentation.
By Telephone. You may redeem your shares by calling the Fund toll free at
1-800-737-3676. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number or TIN
and account registration, (ii) the Fund name from which you are redeeming
shares, and (iii) the amount to be redeemed. The Fund employs reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Fund fails to employ such reasonable procedures, it may be liable for any
loss, damage or expense arising out of any telephone transactions purporting to
be on a shareholder's behalf. In order to assure the accuracy of instructions
received by telephone, the Fund requires some form of personal identification
prior to acting upon instructions received by telephone, records telephone
instructions and provides written confirmation to investors of such
transactions. Telephone redemptions are available to the shareholder unless
otherwise indicated by the shareholder by checking the box on the Purchase
Application.
By Wire. You may redeem your shares by contacting the Fund by mail or
telephone and instructing it to send a wire transmission to your personal bank.
Proceeds of wire redemption for the Fund generally will be transferred to the
designated account on the day the request is received provided that it is
received by 12:00 Noon (Eastern time).
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<PAGE> 36
Your instructions should include: (i) your account number, social security
number or TIN and account registration, (ii) the Fund name, and (iii) the amount
to be redeemed. Wire redemptions are available to the shareholder unless
otherwise indicated by checking the box on the Purchase Application. Please
attach a copy of a void check of account where proceeds are to be wired. Your
bank may charge you a fee for receiving a wire payment on your behalf.
Check Writing. A check redemption ($100 minimum, no maximum) feature is
available with respect to the Fund. Checks are free and may be obtained from the
Fund. It is not possible to use a check to close out your account since
additional shares accrue daily.
The above mentioned services "Telephone", "Wire" and "Check Writing" are
not available for IRAs and trust clients of Trustmark.
Systematic Withdrawal Plan. An owner of $25,000 or more of shares of the
Fund may elect to have periodic redemptions from his account to be paid on a
monthly, quarterly, semi-annual or annual basis. The minimum periodic payment is
$100. A sufficient number of shares to make the scheduled redemption will
normally be redeemed on the date selected by the shareholder. Depending on the
size of the payment requested and fluctuation in the net asset value, if any, of
the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Fund reserves the right to redeem, on not less
than 30 days' notice, an account in the Fund that has been reduced as a result
of shareholder redemption of the account to $500 ($250 for an IRA) or less.
However, if during the 30-day notice period the shareholder purchases sufficient
shares to bring the value of the account above $500 ($250 for an IRA), this
restriction will not apply.
Redemption in Kind. All redemptions of shares of the Fund shall be made in
cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of the Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of the Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy that may not be changed
without shareholder approval. In the case of redemption requests by shareholders
in excess of such amounts, the Board of Trustees reserves the right to have the
Fund make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of
the Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund has qualified and intends to continue to qualify to be treated as
a regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, the Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term
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<PAGE> 37
capital gains over net long-term capital losses). The Fund will declare
dividends of such income daily and pay those dividends monthly. The Fund intends
to distribute, at least annually, substantially all net capital gains (the
excess of net long-term capital gains over net short-term capital losses). In
determining amounts of capital gains to be distributed, any capital loss
carryovers from prior years will be applied against capital gains.
Shareholders may elect to receive distributions in additional Fund shares
based on the net asset value at the close of business on the payment date of the
distribution or may receive such distribution in cash. If no election is made,
distributions will be automatically reinvested in additional shares of the Fund.
Dividends declared in, and attributable to, the preceding month will be paid
within five business days after the end of each month.
Shares purchased will begin earning dividends on the day the purchase order
is executed and shares redeemed will earn dividends through the previous day.
Net investment income for a Saturday, Sunday or a holiday will be declared as a
dividend on the previous business day.
Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of investment income (regardless of whether derived from
dividends, interest or short-term capital gains) will be taxable to shareholders
as ordinary income. Distributions of net long-term capital gains designated by
the Fund as capital gain dividends will be taxable as long-term capital gains,
regardless of how long a shareholder has held his Fund shares. Distributions are
taxable in the same manner whether received in additional shares or in cash.
A distribution, dividend, will be treated as paid on December 31 of the
calendar year if it is declared by the Fund during October, November, or
December of that year to shareholders of record in such a month and paid by the
Fund during January of the following calendar year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares.
The dividends paid by the Fund are not expected to qualify for the
dividends-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amount withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund. Depending on the residence of the
shareholder for tax purposes, distributions also may be subject to state and
local taxes, including withholding taxes. Foreign shareholders may, for example,
be subject to special withholding requirements. Special tax treatment, including
a penalty on certain pre-retirement distributions, is accorded to accounts
maintained as IRAs. Shareholders should consult their own tax advisers as to the
Federal, state and local tax consequences of ownership of shares of the Fund in
their particular circumstances.
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<PAGE> 38
OTHER INFORMATION
CAPITALIZATION
Performance Funds Trust was organized as a Delaware business trust on March
11, 1992, and currently consists of multiple separately managed portfolios or
series. The Board of Trustees may establish additional series in the future. The
capitalization of the Trust consists solely of an unlimited number of shares of
beneficial interest with a par value of $0.001 each. When issued, shares of the
Fund are fully paid and non-assessable.
This Prospectus relates to the Consumer Service Class of the Fund's shares.
The Fund also offers Institutional Class shares which are offered only to
employees (and family members) of Trustmark, the Distributor, Administrator and
affiliates and correspondents, Trustees of the Trust (and family members),
Directors of Trustmark (and family members) and certain institutional investors,
at net asset value without a sales load, which make an initial investment of one
million dollars or more or who, at the time of purchase, have a balance of one
million dollars or more in the Fund or which is a purchaser through (or with
proceeds of a distribution from) a trust, investment management or other
fiduciary account managed or administered by the Adviser, its correspondents or
affiliates pursuant to a written contract (except for asset allocation or "wrap"
accounts). Institutional Class shares and Consumer Service Class shares are
identical in all respects with the exception that the Consumer Service Class
shares may be subject to Rule 12b-1 fees to which the Institutional Class shares
are not subject. Purchases may be made through an authorized broker or financial
institution, including the Fund, by mail or by wire. Call 1-800-737-3676, or
contact your sales representative, broker-dealer or bank to obtain more
information about the Fund's classes of shares.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of each series of the Trust and requires that
notice of the disclaimer be given in each contract or obligation entered into or
executed by the Trust or the Trustees. The risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations and should be
considered remote and is limited to the amount of the shareholder's investment
in the Fund.
VOTING
Shareholders have the right to vote in the election of Trustees when
elections are required by law and on any and all matters on which, by law or
under the provisions of the Declaration of Trust, they may be entitled to vote.
The Trust is not required to hold regular annual meetings of the Fund's
shareholders and does not intend to do so. The Fund may vote separately on items
which affect only the Fund and each class within the Fund may vote separately on
matters which affect only that class. For example, only Consumer Service Class
shareholders will vote on matters related to the Fund's Distribution Plan under
Rule 12b-1. See "Other Information -- Voting Rights" in the SAI.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting of shareholders for the
purpose of considering the removal of a person serving as Trustee if requested
in writing to do so by the holders of not less than 10% of the outstanding
shares of the Trust or Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of the Fund.
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<PAGE> 39
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and/or total return in
advertisements or reports to shareholders or prospective investors. The methods
used to calculate the yield and total return of the Fund is mandated by the SEC.
Quotations of "yield" for the Fund will be based on the income received by
a hypothetical investment (less a pro-rata share of Fund expenses) over a
particular seven-day period, which is then "annualized" (i.e., assuming that the
seven-day yield would be received for 52 weeks, stated in terms of an annual
percentage return on the investment).
"Effective yield" for the Fund is calculated in a manner similar to that
used to calculate yield, but includes the compounding effect of earnings on
reinvested dividends. Quotations of yield and effective yield reflect only the
Fund's performance during the particular seven-day period on which the
calculations are based. Yield and effective yield for the Fund will vary based
on changes in market conditions, the level of interest rates and the level of
the Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
Performance information for the Fund may be compared to various unmanaged
indices, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Fund 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. For a description of the
methods used to determine yield and total return for the Fund, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Fund has been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
Furman Selz acts as the Trust's transfer agent. The Trust compensates
Furman Selz, the Trust's administrator, for providing personnel and facilities
to perform shareholder servicing and transfer agency related services for the
Trust at a rate of $15 per account per year plus certain out-of-pocket expenses.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust,
c/o Furman Selz Mutual Funds Department, 237 Park Avenue, New York, New York
10017.
General and Account Information: (800) PERFORM (737-3676)
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[LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
SPONSOR AND DISTRIBUTOR
Performance Funds Distributor, Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
PMMMCC 0995
[LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MONEY MARKET FUND
CONSUMER SERVICE CLASS
PROSPECTUS
SEPTEMBER 27, 1996
Performance Funds'
Investment Adviser
<PAGE> 41
PERFORMANCE FUNDS TRUST
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
800-PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- INVESTMENT ADVISER
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
This Prospectus describes three investment funds (the "Funds") managed by
Trustmark National Bank. The Funds are:
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE EQUITY FUND
The Funds are separate investment funds of Performance Funds Trust (the
"Trust"), a Delaware business trust and registered management investment company
with distinct investment objectives and policies. This Prospectus relates only
to the "Institutional Class" of each Fund's shares which only certain investors
are qualified to purchase. Each Fund also has a "Consumer Service Class" of
shares. See, "Other Information -- Capitalization." This Prospectus sets forth
concisely the information a prospective investor should know before investing in
any of the Funds and should be read and retained for information about each
Fund.
INVESTMENTS IN THE FUNDS ARE NOT GUARANTEED OR INSURED BY THE UNITED STATES
GOVERNMENT. SHARES OF THE FUNDS ARE NOT AN OBLIGATION OF OR GUARANTEED BY
TRUSTMARK NATIONAL BANK OR ITS AFFILIATES AND SUCH SHARES ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
A Statement of Additional Information, dated September 27, 1996 (the "SAI")
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address and
information number printed above.
------------------------
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.
------------------------
September 27, 1996
<PAGE> 42
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fund Expenses........................................................................... 3
Fee Table............................................................................... 3
Financial Highlights.................................................................... 5
Prospectus Summary...................................................................... 10
The Investment Policies and Practices of the Funds...................................... 12
Description of Securities and Investment Practices...................................... 13
Investment Restrictions................................................................. 20
Management of the Funds................................................................. 20
Fund Share Valuation.................................................................... 23
Purchase of Fund Shares................................................................. 24
Individual Retirement Accounts.......................................................... 25
Exchange Privileges..................................................................... 25
Redemption of Fund Shares............................................................... 26
Dividends, Distributions and Federal Income Tax......................................... 27
Other Information....................................................................... 29
Appendix................................................................................ A-1
</TABLE>
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
2
<PAGE> 43
FUND EXPENSES
The following expense table lists estimated costs and expenses that an
investor in the Institutional Class may incur either directly or indirectly as a
shareholder of a Fund. The information is based on expenses incurred during the
fiscal year ended May 31, 1996; actual expenses in the future may be greater or
less than those shown. Shareholders in the Consumer Service Class of a Fund may
be subject to Rule 12b-1 Plan distribution fees (annually up to 0.35% of the
average net assets of a Fund) to which the Institutional Class is not subject.
The Institutional Class of shares is only available to certain qualified
shareholders.
FEE TABLE
<TABLE>
<CAPTION>
THE THE
SHORT TERM INTERMEDIATE
FUND FUND THE EQUITY FUND
----------------- ---------------- ---------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases.... none none none
Maximum Sales Load Imposed on Reinvested
Dividends................................ none none none
Deferred Sales Load........................ none none none
Redemption Fees............................ none none none
Exchange Fees.............................. none none none
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets annualized)
Investment Advisory Fees (after
waiver)(3)............................... 0.40% 0.45% 0.50%
12b-1 Fees................................. none none none
Other Expenses(4).......................... 0.31% 0.37% 0.31%
------ ------ ------
Total Fund Operating Expenses (after
waiver)(3)............................... 0.71% 0.82% 0.81%
============== ============ ============
</TABLE>
(1) The Consumer Service Class of shares may be subject to Rule 12b-1 Plan
distribution fees (annually up to 0.35% of average net assets of each Fund)
to which the Institutional Class is not subject.
(2) Shares of the Institutional Class of each Fund may be available through
trust, investment management or other fiduciary accounts managed or
administered by the Adviser or its correspondents or affiliates. Such
institutions may provide a variety of services at varying fees to customers
and, although such fees are not fund-related, the fees must be paid by
customers in order to purchase Fund shares.
(3) Reflects a voluntary reduction for the Intermediate Fund and the Equity Fund
(which will remain in effect until further notice) in contractual fee. Had
this reduction not been in effect, investment advisory fees would have been:
0.50% for the Intermediate Fund and 0.60% for the Equity Fund and Total Fund
Operating Expenses would have been 0.87% and 0.91%, respectively.
(4) Certain Service Organizations may receive additional fees from a Fund in
amounts up to an annual rate of 0.35% of the daily net asset value of the
Fund's shares owned by shareholders with whom the Service Organization has a
servicing relationship. See "Management of the Fund -- Service
Organizations" on Page 21.
3
<PAGE> 44
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Funds will bear.
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming 5%
gross annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
THE
THE SHORT TERM INTERMEDIATE TERM THE
PORTFOLIO FUND FUND EQUITY FUND
- --------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
1 year................................. $ 7 $ 8 $ 8
3 years................................ $23 $ 26 $ 26
5 years................................ $40 $ 45 $ 45
10 years............................... $88 $ 102 $ 102
</TABLE>
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURNS. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
4
<PAGE> 45
FINANCIAL HIGHLIGHTS
The financial data shown below is to assist investors in evaluating the
performance of the Funds since commencement of operations through May 31, 1996.
The financial highlights have been audited by Price Waterhouse LLP, independent
accountants, whose report on the financial statements, including this data,
appears in the Funds' 1996 Annual Report to Shareholders. This financial data
should be read in conjunction with the related financial statements and notes
thereto.
SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND INTERMEDIATE TERM GOVERNMENT INCOME FUND
-------------------------------------------- -------------------------------------------
INSTITUTIONAL CLASS INSTITUTIONAL CLASS
-------------------------------------------- -------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1996 1995 1994 1993** 1996 1995 1994 1993**
-------- -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period..................... $ 9.84 $ 9.77 $ 10.10 $ 10.00 $ 10.11 $ 9.87 $ 10.56 $ 10.00
-------- -------- -------- -------- ------- -------- -------- --------
Income from Investment
Operations:
Net investment income...... 0.54 0.53 0.40 0.44 0.56 0.62 0.58 0.62
Net gain (loss) on
securities (both realized
and unrealized).......... (0.09) 0.07 (0.25) 0.22 (0.29) 0.25 (0.52) 0.61
-------- -------- -------- -------- ------- -------- -------- --------
Total from Investment
Operations............... 0.45 0.60 0.15 0.66 0.27 0.87 0.06 1.23
-------- -------- -------- -------- ------- -------- -------- --------
Less Distributions:
Dividends from net
investment income........ (0.54) (0.53) (0.40) (0.44) (0.56) (0.62) (0.58) (0.62)
Distributions from capital
gains.................... -- -- (0.05) (0.12) -- -- (0.11) (0.05)
Distributions in excess of
net realized gains....... -- -- (0.03) -- -- (0.01) (0.06) --
-------- -------- -------- -------- ------- -------- -------- --------
Total Distributions........ (0.54) (0.53) (0.48) (0.56) (0.56) (0.63) (0.75) (0.67)
-------- -------- -------- -------- ------- -------- -------- --------
Net Asset Value, End of
Period..................... $ 9.75 $ 9.84 $ 9.77 $ 10.10 $ 9.82 $ 10.11 $ 9.87 $ 10.56
========= ========= ========= ========= ======== ========= ========= =========
Total Return (not reflecting
sales load)................ 4.65% 6.37% 1.49% 6.74% 2.66% 9.31% 0.34% 12.66%
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands)........... $106,617 $104,730 $111,657 $138,822 $77,677 $108,052 $158,420 $150,115
Ratio of Expenses to
Average Net Assets....... 0.71% 0.74% 0.69% 0.67% 0.81% 0.71% 0.65% 0.67%
Effect of
waivers/reimburse-
ments on expense ratio... 0.01% 0.03% 0.05% 0.05% 0.05% 0.11% 0.15% 0.15%
Ratio of Net Investment
Income to Average Net
Assets................... 5.48% 5.43% 4.00% 4.32% 5.55% 6.44% 5.50% 6.00%
Portfolio Turnover Rate.... 120% 267.65% 213.43% 216.52% 183% 339.95% 102.46% 54.43%
</TABLE>
- ---------------
* Annualized
** Fund commenced operations on June 1, 1992.
5
<PAGE> 46
<TABLE>
<CAPTION>
EQUITY FUND
------------------------------------------
INSTITUTIONAL CLASS
------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1996 1995 1994 1993**
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 12.51 $ 11.33 $ 11.21 $ 10.00
-------- -------- ------- -------
Income from Investment Operations:
Net Investment Income............................... 0.23 0.25 0.23 0.22
Net gain on securities (both realized and
unrealized)...................................... 3.29 1.42 0.12 1.21
-------- -------- ------- -------
Total from Investment Operations.................... 3.52 1.67 0.35 1.43
-------- -------- ------- -------
Less Distributions:
Dividends from net investment income................ (0.23) (0.24) (0.23) (0.22)
Distributions from capital gains.................... (0.51) (0.25) -- --
-------- -------- ------- -------
Total Distributions................................. (0.74) (0.49) (0.23) (0.22)
-------- -------- ------- -------
Net Asset Value, End of Period........................ $ 15.29 $ 12.51 $ 11.33 $ 11.21
======== ======== ======= =======
Total Return (not reflecting sales load).............. 28.73% 15.35% 3.10% 14.48%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)............ $140,144 $100,110 $93,983 $87,755
Ratio of Expenses to Average Net Assets............. 0.81% 0.79% 0.83% 0.83%
Effect of waivers/reimbursements on expense ratio... 0.10% 0.13% 0.15% 0.20%
Ratio of Net Investment Income to Average Net
Assets........................................... 1.65% 2.15% 1.99% 2.20%
Portfolio Turnover Rate............................. 6.00% 58.08% 27.11% 2.61%
Average Commission Rate(a).......................... $ 0.1067 -- -- --
</TABLE>
- ---------------
** Fund commenced operations on June 1, 1992.
(a) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
6
<PAGE> 47
INDEX COMPARISON
The information set forth below compares the investment performance of a
hypothetical investment of $10,000 in each Fund's Institutional Class of shares
to an industry index since the commencement of each Fund's operations.
SHORT TERM FUND
The investment performance of the Institutional Class of the Short Term
Fund is compared to the performance of the Shearson Lehman 1-3 Year Government
Index in the following chart from June 1, 1992 (commencement of operations)
through May 31, 1993 and for the fiscal years ended May 31, 1994, May 31, 1995
and May 31, 1996.
<TABLE>
<CAPTION>
Redemption Shearson
Measurement Period Value Lehman 1-3 Yr
(Fiscal Year Covered) ($10,000 Govt
<S> <C> <C>
Aug. 31, 10322 10300
Nov. 30, 10326 10322
Feb. 28, 10605 10508
May 31, 10674 10682
Aug. 31, 10847 10874
Nov. 30, 10898 10835
Feb. 28, 10921 10980
May 31, 10832 10896
Aug. 31, 10971 10059
Nov. 30, 10923 11014
Feb. 28, 11186 11338
May 31, 11522 11513
Aug. 31, 11690 11708
Nov. 30, 11912 12198
Feb. 28, 12046 12191
May 10, 12057 11965
- --------------------------------------------------------------------------------
Aug. 31, Feb. 28, Feb. 28, Feb. 28,
1992 Nov. 30, 1993 May 31, Aug. 31, Nov. 30, 1994 May 31, Aug. 31, Nov. 30, 1995
- ------------------------------------------------------------------------------------------------------------------------
Redemption
Value ($10,000
Investment)
Since Inception 10,322 10,326 10,605 10,674 10,847 10,898 10,921 10,832 10,971 10,923 11,186
- ------------------------------------------------------------------------------------------------------------------------
Shearson Lehman
1-3 Yr Govt 10,300 10,322 10,508 10,682 10,874 10,835 10,980 10,896 10,059 11,014 11,338
<CAPTION>
Feb. 29,
May 31, Aug. 31, Nov. 30, 1996 May 31,
- ----------------
Redemption
Value ($10,000
Investment)
Since Inception 11,522 11,690 11,912 12,046 12,057
- ----------------
Shearson Lehman
1-3 Yr Govt 11,513 11,708 12,198 12,191 11,965
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE> 48
INTERMEDIATE FUND
The investment performance of the Institutional Class of the Intermediate
Fund is compared to the performance of the Shearson Lehman Government/Corporate
Index in the following chart from June 1, 1992 (commencement of operations)
through May 31, 1993 and the fiscal years ended May 31, 1994, May 31, 1995 and
May 31, 1996.
<TABLE>
<CAPTION>
Redemption Shearson
Measurement Period Value Lehman
(Fiscal Year Covered) ($10,000 Gov't/Corp
<S> <C> <C>
Aug. 31, 10543 10489
Nov. 30, 10466 10470
Feb. 28, 11146 11109
May 31, 11258 11226
Aug. 31, 11794 11821
Nov. 30, 11736 11776
Feb. 28, 11676 11744
May 31, 11268 11340
Aug. 31, 11422 11544
Nov. 30, 11147 11336
Feb. 28, 11637 11900
May 31, 12286 12655
Aug. 31, 12419 12663
Nov. 30, 12906 12449
Feb. 29, 12868 12659
May 31, 12582 13189
- --------------------------------------------------------------------------------
Aug. 31, Feb. 28, Feb. 28, Feb. 28,
1992 Nov. 30, 1993 May 31, Aug. 31, Nov. 30, 1994 May 31, Aug. 31, Nov. 30, 1995
- ------------------------------------------------------------------------------------------------------------------------
Redemption
Value ($10,000
Investment)
Since Inception 10,543 10,466 11,146 11,258 11,794 11,736 11,676 11,268 11,422 11,147 11,637
- ------------------------------------------------------------------------------------------------------------------------
Shearson Lehman
Gov't/Corp 10,489 10,470 11,109 11,226 11,821 11,776 11,744 11,340 11,544 11,336 11,900
<CAPTION>
Feb. 29,
May 31, Aug. 31, Nov. 30, 1996 May 31,
- ----------------
Redemption
Value ($10,000
Investment)
Since Inception 12,286 12,419 12,906 12,868 12,582
- ----------------
Shearson Lehman
Gov't/Corp 12,655 12,663 12,449 12,659 13,189
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 49
EQUITY FUND
The investment performance of the Institutional Class of the Equity Fund is
compared to the performance of the Standard & Poor's 500 Index in the following
chart from June 1, 1992 (commencement of operations) through May 31, 1993 and
the fiscal years ended May 31, 1994, May 31, 1995 and May 31, 1996.
<TABLE>
<CAPTION>
Redemption
Measurement Period Value
(Fiscal Year Covered) ($10,000 S&P 500
<S> <C> <C>
Aug. 31, 9979 10046
Nov. 30, 10695 10546
Feb. 28, 10997 10910
May 31, 11448 11154
Aug. 31, 12014 11564
Nov. 30, 12061 11601
Feb. 28, 12156 11811
May 31, 11803 11629
Aug. 31, 12293 12196
Nov. 30, 11635 11722
Feb. 28, 12535 12679
May 31, 13615 13973
Aug. 31, 14329 14817
Nov. 30, 15665 16059
Feb. 29, 16793 17082
May 31, 17521 17942
- --------------------------------------------------------------------------------
Aug. 31, Feb. 28, Feb. 28, Feb. 28,
1992 Nov. 30, 1993 May 31, Aug. 31, Nov. 30, 1994 May 31, Aug. 31, Nov. 30, 1995
- ------------------------------------------------------------------------------------------------------------------------
Redemption
Value ($10,000
Investment)
Since Inception 9,979 10,695 10,997 11,448 12,014 12,061 12,156 11,803 12,293 11,635 12,535
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 10,046 10,546 10,910 11,154 11,564 11,601 11,811 11,629 12,196 11,722 12,679
<CAPTION>
Feb. 29,
May 31, Aug. 31, Nov. 30, 1996 May 31,
- ----------------
Redemption
Value ($10,000
Investment)
Since Inception 13,615 14,329 15,665 16,793 17,521
- ----------------
S&P 500 13,973 14,817 16,059 17,082 17,942
</TABLE>
- --------------------------------------------------------------------------------
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
9
<PAGE> 50
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The Short Term Government Income Fund (the "Short Term Fund"), the
Intermediate Term Government Income Fund (the "Intermediate Fund") and the
Equity Fund (the "Equity Fund") are three separate investment funds (the
"Funds") managed by Trustmark National Bank.
THE GOVERNMENT INCOME FUNDS:
THE SHORT TERM FUND. The investment objective of the Short Term Fund is to
provide investors with as high a level of current income as is consistent with
limiting the risk of potential loss. Under normal conditions, the Short Term
Fund pursues this objective by investing primarily (at least 65% of total
assets) in short term government income securities which results in a dollar
weighted average portfolio maturity of less than three years. The maximum
maturity for any individual security held by the Short Term Fund is
approximately five years. Securities purchased by the Short Term Fund will
consist of U.S. Government securities, certificates of deposit, bankers'
acceptances, commercial paper rated in the two highest rating categories,
investment grade corporate debt securities, investment grade mortgage- and
asset-backed securities and other instruments which the Adviser believes are of
comparable quality to those above. The Short Term Fund is intended for investors
who seek higher returns than are generally available from money market
instruments, with low risk of significant per share price volatility. Money
market funds, however, generally enjoy more stability of principal and invest in
portfolio securities which are of higher quality.
THE INTERMEDIATE FUND. The investment objective of the Intermediate Fund
is to provide investors with a high level of current income. Total return,
within given quality parameters, is a secondary consideration of the
Intermediate Fund. Under normal conditions, the Intermediate Fund pursues these
objectives by investing primarily (at least 65% of total assets) in intermediate
term government income securities. The Intermediate Fund may also invest in the
same types of securities as the Short Term Fund, except that there are no
restrictions on the maturity of any individual assets of the Intermediate Fund.
The Intermediate Fund will normally have a dollar weighted average portfolio
maturity of 3-10 years.
By investing in longer-term maturities than the Short Term Fund, the
Intermediate Fund attempts to achieve higher returns but with greater risk of
volatility in principal value.
THE EQUITY FUND
The investment objective of the Equity Fund is to provide investors with
long-term capital appreciation. The Equity Fund pursues this objective by
investing primarily (at least 65% of total assets) in common stocks of U.S.
companies. The Equity Fund may invest in large, well-established companies and
smaller companies with market capitalization exceeding $250 million. Income
generation is a secondary consideration for the Equity Fund. However, the Equity
Fund may purchase dividend paying stocks of particular issuers when the issuer's
dividend record may, in the Adviser's opinion, have a favorable influence on the
market value of the securities. The price of an issuer's common stock can be
significantly affected by market fluctuations and other short term factors,
including the stability of the dividend level. Dividend paying stocks are
generally less volatile than securities which pay a low level of dividend income
and will generally not appreciate as much during rising markets or decline as
much during adverse market periods as non-dividend paying stocks.
RISK FACTORS
There is no assurance that a Fund will achieve its investment objective.
Each Fund's net asset value fluctuates, reflecting fluctuations in the market
value of its portfolio securities. Investors in the Short Term
10
<PAGE> 51
Fund and the Intermediate Fund are exposed to three types of risk from fixed
income securities. (1) Interest rate risk is the potential for fluctuations in
bond prices due to changing interest rates. (2) Credit risk is the possibility
that a bond issuer will fail to make timely payments of either interest or
principal to a Fund. (3) Prepayment risk (for mortgage-backed securities) or
call risk (for corporate bonds) is the likelihood that, during periods of
falling interest rates, securities with high stated interest rates will be
prepaid (or "called") prior to maturity, requiring a Fund to invest the proceeds
at generally lower interest rates.
Because the Equity Fund invests primarily in common stocks, it is subject
to market risk -- i.e., the possibility that stock prices in general will
decline over short or even extended periods. The stock market tends to be
cyclical, with periods when stock prices generally rise and periods when stock
prices generally decline.
Small company stocks in which the Equity Fund may invest have historically
been more volatile in price than the stock market as a whole. Among the likely
reasons for the greater price volatility of small company stocks are the less
certain growth prospects of smaller firms, a low degree of liquidity in the
markets for small company stocks, and the small to negligible dividends
generally paid by small companies. Besides exhibiting greater volatility, small
company stocks have at times fluctuated in value independently of the broad
stock market.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Investment Policies and Practices
of the Funds" in this Prospectus. See also the SAI.
MANAGEMENT OF THE FUNDS
Trustmark National Bank ("Trustmark" or the "Adviser") acts as investment
adviser to the Funds. Trustmark's Trust Department, has assets in excess of $1
billion under management. It was founded in 1890 and is the second largest
commercial bank headquartered in Mississippi. Trustmark has been managing trust
monies for over 40 years. See "Fee Table" and "Management of the Funds" in this
Prospectus.
Furman Selz LLC ("Furman Selz") acts as Sponsor and Administrator to the
Funds and provides certain management and administrative services to the Funds,
for which each Fund pays a fee at an annual rate based upon each Fund's average
daily net assets. Performance Funds Distributor, Inc. ("PFD") is the Distributor
for the Trust and may be reimbursed for certain of its distribution related
expenses.
PURCHASES
Shares of the Institutional Class of the Funds are offered at net asset
value without a sales load. Shares of the Consumer Service Class of the Funds
are also offered at net asset value but may be subject to Rule 12b-1 fees to
which the Institutional class shares are not subject. See "Fund Share
Valuation," "Pricing of Fund Shares" and "Purchase of Fund Shares." Purchases of
Institutional Class shares may only be made by one of the following types of
"Institutional Investors": (i) trusts, or investment management and other
fiduciary accounts managed or administered by Trustmark or its affiliates or
correspondents pursuant to a written agreement (except asset allocation or
"wrap" accounts), (ii) employees of Trustmark (and family members), the
Distributor, Administrator, and affiliates and correspondents,(iii) or Trustees
of the Trust (and family members) or Directors of Trustmark (and family
members), (iv) any persons purchasing shares with the proceeds of a distribution
from a trust, investment management and other fiduciary account managed or
administered by Trustmark or its affiliates or correspondents, pursuant to a
written agreement and (v) persons who make an initial investment of one million
dollars or more or who, at the time of purchase have a balance of one million
dollars or more in the Funds. Purchases may be made through an authorized broker
or financial institution, including the Fund, by mail or by wire.
11
<PAGE> 52
SERVICE ORGANIZATIONS
Each Fund may pay fees to various banks, including Trustmark, trust
companies, broker-dealers and other financial organizations ("Service
Organizations") for providing administrative services for the Funds, such as
maintaining shareholder accounts and records. Institutional investors are not
required to purchase Fund shares through a Service Organization.
REDEMPTIONS
Shares may be redeemed at their next determined net asset value. See
"Redemption of Fund Shares" and "Fund Share Valuation." Redemptions may be made
by letter or, if previously authorized, by telephone. The Funds reserve the
right to redeem upon not less than 30 days' written notice all shares in a Fund
account which, as a result of shareholder redemption, has a value below $500
($250 for Individual Retirement Accounts ("IRAs")).
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares and pays its net investment income to shareholders of
record in accordance with the schedule set forth under "Dividends, Distributions
and Federal Income Tax." Any net realized long-term capital gains will be
distributed annually. All dividends and distributions will be automatically
reinvested at net asset value in additional Fund shares unless cash payment is
requested.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund has its own investment objectives and follows its own investment
policies and practices, including certain investment restrictions. The SAI
contains specific investment restrictions which govern the Funds' investments.
Those restrictions and the Funds' investment objectives are fundamental
policies, which means that they may not be changed without a majority vote of
shareholders of the applicable Fund. Except for the objectives and those
restrictions specifically identified as fundamental, all other investment
policies and practices described in this Prospectus and in the SAI are not
fundamental and may be changed by the Board of Trustees without shareholder
approval.
The Adviser selects investments and makes investment decisions based on the
investment objectives and policies of each Fund.
The Government Income Funds. When selecting debt securities for the Short
Term Fund and the Intermediate Fund (collectively, the "Government Income
Funds"), the Adviser seeks to select those instruments that appear best
calculated to achieve each Fund's investment objective within the credit and
risk tolerances established for the Fund. In accordance with those policies, the
Government Income Funds may purchase commercial paper rated A-2 or better by
Standard & Poor Corporation ("S&P") or Prime-2 or better by Moody's Investors
Service ("Moody's"), investment grade corporate debt securities rated BBB or
better by S&P or Baa or better by Moody's, investment grade mortgage and
asset-backed securities and other debt instruments which are of comparable
quality in the Adviser's opinion pursuant to guidelines adopted by the Board of
Trustees. See the Appendix for a description of bond ratings. The remaining net
assets may be invested in bank obligations, commercial paper, corporate debt
securities, mortgage-related securities and other asset-backed securities. The
Government Income Funds will generally not pay brokerage commissions when
purchasing portfolio securities but will incur certain transaction costs. The
portfolio turnover rate is not expected to exceed 250% for the Short Term Fund
and 150% for the Intermediate Fund.
The Equity Fund. In selecting equity investments (which include common
stocks of U.S. companies and American Depository Receipts ("ADRs") of foreign
companies) for the Equity Fund, the Adviser selects
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companies for investment using both quantitative and qualitative analysis to
identify those issuers that, in the Adviser's opinion, exhibit above average
earnings growth and are attractively valued utilizing a multi-factor model. The
quantitative multi-factor approach analyzes companies in six broad categories of
relative valuation. These categories are measures of (1) value, (2) yield, (3)
price and earnings momentum, (4) historical and projected earnings growth, (5)
price and earning risk, and (6) liquidity. ADRs are dollar-denominated receipts
generally issued by domestic banks, which represent the deposit with the bank of
a security of a foreign issuer, and which are publicly traded on exchanges or
over-the-counter in the United States.
The Adviser may also select other equity securities in addition to common
stocks for investment by the Equity Fund such as preferred stocks, high grade
securities convertible into common stocks, and warrants. The Equity Fund will
not invest more than 5% of its net assets in warrants, no more than 2% of which
will be invested in warrants which are not listed on the New York or American
Stock Exchanges. Normally, the Equity Fund will invest at least 65% of its total
assets in common stocks or securities convertible into common stocks. For
temporary defensive purposes, however, the Equity Fund may invest up to 100% of
its total assets in U.S. Government securities or, subject to a 25%
concentration limitation, certificates of deposit, bankers' acceptances,
commercial paper, repurchase agreements (maturing in seven days or less) and
debt obligations of corporations (corporate bonds, debentures, notes and other
similar corporate debt instruments) which are rated A or better by at least two
rating organizations. The Equity Fund intends to manage its portfolio actively;
however, the annual portfolio turnover rate is not expected to exceed 100%.
The following describes in greater detail different types of securities and
investment practices used by certain of the Funds.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities (all Funds). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Treasury bills, which have a maturity of up to one year,
are direct obligations of the United States and are the most frequently issued
marketable U.S. Government security. The U.S. Treasury also issues securities
with longer maturities in the form of notes and bonds.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates,
which may be guaranteed by the Government National Mortgage Association; others,
such as obligations of the Federal Home Loan Banks, Federal Farm Credit Bank,
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal Land
Bank, are guaranteed by the right of the issuer to borrow from the U.S.
Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.
Bank Obligations (all Funds). These obligations include negotiable
certificates of deposit and bankers' acceptances. The Funds limit their bank
investments to dollar-denominated obligations of U.S. banks which have more than
$1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency, or
whose deposits are insured by the FDIC.
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Commercial Paper (all Funds). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by U.S. banks and bank holding companies, U.S. corporations
and financial institutions, as well as similar taxable and tax-exempt
instruments issued by government agencies and instrumentalities. Each Fund
establishes its own standards of creditworthiness for issuers of such
investments.
Corporate Debt Securities (all Funds). Each Fund's investments in U.S.
corporate debt securities are limited to corporate bonds, debentures, notes and
other similar corporate debt instruments which meet the previously disclosed
minimum ratings and maturity criteria established for the Funds under the
direction of the Board of Trustees and the Fund's Adviser or, if unrated, are in
the Adviser's opinion comparable in quality to corporate debt securities in
which the Funds may invest. See "The Investment Policies and Practices of the
Funds."
Investment grade corporate debt securities (securities rated BBB by S&P or
Baa by Moody's) have speculative characteristics and are more sensitive to
economic change than higher rated bonds and may be subject to greater market
fluctuations and greater risk of loss of income or principal, including a
greater possibility of default or bankruptcy of the issuer of such securities,
than are more highly rated debt securities. The Adviser seeks to avoid these
risks by investing in securities rated above investment grade as well, through
diversification, by conducting credit analyses and by monitoring current
developments in interest rates and market conditions.
Repurchase Agreements (all Funds). Securities held by the Funds may be
subject to repurchase agreements. A repurchase agreement is a transaction in
which the seller of a security commits itself at the time of the sale to
repurchase that security from the buyer at a mutually agreed upon time and
price. These agreements may be considered to be loans by the purchaser
collateralized by the underlying securities. These agreements will be fully
collateralized and the collateral will be marked-to-market daily. The Funds will
enter into repurchase agreements only with dealers, domestic banks or recognized
financial institutions which, in the opinion of the Adviser and in accordance
with guidelines adopted by the Board of Trustees present minimal credit risks.
While the maturity of the underlying securities in a repurchase agreement
transaction may be more than one year. Repurchase agreements with a maturity of
greater than seven days will be considered illiquid. See "Investment
Restrictions." In the event of default by the seller under the repurchase
agreement, a Fund may have problems in exercising its rights to the underlying
securities and may experience time delays in connection with the disposition of
such securities.
Loans of Portfolio Securities (all Funds). To increase current income,
each Fund may lend its portfolio securities in an amount up to 5% of each such
Fund's total assets to brokers, dealers and financial institutions, provided
certain conditions are met, including the condition that each loan is secured
continuously by collateral maintained on a daily mark-to-market basis in an
amount at least equal to the current market value of the securities loaned. For
further information, see the Statement of Additional Information.
Variable and Floating Rate Demand and Master Demand Notes (the Government
Income Funds only). The Government Income Funds may, from time to time,
purchase variable or floating rate demand notes issued by corporations, bank
holding companies and financial institutions and similar taxable and tax exempt
instruments issued by government agencies and instrumentalities. These
securities will typically have a maturity over one year but carry with them the
right of the holder to put the securities to a remarketing agent or other entity
at designated time intervals and on specified notice. The obligation of the
issuer of the put to repurchase the securities may be backed up by a letter of
credit or other obligation issued by a financial institution. The purchase price
is ordinarily par plus accrued and unpaid interest. Generally, the remarketing
agent will adjust the interest rate every seven days (or at other specified
intervals) in order to maintain the interest rate at the prevailing rate for
securities with a seven-day or other designated maturity. The
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Government Income Fund's investment in demand instruments which provide that
such Fund will not receive the principal note amount within seven days' notice,
in combination with Government Income Fund's other investments in illiquid
instruments, will be limited to an aggregate total of 15% of Government Income
Fund's net assets.
The Government Income Fund may also buy variable rate master demand notes.
The terms of these obligations permit a Fund to invest fluctuating amounts at
varying rates of interest pursuant to direct arrangements between a Fund, as
lender, and the borrower. These instruments permit weekly and, in some
instances, daily changes in the amounts borrowed. Each Fund has the right to
increase the amount under the note at any time up to the full amount provided by
the note agreement, or to decrease the amount, and the borrower may repay up to
the full amount of the note without penalty. The notes may or may not be backed
by bank letters of credit. Because the notes are direct lending arrangements
between a Fund and a borrower, it is not generally contemplated that they will
be traded, and there is no secondary market for them, although they are
redeemable (and, thus, immediately repayable by the borrower) at principal
amount, plus accrued interest, at any time. In connection with any such purchase
and on an ongoing basis, the Adviser will consider the earning power, cash flow
and other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
make demand simultaneously. While master demand notes, as such, are not
typically rated by credit rating agencies, a Fund may, under its minimum rating
standards, invest in them only if at the time of an investment, the issuer meets
the criteria set forth in this Prospectus for commercial paper obligations.
American Depository Receipts (the Equity Fund only). American Depository
Receipts are U.S. dollar-denominated receipts generally issued by domestic
banks, which evidence the deposit with the bank of a foreign issuer and which
are publicly traded on exchanges or over-the-counter in the United States.
The Equity Fund may invest in both sponsored and unsponsored ADR programs.
There are certain risks associated with investments in unsponsored ADR programs.
Because the non-U.S. company does not actively participate in the creation of
the ADR program, the underlying agreement for service and payment will be
between the depository and the shareholder. The company issuing the stock
underlying the ADRs pays nothing to establish the unsponsored facility, as fees
for ADR issuance and cancellation are paid by brokers. Investors directly bear
the expenses associated with certificate transfer, custody and dividend payment.
In an unsponsored ADR program, there also may be several depositories with
no defined legal obligations to the non-U.S. company. The duplicate depositories
may lead to marketplace confusion because there would be no central source of
information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. In addition, with respect to all ADRs
there is always the risk of loss due to currency fluctuations.
Investments in ADRs involve certain risks not typically involved in purely
domestic investments, including future foreign political and economic
developments, and the possible imposition of foreign governmental laws or
restrictions applicable to such investments. Securities of foreign issuers
through ADRs are subject to different economic, financial, political and social
factors. Individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. With respect to certain countries, there is the possibility
of expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect the value of
a particular ADR. There may be less publicly available information about a
foreign company than about a U.S. company, and foreign companies may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those of U.S. companies. The Equity Fund will seek to
minimize the risks associated with investment in foreign issuers by investing no
more than 15% of its total assets in ADRs.
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Forward Commitments and When-Issued Securities (the Government Income Funds
only). The Government Income Funds may purchase when-issued securities and make
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time if the Funds hold, and maintain until the settlement
date in a segregated account, cash, U.S. Government securities or high-grade
debt obligations in an amount sufficient to meet the purchase price, or if a
Government Income Fund enters into offsetting contracts for the forward sale of
other securities it owns. Purchasing securities on a when-issued basis and
forward commitments involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of a Fund's other assets. No income accrues on
securities purchased on a when-issued basis prior to the time delivery of the
securities is made, although a Fund may earn interest on securities it has
deposited in the segregated account because it does not pay for the when-issued
securities until they are delivered. Although the Government Income Funds would
generally purchase securities on a when-issued basis or enter into forward
commitments with the intention of actually acquiring securities, the Funds may
dispose of a when-issued security or forward commitment prior to settlement if
the Adviser deems it appropriate to do so. A Fund may realize short term profits
or losses upon such sales.
Mortgage-Related Securities (the Government Income Funds only). Mortgage
pass-through securities are securities representing interests in pools of
mortgages in which payments of both interest and principal on the securities are
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities).
Early repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose a
Government Income Fund to a lower rate of return upon reinvestment of principal.
Also, if a security subject to prepayment has been purchased at a premium, in
the event of prepayment the value of the premium would be lost. Like other
government securities, when interest rates rise, the value of a mortgage-related
security generally will decline; however, when interest rates decline, the value
of mortgage-related securities with prepayment features may not increase as much
as other government securities. In recognition of this prepayment risk to
investors, the Public Securities Association (the "PSA") has standardized the
method of measuring the rate of mortgage loan principal prepayments. The PSA
formula, the Constant Prepayment Rate or other similar models that are standard
in the industry will be used by the Government Income Funds in calculating
maturity for purposes of its investment in mortgage-related securities.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association ("GNMA") or
guaranteed by agencies or instrumentalities of the U.S. Government (in the case
of securities guaranteed by the Federal National Mortgage Association ("FNMA")
or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are supported
only by the discretionary authority of the U.S. Government to purchase the
agency's obligations). Mortgage pass-through securities created by
nongovernmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance, and
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers.
Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are paid,
in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans
but are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC or FNMA. CMOs are structured into multiple
classes, with each class bearing a different
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stated maturity. Monthly payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class; investors holding the
longer maturity classes receive principal only after the first class has been
retired. To the extent a particular CMO is issued by an investment company, the
Funds' ability to invest in such CMOs' will be limited. See "Investment
Restrictions" in the Statement of Additional Information.
The Government Income Funds may also invest in mortgage-related securities
with respect to which all interest payments go to one class of holders
("Interest Only Securities" or "IOs") and all principal payments go to a second
class of holders ("Principal Only Securities" or "POs"). These securities are
commonly referred to as mortgage-backed security strips or MBS strips. The
yields to maturity on IOs and POs are sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and
principal payments may have a material effect on yield to maturity. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, a Fund may not fully recoup its initial investment in IOs.
Conversely, if the underlying mortgage assets experience less than anticipated
prepayments of principal, the yield on POs could be materially adversely
affected. IOs and POs which are not issued or guaranteed by the U.S. government
will be considered illiquid and will be subject to each Fund's 15% limitation
regarding investment in illiquid securities. U.S. Government issued or
guaranteed IOs and POs backed by fixed rate mortgages may be determined to be
liquid pursuant to guidelines established by the Board of Trustees.
The Adviser expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. As new types of mortgage-related securities
are developed and offered to investors, the Adviser will, consistent with the
Funds' investment objectives, policies and quality standards, consider making
investments in such new types of mortgage-related securities.
Other Asset-Backed Securities (the Government Income Funds only). The
Government Income Funds may also invest in other asset-backed securities
(unrelated to mortgage loans) such as Certificates for Automobile
Receivables(sm) ("CARS(sm)"). CARS(sm) represent undivided fractional interests
in a trust ("trust") whose assets consist of a pool of motor vehicle retail
installment sales contracts and security interest in the vehicles securing the
contracts. Payments of principal and interest on CARS(sm) are "passed through"
monthly to certificate holders and are guaranteed up to certain amounts and for
a certain time period by a letter of credit issued by a financial institution
unaffiliated with the trustee or originator of the trust. Underlying sales
contracts are subject to prepayment, which may reduce the overall return to
certificate holders. If the letter of credit is exhausted, certificate holders
may also experience delays in payment or losses on CARS(sm) if the full amounts
due on underlying sales contracts are not realized by the trust because of
unanticipated legal or administrative costs of enforcing the contracts, or
because of depreciation, damage or loss of the vehicles securing the contracts,
or other factors. For asset-backed securities, the industry standard uses a
principal prepayment model, the ABS model, which is similar to the PSA described
previously under "Mortgage-Related Securities." Either the PSA model, the ABS
model or other similar models that are standard in the industry will be used by
a Government Income Fund in calculating maturity for purposes of its investment
in asset-backed securities.
Interest Rate Futures (the Government Income Funds only). The Government
Income Funds may purchase and sell interest rate futures contracts ("futures
contracts") as a hedge against changes in interest rates, provided that not more
than 25% of each Fund's net assets are at risk due to such transactions. A
futures contract is an agreement between two parties to buy and sell a security
for a set price on a future date. Future contracts are traded on designated
"contracts markets" which, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures contracts based on
securities such as long-term U.S. Treasury bonds, U.S. Treasury notes, GNMA
Certificates and three-month U.S. Treasury bills.
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Generally, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). Entering into a futures contract for the
sale of securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if a Government Income Fund holds long-term U.S.
Government securities and the Adviser anticipates a rise in long-term interest
rates, it could, in lieu of selling its portfolio securities, enter into futures
contracts for the sale of similar long-term securities. If rates increased and
the value of a Fund's portfolio securities declined, the value of the Fund's
futures contracts would increase, thereby protecting the Fund by preventing net
asset value from declining as much as it otherwise would have declined.
Similarly, entering into futures contracts for the purchase of securities has an
effect similar to actual purchase of the underlying securities, but permits the
continued investment of securities other than the underlying securities. For
example, if the Adviser expects long-term interest rates to decline, the Fund
might enter into futures contracts for the purchase of long-term securities, so
that it could gain rapid market exposure that may offset anticipated increases
in the cost of securities it intends to purchase, while continuing to hold
higher-yielding short-term securities or waiting for the long-term market to
stabilize. The Government Income Funds will maintain a segregated account when
engaged in transactions regarding interest rate futures contracts in an amount
sufficient to cover the obligations of the Government Income Funds pursuant to
such contracts.
Options on Common Stocks and Stock Indices (the Equity Fund only). The
Equity Fund may write (i.e., sell) call options ("calls") if the calls are
"covered" throughout the life of the option. A call is "covered" if the Equity
Fund owns or has the right to acquire the optioned securities and the Fund
maintains, in a segregated account with its custodian, cash or cash equivalents
or U.S. Government securities with a value sufficient to meet its obligations
under the call, or if the Fund owns an offsetting call option. When the Equity
Fund writes a call, it receives a premium and gives the purchaser the right to
buy the underlying security at any time during the call period (usually not more
than nine months in the case of common stock) at a fixed exercise price,
regardless of market price changes during the call period. If the call is
exercised, the Equity Fund forgoes any gain from an increase in the market price
of the underlying security over the exercise price.
The Equity Fund also may purchase put options ("puts"). When the Fund
purchases a put, it pays a premium in return for the right to sell the
underlying security at the exercise price at any time during the option period.
If any put is not exercised or sold, it will become worthless on its expiration
date. If a put is purchased and becomes worthless on its expiration date, the
Equity Fund will have lost the premium and this will have the effect of reducing
the Fund's return.
The Equity Fund will realize a gain (or loss) on a closing purchase
transaction with respect to a call previously written by the Fund if the
premium, plus commission costs, paid to purchase the call is less (or greater)
than the premium, less commission costs, received on the sale of the call. A
gain also will be realized if a call which the Equity Fund has written lapses
unexercised, because the Fund would retain the premium.
There can be no assurance that a liquid secondary market will exist at any
given time for a particular option.
Stock Index Futures Contracts (the Equity Fund only). The Equity Fund may
enter into stock index futures contracts in order to protect the value of common
stock investments, provided that not more than 25% of the Fund's assets are at
risk due to such transactions. A stock index futures contract is an agreement in
which one party agrees to deliver to the other an amount of cash equal to a
specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the agreement is made. As the aggregate market value of the stocks in
the index changes, the value of the index also will change. In the event that
the index level rises above the level at which the stock index futures contract
was sold, the seller of the stock index futures contract will realize a loss
determined by the difference between the two index levels at the time of
expiration of the stock index futures contract, and
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the purchaser will realize a gain in that amount. In the event the index level
falls below the level at which the stock index futures contract was sold, the
seller of the stock index futures contract will realize a loss determined by the
difference between the two index levels at the time of expiration of the stock
index futures contract, and the purchaser will realize a gain in that amount. In
the event the index level falls below the level at which the stock index futures
contract was sold, the seller will recognize a gain determined by the difference
between the two index levels at the expiration of the stock index futures
contract, and the purchaser will realize a loss. Stock index futures contracts
expire on a fixed date, currently one to seven months from the date of the
contract, and are settled upon expiration of the contract.
The Equity Fund intends to buy stock index futures contracts for the
purpose of maintaining a fully invested position during periods of relatively
large cash inflows and therefore would normally be a buyer of stock index
futures contracts. If the Equity Fund is unable to invest its cash (or cash
equivalents) in stocks in an orderly fashion, the Fund could purchase a stock
index futures contract which may be used to offset any increase in the price of
the stock. However, it is possible that the market may decline instead,
resulting in a loss on the stock index futures contract. If the Equity Fund then
concludes not to invest in stock at that time, or if the price of the securities
to be purchased remains constant or increases, the Fund will realize a loss on
the stock index futures contract that is not offset by a reduction in the price
of securities purchased. The Equity Fund may buy or sell stock index futures
contracts to close out existing futures positions.
Put Options on Stock Index Futures Contracts (the Equity Fund only). The
Equity Fund may purchase put options on stock index futures as another method of
protecting the Fund's assets against market declines. See the SAI for further
information about these options contracts.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks 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 Equity Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed. The Equity Fund will maintain a
segregated account when engaged in transactions regarding put options on stock
index futures contracts in an amount sufficient to cover the obligation of the
Equity Fund pursuant to such contracts.
The use of stock index futures contracts and put options on stock index
futures contracts may impair the liquidity of the Equity Fund's assets and the
ability to operate as an open-end investment company. The Adviser will monitor
the Equity Fund's use of such techniques and report to the Board of Trustees
concerning their impact, if any, on liquidity and the Equity Fund's ability to
meet redemptions. For additional information regarding options and futures
contracts see, "Additional Permitted Investment Activities," in the SAI.
Illiquid Investments (all Funds). It is the policy of each Fund that
restricted securities and other illiquid securities (including repurchase
agreements of more than seven days' duration, and variable and floating rate
demand and master demand notes not requiring receipt of the principal note
amount within seven days' notice) may not constitute, at the time of purchase or
at any time, more than 15% of the value of the total net assets of each such
Fund.
Notwithstanding the above, the Funds may purchase securities which are
eligible for purchase and sale under Rule 144A under the Securities Act of 1933
pursuant to procedures adopted and regularly reviewed by the Board of Trustees.
Rule 144A permits certain qualified institutional buyers, such as the Funds, to
trade in privately placed securities even though such securities are not
registered under the 1933 Act. The Adviser, under the supervision of the Board
of Trustees, will consider whether securities purchased under Rule 144A
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are illiquid and thus subject to each Fund's restriction of investing no more
than 15% of its assets in illiquid securities. A determination of whether a Rule
144A security is liquid or not is a question of fact. In making this
determination the Adviser will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security. In
addition, the Adviser could consider the (1) frequency of trades and quotes, (2)
number of dealers and potential purchasers, (3) dealer undertakings to make a
market, and(4) the nature of the security and of marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities would be monitored
and, if as a result of changed conditions, it is determined that a Rule 144A
security is no longer liquid, a Fund's holdings of illiquid securities would be
reviewed to determine what, if any, steps are required to assure that the Fund
does not invest more than 15% of its assets in illiquid securities. Investing in
144A securities could have the effect of increasing the amount of a Fund's
assets invested in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities.
INVESTMENT RESTRICTIONS
(All Funds, except as indicated)
(1) No Fund may borrow money or pledge or mortgage its assets, except that
each Fund may borrow from banks up to 10% of the current value of its total net
assets for temporary or emergency purposes and those borrowings may be secured
by the pledge of not more than 15% of the current value of the Fund's total net
assets (but investments may not be purchased by a Fund while any such borrowings
exist).
(2) No Fund may make loans, except loans of portfolio securities and except
that a Fund may enter into repurchase agreements with respect to its portfolio
securities.
(3) In addition, each Fund is a diversified fund. As such, it will not,
with respect to 75% of its total assets, invest more than 5% of such Fund's
total assets in the securities of any single issuer (except for U.S. Government
securities) or purchase more than 10% of the outstanding voting securities of
any such issuer. Also, each Fund will invest less than 25% of its total assets
in the securities of any one industry. For this purpose, U.S. Government
securities (and repurchase agreements related thereto) are not considered
securities of a single industry.
The foregoing investment restrictions and those described in the SAI are
fundamental policies of each Fund which may be changed only when permitted by
law and approved by the holders of a majority of the applicable Fund's
outstanding voting securities as described under "Other Information -- Voting."
If a percentage restriction on investment policies or the investment or use
of assets set forth in this Prospectus is adhered to at the time a transaction
is effected, later changes in percentage resulting from changing values will not
be considered a violation.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. Additional information about the Trustees, as well as the
Trust's executive officers, may be found in the SAI under the heading
"Management -- Trustees and Officers."
The Investment Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201, serves as investment adviser to the Funds. Trustmark
manages the investment and reinvestment of the assets of each Fund and
continuously reviews, supervises and administers the Funds' investments.
Trustmark is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
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Trustmark's Trust Department, has assets in excess of $1 billion under
management. It was founded in 1890 and is the second largest commercial bank
headquartered in Mississippi. Trustmark has been managing trust monies for over
40 years. Shares of the Funds are not guaranteed by Trustmark, its parent or
affiliates, nor are they insured by the FDIC.
Trustmark has an investment management staff of highly trained
professionals who manage the assets of each Fund. Robert H. Spaulding is
responsible for the day-to-day management of the Intermediate Fund's portfolio.
Mr. Spaulding, a Vice President, has 20 years of trust experience with
Trustmark. Charles H. Windham, Jr., a Vice President of Trustmark since 1970, is
responsible for the day-to-day management of the Equity Fund's portfolio. Mr.
Jonathan Rogers, a Portfolio Manager at Trustmark Bank since 1990, is
responsible for day-to-day management of the Short Term Fund's portfolio.
For the advisory services it provides to the Funds, Trustmark may receive
fees based on average daily net assets up to the following annualized rates:
Short Term Fund, 0.40%; the Intermediate Fund, 0.50%; the Equity Fund, 0.60%.
Based upon the advice of its counsel, Trustmark believes that the
performance of investment advisory services for the Funds 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 Trustmark from continuing to perform such services
for the Funds. If Trustmark were prohibited from acting as investment adviser to
the Funds, it is expected that the Board of Trustees would recommend to
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.
The Sponsor, Distributor and Administrator. Furman Selz LLC, 230 Park
Avenue, New York, New York 10169, acts as the Sponsor and Administrator of the
Funds. Performance Funds Distributor, Inc., an affiliate of Furman Selz, acts as
the Distributor of the Funds' shares. Furman Selz is primarily an institutional
brokerage firm with membership on the New York, American, Boston, Midwest,
Pacific and Philadelphia Stock Exchanges. Furman Selz also serves as
administrator and distributor of other mutual funds.
Administrative Services. The Funds have entered into an Administrative
Services Contract with Furman Selz pursuant to which Furman Selz provides
certain management and administrative services necessary for the Funds'
operations including: (i) general supervision of the operation of the Funds
including coordination of the service performed by the Funds' Investment
Adviser, transfer agent, custodian, independent accountants and legal counsel,
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions,
and preparation of proxy statements and shareholder reports for the Funds, (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Fund's officers and Board of
Trustees, and (iii) furnishing office space and certain facilities required for
conducting the business of the Funds. For these services, Furman Selz receives
from each Fund a monthly fee at the annual rate of 0.15% of the average daily
net assets of each Fund. Pursuant to a Shareholder Servicing Agreement between
the Trust and the Administrator, Furman Selz receives a fee of $15.00 per
account per year plus out-of-pocket expenses. Pursuant to a Fund Accounting
Agreement between the Trust and the Administrator, the Administrator assists the
Trust in calculating net asset values and provides certain other accounting
services for each Fund described therein, for an annual fee of $30,000 per Fund
plus out-of-pocket expenses.
On June 28, 1996, Furman Selz and BISYS Group, Inc. ("BISYS") announced a
definitive agreement which provides that by the end of 1996 Furman Selz will
exit the mutual funds business and recommend BISYS to Furman Selz's existing
fund clients to replace Furman Selz for mutual fund administration,
distribution, fund accounting and transfer agency services.
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BISYS, headquartered in Little Falls, N.J., supports more than 5,000
financial institutions and corporate clients through two strategic business
units. BISYS Information Services Group provides image and data processing
outsourcing, and pricing analysis to more than 600 banks nationwide. BISYS
Investment Services Group designs, administers, and distributes over 30 families
of proprietary mutual funds consisting of more than 365 portfolios, and provides
401(k) marketing support, administration, and recordkeeping services in
partnership with 18 of the nation's leading bank and investment management
companies. BISYS trades on NASDAQ under the symbol BISYS.
As of the date of this prospectus, the Board of Trustees of the Fund is
considering alternatives to Furman Selz LLC as service provider to the Fund. The
Board will decide on Furman Selz's replacement by January 1, 1997. Shareholders
of the Fund will be notified of such decision.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services for the Funds, such as maintaining shareholder accounts
and records. The Funds may pay fees to Service Organizations (which vary
depending upon the services provided) in amounts up to an annual rate of 0.35%
of the daily net asset value of the Funds' shares owned by shareholders with
whom the Service Organization has a servicing relationship. Institutional Class
shareholders are not required to purchase shares through a Service Organization.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the Fund's
minimum initial or subsequent investments or charging a direct fee for
servicing. A Service Organization or broker or other sales-person within such
Service Organization may be compensated at varying rates for the sale of one
class of Fund shares as opposed to another. If imposed, these fees would be in
addition to any amounts which might be paid to the Service Organization by the
Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. In addition, state
securities law on this issue may differ from interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
OTHER EXPENSES.
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD or the Adviser. The costs borne by the
Funds include legal and accounting expenses; Trustees' fees and expenses;
insurance premiums; custodian and transfer agent fees and expenses; expenses
incurred in acquiring or disposing of the Funds' portfolio securities; expenses
of registering and qualifying the Funds' shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Funds' portfolio securities and pricing of the Funds' shares; expenses of
maintaining the Funds' legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
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proxies and prospectuses. Each Fund bears its own expenses associated with its
establishment as a series of Performance Funds Trust; these expenses are
amortized over a five-year period from the commencement of a Fund's operations.
See "Management" in the SAI. Trust expenses directly attributable to a Fund are
charged to that Fund; other expenses are allocated proportionately among all of
the Funds in the Trust in relation to the net assets of each Fund and are
allocated to each share class based on the net assets of such share class. Class
specific expenses are charged directly to the share class which bears such
expense.
Portfolio Transactions. Pursuant to the Investment Advisory Contract, the
Adviser places orders for the purchase and sale of portfolio investments for the
Funds' accounts with brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Adviser will seek the best execution of each Fund's orders.
Purchases and sales of portfolio debt securities for the Funds are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Funds. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter. Purchases and sales of common stocks are generally placed by
the Adviser with broker-dealers which, in the Adviser's judgment, provide prompt
and reliable execution at favorable security prices and reasonable commission
rates. Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Adviser on behalf of the Funds. The Adviser may
cause a Fund to pay commissions higher than another broker-dealer would have
charged if the Adviser believes the commission paid is reasonable in relation to
the value of the brokerage and research services received on behalf of the
Funds.
FUND SHARE VALUATION
The net asset value per share is calculated at 4:15 p.m. (eastern time) for
the Funds, Monday through Friday, on each day the New York Stock Exchange is
open for trading (a "Business Day"), which excludes the following business
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each Fund is computed by dividing the value of a Fund's net
assets (i.e., the value of the assets less the liabilities) by the total number
of such Fund's outstanding shares. All expenses, including fees paid to the
Adviser and Furman Selz, are accrued daily and taken into account for the
purpose of determining the net asset value.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken for the exchange where the security is primarily traded.
Over-the-counter securities are valued on the basis of the bid price at the
close of business on each business day. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or at the direction of the Board of Trustees. Notwithstanding the above,
bonds and other fixed-income securities are valued by using market quotations
and may be valued on the basis of prices provided by a pricing service approved
by the Board of Trustees.
With respect to options contracts, the premium received is recorded as an
asset and equivalent liability, and thereafter adjusts the liability to the
market value of the option determined in accordance with the preceding
paragraph. The premium paid for an option purchased by a Fund is recorded as an
asset and subsequently adjusted to market value.
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PURCHASE OF FUND SHARES
Orders for purchases of Institutional Class shares will be executed at the
net asset value per share next determined after an order has been received. All
monies received by the Funds for purchases of Institutional Class shares are
invested in full and fractional shares of the appropriate Fund. Certificates for
shares are not issued. The Trust maintains records of each shareholder's
holdings of Fund shares, and each shareholder receives a statement confirming
transactions and dividends. The Trust reserves the right to reject any purchase
order. All initial investments should be accompanied by a completed Purchase
Application, a form of which accompanies this Prospectus. A separate application
is required for Individual Retirement Account investments. The Trust and the
Fund reserve the right to waive or reduce the minimum initial investment amount
with respect to certain accounts.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisers and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment adviser or Service Organization with instructions as to
the amount you wish to invest. Your broker will then contact the Fund to place
the order on your behalf on that day.
Orders received by your broker or Service Organization for the Funds in
proper order prior to the determination of net asset value and transmitted to
the Fund prior to the close of its business day (which is currently 4:15 p.m.,
eastern time), will become effective that day. Brokers who receive orders are
obligated to transmit them promptly. You should receive written confirmation of
your order within a few days of receipt of instructions from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank will normally charge you a fee for handling the transaction. To
purchase shares by a Federal funds wire, please first contact the Fund. They
will establish a record of information for the wire to insure the correct
processing of funds. You can reach the Wire Desk at 1-800-737-3676.
Then, have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, Missouri 64105
ABA #1010-0362-1
Account #751-2996
Further Credit to: (Fund Name)
As long as you have received the Prospectus, you may establish a new
regular account through the Wire Desk; IRAs may not be opened in this way. When
new accounts are established by wire, the distribution options will be set to
reinvest all distributions and the social security or Tax Identification Number
("TIN") will not be certified until a signed application is received. Completed
applications should be forwarded immediately to the Fund. With the application,
the shareholder can specify other distribution options and add any special
features offered by the Funds. Should any dividend distributions or redemptions
be paid before the TIN is certified, they will be subject to 31% Federal tax
withholding.
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By Automatic Investment. Investors may participate in the Automatic
Investment Program, which is an investment plan that automatically debits money
from the shareholder's designated bank account and invests it in one or more of
the Funds through the use of electronic fund transfers or automatic bank drafts.
Shareholders may elect to make investments by transfers of a minimum of $50.00
on either the fifth or twentieth day of each month into their established Fund
Account. No minimum initial investment applies when an account is established
through the Automatic Investment Program. Contact the Fund for more information
about the Automatic Investment Program.
By Payroll Direct Deposit. Investors may set up a payroll direct deposit
arrangement for amounts to be automatically invested in any of the Funds.
Participants in the Payroll Direct Deposit Program may make periodic investments
of at least $20.00 per pay period. Contact the Fund for more information about
Payroll Direct Deposits.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as an investment for new or existing IRAs. Shares may
also be purchased for IRAs established with Trustmark or other authorized
custodians. In addition, an IRA may be established through a custodial account
with Investors Fiduciary Trust Company. Completion of a special application is
required in order to create such an account, and the minimum initial investment
for an IRA is $250. Contributions to IRAs are subject to prevailing amount
limits set by the Internal Revenue Service. A $5.00 establishment fee and an
annual $12.00 maintenance and custody fee is payable with respect to each
shareholder; in addition, there will be charged a $10.00 termination fee when
the account is closed. For more information and IRA information, call PFD toll
free at 1-800-737-3676.
EXCHANGE PRIVILEGES
The Funds offer two convenient ways to exchange shares in one of the
Performance Funds for shares in another Performance Fund. Before engaging in an
exchange transaction, a shareholder should read carefully the portions of the
applicable Trust Prospectus which describes the Fund into which the exchange
will be made. A shareholder may not exchange shares of one Fund for shares of
another Fund if both or either are not qualified for sale in the state of the
shareholder's residence. The minimum amount for an initial exchange is $1,000
and the minimum amount for subsequent exchanges is $100. The Trust may terminate
or amend the terms of the exchange privilege at any time upon 60 days' written
notice to shareholders.
A new account opened by exchange must be established with the same name(s),
address and social security number or TIN as the existing account. All exchanges
will be made based on the net asset value next determined following receipt of
the request by a Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to Furman Selz. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which you wish to exchange
your investment; (iii) the dollar or share amount you wish to exchange; and (iv)
the signatures of all registered owners or authorized parties. All signatures
must be guaranteed by a member of a national securities exchange or by a
commercial bank or trust company.
Exchange by Telephone. To exchange Fund shares by telephone or if you have
any questions, simply call the Funds toll free at 1-800-737-3676. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security number or TIN and account registration;
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(ii) the name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The
conversation may be recorded to protect you and the Funds. Telephone exchanges
are available to the shareholder unless otherwise indicated by the shareholder
by checking the box on the Purchase Application. See "Redemption of Fund
Shares -- By Telephone" below for a discussion of telephone transactions
generally.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any Business
Day. Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received and accepted by the
applicable Fund. If shares are redeemed through a broker-dealer or investment
adviser, such redemption is complete upon receipt by the broker-dealer or
investment adviser of the shareholder's redemption request. See "Fund Share
Valuation." A redemption may be a taxable transaction on which gain or loss may
be recognized.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, a Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day,
although each Fund may take up to seven days to make payment. Also, if the New
York Stock Exchange is closed (or when trading is restricted) for any reason
other than the customary weekend or holiday closing or if an emergency condition
as determined by the SEC merits such action, the Funds may suspend redemptions
or postpone payment dates.
Redemption Methods. To ensure acceptance of your redemption request, it is
important to follow the procedures described below. Although the Funds have no
present intention to do so, the Funds reserve the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communication, such as couriers. The Funds' services and their provisions may be
modified or terminated at any time by the Funds. If the Funds terminate any
particular service, they will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your broker or
investment adviser and instructing him to redeem your shares. He will then
contact PFD and place a redemption trade on your behalf. You will receive the
next determined net asset value per share after receipt of such request by your
broker or investment adviser. It will be the responsibility of such broker or
investment adviser to transmit your redemption request to the Fund in a timely
manner. Such broker or investment adviser may charge you a fee for this service.
By Mail. You may redeem your shares by sending a letter directly to the
Fund. To be accepted, a letter requesting redemption must include: (i) the Fund
name and account registration from which you are redeeming shares, (ii) your
account number, (iii) the amount to be redeemed, (iv) the signatures of all
registered owners, and (v) a signature guarantee by a member of a national
securities exchange or a commercial bank or trust company (a signature guarantee
by a savings bank or a notary public is not acceptable). Corporations,
partnerships, trusts or other legal entities will be required to submit
additional documentation.
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By Telephone. You may redeem your shares by calling the Funds toll free at
1-800-737-3676. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number or TIN
and account registration, (ii) the Fund name from which you are redeeming
shares, and (iii) the amount to be redeemed. The Funds employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Funds fail to employ such reasonable procedures, they may be liable for
any loss, damage or expense arising out of any telephone transactions purporting
to be on a shareholder's behalf. In order to assure the accuracy of instructions
received by telephone, the Funds require some form of personal identification
prior to acting upon instructions received by telephone, records telephone
instructions and provides written confirmation to investors of such
transactions. Telephone redemptions are available to the shareholder unless
otherwise indicated by the shareholder by checking the box on the Purchase
Application.
By Wire. You may redeem your shares by contacting the Funds by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Your instructions should include: (i) your account number, social security
number or TIN and account registration, (ii) the Fund name from which you are
redeeming shares, and (iii) the amount to be redeemed. Wire redemptions are
available to the shareholder unless otherwise indicated by checking the box on
the Purchase Application. Please attach a copy of a void check of account where
proceeds are to be wired. Your bank may charge you a fee for receiving a wire
payment on your behalf.
The above mentioned services "Telephone" and "Wire" are not available for
IRAs and trust clients of Trustmark.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, each Fund reserves the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced as a result of
shareholder redemption of the account to $500 ($250 for IRAs) or less. However,
if during the 30-day notice period the shareholder purchases sufficient shares
to bring the value of the account above $500 ($250 for an IRA), this restriction
will not apply.
Redemption in Kind. All redemptions of shares of the Funds shall be made
in cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of a Fund during any 90-day period
of up to the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of such period. Any such redemption in kind will be made in readily
marketable securities. This commitment is irrevocable without the prior approval
of the SEC and is a fundamental policy that may not be changed without
shareholder approval. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Trustees reserves the right to have the
Funds make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of a
Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of that Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund has qualified and intends to continue to qualify annually to be
treated as a regulated investment company pursuant to the provisions of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying and electing, each Fund generally will not be subject to Federal
income tax to the extent that it distributes investment company taxable income
and net capital gains in the manner required under the Code.
Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term
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capital gains (generally including any net option premium income) over net
long-term capital losses). Investment company taxable income will be distributed
by the Equity Fund monthly. The Government Income Funds will declare
distributions of such income daily and pay those dividends monthly. Each Fund
intends to distribute, at least annually, substantially all net capital gain
(the excess of net long-term capital gains over net short-term capital losses).
In determining amounts of capital gains to be distributed, any capital loss
carryovers from prior years will be applied against capital gains.
In the case of the Government Income Funds, the amount declared each day as
a dividend may be based on projections of estimated monthly net investment
income and may differ from the actual investment income determined in accordance
with generally accepted accounting principles. An adjustment will be made to the
dividend each month to account for any difference between the projected and
actual monthly investment income.
Shareholders may elect to receive distributions in additional Fund shares
based on the net asset value at the close of business on the payment date of the
distribution or receive such distributions in cash. If no election is made,
distributions will be automatically reinvested in additional shares of the
applicable Fund. Dividends declared in, and attributable to, the preceding month
will be paid within five business days after the end of each month.
In the case of the Government Income Funds, shares purchased will begin
earning dividends on the day after the purchase order is executed, and shares
redeemed will earn dividends through the day the redemption is executed.
Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of investment income (regardless of whether derived from
dividends, interest or short-term capital gains) will be taxable to shareholders
as ordinary income. Distributions of net long-term capital gains designated by a
Fund as capital gain dividends will be taxable as long-term capital gains,
regardless of how long a shareholder has held his Fund shares. Distributions are
taxable in the same manner whether received in additional shares or in cash.
A distribution will be treated as paid on December 31 of the calendar year
if it is declared by a Fund during October, November, or December of that year
to shareholders of record in such a month and paid by a Fund during January of
the following calendar year. Such distributions will be taxable to shareholders
in the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Special tax rules may apply to a Fund's acquisition of financial futures
contracts and options on futures contracts. Such rules may, among other things,
affect whether gains and losses from such transactions are considered to be
short-term or long-term, may have the effect of deferring losses and/or
accelerating the recognition of gains or losses, and, for purposes of qualifying
as a regulated investment company, may limit the extent to which a Fund may be
able to engage in such transactions.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares.
It is anticipated that a portion of the dividends paid by the Equity Fund
will qualify for the dividends-received deduction available to corporations. The
dividends paid by the other Funds are not expected to so qualify.
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The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amount withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as IRAs. Shareholders should
consult their own tax advisers as to the Federal, state and local tax
consequences of ownership of shares of the Funds in their particular
circumstances.
OTHER INFORMATION
CAPITALIZATION
Performance Funds Trust was organized as a Delaware business trust on March
11, 1992, and consists of multiple separate portfolios or series, three of which
are offered in this Prospectus. The Board of Trustees may establish additional
series in the future. The capitalization of the Trust consists solely of an
unlimited number of shares of beneficial interest with a par value of $0.001
each. When issued, shares of the Funds are fully paid and non-assessable.
This Prospectus relates to the Institutional Class of each Fund's shares.
Each Fund also offers Consumer Service Class shares which are offered to public
investors at the public offering price. Institutional Class shares and Service
Class shares are identical in all respects with the exception that the Consumer
Service Class shares may be subject to Rule 12b-1 fees to which the
Institutional Class shares are not subject. Purchases may be made through an
authorized broker or financial institution, including the Fund, by mail or by
wire. Call 1-800-737-3676, or contact your sales respective, broker-dealer or
bank to obtain more information about the Funds' classes of shares.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the Trust
Instrument disclaims liability of the shareholders, Trustees or officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of each series of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and should be considered remote
and is limited to the amount of the shareholder's investment in each particular
Fund.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. The Trust is not required to hold
regular annual meetings of the Funds' shareholders and does not intend to do so.
Each Fund may vote separately on items which affect only that particular Fund
and each class within a Fund may vote separately on matters which affect only
that class. For example, only Consumer Service Class shareholders will vote on
29
<PAGE> 70
matters related to each Fund's Distribution Plan under Rule 12b-1. See "Other
Information -- Voting Rights" in the SAI.
The Trust Instrument provides that the holders of not less than two-thirds
of the outstanding shares of the Trust may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting of shareholders for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust or Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of a Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of a Fund.
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its yield and/or total return in
advertisements or reports to shareholders or prospective investors. Shareholders
of the Consumer Service Class of shares may experience a lower net return on
their investment than shareholders of the Institutional Class of shares because
of Rule 12b-1 distribution fees paid by such shareholders. The methods used to
calculate the yield and total return of the Funds are mandated by the SEC.
Quotations of "yield" for the Funds will be based on the investment income
per share during a particular 30-day (or one month) period (including dividends
and interest), less expenses accrued during the period ("net investment
income"), and will be computed by dividing net investment income by the net
asset value offering price per share on the last day of the period.
Quotations of average annual total return for a Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), 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.
Performance information for each Fund may be compared to various
appropriate unmanaged indices, such as the Standard & Poor's 500 Stock Index and
the Dow Jones Industrial Average for the Equity Fund, and indices prepared by
Lipper Analytical Services and other entities or organizations which track the
performance of investment companies. Any performance information should be
considered in light of the Fund's investment objectives and policies,
characteristics and quality of the each Fund 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. For a description of the methods used to
determine yield and total return for each Fund, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder. In those cases where a Service Organization or its nominee
is shareholder of record of shares purchased for its customer, the Funds have
been advised that the statement may be transmitted to the customer at the
discretion of the Service Organization.
The Funds retain Furman Selz as transfer agent. Furman Selz provides
personnel necessary to perform shareholder servicing functions. Pursuant to a
Shareholder Servicing Agreement between the Trust and the
30
<PAGE> 71
Administrator, Furman Selz receives a fee of $15.00 per account, per year, and
reimbursement for certain expenses.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust c/o
Furman Selz Mutual Funds Department, 237 Park Avenue, New York, New York 10017.
General and Account Information: (800) PERFORM (737-3676)
31
<PAGE> 72
APPENDIX
DESCRIPTION OF BOND RATINGS
Excerpts from Moody's description of its four highest bond ratings are
listed as follows:
- Aaa -- judged to be the best quality and they carry the smallest
degree of investment risk;
- Aa -- judged to be of high quality by all standards. Together with the
Aaa group, they comprise what are generally known as high grade bonds;
- A -- possess many favorable investment attributes and are to be
considered as "upper medium grade obligations";
- Baa -- considered to be 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;
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
Excerpts from S&P's description of its four highest bond ratings are listed
as follows:
- AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong;
- AA -- also qualify as high grade obligations, having a very strong
capacity to pay interest and repay principal, and differs from issues
only in a small degree;
- A -- regarded as upper medium grade, having a strong capacity to pay
interest and repay principal, although they are somewhat more
susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories;
- BBB -- 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.
This group is the lowest which qualifies for commercial bank
investment.
S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
A-1
<PAGE> 73
(This Page Intentionally Left Blank)
<PAGE> 74
(This Page Intentionally Left Blank)
<PAGE> 75
[LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
SPONSOR AND ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Performance Funds Distributor, Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
PFFDIC0995
[LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE SHORT TERM
GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM
GOVERNMENT INCOME FUND
THE EQUITY FUND
INSTITUTIONAL CLASS
PROSPECTUS
SEPTEMBER 27, 1996
Performance Funds'
Investment Adviser
<PAGE> 76
PERFORMANCE FUNDS TRUST
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- INVESTMENT ADVISER
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
This Prospectus describes three investment funds (the "Funds") managed by
Trustmark National Bank. The Funds are:
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE EQUITY FUND
This Prospectus relates only to the "Consumer Service Class" of each Fund's
shares; certain investors may qualify to invest in a Fund's "Institutional
Class," which is not offered hereby. See, "Other Information -- Capitalization."
The Funds are separate investment funds of Performance Funds Trust (the
"Trust"), a Delaware business trust and registered management investment
company, with distinct investment objectives and policies. Each Fund pays
certain expenses related to the distribution of its shares, calculated at an
annual rate and based on a percentage of the average daily net assets. This
Prospectus sets forth concisely the information a prospective investor should
know before investing in any of the Funds and should be read and retained for
information about each Fund.
INVESTMENTS IN THE FUNDS ARE NOT GUARANTEED OR INSURED BY THE UNITED STATES
GOVERNMENT. SHARES OF THE FUNDS ARE NOT AN OBLIGATION OF OR GUARANTEED BY
TRUSTMARK NATIONAL BANK OR ITS AFFILIATES AND SUCH SHARES ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
A Statement of Additional Information, dated September 27, 1996 (the "SAI")
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address and
information number printed above.
------------------------
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.
------------------------
September 27, 1996
<PAGE> 77
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Fund Expenses......................................................................... 3
Fee Table............................................................................. 3
Financial Highlights.................................................................. 4
Prospectus Summary.................................................................... 9
The Investment Policies and Practices of the Funds.................................... 12
Description of Securities and Investment Practices.................................... 13
Investment Restrictions............................................................... 20
Management of the Funds............................................................... 20
Fund Share Valuation.................................................................. 23
Purchase of Fund Shares............................................................... 24
Individual Retirement Accounts........................................................ 25
Exchange Privileges................................................................... 25
Redemption of Fund Shares............................................................. 26
Dividends, Distributions and Federal Income Tax....................................... 28
Other Information..................................................................... 30
Appendix.............................................................................. A-1
</TABLE>
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
2
<PAGE> 78
FUND EXPENSES
The following expense table lists the estimated costs and expenses that an
investor in the Consumer Service Class may incur either directly or indirectly
as a shareholder of a Fund. The information is based on expenses incurred during
the fiscal year ended May 31, 1996. Actual expenses in the future may be greater
or less than those shown. Shareholders in the Consumer Service Class of the
Funds may be subject to Rule 12b-1 Plan distribution fees (annually up to 0.35%
of the average net assets of a Fund), to which the Institutional Class is not
subject. The Institutional Class of shares is only available to certain
qualified investors.
FEE TABLE
<TABLE>
<CAPTION>
THE
THE SHORT INTERMEDIATE THE EQUITY
TERM FUND TERM FUND FUND
--------- ------------ ----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a percentage
price)....................................................... none none none
Maximum Sales Load Imposed on Reinvested Dividends............. none none none
Deferred Sales Load............................................ none none none
Redemption Fees................................................ none none none
Exchange Fees.................................................. none none none
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets annualized)
Investment Advisory Fees (after waiver)(3)..................... 0.40% 0.45% 0.50%
12b-1 Fees(1).................................................. 0.25% 0.25% 0.25%
Other Expenses(4).............................................. 0.31% 0.37% 0.31%
--------- ----- -----
Total Fund Operating Expenses (after waiver)(3)................ 0.96% 1.07% 1.06%
========= ========== =========
</TABLE>
- ---------------
(1) The Consumer Service Class of shares may be subject to Rule 12b-1 Plan
distribution fees (annually up to 0.35% of the average net assets of each
Fund) to which the Institutional Class is not subject.
(2) Shares of the Consumer Service Class of each Fund may be available through
banks or other financial institutions which have entered into a dealer
agreement with PFD. Such institutions may provide a variety of services at
varying fees to customers and, although such fees are not fund-related, the
fees must be paid by customers in order to purchase Fund shares.
(3) Reflects a voluntary reduction for the Short Term Fund, Intermediate Fund
and Equity Fund (which will remain in effect until further notice) in
contractual fee. Had this reduction not been in effect, investment advisory
fees would have been: 0.40% for Short Term Government Fund; 0.50% for the
Intermediate Fund and 0.60% for the Equity Fund and Total Fund Operating
Expenses would have been 1.06%, 1.22% and 1.26%, respectively.
(4) Certain Service Organizations may receive additional fees from a Fund in
amounts up to an annual rate of 0.35% of the daily net asset value of the
Fund's shares owned by shareholders with whom the Service Organization has a
servicing relationship. See "Management of the Funds -- Service
Organizations" herein.
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Funds will bear.
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming 5%
gross annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
THE THE THE
SHORT INTERMEDIATE EQUITY
PORTFOLIO TERM FUND TERM FUND FUND
- --------------------------------------------------------- --------- ------------ ------
<S> <C> <C> <C>
1 year................................................... $ 10 $ 11 $ 11
3 years.................................................. $ 30 $ 34 $ 34
5 years.................................................. $ 53 $ 58 $ 58
10 years................................................. $ 117 $129 $129
</TABLE>
- ---------------
* This example should not be considered a representation of actual expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of future annual
returns. Actual return may be greater or less than the assumed amount.
3
<PAGE> 79
FINANCIAL HIGHLIGHTS
The financial data shown below is to assist investors in evaluating the
performance of the Funds since their commencement of operations through May 31,
1996. The following financial highlights have been audited by Price Waterhouse
LLP, independent accountants, whose report on the financial statements,
including this data appears in the Funds' 1996 Annual Report to Shareholders
included in the Statement of Additional Information. This financial data should
be read in conjunction with the related financial statements and notes thereto.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SHORT TERM INTERMEDIATE TERM
CONSUMER CLASS CONSUMER CLASS
------------------------------------- -------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1996 1995 1994 1993** 1996 1995 1994 1993**
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.84 $ 9.77 $10.10 $10.00 $10.11 $ 9.87 $10.56 $10.00
Income from Investment
Operations:
Net investment
income.............. 0.51 0.50 0.37 0.43 0.54 0.60 0.55 0.62
Net gain (loss) on
securities (both
realized and
unrealized)......... (0.09 ) 0.07 (0.25 ) 0.22 (0.29 ) 0.25 (0.52 ) 0.61
------- ------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations.......... 0.42 0.57 0.12 0.65 0.25 0.85 0.03 1.23
------- ------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net
investment income... (0.51 ) (0.50 ) (0.37 ) (0.43 ) (0.54 ) (0.60 ) (0.55 ) (0.62 )
Distributions from
capital gains....... -- -- (0.05 ) (0.12 ) -- -- (0.11 ) (0.05 )
Distributions in excess
of net realized
gains............... -- -- (0.03 ) -- -- (0.01 ) (0.06 ) --
------- ------- ------- ------- ------- ------- ------- -------
Total Distributions.... (0.51 ) (0.50 ) (0.45 ) (0.55 ) (0.54 ) (0.61 ) (0.72 ) (0.67 )
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 9.75 $ 9.84 $ 9.77 $10.10 $ 9.82 $10.11 $ 9.87 $10.56
======= ======= ======= ======= ======= ======= ======= =======
Total Return (not
reflecting sales
load).................. 4.38% 6.12% 1.23% 6.67% 2.40% 9.06% 0.08% 12.58%
Ratios/Supplemental Data:
Net Assets, End of
Period (in
thousands).......... $1,477 $ 739 $ 654 $1,125 $2,174 $3,225 $3,384 $1,952
Ratio of Expenses to
Average Net
Assets.............. 0.95% 0.99% 0.94% 0.75% 1.06% 0.96% 0.90% 0.78%
Effect of waivers/
reimbursements on
expense ratio....... 0.01% 0.03% 0.05% 0.05% 0.05% 0.11% 0.15% 0.15%
Ratio of Net Investment
Income to Average
Net Assets.......... 5.23% 5.18% 3.75% 4.24% 5.30% 6.19% 5.25% 5.89%
Portfolio Turnover
Rate................ 120% 267.65% 213.43% 216.52% 183% 339.95% 102.46% 54.43%
</TABLE>
- ---------------
* Annualized
** Fund commenced operations on June 1, 1992.
4
<PAGE> 80
<TABLE>
<CAPTION>
EQUITY FUND
-------------------------------------
CONSUMER SERVICE CLASS
-------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1996 1995 1994 1993**
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period...................... $ 12.51 $11.33 $11.21 $10.00
------- ------- ------- -------
Income from Investment Operations:
Net investment income................................... 0.19 0.22 0.20 0.21
Net gain on securities (both realized and unrealized)... 3.29 1.42 0.12 1.21
------- ------- ------- -------
Total from Investment Operations........................ 3.48 1.64 0.32 1.42
------- ------- ------- -------
Less Distributions:
Dividends from net investment income.................... (0.19) (0.21 ) (0.20 ) (0.21 )
Distributions from capital gains........................ (0.51) (0.25 ) -- --
------- ------- ------- -------
Total Distributions..................................... (0.70) (0.46 ) (0.20 ) (0.21 )
------- ------- ------- -------
Net Asset Value, End of Period............................ $ 15.29 $12.51 $11.33 $11.21
======= ======= ======= =======
Total Return (not reflecting sales load).................. 28.42% 15.10% 2.85% 14.37%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)................ $ 9,831 $5,234 $5,287 $3,348
Ratios of Expenses to Average Net Assets................ 1.06% 1.04% 1.08% 0.94%
Effect of waivers/reimbursements on expense ratio....... 0.10% 0.13% 0.15% 0.20%
Ratio of Net Investment Income to Average Net Assets.... 1.40% 1.90% 1.74% 2.09%
Portfolio Turnover Rate................................. 6.00% 58.08% 27.11% 2.61%
Average Commission Rate(a) $0.1067.. -- -- --
</TABLE>
- ---------------
** Fund commenced operations on June 1, 1992.
(a) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
5
<PAGE> 81
INDEX COMPARISON
The information set forth below compares the investment performance of a
hypothetical investment of $10,000 in each Fund's Consumer Service Class of
shares to an industry index since the commencement of each Fund's operations.
SHORT TERM FUND
The investment performance of the Consumer Service Class of the Short Term
Fund is compared to the performance of the Shearson Lehman 1-3 Year Government
Index in the following chart from June 1, 1992 (commencement of operations)
through May 31, 1993 and for the fiscal years ended May 31, 1994, May 31, 1995
and May 31, 1996.
<TABLE>
<CAPTION>
Redemption Shearson
Measurement Period Value Lehman 1-3 Yr
(Fiscal Year Covered) ($10,000 Govt
<S> <C> <C>
Aug. 31, 10322 10300
Nov. 30, 10326 10322
Feb. 28, 10605 10608
May 31, 10667 10682
Aug. 31, 10833 10874
Nov. 30, 10868 10935
Feb. 28, 10893 10980
May 31, 10798 10898
Aug. 31, 10929 10059
Nov. 30, 10875 11014
Feb. 28, 11131 11338
May 31, 11457 11513
Aug. 31, 11617 11708
Nov. 30, 11830 12198
Feb. 29, 11956 12191
May 31, 11959 11985
- --------------------------------------------------------------------------------
Aug. 31, Feb. 28, Feb. 28, Feb. 28,
1992 Nov. 30, 1993 May 31, Aug. 31, Nov. 30, 1994 May 31, Aug. 31, Nov. 30, 1995
- ------------------------------------------------------------------------------------------------------------------------
Redemption
Value ($10,000
Investment)
Since Inception 10,322 10,326 10,605 10,667 10,833 10,868 10,893 10,798 10,929 10,875 11,131
- ------------------------------------------------------------------------------------------------------------------------
Shearson
Lehman
1-3 Yr Govt 10,300 10,322 10,608 10,682 10,874 10,935 10,980 10,898 10,059 11,014 11,338
<CAPTION>
Feb. 29,
May 31, Aug. 31, Nov. 30, 1996 May 31,
- ----------------
Redemption
Value ($10,000
Investment)
Since Inception 11,457 11,617 11,830 11,956 11,959
- ----------------
Shearson
Lehman
1-3 Yr Govt 11,513 11,708 12,198 12,191 11,985
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE> 82
INTERMEDIATE FUND
The investment performance of the Consumer Service Class of the
Intermediate Fund is compared to the performance of the Shearson Lehman
Government/Corporate Index in the following chart from June 1, 1992
(commencement of operations) through May 31, 1993 and for the fiscal years ended
May 31, 1994, May 31, 1995 and May 31, 1996.
<TABLE>
<CAPTION>
Redemption Shearson
Measurement Period Value Lehman
(Fiscal Year Covered) ($10,000 Gov't/Corp
<S> <C> <C>
Aug. 31, 10543 10489
Nov. 30, 10466 10470
Feb. 28, 11146 11109
May 31, 11258 11226
Aug. 31, 11794 11821
Nov. 30, 11736 11776
Feb. 28, 11676 11744
May 31, 11268 11340
Aug. 31, 11422 11544
Nov. 30, 11147 11336
Feb. 28, 11637 11900
May 31, 12286 12655
Aug. 31, 12419 12663
Nov. 30, 12906 12449
Feb. 29, 12868 12659
May 31, 12582 13189
- --------------------------------------------------------------------------------
Aug. 31, Feb. 28, Feb. 28, Feb. 28,
1992 Nov. 30, 1993 May 31, Aug. 31, Nov. 30, 1994 May 31, Aug. 31, Nov. 30, 1995
- ------------------------------------------------------------------------------------------------------------------------
Redemption
Value ($10,000
Investment)
Since Inception 10,543 10,466 11,146 11,258 11,794 11,736 11,676 11,268 11,422 11,147 11,637
- ------------------------------------------------------------------------------------------------------------------------
Shearson
Lehman
Gov't/Corp 10,489 10,470 11,109 11,226 11,821 11,776 11,744 11,340 11,544 11,336 11,900
<CAPTION>
Feb. 29,
May 31, Aug. 31, Nov. 30, 1996 May 31,
- ----------------
Redemption
Value ($10,000
Investment)
Since Inception 12,286 12,419 12,906 12,868 12,582
- ----------------
Shearson
Lehman
Gov't/Corp 12,655 12,663 12,449 12,659 13,189
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE> 83
EQUITY FUND
The investment performance of the Consumer Service Class of the Equity Fund
is compared to the performance of the Standard & Poor's 500 Index in the
following chart from June 1, 1992 (commencement of operations) through May 31,
1993 and for the fiscal years ended May 31, 1994, May 31, 1995 and May 31, 1996.
<TABLE>
<CAPTION>
Redemption
Measurement Period Value
(Fiscal Year Covered) ($10,000 S&P
<S> <C> <C>
Aug. 31, 9979 10046
Nov. 30, 10695 10546
Feb. 28, 10997 10910
May 31, 11437 11154
Aug. 31, 11996 11564
Nov. 30, 12036 11601
Feb. 28, 12123 11811
May 31, 11763 11629
Aug. 31, 12244 12196
Nov. 30, 11582 11722
Feb. 28, 12468 12679
May 31, 13535 13973
Aug. 30, 14236 14817
Nov. 30, 15534 16059
Feb. 29, 16664 17082
May 31, 17382 17942
- --------------------------------------------------------------------------------
Aug. 31, Feb. 28, Feb. 28, Feb. 28,
1992 Nov. 30, 1993 May 31, Aug. 31, Nov. 30, 1994 May 31, Aug. 31, Nov. 30, 1995
- ------------------------------------------------------------------------------------------------------------------------
Redemption
Value ($10,000
Investment)
Since Inception 9,979 10,695 10,997 11,437 11,996 12,036 12,123 11,763 12,244 11,582 12,468
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 10,046 10,546 10,910 11,154 11,564 11,601 11,811 11,629 12,196 11,722 12,679
<CAPTION>
Feb. 29,
May 31, Aug. 31, Nov. 30, 1996 May 31,
- ----------------
Redemption
Value ($10,000
Investment)
Since Inception 13,535 14,236 15,534 16,664 17,382
- ----------------
S&P 500 13,973 14,817 16,059 17,082 17,942
</TABLE>
- --------------------------------------------------------------------------------
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
8
<PAGE> 84
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The Short Term Government Income Fund (the "Short Term Fund"), the
Intermediate Term Government Income Fund (the "Intermediate Fund") and the
Equity Fund (the "Equity Fund") are three separate investment funds (the
"Funds") managed by Trustmark National Bank.
THE GOVERNMENT INCOME FUNDS:
THE SHORT TERM FUND. The investment objective of the Short Term Fund is to
provide investors with as high a level of current income as is consistent with
limiting the risk of potential loss. Under normal conditions, the Short Term
Fund pursues this objective by investing primarily (at least 65% of total
assets) in short term government income securities which results in a dollar
weighted average portfolio maturity of less than three years. The maximum
maturity for any individual security held by the Short Term Fund is
approximately five years. Securities purchased by the Short Term Fund will
consist of U.S. Government securities, certificates of deposit, bankers'
acceptances, commercial paper rated in the two highest rating categories,
investment grade corporate debt securities, investment grade mortgage- and
asset-backed securities and other instruments which the Adviser believes are of
comparable quality to those above. The Short Term Fund is intended for investors
who seek higher returns than are generally available from money market
instruments, with low risk of significant per share price volatility. Money
market funds, however, generally enjoy more stability of principal and invest in
portfolio securities which are of higher quality.
THE INTERMEDIATE TERM FUND. The investment objective of the Intermediate
Fund is to provide investors with a high level of current income. Total return,
within given quality parameters, is a secondary consideration of the
Intermediate Fund. Under normal conditions, the Intermediate Fund pursues these
objectives by investing primarily (at least 65% of total assets) in intermediate
term government income securities. The Intermediate Fund may also invest in the
same types of securities as the Short Term Fund, except that there are no
restrictions on the maturity of any individual assets of the Intermediate Fund.
The Intermediate Fund will normally have a dollar weighted average portfolio
maturity of 3-10 years.
By investing in longer-term maturities than the Short Term Fund, the
Intermediate Fund attempts to achieve higher returns but with greater risk of
volatility in principal value.
THE EQUITY FUND
The investment objective of the Equity Fund is to provide investors with
long-term capital appreciation. The Equity Fund pursues this objective by
investing primarily (at least 65% of total assets) in common stocks of U.S.
companies. The Equity Fund may invest in large, well-established companies and
smaller companies with market capitalization exceeding $250 million. Income
generation is a secondary consideration for the Equity Fund. However, the Equity
Fund may purchase dividend paying stocks of particular issuers when the issuer's
dividend record may, in the Adviser's opinion, have a favorable influence on the
market value of the securities. The price of an issuer's common stock can be
significantly affected by market fluctuations and other short term factors,
including the stability of the dividend level. Dividend paying stocks are
generally less volatile than securities which pay a low level of dividend income
and will generally not appreciate as much during rising markets or decline as
much during adverse market periods as non-dividend paying stocks.
RISK FACTORS
There is no assurance that a Fund will achieve its investment objective.
Each Fund's net asset value fluctuates, reflecting fluctuations in the market
value of its portfolio securities. Investors in the Short Term
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Fund and the Intermediate Fund are exposed to three types of risk from fixed
income securities. (1) Interest rate risk is the potential for fluctuations in
bond prices due to changing interest rates. (2) Credit risk is the possibility
that a bond issuer will fail to make timely payments of either interest or
principal to a Fund. (3) Prepayment risk (for mortgage-backed securities) or
call risk (for corporate bonds) is the likelihood that, during periods of
falling interest rates, securities with high stated interest rates will be
prepaid (or "called") prior to maturity, requiring a Fund to invest the proceeds
at generally lower interest rates.
Because the Equity Fund invests primarily in common stocks, it is subject
to market risk -- i.e., the possibility that stock prices in general will
decline over short or even extended periods. The stock market tends to be
cyclical, with periods when stock prices generally rise and periods when stock
prices generally decline.
Small company stocks in which the Equity Fund may invest have historically
been more volatile in price than the stock market as a whole. Among the likely
reasons for the greater price volatility of small company stocks are the less
certain growth prospects of smaller firms, a low degree of liquidity in the
markets for small company stocks, and the small to negligible dividends
generally paid by small companies. Besides exhibiting greater volatility, small
company stocks have at times fluctuated in value independently of the broad
stock market.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Investment Policies and Practices
of the Funds" in this Prospectus. See also the SAI.
MANAGEMENT OF THE FUNDS
Trustmark National Bank ("Trustmark" or the "Adviser") acts as investment
adviser to the Funds. Trustmark's Trust Department, has assets in excess of $1
billion under management. It was founded in 1890 and is the second largest
commercial bank headquartered in Mississippi. Trustmark has been managing trust
monies for over 40 years and currently manages various common and collective
funds. See "Fee Table" and "Management of the Funds" in this Prospectus.
Furman Selz LLC ("Furman Selz") acts as Administrator to the Funds and
provides certain management and administrative services to the Funds, for which
each Fund pays a fee at an annual rate based upon each Fund's average daily net
assets. Performance Funds Distributor, Inc. ("PFD") is the Distributor for the
Trust and distributes the Funds' shares and may be reimbursed for certain of its
distribution related expenses.
PURCHASES
Shares of the Consumer Service Class of the Funds are offered at net asset
value and may be subject to Rule 12b-1 fees to which the Institutional Class
shares are not subject. Only certain investors are eligible to invest in the
"Institutional Class" of each Fund's shares. See "Purchase of Fund Shares" and
"Other Information -- Capitalization." Purchases may be made through an
authorized broker or financial institution, including the Fund, by mail or by
wire. Purchases may only be made in cash with a minimum initial investment for
any Fund of $1,000 which may be waived for certain accounts. Subsequent
investments must be at least $100.
SERVICE ORGANIZATIONS
Each Fund may pay fees to various banks, including Trustmark, trust
companies, broker-dealers and other financial organizations ("Service
Organizations") for providing administrative services for the Funds, such as
maintaining shareholder accounts and records. Investors are not required to
purchase Fund shares through or maintain an account with a Service Organization.
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REDEMPTIONS
Shares may be redeemed at their next determined net asset value. See
"Redemption of Fund Shares" and "Fund Share Valuation." Redemptions may be made
by letter or, if previously authorized, by telephone. The Funds reserve the
right to redeem upon not less than 30 days' written notice all shares in a Fund
account which, as a result of shareholder redemption, has a value below $500
($250 for Individual Retirement Accounts ("IRAs")).
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares and pays its net investment income to shareholders of
record in accordance with the schedule set forth under "Dividends, Distributions
and Federal Income Tax." Any net realized long-term capital gains will be
distributed annually. All dividends and distributions will be automatically
reinvested at net asset value in additional Fund shares unless cash payment is
requested.
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THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund has its own investment objectives, and follows its own investment
policies and practices, including certain investment restrictions. The Statement
of Additional Information (the "SAI") contains specific investment restrictions
which govern the Funds' investments. Those restrictions and the Funds'
investment objectives are fundamental policies, which means that they may not be
changed without a majority vote of shareholders of the applicable Fund. Except
for the objectives and those restrictions specifically identified as
fundamental, all other investment policies and practices described in this
Prospectus and in the SAI are not fundamental and may be changed by the Board of
Trustees without shareholder approval.
The Adviser selects investments and makes investment decisions based on the
investment objectives and policies of each Fund.
The Government Income Funds. When selecting debt securities for the Short
Term Fund and the Intermediate Fund (collectively, the "Government Income
Funds"), the Adviser seeks to select those instruments that appear best
calculated to achieve each Fund's investment objective within the credit and
risk tolerances established for the Fund. In accordance with those policies, the
Government Income Funds may purchase commercial paper rated A-2 or better by
Standard & Poor's Corporation ("S&P") or Prime-2 or better by Moody's Investors
Service ("Moody's"), investment grade corporate debt securities rated BBB or
better by S&P or Baa or better by Moody's, investment grade mortgage and
asset-backed securities and other debt instruments which are of comparable
quality in the Adviser's opinion pursuant to guidelines adopted by the Board of
Trustees. See the Appendix for a description of bond ratings. The remaining net
assets may be invested in bank obligations, commercial paper, corporate debt
securities, mortgage-related securities and other asset-backed securities. The
Government Income Funds will generally not pay brokerage commissions when
purchasing portfolio securities but will incur certain transaction costs. The
portfolio turnover rate is not expected to exceed 250% for the Short Term Fund
and 150% for the Intermediate Fund.
The Equity Fund. In selecting equity investments (which include common
stocks of U.S. companies and American Depository Receipts ("ADRs") of foreign
companies) for the Equity Fund, the Adviser selects companies for investment
using both quantitative and qualitative analysis to identify those issuers that,
in the Adviser's opinion, exhibit above average earnings growth and are
attractively valued utilizing a multi-factor model. The quantitative
multi-factor approach analyzes companies in six broad categories of relative
valuation. These categories are measures of (1) value, (2) yield, (3) price and
earnings momentum, (4) historical and projected earnings growth, (5) price and
earnings risk, and (6) liquidity. ADRs are dollar-denominated receipts generally
issued by domestic banks, which represent the deposit with the bank of a
security of a foreign issuer, and which are publicly traded on exchanges or
over-the-counter in the United States.
The Adviser may also select other equity securities in addition to common
stocks for investment by the Equity Fund such as preferred stocks, high grade
securities convertible into common stocks, and warrants. The Equity Fund will
not invest more than 5% of its net assets in warrants, no more than 2% of which
will be invested in warrants which are not listed on the New York or American
Stock Exchanges. Normally, the Equity Fund will invest at least 65% of its total
assets in common stocks or securities convertible into common stocks. For
temporary defensive purposes, however, the Equity Fund may invest up to 100% of
its total assets in U.S. Government securities or, subject to a 25% industry
concentration limitation, certificates of deposit, bankers' acceptances,
commercial paper, repurchase agreements (maturing in seven days or less) and
debt obligations of corporations (corporate bonds, debentures, notes and other
similar corporate debt instruments) which are rated A or better by at least two
rating organizations. The Equity Fund intends to manage its portfolio actively;
however, the annual portfolio turnover rate is not expected to exceed 100%.
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The following describes in greater detail different types of securities and
investment practices used by certain of the Funds.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities (all Funds). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Treasury bills, which have a maturity of up to one year,
are direct obligations of the United States and are the most frequently issued
marketable U.S. Government security. The U.S. Treasury also issues securities
with longer maturities in the form of notes and bonds.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates,
which may be guaranteed by the Government National Mortgage Association; others,
such as obligations of the Federal Home Loan Banks, Federal Farm Credit Bank,
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal Land
Bank, are guaranteed by the right of the issuer to borrow from the U.S.
Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.
Bank Obligations (all Funds). These obligations include negotiable
certificates of deposit and bankers' acceptances. The Funds limit their bank
investments to dollar-denominated obligations of U.S. banks which have more than
$1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency, or
whose deposits are insured by the FDIC.
Commercial Paper (all Funds). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by U.S. banks and bank holding companies, U.S. corporations
and financial institutions, as well as similar taxable and tax-exempt
instruments issued by government agencies and instrumentalities. Each Fund
establishes its own standards of creditworthiness for issuers of such
investments.
Corporate Debt Securities (all Funds). Each Fund's investments in U.S.
corporate debt securities are limited to corporate bonds, debentures, notes and
other similar corporate debt instruments which meet the previously disclosed
minimum ratings and maturity criteria established for the Funds under the
direction of the Board of Trustees and the Funds' Adviser or, if unrated, are in
the Adviser's opinion comparable in quality to corporate debt securities in
which the Funds may invest. See "The Investment Policies and Practices of the
Funds."
Investment grade corporate debt securities (securities rated BBB by S&P or
Baa by Moody's) have speculative characteristics and are more sensitive to
economic change than higher rated bonds and may be subject to greater market
fluctuations and greater risk of loss of income or principal, including a
greater possibility of default or bankruptcy of the issuer of such securities,
than are more highly rated debt securities. The Adviser seeks to avoid these
risks by investing in securities rated above investment grade as well, through
diversification, by conducting credit analyses and by monitoring current
developments in interest rates and market conditions.
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Repurchase Agreements (all Funds). Securities held by the Funds may be
subject to repurchase agreements. A repurchase agreement is a transaction in
which the seller of a security commits itself at the time of the sale to
repurchase that security from the buyer at a mutually agreed upon time and
price. These agreements may be considered to be loans by the purchaser
collateralized by the underlying securities. These agreements will be fully
collateralized and the collateral will be marked-to-market daily. The Funds will
enter into repurchase agreements only with dealers, domestic banks or recognized
financial institutions which, in the opinion of the Adviser and in accordance
with guidelines adopted by the Board of Trustees, present minimal credit risks.
While the maturity of the underlying securities in a repurchase agreement
transaction may be more than one year. Repurchase agreements with a maturity of
greater than seven days will be considered illiquid. See "Investment
Restrictions." In the event of default by the seller under the repurchase
agreement, a Fund may have problems in exercising its rights to the underlying
securities and may experience time delays in connection with the disposition of
such securities.
Loans of Portfolio Securities (all Funds). To increase current income,
each Fund may lend its portfolio securities in an amount up to 5% of each such
Fund's total assets to brokers, dealers and financial institutions, provided
certain conditions are met, including the condition that each loan is secured
continuously by collateral maintained on a daily mark-to-market basis in an
amount at least equal to the current market value of the securities loaned. For
further information, see the SAI.
Variable and Floating Rate Demand and Master Demand Notes (the Government
Income Funds only). The Government Income Funds may, from time to time,
purchase variable or floating rate demand notes issued by corporations, bank
holding companies and financial institutions and similar taxable and tax exempt
instruments issued by government agencies and instrumentalities. These
securities will typically have a maturity over one year but carry with them the
right of the holder to put the securities to a remarketing agent or other entity
at designated time intervals and on specified notice. The obligation of the
issuer of the put to repurchase the securities may be backed up by a letter of
credit or other obligation issued by a financial institution. The purchase price
is ordinarily par plus accrued and unpaid interest. Generally, the remarketing
agent will adjust the interest rate every seven days (or at other specified
intervals) in order to maintain the interest rate at the prevailing rate for
securities with a seven-day or other designated maturity. A Fund's investment in
demand instruments which provide that such Fund will not receive the principal
note amount within seven days' notice, in combination with a Fund's other
investments in illiquid instruments, will be limited to an aggregate total of
15% of that Fund's net assets.
The Funds may also buy variable rate master demand notes. The terms of
these obligations permit a Fund to invest fluctuating amounts at varying rates
of interest pursuant to direct arrangements between a Fund, as lender, and the
borrower. These instruments permit weekly and, in some instances, daily changes
in the amounts borrowed. Each Fund has the right to increase the amount under
the note at any time up to the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the full amount of the
note without penalty. The notes may or may not be backed by bank letters of
credit. Because the notes are direct lending arrangements between a Fund and a
borrower, it is not generally contemplated that they will be traded, and there
is no secondary market for them, although they are redeemable (and, thus,
immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. In connection with any such purchase and on an ongoing
basis, the Adviser will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes make demand
simultaneously. While master demand notes, as such, are not typically rated by
credit rating agencies, a Fund may, under its minimum rating standards, invest
in them only if at the time of an investment, the issuer meets the criteria set
forth in this Prospectus for commercial paper obligations.
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American Depository Receipts (the Equity Fund only). American Depository
Receipts are U.S. dollar-denominated receipts generally issued by domestic
banks, which evidence the deposit with the bank of a foreign issuer and which
are publicly traded on exchanges or over-the-counter in the United States.
The Equity Fund may invest in both sponsored and unsponsored ADR programs.
There are certain risks associated with investments in unsponsored ADR programs.
Because the non-U.S. company does not actively participate in the creation of
the ADR program, the underlying agreement for service and payment will be
between the depository and the shareholder. The company issuing the stock
underlying the ADRs pays nothing to establish the unsponsored facility, as fees
for ADR issuance and cancellation are paid by brokers. Investors directly bear
the expenses associated with certificate transfer, custody and dividend payment.
In an unsponsored ADR program, there also may be several depositories with
no defined legal obligations to the non-U.S. company. The duplicate depositories
may lead to marketplace confusion because there would be no central source of
information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. In addition, with respect to all ADRs
there is always the risk of loss due to currency fluctuations.
Investments in ADRs involve certain risks not typically involved in purely
domestic investments, including future foreign political and economic
developments, and the possible imposition of foreign governmental laws or
restrictions applicable to such investments. Securities of foreign issuers
through ADRs are subject to different economic, financial, political and social
factors. Individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. With respect to certain countries, there is the possibility
of expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect the value of
the particular ADR. There may be less publicly available information about a
foreign company than about a U.S. company, and foreign companies may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those of U.S. companies. The Equity Fund will seek to
minimize the risk associated with investment in foreign issuers by investing no
more than 15% of its total assets in ADRs.
Forward Commitments and When-Issued Securities (the Government Income Funds
only). The Government Income Funds may purchase when-issued securities and make
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time if the Funds hold, and maintain until the settlement
date in a segregated account, cash, U.S. Government securities or high-grade
debt obligations in an amount sufficient to meet the purchase price, or if a
Government Income Funds enters into offsetting contracts for the forward sale of
other securities it owns. Purchasing securities on a when-issued basis and
forward commitments involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Government Income Fund's other assets. No
income accrues on securities purchased on a when-issued basis prior to the time
delivery of the securities is made, although the Government Income Funds may
earn interest on securities it has deposited in the segregated account because
it does not pay for the when-issued securities until they are delivered.
Although the Government Income Funds will generally purchase securities on a
when-issued basis or enter into forward commitments with the intention of
actually acquiring securities, the Government Income Funds may dispose of a
when-issued security or forward commitment prior to settlement, if the Adviser
deems it appropriate to do so. The Government Income Funds may realize
short-term profits or losses upon such sales.
Mortgage-Related Securities (the Government Income Funds only). Mortgage
pass-through securities are securities representing interests in pools of
mortgages in which payments of both interest and principal on the securities are
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or
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guarantor of the securities). Early repayment of principal on mortgage
pass-through securities (arising from prepayments of principal due to sale of
the underlying property, refinancing, or foreclosure, net of fees and costs
which may be incurred) may expose a Government Income Fund to a lower rate of
return upon reinvestment of principal. Also, if a security subject to prepayment
has been purchased at a premium, in the event of prepayment the value of the
premium would be lost. Like other government securities, when interest rates
rise, the value of a mortgage-related security generally will decline; however,
when interest rates decline, the value of mortgage-related securities with
prepayment features may not increase as much as other government securities. In
recognition of this prepayment risk to investors, the Public Securities
Association (the "PSA") has standardized the method of measuring the rate of
mortgage loan principal prepayments. The PSA formula, the Constant Prepayment
Rate or other similar models that are standard in the industry will be used by
the Government Income Funds in calculating maturity for purposes of its
investment in mortgage-related securities.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association, ("GNMA") or
guaranteed by agencies or instrumentalities of the U.S. Government (in the case
of securities guaranteed by the Federal National Mortgage Association ("FNMA")
or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are supported
only by the discretionary authority of the U.S. Government to purchase the
agency's obligations). Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance, and
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers.
Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are paid,
in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans
but are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC or FNMA. CMOs are structured into multiple
classes, with each class bearing a different stated maturity. Monthly payments
of principal, including prepayments, are first returned to investors holding the
shortest maturity class; investors holding the longer maturity classes receive
principal only after the first class has been retired. To the extent a
particular CMO is issued by an investment company, the Funds' ability to invest
in such CMOs will be limited. See "Investment Restrictions" in the SAI.
The Government Income Funds may also invest in mortgage-related securities
with respect to which all interest payments go to one class of holders
("Interest Only Securities" or "IOs") and all principal payments go to a second
class of holders ("Principal Only Securities" or "POs"). These securities are
commonly referred to as mortgage-backed security strips or MBS strips. The
yields to maturity on IOs and POs are sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and
principal payments may have a material effect on yield to maturity. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, a Fund may not fully recoup its initial investment in IOs.
Conversely, if the underlying mortgage assets experience less than anticipated
prepayments of principal, the yield on POs could be materially adversely
affected. IOs and POs which are not issued or guaranteed by the U.S. Government
will be considered illiquid and will be subject to each Fund's 15% limitation
regarding investment in illiquid securities. U.S. Government issued or
guaranteed IOs and POs backed by fixed rate mortgages may be determined to be
liquid pursuant to guidelines established by the Board of Trustees.
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The Adviser expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. As new types of mortgage-related securities
are developed and offered to investors, the Adviser will, consistent with the
Funds' investment objectives, policies and quality standards, consider making
investments in such new types of mortgage-related securities.
Other Asset-Backed Securities (the Government Income Funds only). The
Government Income Funds may also invest in other asset-backed securities
(unrelated to mortgage loans) such as Certificates for Automobile Receivablessm
("CARSsm"). CARSsm represent undivided fractional interests in a trust ("trust")
whose assets consist of a pool of motor vehicle retail installment sales
contracts and security interest in the vehicles securing the contracts. Payments
of principal and interest on CARSsm are "passed through" monthly to certificate
holders and are guaranteed up to certain amounts and for a certain time period
by a letter of credit issued by a financial institution unaffiliated with the
trustee or originator of the trust. Underlying sales contracts are subject to
prepayment, which may reduce the overall return to certificate holders. If the
letter of credit is exhausted, certificate holders may also experience delays in
payment or losses on CARSsm if the full amounts due on underlying sales
contracts are not realized by the trust because of unanticipated legal or
administrative costs of enforcing the contracts, or because of depreciation,
damage or loss of the vehicles securing the contracts, or other factors. For
asset-backed securities, the industry standard uses a principal prepayment
model, the ABS model, which is similar to the PSA described previously under
"Mortgage-Related Securities." Either the PSA model, the ABS model or other
similar models that are standard in the industry will be used by a Government
Income Fund in calculating maturity for purposes of its investment in
asset-backed securities.
Interest Rate Futures (the Government Income Funds only). The Government
Income Funds may purchase and sell interest rate futures contracts ("futures
contracts") as a hedge against changes in interest rates, provided that not more
than 25% of each Fund's net assets are at risk due to such transactions. A
futures contract is an agreement between two parties to buy and sell a security
for a set price on a future date. Future contracts are traded on designated
"contracts markets" which, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures contracts based on
securities such as long-term U.S. Treasury bonds, U.S. Treasury notes, GNMA
Certificates and three-month U.S. Treasury bills.
Generally, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). Entering into a futures contract for the
sale of securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if a Government Income Fund holds long-term U.S.
Government securities and the Adviser anticipates a rise in long-term interest
rates, it could, in lieu of selling its portfolio securities, enter into futures
contracts for the sale of similar long-term securities. If rates increased and
the value of a Fund's portfolio securities declined, the value of the Fund's
futures contracts would increase, thereby protecting the Fund by preventing net
asset value from declining as much as it otherwise would have declined.
Similarly, entering into futures contracts for the purchase of securities has an
effect similar to actual purchase of the underlying securities, but permits the
continued investment of securities other than the underlying securities. For
example, if the Adviser expects long-term interest rates to decline, the Fund
might enter into futures contracts for the purchase of long-term securities, so
that it could gain rapid market exposure that may offset anticipated increases
in the cost of securities it intends to purchase, while continuing to hold
higher-yielding short-term securities or waiting for the long-term market to
stabilize. The Government Income Funds will maintain a segregated account when
engaged in transactions regarding interest rate futures contracts in an amount
sufficient to cover the obligations of the Government Income Funds pursuant to
such contracts.
Options on Common Stocks and Stock Indices (the Equity Fund only). The
Equity Fund may write (i.e., sell) call options ("calls") if the calls are
"covered" throughout the life of the option. A call is "covered" if
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the Equity Fund owns or has the right to acquire the optioned securities and the
Equity Fund maintains, in a segregated account with its custodian, cash or cash
equivalents or U.S. Government securities with a value sufficient to meet its
obligations under the call, or if the Equity Fund owns an offsetting call
option. When the Equity Fund writes a call, it receives a premium and gives the
purchaser the right to buy the underlying security at any time during the call
period (usually not more than nine months in the case of common stock) at a
fixed exercise price, regardless of market price changes during the call period.
If the call is exercised, the Equity Fund forgoes any gain from an increase in
the market price of the underlying security over the exercise price.
The Equity Fund also may purchase put options ("puts"). When the Equity
Fund purchases a put, it pays a premium in return for the right to sell the
underlying security at the exercise price at any time during the option period.
If any put is not exercised or sold, it will become worthless on its expiration
date. If a put is purchased and becomes worthless on its expiration date, the
Equity Fund will have lost the premium and this will have the effect of reducing
the Fund's return.
The Equity Fund will realize a gain (or loss) on a closing purchase
transaction with respect to a call previously written by the Equity Fund if the
premium, plus commission costs, paid to purchase the call is less (or greater)
than the premium, less commission costs, received on the sale of the call. A
gain also will be realized if a call which the Equity Fund has written lapses
unexercised, because the Equity Fund would retain the premium.
There can be no assurance that a liquid secondary market will exist at any
given time for a particular option.
Stock Index Futures Contracts (the Equity Fund only). The Equity Fund may
enter into stock index futures contracts in order to protect the value of common
stock investments, provided that not more than 25% of the Equity Fund's assets
are at risk due to such transactions. A stock index futures contract is an
agreement in which one party agrees to deliver to the other an amount of cash
equal to a specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made. As the aggregate market value of the
stocks in the index changes, the value of the index also will change. In the
event that the index level rises above the level at which the stock index
futures contract was sold, the seller of the stock index futures contract will
realize a loss determined by the difference between the two index levels at the
time of expiration of the stock index futures contract, and the purchaser will
realize a gain in that amount. In the event the index level falls below the
level at which the stock index futures contract was sold, the seller will
recognize a gain determined by the difference between the two index levels at
the expiration of the stock index futures contract, and the purchaser will
realize a loss. Stock index futures contracts expire on a fixed date, currently
one to seven months from the date of the contract, and are settled upon
expiration of the contract.
The Equity Fund intends to buy stock index futures contracts for the
purpose of maintaining a fully invested position during periods of relatively
large cash inflows and therefore would normally be a buyer of stock index
futures contracts. If the Equity Fund is unable to invest its cash (or cash
equivalents) in stock in an orderly fashion, the Equity Fund could purchase a
stock index futures contract which may be used to offset any increase in the
price of the stock. However, it is possible that the market may decline instead,
resulting in a loss on the stock index futures contract. If the Equity Fund then
concludes not to invest in stock at that time, or if the price of the securities
to be purchased remains constant or increases, the Equity Fund will realize a
loss on the stock index futures contract that is not offset by a reduction in
the price of securities purchased. The Equity Fund may buy or sell stock index
futures contracts to close out existing futures positions.
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Put Options on Stock Index Futures Contracts (the Equity Fund only). The
Equity Fund may purchase put options on stock index futures as another method of
protecting the Equity Fund's assets against market declines. See the SAI for
further information about these options contracts.
There can be no assurance that a liquid market will exist at a time when a
Equity Fund seeks 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 Equity Fund from
liquidating an unfavorable position and the Equity Fund would remain obligated
to meet margin requirements until the position is closed. The Equity Fund will
maintain a segregated account when engaged in transactions regarding put options
on stock index futures contracts in an amount sufficient to cover the obligation
of the Equity Fund pursuant to such contracts.
The use of stock index futures contracts and put options on stock index
futures contracts may impair the liquidity of the Equity Fund's assets and the
ability to operate as an open-end investment company. The Adviser will monitor
the Equity Fund's use of such techniques and report to the Board of Trustees
concerning their impact, if any, on liquidity and the Equity Fund's ability to
meet redemptions. For additional information regarding options and futures
contracts see, "Additional Permitted Investment Activities" in the SAI.
Illiquid Investments (all Funds). It is the policy of each Fund that
restricted securities and other illiquid securities (including repurchase
agreements of more than seven days' duration and variable and floating rate
demand and master demand notes not requiring receipt of the principal note
amount within seven days' notice) may not constitute, at the time of purchase or
at any time, more than 15% of the value of the total net assets of each such
Fund.
Notwithstanding the above, the Funds may purchase securities which are
eligible for purchase and sale under Rule 144A under the Securities Act of 1933
pursuant to procedures adopted and regularly reviewed by the Board of Trustees.
Rule 144A permits certain qualified institutional buyers, such as the Funds, to
trade in privately placed securities even though such securities are not
registered under the 1933 Act. The Adviser, under the supervision of the Board
of Trustees, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to each Fund's restriction of investing no more than
15% of its assets in illiquid securities. A determination of whether a Rule 144A
security is liquid or not is a question of fact. In making this determination
the Adviser will consider the trading markets for the specific security taking
into account the unregistered nature of a Rule 144A security. In addition, the
Adviser could consider the (1) frequency of trades and quotes, (2) number of
dealers and potential purchasers, (3) dealer undertakings to make a market, and
(4) the nature of the security and of marketplace trades (e.g., the time needed
to dispose of the security, the method of soliciting offers and the mechanics of
transfer). The liquidity of Rule 144A securities would be monitored and, if as a
result of changed conditions, it is determined that a Rule 144A security is no
longer liquid, a Fund's holdings of illiquid securities would be reviewed to
determine what, if any, steps are required to assure that the Fund does not
invest more than 15% of its assets in illiquid securities. Investing in 144A
securities could have the effect of increasing the amount of a Fund's assets
invested in illiquid securities if qualified institutional buyers are unwilling
to purchase such securities.
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INVESTMENT RESTRICTIONS
(All Funds, except as indicated)
(1) No Fund may borrow money or pledge or mortgage its assets, except that
each Fund may borrow from banks up to 10% of the current value of its total net
assets for temporary or emergency purposes and those borrowings may be secured
by the pledge of not more than 15% of the current value of the Fund's total net
assets (but investments may not be purchased by a Fund while any such borrowings
exist).
(2) No Fund may make loans, except loans of portfolio securities and except
that a Fund may enter into repurchase agreements with respect to its portfolio
securities.
(3) In addition, each Fund is a diversified fund. As such, it will not,
with respect to 75% of its total assets, invest more than 5% of such Fund's
total assets in the securities of any one issuer (except for U.S. Government
securities) or purchase more than 10% of the outstanding voting securities of
any single issuer. Also, each Fund will invest less than 25% of its total assets
in the securities of any one industry. For this purpose, U.S. Government
securities (and repurchase agreements related thereto) are not considered
securities of a single industry.
The foregoing investment restrictions and those described in the SAI are
fundamental policies of each Fund which may be changed only when permitted by
law and approved by the holders of a majority of the applicable Fund's
outstanding voting securities as described under "Other Information -- Voting."
If a percentage restriction on investment policies or the investment or use
of assets set forth in this Prospectus is adhered to at the time a transaction
is effected, later changes in percentage resulting from changing values will not
be considered a violation.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. Additional information about the Trustees, as well as the
Trust's executive officers, may be found in the SAI under the heading
"Management -- Trustees and Officers."
The Investment Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201, serves as investment adviser to the Funds. Trustmark
manages the investment and reinvestment of the assets of each Fund and
continuously reviews, supervises and administers the Funds' investments.
Trustmark is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
Trustmark's Trust Department, has assets in excess of $1 billion under
management. It was founded in 1890 and is the second largest commercial bank
headquartered in Mississippi. Trustmark has been managing trust monies for over
40 years. Shares of the Funds are not guaranteed by Trustmark, its parent or
affiliates, nor are they insured by the FDIC.
Trustmark has an investment management staff of highly trained
professionals who manage the assets of each Fund. Robert H. Spaulding is
responsible for the day-to-day management of the Intermediate Fund's portfolio.
Mr. Spaulding, a Vice President, has 20 years of trust experience with
Trustmark. Charles H. Windham, Jr., a Vice President of Trustmark since 1970, is
responsible for the day-to-day management of the Equity Fund's portfolio. Mr.
Jonathan Rogers, a Portfolio Manager, at Trustmark National Bank since 1990, is
responsible for the day-to-day management of the Short Term Fund's portfolio.
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For the advisory services it provides to the Funds, Trustmark may receive
fees based on average daily net assets up to the following annualized rates:
Short Term Fund, 0.40%; the Intermediate Fund, 0.50%; the Equity Fund, 0.60%.
Based upon the advice of its counsel, Trustmark believes that the
performance of investment advisory services for the Funds 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 Trustmark from continuing to perform such services
for the Funds. If Trustmark were prohibited from acting as investment adviser to
the Funds, it is expected that the Board of Trustees would recommend to
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.
The Sponsor and Administrator. Furman Selz LLC, 230 Park Avenue, New York,
New York 10169, acts as the Sponsor and Administrator of the Funds. Performance
Funds Distributor, Inc., an affiliate of Furman Selz, acts as the Distributor of
the Funds' shares. Furman Selz is primarily an institutional brokerage firm with
membership on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds.
Under the Distribution Plan ("the Plan") adopted by the Trust, each Fund
may pay directly or reimburse PFD monthly for costs and expenses of PFD in
connection with the distribution of Fund shares. These costs and expenses
include (i) advertising by radio, television, newspapers, magazines, brochures,
sales literature, direct mail or any other form of advertising, (ii) expenses of
sales employees or agents of PFD, including salary, commissions, travel and
related expenses, (iii) payments to broker-dealers and financial institutions
for services in connection with the distribution of shares, including
promotional incentives and fees calculated with reference to the average daily
net asset value of shares held by shareholders who have a brokerage or other
service relationship with the broker-dealer or other institution receiving such
fees, (iv) costs of printing prospectuses and other materials to be given or
sent to prospective investors, and (v) such other similar services as the
Trustees determine to be reasonably calculated to result in the sale of shares
of the Funds. Each Fund will pay all costs and expenses in connection with the
preparation, printing and distribution of its Prospectus to current shareholders
and the operation of its Plan, including related legal and accounting fees. No
Fund will be liable for distribution expenditures made by PFD in any given year
in excess of the maximum amount payable under the Plan for that Fund in that
year.
Administrative Services. The Funds have entered into an Administrative
Services Contract with Furman Selz pursuant to which Furman Selz provides
certain management and administrative services necessary for the Funds'
operations including: (i) general supervision of the operation of the Funds
including coordination of the service performed by the Funds' Investment
Adviser, transfer agent, custodian, independent accountants and legal counsel,
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions,
and preparation of proxy statements and shareholder reports for the Funds, (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Fund's officers and Board of
Trustees, and (iii) furnishing office space and certain facilities required for
conducting the business of the Funds. For these services, Furman Selz receives
from each Fund a monthly fee at the annual rate of 0.15% of the average daily
net assets of each Fund.
Pursuant to a Shareholder Servicing Agreement between the Trust and the
Administrator, Furman Selz receives a fee of $15.00 per account per year plus
out-of-pocket expenses. Pursuant to a Fund Accounting Agreement between the
Trust and the Administrator, the Administrator assists the Trust in calculating
net asset values and provides certain other accounting services for each Fund
described therein, for an annual fee of $30,000 per Fund plus out-of-pocket
expenses.
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On June 28, 1996, Furman Selz and BISYS Group, Inc. ("BISYS") announced a
definitive agreement which provides that by the end of 1996 Furman Selz will
exit the mutual funds business and recommend BISYS to Furman Selz's existing
fund clients to replace Furman Selz for mutual fund administration,
distribution, fund accounting and transfer agency services.
BISYS, headquartered in Little Falls, N.J., supports more than 5,000
financial institutions and corporate clients through two strategic business
units. BISYS Information Services Group provides image and data processing
outsourcing, and pricing analysis to more than 600 banks nationwide. BISYS
Investment Services Group designs, administers, and distributes over 30 families
of proprietary mutual funds consisting of more than 365 portfolios, and provides
401(k) marketing support, administration, and recordkeeping services in
partnership with 18 of the nation's leading bank and investment management
companies. BISYS trades on NASDAQ under the symbol BISYS.
As of the date of this Prospectus, the Board of Trustees of the Fund is
considering alternatives to Furman Selz LLC as service provider to the Fund. The
Board will decide on Furman Selz's replacement by January 1, 1997. Shareholders
of the Fund will be notified of such decision.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services for the Funds, such as maintaining shareholder accounts
and records. The Funds may pay fees to Service Organizations (which vary
depending upon the services provided) in amounts up to an annual rate of 0.35%
of the daily net asset value of the Funds' shares owned by shareholders with
whom the Service Organization has a servicing relationship. Investors are not
required to purchase shares through or maintain an account with a Service
Organization.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the Funds'
minimum initial or subsequent investments or charging a direct fee for
servicing. A Service Organization or broker or other sales-person within such
Service Organization may be compensated at varying rates for the sale of one
class of Fund shares as opposed to another. If imposed, these fees would be in
addition to any amounts which might be paid to the Service Organization by the
Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. In addition, state
securities law on this issue may differ from interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
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OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD or the Adviser. The costs borne by the
Funds include legal and accounting expenses; Trustees' fees and expenses;
insurance premiums; custodian and transfer agent fees and expenses; expenses
incurred in acquiring or disposing of the Funds' portfolio securities; expenses
of registering and qualifying the Funds' shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Funds' portfolio securities and pricing of the Funds' shares; expenses of
maintaining the Funds' legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. Each Fund bears its own expenses associated with its
establishment as a series of Performance Funds Trust; these expenses are
amortized over a five-year period from the commencement of a Fund's operations.
See "Management" in the SAI. Trust expenses directly attributable to a Fund are
charged to that Fund; other expenses are allocated proportionately among all of
the Funds in the Trust in relation to the net assets of each Fund and are
allocated to each share class based on the net assets of such share class. Class
specific expenses are charged directly to the share class which bears such
expense.
Portfolio Transactions. Pursuant to the Investment Advisory Contract, the
Adviser places orders for the purchase and sale of portfolio investments for the
Funds' accounts with brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Adviser will seek the best execution of each Fund's orders.
Purchases and sales of portfolio debt securities for the Funds are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Funds. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter. Purchases and sales of common stocks are generally placed by
the Adviser with broker-dealers which, in the Adviser's judgment, provide prompt
and reliable execution at favorable security prices and reasonable commission
rates. Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Adviser on behalf of the Funds. The Adviser may
cause a Fund to pay commissions higher than another broker-dealer would have
charged if the Adviser believes the commission paid is reasonable in relation to
the value of the brokerage and research services received on behalf of the
Funds.
FUND SHARE VALUATION
The net asset value per share is calculated at 4:15 p.m. (eastern time) for
the Funds, Monday through Friday, on each day the New York Stock Exchange is
open for trading (a "Business Day"), which excludes the following business
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each Fund is computed by dividing the value of each share
class of a Fund's net assets (i.e., the value of the assets less the
liabilities) by the total number of such share class of a Fund's outstanding
shares. All expenses, including fees paid to the Adviser and Furman Selz, are
accrued daily and taken into account for the purpose of determining the net
asset value.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken for the exchange where the security is primarily traded.
Over-the-counter securities are valued on the basis of the bid price at the
close of business on each business day. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or at the direction of
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the Board of Trustees. Notwithstanding the above, bonds and other fixed-income
securities are valued by using market quotations and may be valued on the basis
of prices provided by a pricing service approved by the Board of Trustees.
With respect to options contracts, the premium received is recorded as an
asset and equivalent liability, and thereafter adjusts the liability to the
market value of the option determined in accordance with the preceding
paragraph. The premium paid for an option purchased by a Fund is recorded as an
asset and subsequently adjusted to market value.
PURCHASE OF FUND SHARES
Orders for purchases of Consumer Service Class shares will be executed at
the net asset value next determined after an order has been received. All monies
received by the Funds are invested in full and fractional shares of the
appropriate Fund. Certificates for shares are not issued. The Trust maintains
records of each shareholder's holdings of Fund shares, and each shareholder
receives a statement of transactions, holdings and dividends. The Funds reserve
the right to reject any purchase. The Fund does not accept third party checks.
Minimum Purchase Requirements. The minimum initial investment in a Fund is
$1,000, except that the minimum is $250 for an IRA, other than an IRA for which
Trustmark serves as trustee. Subsequent investments must be at least $100, or
$50 for an IRA. All initial investments should be accompanied by a completed
Purchase Application. A Purchase Application accompanies this Prospectus.
Different minimums apply, and a separate application is required for IRA
investments. The Fund reserves the right to reject purchase orders.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisers and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment adviser or Service Organization with instructions as to
the amount you wish to invest. Your broker will then contact the Fund to place
the order on your behalf on that day.
Orders received by your broker or Service Organization for the Funds in
proper order prior to the determination of net asset value and transmitted to
the Fund prior to the close of its business day (which is currently 4:15 p.m.,
eastern time), will become effective that day. Brokers who receive orders are
obligated to transmit them promptly. You should receive written confirmation of
your order within a few days of receipt of instructions from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank will normally charge you a fee for handling the transaction. To
purchase shares by a Federal funds wire, please first contact the Fund. The Fund
will establish a record of information for the wire to insure the correct
processing of funds. You can reach the Wire Desk at 1-800-737-3676.
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Then, have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, Missouri 64105
ABA #1010-0362-1
Account #751-2996
Further Credit to: (Fund Name)
As long as you have received the Prospectus, you may establish a new
regular account through the Wire Desk; IRAs may not be opened in this way. When
new accounts are established by wire, the distribution options will be set to
reinvest all distributions and the social security or Tax Identification Number
("TIN") will not be certified until a signed application is received. Completed
applications should be forwarded immediately to the Fund. With the application,
the shareholder can specify other distribution options and add any special
features offered by the Funds. Should any dividend distributions or redemptions
be paid before the TIN is certified, they will be subject to 31% Federal tax
withholding.
By Automatic Investment. Investors may participate in the Automatic
Investment Program, which is an investment plan that automatically debits money
from the shareholder's designated bank account and invests it in one or more of
the Funds through the use of electronic fund transfers or automatic bank drafts.
Shareholders may elect to make investments by transfers of a minimum of $50.00
on either the fifth or twentieth day of each month into their established Fund
Account. No minimum initial investment applies when an account is established
through the Automatic Investment Program. Contact the Funds for more information
about the Automatic Investment Program.
By Payroll Direct Deposits. Investors may set up a payroll direct deposit
arrangement for amounts to be automatically invested in any of the Funds.
Participants in the Payroll Direct Deposit program may make periodic investments
of at least $20.00 per pay period. Contact the Fund for more information about
Payroll Direct Deposits.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as an investment for new or existing IRAs. Shares may
also be purchased for IRAs established with Trustmark or other authorized
custodians. In addition, an IRA may be established through a custodial account
with Investors Fiduciary Trust Company. Completion of a special application is
required in order to create such an account, and the minimum initial investment
for an IRA is $250. Contributions to IRAs are subject to prevailing amount
limits set by the Internal Revenue Service. A $5.00 establishment fee and an
annual $12.00 maintenance and custody fee is payable with respect to each
shareholder; in addition, there will be charged a $10.00 termination fee when
the account is closed. For more information and IRA information, call the Fund
toll free at 1-800-737-3676.
EXCHANGE PRIVILEGES
The Funds offer two convenient ways to exchange shares in one of the
Performance Funds for shares in another Performance Fund. Before engaging in an
exchange transaction, a shareholder should read carefully the portions of the
applicable Trust Prospectus which describes the Fund into which the exchange
will be made. A shareholder may not exchange shares of one Fund for shares of
another Fund if both or either are not qualified for sale in the state of the
shareholder's residence. The minimum amount for an initial exchange is $1,000
and the minimum amount for subsequent exchanges is $100. The Trust may terminate
or amend the terms of the exchange privilege at any time upon 60 days' written
notice to shareholders.
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A new account opened by exchange must be established with the same name(s),
address and social security number or TIN as the existing account. All exchanges
will be made based on the net asset value next determined following receipt of
the request by a Fund in good order. No service fee is imposed for exchanges.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to Furman Selz. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which you wish to exchange
your investment; (iii) the dollar or share amount you wish to exchange; and (iv)
the signatures of all registered owners or authorized parties. All signatures
must be guaranteed by a member of a national securities exchange or by a
commercial bank or trust company.
Exchange by Telephone. To exchange Fund shares by telephone or if you have
any questions, simply call the Funds toll free at 1-800-737-3676. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security number or TIN and account registration;
(ii) the name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. Telephone
exchanges are available to the shareholder unless otherwise indicated by the
shareholder by checking the box on the Purchase Application. See "Redemption of
Fund Shares -- By Telephone" below for a discussion of telephone transactions
generally.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any business
day. Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received and accepted by the
applicable Fund. If shares are redeemed through a broker-dealer or investment
adviser, such redemption is complete upon receipt by the broker-dealer or
investment adviser of the shareholder's redemption request. See "Fund Share
Valuation." A redemption may be a taxable transaction on which gain or loss may
be recognized.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, a Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day,
although each Fund may take up to seven days to make payment. Also, if the New
York Stock Exchange is closed (or when trading is restricted) for any reason
other than the customary weekend or holiday closing or if an emergency condition
as determined by the SEC merits such action, the Funds may suspend redemptions
or postpone payment dates.
Redemption Methods. To ensure acceptance of your redemption request, it is
important to follow the procedures described below. Although the Funds have no
present intention to do so, the Funds reserve the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communication, such as couriers. The Funds' services and their provisions may be
modified or terminated at any time by the Funds. If the Funds terminate any
particular service, they will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
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You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your broker or
investment adviser and instructing him to redeem your shares. He will then
contact PFD and place a redemption trade on your behalf. You will receive the
next determined net asset value per share after receipt of such request by your
broker or investment adviser. It will be the responsibility of such broker or
investment adviser to transmit your redemption request to the Fund in a timely
manner. A broker or investment adviser which has received any portion of a sales
load or 12b-1 fee for the sale of such shares may not also receive a fee for
this service.
By Mail. You may redeem your shares by sending a letter directly to PFD.
To be accepted, a letter requesting redemption must include: (i) the Fund name
and account registration from which you are redeeming shares, (ii) your account
number, (iii) the amount to be redeemed, (iv) the signatures of all registered
owners, and (v) a signature guarantee by a member of a national securities
exchange or a commercial bank or trust company (a signature guarantee by a
savings bank or a notary public is not acceptable). Corporations, partnerships,
trusts or other legal entities will be required to submit additional
documentation.
By Telephone. You may redeem your shares by calling the Funds toll free at
1-800-737-3676. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number or TIN
and account registration, (ii) the Fund name from which you are redeeming
shares, and (iii) the amount to be redeemed. The Funds employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Funds fail to employ such reasonable procedures, they may be liable for
any loss, damage or expense arising out of any telephone transactions purporting
to be on a shareholder's behalf. In order to assure the accuracy of instructions
received by telephone, the Funds require some form of personal identification
prior to acting upon instructions received by telephone, records telephone
instructions and provides written confirmation to investors of such
transactions. Telephone redemptions are available to the shareholder unless
otherwise indicated by the shareholder by checking the box on the Purchase
Application.
By Wire. You may redeem your shares by contacting the Funds by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Your instructions should include: (i) your account number, social security
number or TIN and account registration, (ii) the Fund name from which you are
redeeming shares, and (iii) the amount to be redeemed. Wire redemptions are
available to the shareholder unless otherwise indicated by checking the box on
the Purchase Application. Please attach a copy of a void check of account where
proceeds are to be wired. Your bank may charge you a fee for receiving a wire
payment on your behalf.
The above mentioned services "Telephone" and "Wire" are not available for
IRAs and trust clients of Trustmark.
Systematic Withdrawal Plan. An owner of $25,000 or more of shares of a
Fund may elect to have periodic redemptions from his account to be paid on a
monthly, quarterly, semi-annual or annual basis. The minimum periodic payment is
$100. A sufficient number of shares to make the scheduled redemption will
normally be redeemed on the date selected by the shareholder. Depending on the
size of the payment requested and fluctuation in the net asset value, if any, of
the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
27
<PAGE> 103
Reinstatement Privilege. A shareholder in any Fund who has redeemed shares
may reinvest, up to the full amount of such redemption at the net asset value
determined at the time of the reinvestment within 30 days of the original
redemption. This privilege must be effected within 30 days of the redemption.
The shareholder must reinvest in the same Fund and account from which the shares
were redeemed. A redemption is a taxable transaction and gain or loss may be
recognized for Federal income tax purposes even if the reinstatement privilege
is exercised. Any loss realized upon the redemption will not be recognized as to
the number of shares acquired by reinstatement, except through an adjustment in
the tax basis of the shares so acquired.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, each Fund reserves the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced by shareholder
redemption of the account to $500 ($250 for IRAs) or less. However, if during
the 30-day notice period the shareholder purchases sufficient shares to bring
the value of the account above $500 ($250 for IRAs), this restriction will not
apply.
Redemption in Kind. All redemptions of shares of the Funds shall be made
in cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of a Fund during any 90-day period
of up to the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of such period. Any such redemption in kind will be made in readily
marketable securities. This commitment is irrevocable without the prior approval
of the SEC and is a fundamental policy that may not be changed without
shareholder approval. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Trustees reserves the right to have the
Funds make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of a
Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of that Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund has qualified and intends to continue to qualify to be treated as
a regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, each Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). Investment company taxable income will be distributed by the Equity
Fund monthly. The Government Income Funds will declare dividends of such income
daily and pay those dividends monthly. Each Fund intends to distribute, at least
annually, substantially all net capital gain (the excess of net long-term
capital gains over net short-term capital losses). In determining amounts of
capital gains to be distributed, any capital loss carryovers from prior years
will be applied against capital gains.
In the case of the Government Income Funds, the amount declared each day as
a dividend may be based on projections of estimated monthly net investment
income and may differ from the actual investment income determined in accordance
with generally accepted accounting principles. An adjustment will be made to the
dividend each month to account for any difference between the projected and
actual monthly investment income.
28
<PAGE> 104
Shareholders may elect to receive distributions in additional Fund shares
based on the net asset value at the close of business on the payment date of the
distribution or may receive such distribution in cash. If no election is made,
distributions will be automatically reinvested in additional shares of the
applicable Fund. Dividends declared in, and attributable to, the preceding month
will be paid within five business days after the end of each month.
In the case of the Government Income Funds shares purchased will begin
earning dividends on the day after the purchase order is executed, and shares
redeemed will earn dividends through the day the redemption is executed.
Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of net investment income (regardless of whether derived from
dividends, interest or short-term capital gains), generally will be taxable to
shareholders as ordinary income. Distributions of net long-term capital gains
designated by a Fund as capital gain dividends will be taxable as long-term
capital gains, regardless of how long a shareholder has held his Fund shares.
Distributions are taxable in the same manner whether received in additional
shares or in cash.
A distribution, will be treated as paid on December 31 of the calendar year
if it is declared by a Fund during October, November, or December of that year
to shareholders of record in such a month and paid by a Fund during January of
the following calendar year. Such distributions will be taxable to shareholders
in the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Special tax rules may apply to a Fund's acquisition of financial futures
contracts, and options on futures contracts. Such rules may, among other things,
affect whether gains and losses from such transactions are considered to be
short-term or long-term, may have the effect of deferring losses and/or
accelerating the recognition of gains or losses, and, for purposes of qualifying
as a regulated investment company, may limit the extent to which a Fund may be
able to engage in such transactions.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares.
It is anticipated that a portion of the dividends paid by the Equity Fund
will qualify for the dividends-received deduction available to corporations.
Pending tax law proposals may affect the dividends-received deduction. The
dividends paid by the Government Income Funds are not expected to so qualify.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amount withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty
29
<PAGE> 105
on certain pre-retirement distributions, is accorded to accounts maintained as
IRAs. Shareholders should consult their own tax advisers as to the Federal,
state and local tax consequences of ownership of shares of the Funds in their
particular circumstances.
OTHER INFORMATION
CAPITALIZATION
Performance Funds Trust was organized as a Delaware business trust on March
11, 1992, and consists of multiple separate portfolios or series, three of which
are offered in this Prospectus. The Board of Trustees may establish additional
series in the future. The capitalization of the Trust consists solely of an
unlimited number of shares of beneficial interest with a par value of $0.001
each. When issued, shares of the Funds are fully paid and non-assessable.
This Prospectus relates to the Consumer Service Class of each Fund's
shares. Each Fund also offers Institutional Class shares which are offered only
to employees (and family members) of Trustmark, the Distributor, Administrator
and affiliates and correspondents, Trustees of the Trust (and family members),
Directors of Trustmark (and family members) and certain institutional investors
at net asset value, which make an initial investment of one million dollars or
more or who, at the time of purchase, have a balance of one million dollars or
more in the Funds or which is a purchaser through (or with proceeds of a
distribution from) a trust, investment management or other fiduciary account
managed or administered by the Adviser or its affiliates or correspondents
pursuant to a written agreement (except for asset allocation or "wrap"
accounts). Institutional Class shares and Consumer Service Class shares are
identical in all respects with the exception that the Consumer Service Class
shares may be subject to Rule 12b-1 fees to which the Institutional Class shares
are not subject. Purchases may be made through an authorized broker or financial
institution, including the Fund, by mail or by wire. Call 1-800-737-3676, or
contact your sales representative, broker-dealer or bank to obtain more
information about the Fund's classes of shares.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the Trust
Instrument disclaims liability of the shareholders, Trustees or officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of each series of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and should be considered remote
and is limited to the amount of the shareholder's investment in each particular
Fund.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. The Trust is not required to hold
regular annual meetings of the Funds' shareholders and does not intend to do so.
Each Fund may vote separately on items which affect only that particular Fund
and each class within a Fund may vote separately on matters which affect only
that class. For example, only Consumer Service Class shareholders will vote on
matters related to each Fund's Distribution Plan under Rule 12b-1. See "Other
Information -- Voting Rights" in the SAI.
The Trust Instrument provides that the holders of not less than two-thirds
of the outstanding shares of the Trust may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting of shareholders for the purpose of
considering the
30
<PAGE> 106
removal of a person serving as Trustee if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust or Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of a Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of a Fund.
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its yield and/or total return in
advertisements or reports to shareholders or prospective investors. Shareholders
of the Consumer Service Class of shares may experience a lower net return on
their investment than shareholders of the Institutional Class of shares because
of Rule 12b-1 Plan distribution fees paid by such shareholders. The methods used
to calculate the yield and total return of the Funds are mandated by the SEC.
Quotations of "yield" for the Funds will be based on the investment income
per share during a particular 30-day (or one month) period (including dividends
and interest), less expenses accrued during the period ("net investment
income"), and will be computed by dividing net investment income by the net
asset value per share on the last day of the period.
Quotations of average annual total return for a Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), 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.
Performance information for each Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average for the Equity Fund. Indices prepared by Lipper Analytical Services, and
other entities or organizations which track the performance of investment
companies. Any performance information should be considered in light of the
Fund's investment objectives and policies, characteristics and quality of each
Fund 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. For a
description of the methods used to determine yield and total return for each
Fund, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder. In those cases where a Service Organization or its nominee
is shareholder of record of shares purchased for its customer, the Funds have
been advised that the statement may be transmitted to the customer at the
discretion of the Service Organization.
The Funds retain Furman Selz as transfer agent. Furman Selz provides
personnel necessary to perform shareholder servicing functions. Pursuant to a
Shareholder Servicing Agreement between the Trust and the Administrator, Furman
Selz receives a fee of $15.00 per account, per year, and reimbursement for
certain expenses.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust c/o
Furman Selz Mutual Funds Department, 237 Park Avenue, New York, New York 10017.
General and Account Information: (800) PERFORM (737-3676).
31
<PAGE> 107
APPENDIX
DESCRIPTION OF BOND RATINGS
Excerpts from Moody's description of its four highest bond ratings are
listed as follows:
- Aaa -- judged to be the best quality and they carry the smallest degree
of investment risk;
- Aa -- judged to be of high quality by all standards. Together with the
Aaa group, they comprise what are generally known as high grade bonds;
- A -- possess many favorable investment attributes and are to be
considered as "upper medium grade obligations";
- Baa -- considered to be 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;
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
Excerpts from S&P's description of its four highest bond ratings are listed
as follows:
- AAA -- highest grade obligations, in which capacity to pay interest and
repay principal is extremely strong;
- AA -- also qualify as high grade obligations, having a very strong
capacity to pay interest and repay principal, and differs from issues
only in a small degree;
- A -- regarded as upper medium grade, having a strong capacity to pay
interest and repay principal, although they are somewhat more
susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories;
- BBB -- 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. This group is the
lowest which qualifies for commercial bank investment.
S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
A-1
<PAGE> 108
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<PAGE> 109
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<PAGE> 110
[LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
SPONSOR AND ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Performance Funds Distributor, Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
PFFDCC0995
[LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE SHORT TERM
GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM
GOVERNMENT INCOME FUND
THE EQUITY FUND
CONSUMER SERVICE CLASS
PROSPECTUS
SEPTEMBER 27, 1996
Performance Funds'
Investment Adviser
<PAGE> 111
PERFORMANCE FUNDS TRUST
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- INVESTMENT ADVISER
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
THE MID CAP GROWTH FUND
This Prospectus describes The Mid Cap Growth Fund (the "Fund") managed by
Trustmark National Bank. This Prospectus relates only to the "Institutional
Class" of the Fund's shares which only certain investors are qualified to
purchase. The Fund also has a "Consumer Service Class" of shares. See, "Other
Information -- Capitalization." The Fund is a separate investment fund of
Performance Funds Trust (the "Trust"), a Delaware business trust and registered
management investment company, with distinct investment objectives and policies.
The Fund pays certain expenses related to the distribution of its shares,
calculated at an annual rate and based on a percentage of the average daily net
assets.
AN INVESTMENT IN THE FUND IS NOT GUARANTEED OR INSURED BY THE UNITED STATES
GOVERNMENT. SHARES OF THE FUND ARE NOT AN OBLIGATION OF OR GUARANTEED BY
TRUSTMARK NATIONAL BANK OR ITS AFFILIATES AND SUCH SHARES ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund.
A Statement of Additional Information ("SAI"), dated September 27, 1996
containing additional and more detailed information about the Fund, has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by writing or calling the Fund at the address and information number
printed above.
------------------------
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.
------------------------
September 27, 1996
<PAGE> 112
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fund Expenses........................................................................... 3
Fee Table............................................................................... 3
Financial Highlights.................................................................... 4
Prospectus Summary...................................................................... 5
Investment Objective, Policies and Practices............................................ 7
Investment Restrictions................................................................. 13
Management of the Fund.................................................................. 14
Fund Share Valuation.................................................................... 16
Purchase of Fund Shares................................................................. 17
Individual Retirement Accounts.......................................................... 18
Exchange Privileges..................................................................... 18
Redemption of Fund Shares............................................................... 19
Dividends, Distributions and Federal Income Tax......................................... 21
Other Information....................................................................... 22
</TABLE>
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
2
<PAGE> 113
FUND EXPENSES
The following expense table lists the costs and expenses that an investor
in the Institutional Class will incur either directly or indirectly as a
shareholder of the Fund based upon expenses incurred during the fiscal year
ended May 31, 1996. Shareholders in the Consumer Service Class of the Fund may
be subject to Rule 12b-1 Plan distribution fees (annually up to 0.35% of the
average net assets of the Fund), to which the Institutional Class is not
subject. The Institutional Class of shares is only available to certain
qualified investors.
FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a percentage price)................... none
Maximum Sales Load Imposed on Reinvested Dividends................................ none
Deferred Sales Load............................................................... none
Redemption Fees................................................................... none
Exchange Fees..................................................................... none
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets annualized)
Investment Advisory Fees (after waiver)(3)........................................ 0.60%
12b-1 Fees........................................................................ none
Other Expenses(4)................................................................. 0.34%
----
Total Fund Operating Expenses (after waiver)(3)................................... 0.94%
====
</TABLE>
(1) The Consumer Service Class of shares may be subject to Rule 12b-1 Plan
distribution fees (annually up to 0.35% of the average net assets of the
Fund) to which the Institutional Class is not subject.
(2) Shares of the Institutional Class of the Fund may be available through a
trust, investment management or other fiduciary account managed or
administered by the Adviser or its affiliates or correspondents. Such
institutions may provide a variety of services at varying fees to customers
and, although such fees are not fund-related, the fees must be paid by
customers in order to purchase Fund shares.
(3) Absent waiver, the advisory fee would be an annual rate of 0.75% of the
Fund's average daily net assets and Total Fund Operating Expenses would be
1.09%.
(4) Certain Service Organizations may receive additional fees from the Fund in
amounts up to an annual rate of 0.35% of the daily net asset value of the
Fund's shares owned by shareholders with whom the Service Organization has a
servicing relationship. See "Management of the Fund -- Service
Organizations" herein.
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Fund will bear.
3
<PAGE> 114
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming 5%
gross annual return and redemption at the end of each time period:
<TABLE>
<S> <C>
1 year..................................................... $ 10
3 years.................................................... $ 30
5 years.................................................... $ 52
10 years.................................................... $116
</TABLE>
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual returns. Actual return may be greater or less than the assumed amount.
FINANCIAL HIGHLIGHTS
The financial data shown below is to assist investors in evaluating the
performance of the Fund since commencement of operations through May 31, 1996.
The selected per share data and ratios have been audited by Price Waterhouse
LLP, independent accountants, whose report on the financial statements,
including this data, appears in the Fund's 1996 Annual Report to Shareholders.
This financial data should be read in conjunction with the related financial
statements and notes thereto.
Selected Per Share Data and Ratios
<TABLE>
<CAPTION>
MID CAP GROWTH FUND
--------------------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------------------
FOR THE PERIOD FEBRUARY 24, 1994
YEAR ENDED YEAR ENDED (COMMENCEMENT OF OPERATIONS)
MAY 31, 1996 MAY 31, 1995 THROUGH MAY 31, 1994
------------ ------------ --------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 11.11 $ 9.60 $ 10.00
------------ ------------ ----------
Income from Investment Operations:
Net investment income................. 0.13 0.13 0.03
Net gain (loss) on securities (both
realized and unrealized)........... 3.44 1.51 (0.40)
------------ ------------ ----------
Total from Investment Operations...... 3.57 1.64 (0.37)
------------ ------------ ----------
Less Distributions:
Dividends from net investment
income............................. (0.13) (0.13) (0.03)
Distributions from capital gains...... (0.50) -- --
------------ ------------ ----------
Total Distributions................... (0.63) (0.13) (0.03)
------------ ------------ ----------
Net Asset Value, End of Period.......... $ 14.05 $ 11.11 $ 9.60
========== ========== =======================
Total Return (not reflecting sales
load)................................. 33.06% 17.31% (3.66)%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) .. $ 80,704 $ 48,068 $ 33,779
Ratio of Expenses to Average Net
Assets............................. 0.98% 0.96% 0.93%*
Effect of waivers/reimbursements on
expense ratio...................... 0.16% 0.26% 1.00%*
Ratios of Net Investment Income to
Average Net Assets................. 1.06% 1.37% 1.60%*
Portfolio Turnover Rate............... 28% 20.39% 5.88%
Average Commission Rate(a)............ $ 0.1070 -- --
</TABLE>
- ---------------
* Annualized
(a) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
4
<PAGE> 115
INDEX COMPARISON
The information set forth below compares the performance of a hypothetical
investment of $10,000 in the Fund's Institutional Class of shares to an industry
index. Performance is compared from February 24, 1994 (commencement of the
Fund's operations) through May 31, 1994 and for the fiscal years ended May 31,
1995 and 1996.
<TABLE>
<CAPTION>
Redemption
Measurement Period Value S&P Mid Cap
(Fiscal Year Covered) ($10,000 400
<S> <C> <C>
May 31, 9634 9610
Aug. 31, 10100 10091
Nov. 30, 9563 9562
Feb. 28, 10500 10261
May 31, 11301 10907
Aug. 31, 12676 12163
Nov. 30, 13180 12677
Feb. 29, 13849 13252
May 31, 15037 14013
</TABLE>
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
The Fund's investment objective is to seek to achieve growth of capital by
attempting to outperform the S&P MidCap Index. The Fund will seek to achieve
this objective by investing primarily in common stocks of mid-sized companies
(those with market capitalization ranging from $200 million to $5.2 billion),
including common stocks listed on the S&P MidCap Index (collectively, "Mid Cap
Common Stocks") which the Fund's investment adviser believes are likely to
outperform the S&P MidCap Index. Although the Fund may also invest in the types
of investment grade fixed income instruments described under "Investment
Objective, Policies and Practices" herein, and may use various special
investment techniques, under normal market conditions the Fund will invest at
least 80% of its total assets in Mid Cap Common Stocks. Under normal market
conditions, up to 20% of the Fund's total assets may be invested in options,
warrants, futures contracts, preferred stock, investment grade debt securities
and securities convertible into common or preferred stock. See "Investment
Objective, Policies and Practices." There is no assurance that the Fund will
achieve its investment objective. The investment objective of the Fund and its
investment restrictions described in the SAI are fundamental and may not be
changed without shareholder approval.
5
<PAGE> 116
RISK FACTORS
There is no assurance that the Fund will achieve its investment objective.
The Fund's net asset value fluctuates, reflecting fluctuations in the market
value of its portfolio securities. Investors should consider the risks
associated with investing in Mid Cap Common Stocks. While investing in mid-cap
growth companies generally entails greater risk and volatility than investing in
large, well-established companies, mid-cap companies are expected to offer the
potential for more rapid growth and for capital appreciation because of their
higher growth rates. In addition, the stocks of such companies are less actively
followed by securities analysts and may, therefore, be undervalued by investors.
The Fund may invest in options, warrants, futures contracts, investment grade
convertible securities and may engage in short sales. For additional information
concerning the investment policies, practices and risk considerations of the
Fund, see "The Management of the Fund" and "Investment Objective, Policies and
Practices" in this Prospectus. See also the SAI.
MANAGEMENT OF THE FUND
Trustmark National Bank ("Trustmark" or the "Adviser") acts as investment
adviser to the Fund. Trustmark currently has assets in excess of $1 billion
under management. It was founded in 1890 and is the second largest commercial
bank headquartered in Mississippi. For its services, the Adviser receives from
the Fund a fee based on average daily net assets up to 0.75% of the Fund's
average daily net assets. Trustmark has been managing trust monies for over 40
years and currently manages the Performance Funds as well as various common and
collective funds. See "Fee Table" and "Management of the Fund" in this
Prospectus.
Furman Selz LLC ("Furman Selz") acts as Sponsor and Administrator to the
Fund and provides certain management and administrative services to the Fund,
for which the Fund pays a fee at an annual rate based upon the Fund's average
daily net assets. Performance Funds Distributor, Inc. ("PFD") is the Distributor
for the Trust and distributes the Fund's shares and may be reimbursed for
certain of its distribution related expenses.
PURCHASES
Shares of the Institutional Class of the Fund are offered at net asset
value without a sales load. Shares of the Consumer Service Class of the Fund are
also offered at net asset without a sales load but may be subject to 12b-1 Fees
to which the Institutional Class shares are not subject. See "Fund Share
Valuation," and "Purchase of Fund Shares." Purchases of Institutional Class
shares may only be made by one of the following types of "Institutional
Investors": (i) trust, investment management and other fiduciary accounts
managed or administered by Trustmark or its affiliates or correspondents
pursuant to a written agreement (except asset allocation or "wrap" accounts),
(ii) Trustees of the Trust (and family members), Directors of Trustmark (and
family members), employees of Trustmark (and family members), the Distributor,
Administrator and affiliates and correspondents: and any persons purchasing
shares with the proceeds of a distribution from a trust, investment management
and other fiduciary account managed or administered by Trustmark or its
affiliates or (iii) correspondents pursuant to a written agreement, (iv) persons
who make an initial investment of one million dollars or more or who, at the
time of purchase, have a balance of one million dollars or more in the Fund.
Purchases may be made through an authorized broker or financial institution,
including the Fund, by mail or by wire.
SERVICE ORGANIZATIONS
The Fund may pay fees to various banks (including Trustmark), trust
companies, broker-dealers and other financial organizations ("Service
Organizations") for providing administrative services for the Fund,
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such as maintaining shareholder accounts and records. Institutional Class
shareholders are required to purchase shares through a Service Organization.
REDEMPTIONS
Shares may be redeemed at their next determined net asset value. See
"Redemption of Fund Shares" and "Fund Share Valuation." Redemptions may be made
by letter or, if previously authorized, by telephone. The Fund reserves the
right to redeem upon not less than 30 days' written notice all shares in the
Fund account which, as a result of shareholder redemption, has a value below
$500 ($250 for Individual Retirement Accounts ("IRAs")).
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays its net investment income to shareholders of
record in accordance with the schedule set forth under "Dividends, Distributions
and Federal Income Tax." Any net realized long-term capital gains will be
distributed annually. All dividends and distributions will be automatically
reinvested at net asset value in additional shares of the Fund unless cash
payment is requested.
INVESTMENT OBJECTIVE, POLICIES AND PRACTICES
The Fund's investment objective is to seek growth of capital by attempting
to outperform the S&P MidCap Index. The Fund will attempt to achieve its
objective by purchasing common stocks of mid-sized companies (companies with
market capitalization ranging from $200 million to $5.2 billion), including
common stocks listed on the S&P MidCap Index (collectively, "Mid Cap Common
Stocks").
There is no assurance that the Fund will achieve its investment objective.
The investment objective of the Fund and its investment restrictions, which are
described herein and in the SAI, are fundamental and may not be changed without
shareholder approval. The Fund's other investment policies indicated below may
be changed by the Board of Trustees without shareholder approval.
Although under normal market conditions the Fund intends to invest all of
its assets in Mid Cap Common Stocks (and in no event less than 80% of the Fund's
total assets), the Fund may invest up to 20% of its assets in other types of
investment grade fixed income securities of such mid-sized companies (primarily
preferred stock, debt securities and securities convertible into common or
preferred stock) and in options, warrants and futures contracts with respect to
such companies, as determined by the Fund's Adviser. When warranted by business
or financial conditions, the Fund may invest temporarily for defensive purposes
without limitation in investment grade debt securities, preferred stock,
obligations of the U.S. government, its agencies or instrumentalities (including
such obligations subject to repurchase agreements), or in short-term (maturing
in less than one year) money market instruments, including commercial paper
rated "A-1" or better by Standard & Poor's Corporation ("S&P") or "P-1" or
better by Moody's Investors Services ("Moody's").
In June 1991, S&P introduced the S&P MidCap Index covering middle size
companies traded in the United States. The S&P MidCap Index contains 400
domestic stocks with market capitalization ranging from $200 million to $5.2
billion. The median market capitalization is about $600 million. This index,
which complements the widely used S&P's 500 Index, was developed in response to
widespread interest in the U.S. and international investment communities in a
way to track and invest in a broad base of companies with market capitalizations
smaller than those in the "500" but still large enough to be liquid and easily
traded by large investors.
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The Adviser will rely extensively upon computer models developed by it for
stock selection. The disciplined approach which is based on input of the Fund's
companies' fundamentals allows it to rank the 400 stocks in the S&P MidCap Index
in order of attractiveness. The Fund, depending on the size, will contain
anywhere from approximately 40 to 120 of the most attractive stocks ranked by
the model. The Adviser may also rely upon other factors both fundamental and
non-fundamental in determining the composition of the Fund.
Factors considered by the Adviser when selecting the most attractive stocks
include the following: (1) company profitability; (2) dividend yield; (3)
earnings volatility; (4) proprietary valuation model; (5) proprietary analysis
of earnings momentum; (6) relative valuation and relative earnings momentum; and
(7) composite rank.
MID CAP COMMON STOCKS
Under normal market conditions, the Fund will invest at least 80% of the
value of its total net assets in Mid Cap Common Stocks. Common stocks represent
the residual ownership interest in the issuer and are entitled to the income and
increase in the value of the assets and business of the entity after all of its
obligations and preferred stocks are satisfied. Common stocks generally have
voting rights. Common stocks fluctuate in price in response to many factors
including historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions and
market liquidity.
OTHER INVESTMENTS AND RELATED RISK FACTORS
Options and Futures Contracts
The Fund may invest in options or futures contracts listed on the S&P
MidCap Index as a means of achieving additional return or of hedging the value
of the Fund. A call option is a contract that gives the holder of the option the
right, in return for a premium paid, to buy from the seller the security
underlying the option at a specified exercise price at any time during the term
of the option or, in some cases, only at the end of the term of the option. The
seller of the call option has the obligation upon exercise of the option to
deliver the underlying security upon payment of the exercise price. When the
Fund sells an option on a current Fund security which gives the holder of the
option the right to buy the underlying security from the Fund a specified time
and a specified price, such an option is considered a "covered" option.
The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unrecognized but
forgoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions impose on the Fund the credit risk that the
counterpart will fail to honor its obligations. The assets of the Fund used to
cover its options positions are deemed illiquid securities, see "Investment
Restrictions" below. The Fund will not purchase options if, as a result, the
aggregate cost of all outstanding options exceeds 10% of the Fund's total
assets. To the extent that puts, calls, straddles and similar investment
strategies involve instruments regulated by the Commodity Futures Trading
Commission, the Fund is limited to an investment not in excess of 5% of its
total assets.
The Fund may purchase and sell stock index futures contracts ("futures
contracts") that are listed on the S&P MidCap Index for the purpose of hedging
its portfolio (or anticipated portfolio) securities against changes in their
prices. As a futures contract purchaser, the Fund incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price.
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As a seller of a futures contract, the Fund incurs an obligation to deliver the
specified amount of the underlying obligation at a specified time in return for
an agreed upon price. The Fund will establish a segregated account in which it
will maintain cash and marketable securities equal in value to the futures
contracts it has purchased or sold. Such segregated securities either will
mature or, if necessary, be sold on or before the settlement date.
If the Adviser anticipates that the prices of stock held by the Fund may
fall, the Fund may sell a stock index futures contract. Conversely, if the
Adviser wishes to hedge against anticipated price rises in those stocks which
the Fund intends to purchase, the Fund may purchase stock index futures
contracts. In addition, stock index futures contracts will be bought or sold in
order to close out a short or long position in a corresponding futures contract.
The Fund may close out its position as writer of an option, or as a buyer
or seller of a futures contract only if a liquid secondary market exists for
options or futures contracts of that series. There is no assurance that such a
market will exist.
Exchanges may limit the amount by which the price of many futures contracts
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
The extent to which the Fund may enter into transactions involving options
and futures contracts may be limited by the Internal Revenue Code's requirements
for qualification as a regulated investment company and the Fund's intention to
qualify as such. See "Dividends, Distributions and Federal Income Tax."
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's securities are not speculative in
nature, there are risks inherent in the use of such instruments. One such risk
is that the Adviser could be incorrect in its expectations as to the direction
or extent of various interest rate or price movements or the time span within
which the movements take place. For example, if the Fund sold futures contracts
for the sale of securities in anticipation of an increase in interest rates, and
then interest rates went down instead, causing bond prices to rise, the Fund
would lose money on the sale.
Another risk which may arise in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash prices
of the Fund's securities. Another such risk is that prices of interest rate
futures contracts may not move in tandem with the changes in prevailing interest
rates against which the Fund seeks a hedge. A correlation may also be distorted
by the fact that the futures market is dominated by short-term traders seeking
to profit from the difference between a contract or security price objective and
their cost of borrowing funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
Warrants and Rights
The Fund may invest in warrants or rights of securities of mid-sized
companies (other than those acquired in units or attached to other securities)
which entitle the holder to buy equity securities at a specific price for a
specific period of time but will do so only if such equity securities are deemed
appropriate by the Adviser for inclusion in the Fund. In the event the
underlying security does not sufficiently increase in value during the period
when the warrant may be exercised so as to provide an attractive investment for
the Fund, the warrant will expire and the Fund will suffer a loss on the price
it paid for the warrant. The Fund will not invest more than 2% of its total
assets in warrants or rights which are not listed on the New York or American
Stock Exchanges.
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Convertible Securities
Convertible securities may include corporate notes or preferred stock but
are ordinarily a long-term debt obligation of the issuer convertible at a stated
exchange rate into common stock of the issuer. As with all debt securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, to increase as interest rates decline. Convertible
securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality. However, when the market price of
the common stock underlying a convertible security exceeds the conversion price,
the price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security tends to trade increasingly on a yield basis,
and thus may not depreciate to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks on an issuer's capital
structure and are consequently of higher quality and entail less risk than the
issuer's common stock, although the extent to which such risk is reduced depends
in large measure upon the degree to which the convertible security sells above
its value as a fixed income security.
The Fund may invest in convertible securities when it appears to the
Adviser that it may not be prudent to be fully invested in Common Stocks. In
evaluating a convertible security, the Adviser places primary emphasis on the
attractiveness of the underlying common stock and the potential for capital
appreciation through conversion. See "Convertible Securities" in the SAI.
The Fund will purchase only investment grade convertible securities having
a rating of, or equivalent to, at least an S&P rating of BBB (which rating may
have speculative characteristics) or, if unrated, judged by the Adviser to be of
comparable quality. Securities in the lowest investment grade debt category
generally have higher yields, may have speculative characteristics and, as a
result, changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than is the
case with higher investment grade securities. See "Description of Corporate Debt
Ratings" in the SAI.
Corporate Reorganizations
Subject to the Fund's policy of investing at least 80% of its total assets
in Mid Cap Common Stocks, the Fund may invest without limit in securities listed
on the S&P MidCap Index for which a tender or exchange offer has been made or
announced and in securities of companies for which a merger, consolidation,
liquidation or similar reorganization proposal has been announced if, in the
judgment of the Adviser, there is a reasonable prospect of capital appreciation
significantly greater than the added portfolio turnover expenses inherent in the
short term nature of such transactions. The principal risk is that such offers
or proposals may not be consummated within the time and under the terms
contemplated at the time of the investment, in which case, unless such offers or
proposals are replaced by equivalent or increased offers or proposals which are
consummated, the Fund may sustain a loss. For further information on such
investments, see "Description of the Fund's Investment Securities" in the SAI.
Investments in Small, Unseasoned Companies
The Fund may invest up to 5% of its total net assets in small, less well
known companies which (including predecessors) have operated less than three
years. The securities of such companies may have limited liquidity.
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When Issued, Delayed Delivery Securities and Forward Commitments
The Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring. When such transactions are negotiated, the
price is fixed at the time of the commitment, with payment and delivery taking
place in the future, generally a month or more after the date of the commitment.
While the Fund will only enter into a forward commitment with the intention of
actually acquiring the security, the Fund may sell the security before the
settlement date if it is deemed advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Fund prior to the
settlement date. The Fund will segregate cash or liquid high-grade debt
securities with the Fund's custodian in an aggregate amount at least equal to
the amount of its outstanding forward commitments.
Short Sales
The Fund may make short sales of securities. A short sale is a transaction
in which the Fund sells a security it does not own in anticipation that the
market price of that security will decline. The Fund expects to make short sales
both to obtain capital gains from anticipated declines in securities and as a
form of hedging to offset potential declines in long positions in the same or
similar securities. The short sale of a security is considered a speculative
investment technique.
When the Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale in
order to satisfy its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.
The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other highly liquid securities. The Fund will also be required to
deposit similar collateral with its Custodian to the extent, if any, necessary
so that the value of both collateral deposits in the aggregate is at all times
equal to the greater of the price at which the security is sold short or 100% of
the current market value of the security sold short. Depending on arrangements
made with the broker-dealer from which it borrowed the security regarding
payments received by the Fund on such security, the Fund may not receive any
payments (including interest) on its collateral deposited with such
broker-dealer.
If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a capital
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. Although the Fund's gain is limited to the price at which
it sold the security short, its potential loss is theoretically unlimited.
The market value of the securities sold short of any one issuer will not
exceed either 5% of the Fund's total assets or 5% of such issuer's voting
securities. The Fund will not make a short sale, if, after giving effect to such
sale, the market value of all securities sold short exceeds 20% of the value of
its assets or the Fund's aggregate short sales of a particular class of
securities exceeds 20% of the outstanding securities of that class. The Fund may
also make short sales "against the box" without respect to such limitations. In
this type of short sale, at the time of the sale, the Fund owns or has the
immediate and unconditional right to acquire at no additional cost the identical
security.
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Repurchase Agreements
The Fund may invest in repurchase agreements, which are agreements pursuant
to which securities are acquired by the Fund from a third party with the
understanding that they will be repurchased by the seller at a fixed price on an
agreed upon date. These agreements may be made with respect to any of the
portfolio securities in which the Fund is authorized to invest. Repurchase
agreements may be characterized as loans secured by the underlying securities.
The Fund may enter into repurchase agreements with (i) member banks of the
Federal Reserve System having total assets in excess of $500 million and (ii)
securities dealers, provided that such banks or dealers meet the
creditworthiness standards established by the Fund's board of trustees
("Qualified Institutions"). The Adviser will monitor the continued
creditworthiness of Qualified Institutions, subject to the supervision of the
Fund's Board of Trustees. 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 collateral is marked to market
daily. Such agreements permit the Fund to keep all its assets earning interest
while retaining "overnight" flexibility in pursuit of investments of a
longer-term nature.
The use of repurchase agreements involves certain risks. For example, if
the seller of securities under a repurchase agreement defaults on its obligation
to repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the Fund's Custodian at all
times in an amount at least equal to the repurchase price, including accrued
interest. If the seller fails to repurchase the securities, the Fund may suffer
a loss to the extent proceeds from the sale of the underlying securities are
less than the repurchase price. The Fund will not enter into repurchase
agreements of a duration of more than seven days if, taken together with all
other illiquid securities in the Fund, more than 15% of its net assets would be
so invested.
Loans of Portfolio Securities
To increase income, the Fund may lend its securities to securities
broker-dealers or financial institutions if (1) the loan is collateralized in
accordance with applicable regulatory requirements including collateralization
continuously at no less than 100% by marking to market daily, (2) the loan is
subject to termination by the Fund at any time, (3) the Fund receives reasonable
interest or fee payments on the loan, (4) the Fund is able to exercise all
voting rights with respect to the loaned securities and (5) the loan will not
cause the value of all loaned securities to exceed one-third of the value of the
Fund's assets.
If the borrower fails to maintain the requisite amount of collateral, the
loan automatically terminates and the Fund could use the collateral to replace
the securities while holding the borrower liable for any excess of replacement
cost over the value of the collateral. As with any extension of credit, there
are risks of delay in recovery and in some cases even loss of rights in
collateral should the borrower of the securities fail financially.
Portfolio Turnover
Purchases and sales are made for the Fund whenever necessary, in the
Adviser's opinion, to meet the Fund's objectives. Portfolio turnover may involve
the payment by the Fund of dealer spreads or underwriting commissions, and other
transaction costs, on the sale of securities, as well as on the reinvestment of
the proceeds in other securities. The greater the portfolio turnover the greater
the transaction costs to the Fund which will increase the Fund's total operating
expenses. In order to qualify as a regulated investment
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company, less than 30% of the Fund's gross income must be derived from the sale
or other disposition of stock, securities or certain other investments held for
less than three months. Although increased portfolio turnover may increase the
likelihood of additional capital gains for the Fund, the Fund expects to satisfy
the 30% income test. The Adviser expects that the turnover of the Fund should
not exceed 200%.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Fund are
subject to the following limitations: (a) the Fund may not invest more than 5%
of its total assets in the securities of any one issuer, except obligations of
the United States Government and its agencies and instrumentalities, and (b) the
Fund may not own more than 10% of the outstanding voting securities of any one
issuer. The classification of the Fund as a diversified investment company is a
fundamental policy of the Fund and may be changed only with the approval of the
holders of a majority of the Fund's outstanding shares. As used in this
Prospectus, the term "majority of the outstanding shares" of the Fund means,
respectively, the vote of the lesser of (i) 67% or more of the shares of the
Fund present at the meeting, if more than 50% of the outstanding shares of the
Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund.
The Fund also operates under certain investment restrictions which are
deemed fundamental policies of the Fund and also may be changed only with the
approval of the holders of a majority of the Fund's outstanding shares. In
addition to other restrictions listed in the SAI, the Fund may not (except where
specified):
(i) invest more than 15% of the market value of the Fund's net assets
in illiquid investments including repurchase agreements maturing in more
than seven days;
(ii) purchase securities on margin or borrow money, except (a) from
banks for extraordinary or emergency purposes (not for leveraging or
investment) or (b) by engaging in reverse repurchase agreements, provided
that (a) and (b) in the aggregate do not exceed an amount equal to
one-third of the value of the total assets of the Fund less its liabilities
(not including the amount borrowed) at the time of the borrowing, and
further provided that 300% asset coverage is maintained at all times;
(iii) purchase securities while borrowings exceed 5% of its total
assets;
(iv) mortgage, pledge or hypothecate any assets except that the Fund
may pledge not more than one-third of its total assets to secure borrowings
made in accordance with paragraph (ii) above. However, although not a
fundamental policy of the Fund, as a matter of operating policy in order to
comply with certain state statutes, the Fund will not pledge its assets in
excess of an amount equal to 10% of net assets; or
(v) lend portfolio securities (including repurchase agreements) of
value exceeding in the aggregate one-third of the market value of the
Fund's total assets less liabilities other than obligations created by
these transactions.
If a percentage restriction is adhered to at the time an investment is
made, a later change in percentage resulting from changes in the value of the
Fund's investment securities will not be considered a violation of the Fund's
restrictions.
For a more detailed discussion of these investment restrictions, see
"Investment Restrictions" in the SAI.
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MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. Additional information about the Trustees, as well as the
Trust's executive officers, may be found in the SAI under the heading
"Management -- Trustees and Officers."
The Investment Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201, serves as investment adviser to the Fund. Trustmark
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments.
Trustmark is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
Trustmark currently has assets in excess of $1 billion under management. It
was founded in 1890 and is the second largest commercial bank headquartered in
Mississippi. Trustmark has been managing trust monies for over 40 years and
currently manages the Performance Funds as well as various common and collective
Funds. Shares of the Fund are not guaranteed by Trustmark, its parent or
affiliates, nor are they insured by the FDIC.
Trustmark has an investment management staff of highly trained
professionals who manage the assets of the Performance Funds. Douglas H.
Ralston, CFA, Vice President and Trust Officer, with 5 years of investment
experience with Trustmark, is responsible for the day-to-day management of the
Fund. Prior to Trustmark, Mr. Ralston was employed by the Third National Bank of
Nashville for 5 years.
For the advisory services it provides to the Fund, Trustmark receives fees
based on average daily net assets up to an annual rate of 0.75% of the Fund's
average daily net assets.
Based upon the advice of its counsel, Trustmark believes that the
performance of investment advisory services for the Fund 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 Trustmark from continuing to perform such services
for the Fund. If Trustmark were prohibited from acting as investment adviser to
the Fund, it is expected that the Board of Trustees would recommend to
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.
The Sponsor, Distributor and Administrator. Furman Selz LLC, 230 Park
Avenue, New York, New York 10169, acts as the Sponsor and Administrator of the
Fund. Performance Funds Distributor, Inc., an affiliate of Furman Selz, acts as
the Distributor of the Fund's shares. Furman Selz is primarily an institutional
brokerage firm with membership on the New York, American, Boston, Midwest,
Pacific and Philadelphia Stock Exchanges. Furman Selz also serves as
administrator and distributor of other mutual funds.
Administrative Services. The Fund has entered into an Administrative
Services Contract with Furman Selz pursuant to which Furman Selz provides
certain management and administrative services necessary for the Fund's
operations including: (i) general supervision of the operation of the Fund
including coordination of the services performed by the Fund's Adviser, transfer
agent, custodian, independent accountants and legal counsel, regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions, and
preparation of proxy statements and shareholder reports for the Fund, (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Fund's officers and Board of
Trustees, and (iii) furnishing office space and certain facilities required for
conducting the business of the Fund. For these services, Furman Selz receives
from the Fund a monthly fee at the annual rate of 0.15% of the average daily net
assets of the Fund. Pursuant to a Shareholder Servicing Agreement between the
Trust and the Administrator, Furman
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Selz receives a fee of $15.00 per account per year plus out-of-pocket expenses.
Pursuant to a Fund Accounting Agreement between the Trust and the Administrator,
the Administrator assists the Trust in calculating net asset values and provides
certain other accounting services for the Fund described therein, for an annual
fee of $30,000 per Fund plus out-of-pocket expenses.
On June 28, 1996, Furman Selz and BISYS Group, Inc. ("BISYS") announced a
definitive agreement which provides that by the end of 1996 Furman Selz will
exit the mutual funds business and recommend BISYS to Furman Selz's existing
fund clients to replace Furman Selz for mutual fund administration,
distribution, fund accounting and transfer agency services.
BISYS, headquartered in Little Falls, N.J., supports more than 5,000
financial institutions and corporate clients through two strategic business
units. BISYS Information Services Group provides image and data processing
outsourcing, and pricing analysis to more than 600 banks nationwide. BISYS
Investment Services Group designs, administers, and distributes over 30 families
of proprietary mutual funds consisting of more than 365 portfolios, and provides
401(k) marketing support, administration, and recordkeeping services in
partnership with 18 of the nation's leading bank and investment management
companies. BISYS trades on NASDAQ under the symbol BISYS.
As of the date of this prospectus, the Board of Trustees of the Fund is
considering alternatives to Furman Selz LLC as service provider to the Fund. The
Board will decide on Furman Selz's replacement by January 1, 1997. Shareholders
of the Fund will be notified of such decision.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services for the Fund, such as maintaining shareholder accounts
and records. The Fund may pay fees to Service Organizations (which vary
depending upon the services provided) in amounts up to an annual rate of 0.35%
of the daily net asset value of the Fund's shares owned by shareholders with
whom the Service Organization has a servicing relationship. Investors are not
required to purchase shares through or maintain an account with a Service
Organization.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the Fund's
minimum initial or subsequent investments or charging a direct fee for
servicing. A Service Organization or broker or other sales-person within such
Service Organization may be compensated at varying rates for the sale of one
class of Fund shares as opposed to another. If imposed, these fees would be in
addition to any amounts which might be paid to the Service Organization by the
Fund. Each Service Organization has agreed to transmit to its clients a schedule
of any such fees. Shareholders using Service Organizations are urged to consult
with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. In addition, state
securities law on this issue may differ from interpretations of federal law
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expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD or the Adviser. The costs borne by the Fund include
legal and accounting expenses; Trustees' fees and expenses; insurance premiums;
custodian and transfer agent fees and expenses; expenses incurred in acquiring
or disposing of the Fund's portfolio securities; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of obtaining quotations on the Fund's portfolio
securities and pricing of the Fund's shares; expenses of maintaining the Fund's
legal existence and of shareholders' meetings; and expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses. The
Fund bears its own expenses associated with its establishment as a series of
Performance Funds Trust; these expenses are amortized over a five-year period
from the commencement of the Fund's operations. See "Management" in the SAI.
Trust expenses directly attributable to the Fund are charged to the Fund; other
expenses are allocated proportionately among all of the Funds in the Trust in
relation to the net assets of each Fund which are allocated to each share class
based on the net assets of such class. Class specific expenses are charged
directly to the share class which bears such expense.
Portfolio Transactions. Pursuant to the Investment Advisory Contract, the
Adviser places orders for the purchase and sale of portfolio investments for the
Fund's accounts with brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Adviser will seek the best execution of the Fund's orders.
Purchases and sales of portfolio debt securities for the Fund are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter. Purchases and sales of common stocks are generally placed by
the Adviser with broker-dealers which, in the Adviser's judgment, provide prompt
and reliable execution at favorable security prices and reasonable commission
rates. Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Adviser on behalf of the Fund. The Adviser may
cause the Fund to pay commissions higher than another broker-dealer would have
charged if the Adviser believes the commission paid is reasonable in relation to
the value of the brokerage and research services received on behalf of the Fund.
FUND SHARE VALUATION
The net asset value per share is calculated at 4:15 p.m. (eastern time) for
the Fund, Monday through Friday, on each day the New York Stock Exchange is open
for trading (a "Business Day"), which excludes the following business holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of
the Fund is computed by dividing the value of each share class of the Fund's net
assets (i.e., the value of the assets less the liabilities) by the total number
of each share class of the Fund's outstanding shares. All expenses, including
fees paid to the Adviser and Furman Selz, are accrued daily and taken into
account for the purpose of determining the net asset value.
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Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken for the exchange where the security is primarily traded.
Over-the-counter securities are valued on the basis of the bid price at the
close of business on each business day. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or at the direction of the Board of Trustees. Notwithstanding the above,
bonds and other fixed-income securities are valued by using market quotations
and may be valued on the basis of prices provided by a pricing service approved
by the Board of Trustees.
With respect to options contracts, the premium received is recorded as an
asset and equivalent liability, and thereafter adjusts the liability to the
market value of the option determined in accordance with the preceding
paragraph. The premium paid for an option purchased by the Fund is recorded as
an asset and subsequently adjusted to market value.
PURCHASE OF FUND SHARES
Orders for purchases of Institutional Class shares will be executed at the
net asset value per share next determined after an order has been received. All
monies received by the Fund for purchases of Institutional Class shares are
invested in full and fractional shares of the Fund. Certificates for shares are
not issued. The Trust maintains records of each shareholder's holdings of Fund
shares, and each shareholder receives a statement confirming transactions and
dividends. The Trust reserves the right to reject any purchase order. All
initial investments should be accompanied by a completed Purchase Application, a
form of which accompanies this Prospectus. The Fund does not accept third party
checks. A separate application is required for Individual Retirement Account
investments. The Trust and the Fund reserve the right to waive or reduce the
minimum initial investment amount with respect to certain accounts.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisers and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment adviser or Service Organization with instructions as to
the amount you wish to invest. Your broker will then contact the Fund to place
the order on your behalf on that day.
Orders received by your broker or Service Organization for the Fund in
proper order prior to the determination of net asset value and transmitted to
the Fund prior to the close of its business day (which is currently 4:15 p.m.,
eastern time), will become effective that day. Brokers who receive orders are
obligated to transmit them promptly. You should receive written confirmation of
your order within a few days of receipt of instructions from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the Fund. In most cases, your bank will either be a member of the
Federal Reserve Banking System or have a relationship with a bank that is. Your
bank will normally charge you a fee for handling the transaction. To purchase
shares by a Federal funds wire, please first contact Furman Selz Mutual Funds
Client Services. They will establish a record of information for the wire to
insure the correct processing of funds. You can reach the Wire Desk at
1-800-737-3676.
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Then, have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, Missouri 64105
ABA 1010-0362-1
Account #751-2996
Further Credit to: The Performance Mid Cap Growth
Fund
As long as you have received the Prospectus, you may establish a new
regular account through the Wire Desk; IRAs may not be opened in this way. When
new accounts are established by wire, the distribution options will be set to
reinvest all distributions and the social security or Tax Identification Number
("TIN") will not be certified until a signed application is received. Completed
applications should be forwarded immediately to the Fund. With the application,
the shareholder can specify other distribution options and add any special
features offered by the Fund. Should any dividend distributions or redemptions
be paid before the TIN is certified, they will be subject to 31% Federal tax
withholding.
By Automatic Investment. Investors may participate in the Automatic
Investment Program, which is an investment plan that automatically debits money
from the shareholder's designated bank account and invests it in the Fund
through the use of electronic fund transfers or automatic bank drafts.
Shareholders may elect to make investments by transfers of a minimum of $50.00
on either the fifth or twentieth day of each month into their established Fund
Account. No minimum initial investment applies when an account is established
through the Automatic Investment Program. Contact the Fund for more information
about the Automatic Investment Program.
By Payroll Direct Deposits. Investors may set up a payroll direct deposit
arrangement for amounts to be automatically invested in the Fund. Participants
in the Payroll Direct Deposit program may make periodic investments of at least
$20.00 per pay period. Contact the Fund for more information about Payroll
Direct Deposits.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment for new or existing IRAs. Shares may
also be purchased for IRAs established with Trustmark or other authorized
custodians. In addition, an IRA may be established through a custodial account
with Investors Fiduciary Trust Company. Completion of a special application is
required in order to create such an account, and the minimum initial investment
for an IRA is $250. Contributions to IRAs are subject to prevailing amount
limits set by the Internal Revenue Service. A $5.00 establishment fee and an
annual $12.00 maintenance and custody fee is payable with respect to each
shareholder; in addition there will be charged a $10.00 termination fee when the
account is closed. For more information and IRA information, call Furman Selz
toll free at 1-800-737-3676.
EXCHANGE PRIVILEGES
The Fund offers two convenient ways to exchange shares in one of the
Performance Funds for shares in another Performance Fund. Before engaging in an
exchange transaction, a shareholder should read carefully the portions of the
Prospectus describing the Fund into which the exchange will be made. A
shareholder may not exchange shares of one Fund for shares of another Fund if
both or either are not qualified for sale in the state of the shareholder's
residence. The minimum amount for an initial exchange is $1,000 and the minimum
amount for subsequent exchanges is $100. The Trust may terminate or amend the
terms of the exchange privilege at any time upon 60 days' written notice to
shareholders.
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A new account opened by exchange must be established with the same name(s),
address and social security number or TIN as the existing account. All exchanges
will be made based on the net asset value next determined following receipt of
the request by a Fund in good order, plus any applicable sales charge.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of shares, equal to the excess of the sales load
applicable to the shares to be acquired, over the amount of any sales load
previously paid on the shares to be exchanged. No service fee is imposed.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to PFD. The letter of instruction must include: (i) your account
number; (ii) the Fund from and the Fund into which you wish to exchange your
investment; (iii) the dollar or share amount you wish to exchange; and (iv) the
signatures of all registered owners or authorized parties. All signatures must
be guaranteed by a member of a national securities exchange or by a commercial
bank or trust company.
Exchange by Telephone. To exchange Fund shares by telephone or if you have
any questions, simply call the Fund toll free at 1-800-737-3676. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security number or TIN and account registration;
(ii) the name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The Fund
employs reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Fund fails to employ such reasonable procedures,
it may be liable for any loss, damage or expense arising out of any telephone
transactions purporting to be on a shareholder's behalf. In order to assure the
accuracy of instructions received by telephone, the Fund requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions. Telephone exchanges are available only if the shareholder so
indicates by checking the box on the Purchase Application.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any Business
Day. Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received and accepted by the Fund. See
"Fund Share Valuation." A redemption may be a taxable transaction on which gain
or loss may be recognized.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day,
although the Fund may take up to seven days to make payment. Also, if the New
York Stock Exchange is closed (or when trading is restricted) for any reason
other than the customary weekend or holiday closing or if an emergency condition
as determined by the SEC merits such action, the Fund may suspend redemptions or
postpone payment dates.
Redemption Methods. To ensure acceptance of your redemption request, it is
important to follow the procedures described below. Although the Fund has no
present intention to do so, the Fund reserves the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place
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orders by telephone during periods of severe market or economic change, and a
shareholder should consider alternative methods of communications, such as
couriers. The Fund's services and their provisions may be modified or terminated
at any time by the Fund. If the Fund terminates any particular service, it will
do so only after giving written notice to shareholders. Redemption by mail will
always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your broker or
investment adviser and instructing him to redeem your shares. He will then
contact PFD and place a redemption trade on your behalf. You will receive the
next determined net asset value per share after receipt of such request by your
broker or investment adviser. It will be the responsibility of such broker or
investment adviser to transmit your redemption request to the Fund in a timely
manner. A broker or investment adviser which has received any portion of a sales
load or 12b-1 fee for the sale of such shares may not also receive a fee for
this service.
By Mail. You may redeem your shares by sending a letter directly to the
Fund. To be accepted, a letter requesting redemption must include: (i) the
Fund's name and account registration from which you are redeeming shares, (ii)
your account number, (iii) the amount to be redeemed, (iv) the signatures of all
registered owners, and (v) a signature guarantee by a member of a national
securities exchange or a commercial bank or trust company (a signature guarantee
by a savings bank or a notary public is not acceptable). Corporations,
partnerships, trusts or other legal entities will be required to submit
additional documentation.
By Telephone. You may redeem your shares by calling the Fund toll free at
1-800-737-3676. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number or TIN
and account registration, (ii) the Fund's name from which you are redeeming
shares, and (iii) the amount to be redeemed. The conversation may be recorded to
protect you and the Fund. Telephone redemptions are available to the shareholder
unless otherwise indicated by the shareholder by checking the box on the
Purchase Application.
By Wire. You may redeem your shares by contacting the Fund by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Your instructions should include: (i) your account number, social security
number or TIN and account registration, (ii) the Fund's name from which you are
redeeming shares, and (iii) the amount to be redeemed. Wire redemptions are
available to the shareholder unless otherwise indicated by checking the box on
the Purchase Application. Please attach a copy of a void check of account where
proceeds are to be wired. Your bank may charge you a fee for receiving a wire
payment on your behalf.
The above mentioned services "Telephone" and "Wire" are not available for
IRAs and trust clients of Trustmark.
Systematic Withdrawal Plan. An owner of $25,000 or more of shares of the
Fund may elect to have periodic redemptions from his account to be paid on a
monthly, quarterly, semi-annual or annual basis. The minimum periodic payment is
$100. A sufficient number of shares to make the scheduled redemption will
normally be redeemed on the date selected by the shareholder. Depending on the
size of the payment requested and fluctuation in the net asset value, if any, of
the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
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Reinstatement Privilege. A shareholder in the Fund who has redeemed shares
may reinvest up to the full amount of such redemption at the net asset value
determined at the time of the reinvestment within 30 days of the original
redemption. This privilege must be effected within 30 days of the redemption.
The shareholder must reinvest in the same Fund and account from which the shares
were redeemed. A redemption is a taxable transaction and gain or loss may be
recognized for Federal income tax purposes even if the reinstatement privilege
is exercised. Any loss realized upon the redemption will not be recognized as to
the number of shares acquired by reinstatement, except through an adjustment in
the tax basis of the shares so acquired.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Fund reserves the right to redeem, on not less
than 30 days' notice, an account in the Fund that has been reduced by
shareholder redemption of the account to $500 ($250 for IRAs) or less. However,
if during the 30-day notice period the shareholder purchases sufficient shares
to bring the value of the account above $500 ($250 for IRAs), this restriction
will not apply.
Redemption in Kind. All redemptions of shares of the Fund shall be made in
cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of the Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of the Fund
at the beginning of such period. Any such redemption in kind will be made in
readily marketable securities. This commitment is irrevocable without the prior
approval of the SEC and is a fundamental policy that may not be changed without
shareholder approval. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Trustees reserves the right to have the
Fund make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of
the Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund has qualified and intends to continue to qualify to be treated as
a regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, the Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses).
Investment company taxable income will be distributed by the Fund monthly. The
Fund intends to distribute, at least annually, substantially all net capital
gain (the excess of net long-term capital gains over net short-term capital
losses). In determining amounts of capital gains to be distributed, any capital
loss carryovers from prior years will be applied against capital gains.
Shareholders may elect to receive distributions in additional Fund shares
based on the net asset value at the close of business on the payment date of the
distribution or may receive such distribution in cash. If no election is made,
distributions will be automatically reinvested in additional shares of the Fund.
Dividends declared in, and attributable to, the preceding month will be paid
within five business days after the end of each month.
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Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of investment income (regardless of whether derived from
dividends, interest or short-term capital gains) will be taxable to shareholders
as ordinary income. Distributions of net long-term capital gains designated by
the Fund as capital gain dividends will be taxable as long-term capital gains,
regardless of how long a shareholder has held his Fund shares. Distributions are
taxable in the same manner whether received in additional shares or in cash.
A distribution will be treated as paid on December 31 of the calendar year
if it is declared by the Fund during October, November, or December of that year
to shareholders of record in such a month and paid by the Fund during January of
the following calendar year. Such distributions will be taxable to shareholders
in the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Special tax rules may apply to the Fund's acquisition of financial futures
contracts, and options on futures contracts. Such rules may, among other things,
affect whether gains and losses from such transactions are considered to be
short-term or long-term, may have the effect of deferring losses and/or
accelerating the recognition of gains or losses, and, for purposes of qualifying
as a regulated investment company, may limit the extent to which the Fund may be
able to engage in such transactions.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares.
It is anticipated that a portion of the dividends paid by the Fund will
qualify for the dividends-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amount, withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund in which they invest. Depending on the
residence of the shareholder for tax purposes, distributions also may be subject
to state and local taxes, including withholding taxes. Foreign shareholders may,
for example, be subject to special withholding requirements. Special tax
treatment, including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. Shareholders should consult their own
tax advisers as to the Federal, state and local tax consequences of ownership of
shares of the Fund in its particular circumstances.
OTHER INFORMATION
CAPITALIZATION
Performance Funds Trust was organized as a Delaware business trust on March
11, 1992, and currently consists of multiple separate portfolios or series, one
of which is offered in this Prospectus. The Board of
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Trustees may establish additional series in the future. The capitalization of
the Trust consists solely of an unlimited number of shares of beneficial
interest with a par value of $0.001 each. When issued, shares of the Fund are
fully paid and non-assessable.
This Prospectus relates to the Institutional Class of the Fund's shares.
The Fund also offers Consumer Service Class shares. Institutional Class shares
and Consumer Service Class shares are identical in all respects with the
exception that the Consumer Service Class shares may be subject to Rule 12b-1
fees to which the Institutional Class shares are not subject. Purchases may be
made through an authorized broker or financial institution, including the Fund,
by mail or by wire. Call 1-800-727-3676, or contact your sales representative,
broker-dealer or bank to obtain more information about the Fund's Classes of
shares.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the Trust
Instrument disclaims liability of the shareholders, Trustees or officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of each series of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and should be considered remote
and is limited to the amount of the shareholder's investment in the Fund.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. The Trust is not required to hold
regular annual meetings of the Fund's shareholders and does not intend to do so.
The Fund may vote separately on items which affect the Fund and each class
within the Fund may vote separately on matters which affect only that class. For
example, only Consumer Service Class shareholders will vote on matters related
to the Fund's Distribution Plan under Rule 12b-1. See "Other
Information -- Voting Rights" in the SAI.
The Trust Instrument provides that the holders of not less than two-thirds
of the outstanding shares of the Trust may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting of shareholders for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust or Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of the Fund.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and/or total return in
advertisements or reports to shareholders or prospective investors. Shareholders
of the Consumer Service Class of shares may experience a lower net return on
their investment than shareholders of the Institutional Class of shares because
of Rule 12b-1 Plan distribution fees paid by such shareholders. The methods used
to calculate the yield and total return of the Fund are mandated by the SEC.
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Quotations of "yield" for the Fund will be based on the investment income
per share during a particular 30-day (or one month) period (including dividends
and interest), less expenses accrued during the period ("net investment
income"), and will be computed by dividing net investment income by the net
asset value per share on the last day of the period.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), 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.
Performance information for the Fund may be compared to various unmanaged
indices, such as the S&P MidCap Index and the Standard & Poor's 500 Index.
Indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Fund 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. For a description of the
methods used to determine yield and total return for the Fund, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Fund has been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
The Fund retains Furman Selz as transfer agent. Furman Selz provides
personnel necessary to perform shareholder servicing functions. Pursuant to a
Shareholder Servicing Agreement between the Trust and the Administrator, Furman
Selz receives a fee of $15.00 per account, per year, and reimbursement for
certain expenses.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust,
c/o Furman Selz Mutual Funds Department, 237 Park Avenue, New York, New York
10017.
General and Account Information: (800) PERFORM (737-3676).
24
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[LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
SPONSOR AND ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Performance Funds Distributor, Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
PFMCIC0995
[LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MID CAP GROWTH FUND
INSTITUTIONAL CLASS
PROSPECTUS
SEPTEMBER 27, 1996
Performance Funds'
Investment Adviser
<PAGE> 139
PERFORMANCE FUNDS TRUST
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- INVESTMENT ADVISER
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
THE MID CAP GROWTH FUND
This Prospectus describes The Mid Cap Growth Fund (the "Fund") managed by
Trustmark National Bank. This Prospectus relates only to the "Consumer Service
Class" of the Fund's shares; certain investors may qualify to invest in the
Fund's "Institutional Class," which is not offered hereby. See, "Other
Information -- Capitalization." The Fund is a separate investment fund of
Performance Funds Trust (the "Trust"), a Delaware business trust and registered
management investment company, with distinct investment objectives and policies.
The Fund pays certain expenses related to the distribution of its shares,
calculated at an annual rate and based on a percentage of the average daily net
assets.
AN INVESTMENT IN THE FUND IS NOT GUARANTEED OR INSURED BY THE UNITED STATES
GOVERNMENT. SHARES OF THE FUND ARE NOT AN OBLIGATION OF OR GUARANTEED BY
TRUSTMARK NATIONAL BANK OR ITS AFFILIATES AND SUCH SHARES ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund.
A Statement of Additional Information ("SAI"), dated September 27, 1996
containing additional and more detailed information about the Fund, has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by writing or calling the Fund at the address and information number
printed above.
------------------------
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.
------------------------
September 27, 1996
<PAGE> 140
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fund Expenses........................................................................... 3
Fee Table............................................................................... 3
Financial Highlights.................................................................... 4
Prospectus Summary...................................................................... 5
Investment Objective, Policies and Practices............................................ 7
Investment Restrictions................................................................. 13
Management of the Fund.................................................................. 13
Fund Share Valuation.................................................................... 17
Purchase of Fund Shares................................................................. 17
Individual Retirement Accounts.......................................................... 18
Exchange Privileges..................................................................... 19
Redemption of Fund Shares............................................................... 19
Dividends, Distributions and Federal Income Tax......................................... 21
Other Information....................................................................... 23
</TABLE>
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
2
<PAGE> 141
FUND EXPENSES
The following expense table lists the estimated costs and expenses that an
investor in the Consumer Service Class may incur either directly or indirectly
as a shareholder of the Fund based upon expenses incurred during the fiscal year
ended May 31, 1996. The Fund's actual expenses in the future may be greater or
less than those shown. Shareholders in the Consumer Service Class of the Fund
may be subject to Rule 12b-1 Plan distribution fees (annually up to 0.35% of the
average net assets of the Fund), to which the Institutional Class is not
subject. The Institutional Class of shares is only available to certain
qualified investors.
FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a percentage price)................... none
Maximum Sales Load Imposed on Reinvested Dividends................................ none
Deferred Sales Load............................................................... none
Redemption Fees................................................................... none
Exchange Fees..................................................................... none
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets annualized)
Investment Advisory Fees (after waiver)(3)........................................ 0.60%
12b-1 Fees(4)..................................................................... 0.25%
Other Expenses(5)................................................................. 0.34%
----
Total Fund Operating Expenses (after waiver)(3)................................... 1.19%
====
</TABLE>
(1) The Consumer Service Class of shares may be subject to Rule 12b-1 Plan
distribution fees (annually up to 0.35% of the average net assets of the
Fund) to which the Institutional Class is not subject.
(2) Shares of the Consumer Service Class of the Fund may be available through
banks or other financial institutions which have entered into a dealer
agreement with the Fund. Such institutions may provide a variety of services
at varying fees to customers and, although such fees are not fund-related,
the fees must be paid by customers in order to purchase Fund shares.
(3) Absent waivers, the advisory fee would be 0.75% of the Fund's average daily
net assets and Total Fund Operating Expenses would be 1.44%.
(4) 12b-1 fees may be increased to an annual rate of 0.35% of the Fund's average
daily net assets.
(5) Certain Service Organizations may receive additional fees from the Fund in
amounts up to an annual rate of 0.35% of the daily net asset value of the
Fund's shares owned by shareholders with whom the Service Organization has a
servicing relationship. See "Management of the Fund -- Service
Organizations" herein.
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Fund will bear.
3
<PAGE> 142
EXAMPLE:*
You would pay the following expenses on a $1,000 investment assuming a 5%
gross annual return and redemption at the end of each time period:
<TABLE>
<S> <C>
1 year..................................................... $ 12
3 years.................................................... $ 39
5 years.................................................... $ 68
10 years.................................................... $149
</TABLE>
* This example should not be considered a representation of actual expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of future annual
returns. Actual return may be greater or less than the assumed amount.
FINANCIAL HIGHLIGHTS
The financial data shown below is to assist investors in evaluating the
performance of the Fund since commencement of operations through May 31, 1996.
The selected per share data and ratios have been audited by Price Waterhouse
LLP, independent accountants, whose report on the financial statements,
including this data, appears in the Fund's 1996 Annual Report to Shareholders.
This financial data should be read in conjunction with the related financial
statements and notes thereto.
Selected Per Share Data and Ratios
<TABLE>
<CAPTION>
MID CAP GROWTH FUND
-------------------------------------------
CONSUMER SERVICE CLASS
-------------------------------------------
FOR THE PERIOD
YEAR YEAR FEBRUARY 24, 1994
ENDED ENDED (COMMENCEMENT OF
MAY 31, MAY 31, OPERATIONS) THROUGH
1996 1995 MAY 31, 1994
------- ------- -------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 11.11 $ 9.60 $ 10.00
------- ------- -------
Income from Investment Operations:
Net investment income................................ 0.10 0.11 0.03
Net gain/(loss) on securities (both realized and
unrealized)....................................... 3.44 1.51 (0.40)
------- ------- -------
Total from Investment Operations..................... 3.54 1.62 (0.37)
------- ------- -------
Less Distributions:
Dividends from net investment income................. (0.10) (0.11 ) (0.03)
Distributions from capital gains..................... (0.50) -- --
------- ------- -------
Total Distributions.................................. (0.60) (0.11 ) (0.03)
------- ------- -------
Net Asset Value, End of Period......................... $ 14.05 $11.11 $ 9.60
======= ====== ===============
Total Return........................................... 32.76% 17.06 % (3.70)%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)............. $ 1,437 $ 277 $ 35
Ratio of Expenses to Average Net Assets.............. 1.23% 1.21 % 1.18%*
Effect of waivers/reimbursements on expense ratio.... 0.16% 0.26 % 1.00%*
Ratio of Net Investment Income to Average Net
Assets............................................ 0.79% 1.12 % 1.35%*
Portfolio Turnover Rate.............................. 28% 20.39 % 5.88%
Average Commission Rate(a)........................... $0.1070 -- --
</TABLE>
- ---------------
* Annualized
(a) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
4
<PAGE> 143
INDEX COMPARISON
The information set forth below compares the performance of a hypothetical
investment of $10,000 in the Fund's Consumer Service Class of shares to an
industry index. Performance is compared from February 24, 1994 (commencement of
operations) through May 31, 1995 and for the fiscal years ended May 31, 1995 and
May 31, 1996.
<TABLE>
<CAPTION>
Redemption
Measurement Period Value S&P Mid Cap
(Fiscal Year Covered) ($10,000 400
<S> <C> <C>
May 31, 9630 9610
Aug. 31, 10090 10091
Nov. 30, 9548 9562
Feb. 28, 10478 10261
May 31, 11270 10907
Aug. 31, 12635 12163
Nov. 30, 13129 12667
Feb. 29, 13787 13252
May 31, 14962 14013
- --------------------------------------------------------------------------------
May 31, Feb. 28, Feb. 29,
1994 Aug. 31, Nov. 30, 1995 May 31, Aug. 31, Nov. 30, 1996 May 31,
- ------------------------------------------------------------------------------------------------------------------
Redemption Value ($10,000
Investment) Since Inception 9,630 10,090 9,548 10,478 11,270 12,635 13,129 13,787 14,962
- ------------------------------------------------------------------------------------------------------------------
S&P Mid Cap 400 9,610 10,091 9,562 10,261 10,907 12,163 12,667 13,252 14,013
</TABLE>
- --------------------------------------------------------------------------------
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
The Fund's investment objective is to seek to achieve growth of capital by
attempting to outperform the S&P MidCap Index. The Fund will seek to achieve
this objective by investing primarily in common stocks of mid-sized companies
(those with market capitalization ranging from $200 million to $5.2 billion),
including common stocks listed on the S&P MidCap Index (collectively, "Mid Cap
Common Stocks") which the Fund's investment adviser believes are likely to
outperform the S&P MidCap Index. Although the Fund may also invest in the types
of investment grade fixed income instruments described under "Investment
Objective, Policies and Practices" herein, and may use various special
investment techniques, under normal market conditions the Fund will invest at
least 80% of its total assets in Mid Cap Common Stocks. Under normal market
conditions, up to 20% of the Fund's total assets may be invested in options,
warrants, futures contracts, preferred stock, investment grade debt securities
and securities convertible into common or preferred stock. See "Investment
Objectives, Policies and Practices." There is no assurance that the Fund will
achieve its investment objective. The investment objective of the Fund and its
investment restrictions described in the SAI are fundamental and may not be
changed without shareholder approval.
5
<PAGE> 144
RISK FACTORS
There is no assurance that the Fund will achieve its investment objective.
The Fund's net asset value fluctuates, reflecting fluctuations in the market
value of its portfolio securities. Investors should consider the risks
associated with investing in Mid Cap Common Stocks. While investing in mid-cap
growth companies generally entails greater risk and volatility than investing in
large, well-established companies, mid-cap companies are expected to offer the
potential for more rapid growth and for capital appreciation because of their
higher growth rates. In addition, the stocks of such companies are less actively
followed by securities analysts and may, therefore, be undervalued by investors.
The Fund may invest in options, warrants, futures contracts, investment grade
convertible securities and may engage in short sales. For additional information
concerning the investment policies, practices and risk considerations of the
Fund, see "Management of the Fund" and "Investment Objectives, Policies and
Practices" in this Prospectus. See also the SAI.
MANAGEMENT OF THE FUND
Trustmark National Bank ("Trustmark" or the "Adviser") acts as investment
adviser to the Fund. Trustmark currently has assets in excess of $1 billion
under management. It was founded in 1890 and is the second largest commercial
bank headquartered in Mississippi. For its services, the Adviser receives from
the Fund a fee based on average daily net assets up to an annual rate of 0.75%
of the average daily net assets of the Fund. Trustmark has been managing trust
monies for over 40 years and currently manages various common and collective
funds. See "Fee Table" and "Management of the Fund" in this Prospectus.
Furman Selz Incorporated ("Furman Selz") acts as Sponsor and Administrator
to the Fund and provides certain management and administrative services to the
Fund, for which the Fund pays a fee at an annual rate based upon the Fund's
average daily net assets. Performance Funds Distributor, Inc. ("PFD") is the
Distributor for the Trust and distributes the Fund's shares and may be
reimbursed for certain of its distribution related expenses.
PURCHASES
Shares of the Consumer Service Class of the Fund are offered at net asset
value without a sales load. Only certain investors are eligible to invest in the
"Institutional Class" of the Fund's shares. See "Purchase of Fund Shares" and
"Other Information--Capitalization." Purchases may be made through an authorized
broker or financial institution, including the Fund, by mail or by wire.
Purchases may only be made in cash with a minimum initial investment in the Fund
of $1,000 which may be waived for certain accounts. Subsequent investments must
be at least $100.
SERVICE ORGANIZATIONS
The Fund may pay fees to various banks (including Trustmark), trust
companies, broker-dealers and other financial organizations ("Service
Organizations") for providing administrative services for the Fund, such as
maintaining shareholder accounts and records. Investors are not required to
purchase Fund shares through or maintain an account with a Service Organization.
REDEMPTIONS
Shares may be redeemed at their next determined net asset value. See
"Redemption of Fund Shares" and "Fund Share Valuation." Redemptions may be made
by letter or, if previously authorized, by telephone. The Fund reserves the
right to redeem upon not less than 30 days' written notice all shares in the
Fund account
6
<PAGE> 145
which, as a result of shareholder redemption, has a value below $500 ($250 for
Individual Retirement Accounts ("IRAs")).
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays its net investment income to shareholders of
record in accordance with the schedule set forth under "Dividends, Distributions
and Federal Income Tax." Any net realized long-term capital gains will be
distributed annually. All dividends and distributions will be automatically
reinvested at net asset value in additional shares of the Fund unless cash
payment is requested.
INVESTMENT OBJECTIVE, POLICIES AND PRACTICES
The Fund's investment objective is to seek growth of capital by attempting
to outperform the S&P MidCap Index. The Fund will attempt to achieve its
objective by purchasing common stocks of mid-sized companies (companies with
market capitalization ranging from $200 million to $5.2 billion), including
common stocks listed on the S&P MidCap Index (collectively, "Mid Cap Common
Stocks"). There is no assurance that the Fund will achieve its investment
objective. The investment objective of the Fund and its investment restrictions,
which are described herein and in the SAI, are fundamental and may not be
changed without shareholder approval. The Fund's other investment policies
indicated below may be changed by the Board of Trustees without shareholder
approval.
Although under normal market conditions the Fund intends to invest all of
its assets in Mid Cap Common Stocks (and in no event less than 80% of the Fund's
total assets), the Fund may invest up to 20% of its assets in other types of
investment grade fixed income securities of such mid-sized companies (primarily
preferred stock, debt securities and securities convertible into common or
preferred stock) and in options, warrants and futures contracts with respect to
such companies, as determined by the Fund's Adviser. When warranted by business
or financial conditions, the Fund may invest temporarily for defensive purposes
without limitation in investment grade debt securities, preferred stock,
obligations of the U.S. government, its agencies or instrumentalities (including
such obligations subject to repurchase agreements), or in short-term (maturing
in less than one year) money market instruments, including commercial paper
rated "A-1" or better by Standard & Poor's Corporation ("S&P") or "P-1" or
better by Moody's Investors Services ("Moody's").
In June 1991, S&P introduced the S&P MidCap Index covering middle size
companies traded in the United States. The S&P MidCap Index contains 400
domestic stocks with market capitalization ranging from $200 million to $5.2
billion. The median market capitalization is about $600 million. This index,
which complements the widely used S&P's 500 Index, was developed in response to
widespread interest in the U.S. and international investment communities in a
way to track and invest in a broad base of companies with market capitalizations
smaller than those in the "500" but still large enough to be liquid and easily
traded by large investors.
The Adviser will rely extensively upon computer models developed by it for
stock selection. The disciplined approach which is based on input of the Fund's
companies' fundamentals allows it to rank the 400 stocks in the S&P MidCap Index
in order of attractiveness. The Fund, depending on the size, will contain
anywhere from approximately 40 to 120 of the most attractive stocks ranked by
the model. The Adviser may also rely upon other factors both fundamental and
non-fundamental in determining the composition of the Fund.
Factors considered by the Adviser when selecting the most attractive stocks
include the following: (1) company profitability; (2) dividend yield; (3)
earnings volatility; (4) proprietary valuation model;
7
<PAGE> 146
(5) proprietary analysis of earnings momentum; (6) relative valuation and
relative earnings momentum; and (7) composite rank.
MID CAP COMMON STOCKS
Under normal market conditions, the Fund will invest at least 80% of the
value of its total net assets in Mid Cap Common Stocks. Common stocks represent
the residual ownership interest in the issuer and are entitled to the income and
increase in the value of the assets and business of the entity after all of its
obligations and preferred stocks are satisfied. Common stocks generally have
voting rights. Common stocks fluctuate in price in response to many factors
including historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions and
market liquidity.
OTHER INVESTMENTS AND RELATED RISK FACTORS
Options and Futures Contracts
The Fund may invest in options or futures contracts listed on the S&P
MidCap Index as a means of achieving additional return or of hedging the value
of the Fund. A call option is a contract that gives the holder of the option the
right, in return for a premium paid, to buy from the seller the security
underlying the option at a specified exercise price at any time during the term
of the option or, in some cases, only at the end of the term of the option. The
seller of the call option has the obligation upon exercise of the option to
deliver the underlying security upon payment of the exercise price. When the
Fund sells an option on a current Fund security which gives the holder of the
option the right to buy the underlying security from the Fund a specified time
and a specified price, such an option is considered a "covered" option.
The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unrecognized but
forgoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions impose on the Fund the credit risk that the
counterpart will fail to honor its obligations. The assets of the Fund used to
cover its options positions are deemed illiquid securities, see "Investment
Restriction" below. The Fund will not purchase options if, as a result, the
aggregate cost of all outstanding options exceeds 10% of the Fund's total
assets. To the extent that puts, calls, straddles and similar investment
strategies involve instruments regulated by the Commodity Futures Trading
Commission, the Fund is limited to an investment not in excess of 5% of its
total assets.
The Fund may purchase and sell stock index futures contracts ("futures
contracts") that are listed on the S&P MidCap Index for the purpose of hedging
its portfolio (or anticipated portfolio) securities against changes in their
prices. As a futures contract purchaser, the Fund incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, the Fund incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
The Fund will establish a segregated account in which it will maintain cash and
marketable securities equal in value to the futures contracts it has purchased
or sold. Such segregated securities either will mature or, if necessary, be sold
on or before the settlement date.
If the Adviser anticipates that the prices of stock held by the Fund may
fall, the Fund may sell a stock index futures contract. Conversely, if the
Adviser wishes to hedge against anticipated price rises in those stocks which
the Fund intends to purchase, the Fund may purchase stock index futures
contracts. In addition,
8
<PAGE> 147
stock index futures contracts will be bought or sold in order to close out a
short or long position in a corresponding futures contract.
The Fund may close out its position as writer of an option, or as a buyer
or seller of a futures contract only if a liquid secondary market exists for
options or futures contracts of that series. There is no assurance that such a
market will exist.
Exchanges may limit the amount by which the price of many futures contracts
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
The extent to which the Fund may enter into transactions involving options
and futures contracts may be limited by the Internal Revenue Code's requirements
for qualification as a regulated investment company and the Fund's intention to
qualify as such. See "Dividends, Distributions and Federal Income Tax."
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's securities are not speculative in
nature, there are risks inherent in the use of such instruments. One such risk
is that the Adviser could be incorrect in its expectations as to the direction
or extent of various interest rate or price movements or the time span within
which the movements take place. For example, if the Fund sold futures contracts
for the sale of securities in anticipation of an increase in interest rates, and
then interest rates went down instead, causing bond prices to rise, the Fund
would lose money on the sale.
Another risk which may arise in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash prices
of the Fund's securities. Another such risk is that prices of interest rate
futures contracts may not move in tandem with the changes in prevailing interest
rates against which the Fund seeks a hedge. A correlation may also be distorted
by the fact that the futures market is dominated by short-term traders seeking
to profit from the difference between a contract or security price objective and
their cost of borrowing funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
Warrants and Rights
The Fund may invest in warrants or rights of securities of mid-sized
companies (other than those acquired in units or attached to other securities)
which entitle the holder to buy equity securities at a specific price for a
specific period of time but will do so only if such equity securities are deemed
appropriate by the Adviser for inclusion in the Fund. In the event the
underlying security does not sufficiently increase in value during the period
when the warrant may be exercised so as to provide an attractive investment for
the Fund, the warrant will expire and the Fund will suffer a loss on the price
it paid for the warrant. The Fund will not invest more than 2% of its total
assets in warrants or rights which are not listed on the New York or American
Stock Exchanges.
Convertible Securities
Convertible securities may include corporate notes or preferred stock but
are ordinarily a long-term debt obligation of the issuer convertible at a stated
exchange rate into common stock of the issuer. As with all debt securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, to increase as interest rates decline. Convertible
securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality. However, when the market price of
the common stock underlying a convertible security exceeds the conversion price,
the price of the convertible security tends to reflect the
9
<PAGE> 148
value of the underlying common stock. As the market price of the underlying
common stock declines, the convertible security tends to trade increasingly on a
yield basis, and thus may not depreciate to the same extent as the underlying
common stock. Convertible securities rank senior to common stocks on an issuer's
capital structure and are consequently of higher quality and entail less risk
than the issuer's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed income security.
The Fund may invest in convertible securities when it appears to the
Adviser that it may not be prudent to be fully invested in Common Stocks. In
evaluating a convertible security, the Adviser places primary emphasis on the
attractiveness of the underlying common stock and the potential for capital
appreciation through conversion. See "Convertible Securities" in the SAI.
The Fund will purchase only investment grade convertible securities having
a rating of, or equivalent to, at least an S&P rating of BBB (which rating may
have speculative characteristics) or, if unrated, judged by the Adviser to be of
comparable quality. Securities in the lowest investment grade debt category
generally have higher yields, may have speculative characteristics and, as a
result, changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than is the
case with higher investment grade securities. See "Description of Corporate Debt
Ratings" in the SAI.
Corporate Reorganizations
Subject to the Fund's policy of investing at least 80% of its total assets
in Mid Cap Common Stocks, the Fund may invest without limit in securities listed
on the S&P MidCap Index for which a tender or exchange offer has been made or
announced and in securities of companies for which a merger, consolidation,
liquidation or similar reorganization proposal has been announced if, in the
judgment of the Adviser, there is a reasonable prospect of capital appreciation
significantly greater than the added portfolio turnover expenses inherent in the
short term nature of such transactions. The principal risk is that such offers
or proposals may not be consummated within the time and under the terms
contemplated at the time of the investment, in which case, unless such offers or
proposals are replaced by equivalent or increased offers or proposals which are
consummated, the Fund may sustain a loss. For further information on such
investments, see "Description of the Fund's Investment Securities" in the SAI.
Investments in Small, Unseasoned Companies
The Fund may invest up to 5% of its total net assets in small, less well
known companies which (including predecessors) have operated less than three
years. The securities of such companies may have limited liquidity.
When Issued, Delayed Delivery Securities and Forward Commitments
The Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring. When such transactions are negotiated, the
price is fixed at the time of the commitment, with payment and delivery taking
place in the future, generally a month or more after the date of the commitment.
While the Fund will only enter into a forward commitment with the intention of
actually acquiring the security, the Fund may sell the security before the
settlement date if it is deemed advisable.
10
<PAGE> 149
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Fund prior to the
settlement date. The Fund will segregate cash or liquid high-grade debt
securities with the Fund's custodian in an aggregate amount at least equal to
the amount of its outstanding forward commitments.
Short Sales
The Fund may make short sales of securities. A short sale is a transaction
in which the Fund sells a security it does not own in anticipation that the
market price of that security will decline. The Fund expects to make short sales
both to obtain capital gains from anticipated declines in securities and as a
form of hedging to offset potential declines in long positions in the same or
similar securities. The short sale of a security is considered a speculative
investment technique.
When the Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale in
order to satisfy its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.
The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other highly liquid securities. The Fund will also be required to
deposit similar collateral with its Custodian to the extent, if any, necessary
so that the value of both collateral deposits in the aggregate is at all times
equal to the greater of the price at which the security is sold short or 100% of
the current market value of the security sold short. Depending on arrangements
made with the broker-dealer from which it borrowed the security regarding
payments received by the Fund on such security, the Fund may not receive any
payments (including interest) on its collateral deposited with such
broker-dealer.
If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a capital
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. Although the Fund's gain is limited to the price at which
it sold the security short, its potential loss is theoretically unlimited.
The market value of the securities sold short of any one issuer will not
exceed either 5% of the Fund's total assets or 5% of such issuer's voting
securities. The Fund will not make a short sale, if, after giving effect to such
sale, the market value of all securities sold short exceeds 20% of the value of
its assets or the Fund's aggregate short sales of a particular class of
securities exceeds 20% of the outstanding securities of that class. The Fund may
also make short sales "against the box" without respect to such limitations. In
this type of short sale, at the time of the sale, the Fund owns or has the
immediate and unconditional right to acquire at no additional cost the identical
security.
Repurchase Agreements
The Fund may invest in repurchase agreements, which are agreements pursuant
to which securities are acquired by the Fund from a third party with the
understanding that they will be repurchased by the seller at a fixed price on an
agreed upon date. These agreements may be made with respect to any of the
portfolio securities in which the Fund is authorized to invest. Repurchase
agreements may be characterized as loans secured by the underlying securities.
The Fund may enter into repurchase agreements with (i) member banks of the
Federal Reserve System having total assets in excess of $500 million and (ii)
securities dealers, provided that such banks or dealers meet the
creditworthiness standards established by the Fund's board of
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trustees ("Qualified Institutions"). The Adviser will monitor the continued
creditworthiness of Qualified Institutions, subject to the supervision of the
Fund's Board of Trustees. 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 collateral is marked to market
daily. Such agreements permit the Fund to keep all its assets earning interest
while retaining "overnight" flexibility in pursuit of investments of a
longer-term nature.
The use of repurchase agreements involves certain risks. For example, if
the seller of securities under a repurchase agreement defaults on its obligation
to repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the Fund's Custodian at all
times in an amount at least equal to the repurchase price, including accrued
interest. If the seller fails to repurchase the securities, the Fund may suffer
a loss to the extent proceeds from the sale of the underlying securities are
less than the repurchase price. The Fund will not enter into repurchase
agreements of a duration of more than seven days if, taken together with all
other illiquid securities in the Fund, more than 15% of its net assets would be
so invested.
Loans of Portfolio Securities
To increase income, the Fund may lend its securities to securities
broker-dealers or financial institutions if (1) the loan is collateralized in
accordance with applicable regulatory requirements including collateralization
continuously at no less than 100% by marking to market daily, (2) the loan is
subject to termination by the Fund at any time, (3) the Fund receives reasonable
interest or fee payments on the loan, (4) the Fund is able to exercise all
voting rights with respect to the loaned securities and (5) the loan will not
cause the value of all loaned securities to exceed one-third of the value of the
Fund's assets.
If the borrower fails to maintain the requisite amount of collateral, the
loan automatically terminates and the Fund could use the collateral to replace
the securities while holding the borrower liable for any excess of replacement
cost over the value of the collateral. As with any extension of credit, there
are risks of delay in recovery and in some cases even loss of rights in
collateral should the borrower of the securities fail financially.
Portfolio Turnover
Purchases and sales are made for the Fund whenever necessary, in the
Adviser's opinion, to meet the Fund's objectives. Portfolio turnover may involve
the payment by the Fund of dealer spreads or underwriting commissions, and other
transaction costs, on the sale of securities, as well as on the reinvestment of
the proceeds in other securities. The greater the portfolio turnover the greater
the transaction costs to the Fund which will increase the Fund's total operating
expenses. In order to qualify as a regulated investment company, less than 30%
of the Fund's gross income must be derived from the sale or other disposition of
stock, securities or certain other investments held for less than three months.
Although increased portfolio turnover may increase the likelihood of additional
capital gains for the Fund, the Fund expects to satisfy the 30% income test. The
Adviser expects that the turnover of the Fund should not exceed 200%.
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INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Fund are
subject to the following limitations: (a) the Fund may not invest more than 5%
of its total assets in the securities of any one issuer, except obligations of
the United States Government and its agencies and instrumentalities, and (b) the
Fund may not own more than 10% of the outstanding voting securities of any one
issuer. The classification of the Fund as a diversified investment company is a
fundamental policy of the Fund and may be changed only with the approval of the
holders of a majority of the Fund's outstanding shares. As used in this
Prospectus, the term "majority of the outstanding shares" of the Fund means,
respectively, the vote of the lesser of (i) 67% or more of the shares of the
Fund present at the meeting, if more than 50% of the outstanding shares of the
Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund.
The Fund also operates under certain investment restrictions which are
deemed fundamental policies of the Fund and also may be changed only with the
approval of the holders of a majority of the Fund's outstanding shares. In
addition to other restrictions listed in the SAI, the Fund may not (except where
specified):
(i) invest more than 15% of the market value of the Fund's net assets
in illiquid investments including repurchase agreements maturing in more
than seven days;
(ii) purchase securities on margin or borrow money, except (a) from
banks for extraordinary or emergency purposes (not for leveraging or
investment) or (b) by engaging in reverse repurchase agreements, provided
that (a) and (b) in the aggregate do not exceed an amount equal to
one-third of the value of the total assets of the Fund less its liabilities
(not including the amount borrowed) at the time of the borrowing, and
further provided that 300% asset coverage is maintained at all times;
(iii) purchase securities while borrowings exceed 5% of its total
assets;
(iv) mortgage, pledge or hypothecate any assets except that the Fund
may pledge not more than one-third of its total assets to secure borrowings
made in accordance with paragraph (ii) above. However, although not a
fundamental policy of the Fund, as a matter of operating policy in order to
comply with certain state statutes, the Fund will not pledge its assets in
excess of an amount equal to 10% of net assets; or
(v) lend portfolio securities (including repurchase agreements) of
value exceeding in the aggregate one-third of the market value of the
Fund's total assets less liabilities other than obligations created by
these transactions.
If a percentage restriction is adhered to at the time an investment is
made, a later change in percentage resulting from changes in the value of the
Fund's investment securities will not be considered a violation of the Fund's
restrictions.
For a more detailed discussion of these investment restrictions, see
"Investment Restrictions" in the SAI.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. Additional information about the Trustees, as well as the
Trust's executive officers, may be found in the SAI under the heading
"Management -- Trustees and Officers."
The Investment Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201, serves as investment adviser to the Fund. Trustmark
manages the investment and reinvestment of the
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assets of the Fund and continuously reviews, supervises and administers the
Fund's investments. Trustmark is responsible for placing orders for the purchase
and sale of the Fund's investments directly with brokers and dealers selected by
it in its discretion.
Trustmark currently has assets in excess of $1 billion under management. It
was founded in 1890 and is the second largest commercial bank headquartered in
Mississippi. Trustmark has been managing trust monies for over 40 years and
currently manages the Performance Funds as well as various common and collective
Funds. Shares of the Fund are not guaranteed by Trustmark, its parent or
affiliates, nor are they insured by the FDIC.
Trustmark has an investment management staff of highly trained
professionals who manage the assets of the Performance Funds. Douglas H.
Ralston, CFA, an Assistant Vice President and Trust Officer, with 3 years of
investment experience with Trustmark, is responsible for the day-to-day
management of the Fund. Prior to Trustmark, Mr. Ralston was employed by the
Third National Bank of Nashville for 5 years.
For the advisory services it provides to the Fund, Trustmark receives fees
based on average daily net assets up to an annual rate of 0.75% of the Fund's
average daily net assets.
Based upon the advice of its counsel, Trustmark believes that the
performance of investment advisory services for the Fund 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 Trustmark from continuing to perform such services
for the Fund. If Trustmark were prohibited from acting as investment adviser to
the Fund, it is expected that the Board of Trustees would recommend to
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.
The Sponsor, Distributor and Administrator. Furman Selz LLC, 230 Park
Avenue, New York, New York 10169, acts as the Sponsor and Administrator of the
Fund. Performance Funds Distributor, Inc., an affiliate of Furman Selz, acts as
the Distributor of the Fund's shares. Furman Selz is primarily an institutional
brokerage firm with membership on the New York, American, Boston, Midwest,
Pacific and Philadelphia Stock Exchanges. Furman Selz also serves as
administrator and distributor of other mutual funds.
Under the Distribution Plan ("the Plan") adopted by the Trust, the Fund may
pay directly or reimburse PFD monthly (subject to a limit of 0.35% per annum of
the Fund's average daily net assets) for costs and expenses of PFD in connection
with the distribution of Fund shares. These costs and expenses include (i)
advertising by radio, television, newspapers, magazines, brochures, sales
literature, direct mail or any other form of advertising, (ii) expenses of sales
employees or agents of PFD, including salary, commissions, travel and related
expenses, (iii) payments to broker-dealers and financial institutions for
services in connection with the distribution of shares, including promotional
incentives and fees calculated with reference to the average daily net asset
value of shares held by shareholders who have a brokerage or other service
relationship with the broker-dealer or other institution receiving such fees,
(iv) costs of printing prospectuses and other materials to be given or sent to
prospective investors, and (v) such other similar services as the Trustees
determine to be reasonably calculated to result in the sale of shares of the
Fund. The Fund will pay all costs and expenses in connection with the
preparation, printing and distribution of its Prospectus to current shareholders
and the operation of its Plan, including related legal and accounting fees. The
Fund will not be liable for distribution expenditures made by PFD in any given
year in excess of the maximum amount payable under the Plan for the Fund in that
year.
Administrative Services. The Fund has entered into an Administrative
Services Contract with Furman Selz pursuant to which Furman Selz provides
certain management and administrative services necessary for
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the Fund's operations including: (i) general supervision of the operation of the
Fund including coordination of the services performed by the Fund's Adviser,
transfer agent, custodian, independent accountants and legal counsel, regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions, and
preparation of proxy statements and shareholder reports for the Fund, (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Fund's officers and Board of
Trustees, and (iii) furnishing office space and certain facilities required for
conducting the business of the Fund. For these services, Furman Selz receives
from the Fund a monthly fee at the annual rate of 0.15% of the average daily net
assets of the Fund. Pursuant to a Shareholder Servicing Agreement between the
Trust and the Administrator, Furman Selz receives a fee of $15.00 per account
per year plus out-of-pocket expenses. Pursuant to a Fund Accounting Agreement
between the Trust and the Administrator, the Administrator assists the Trust in
calculating net asset values and provides certain other accounting services for
the Fund described therein, for an annual fee of $30,000 per Fund plus
out-of-pocket expenses.
On June 28, 1996, Furman Selz and BISYS Group, Inc. ("BISYS") announced a
definitive agreement which provides that by the end of 1996 Furman Selz will
exit the mutual funds business and recommend BISYS to Furman Selz's existing
fund clients to replace Furman Selz for mutual fund administration,
distribution, fund accounting and transfer agency services.
BISYS, headquartered in Little Falls, N.J., supports more than 5,000
financial institutions and corporate clients through two strategic business
units. BISYS Information Services Group provides image and data processing
outsourcing, and pricing analysis to more than 600 banks nationwide. BISYS
Investment Services Group designs, administers, and distributes over 30 families
of proprietary mutual funds consisting of more than 365 portfolios, and provides
401(k) marketing support, administration, and recordkeeping services in
partnership with 18 of the nation's leading bank and investment management
companies. BISYS trades on NASDAQ under the symbol BISYS.
As of the date of this prospectus the Board of Trustees of the Fund is
considering alternatives to Furman Selz LLC as service provider to the Fund. The
Board will decide on Furman Selz's replacement by January 1, 1997. Shareholders
of the Fund will be notified of such decision.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services for the Fund, such as maintaining shareholder accounts
and records. The Fund may pay fees to Service Organizations (which vary
depending upon the services provided) in amounts up to an annual rate of 0.35%
of the daily net asset value of the Fund's shares owned by shareholders with
whom the Service Organization has a servicing relationship. Institutional Class
shareholders are not required not to purchase shares through a Service
Organization.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the Fund's
minimum initial or subsequent investments or charging a direct fee for
servicing. A Service Organization or broker or other sales-person within such
Service Organization may be compensated at varying rates for the sale of one
class of Fund shares as opposed to another. If imposed, these fees would be in
addition to any amounts which might be paid to the Service Organization by the
Fund. Each Service Organization has agreed to transmit to its clients a schedule
of any such fees. Shareholders using Service Organizations are urged to consult
with them regarding any such fees or conditions.
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The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. In addition, state
securities law on this issue may differ from interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD or the Adviser. The costs borne by the Fund include
legal and accounting expenses; Trustees' fees and expenses; insurance premiums;
custodian and transfer agent fees and expenses; expenses incurred in acquiring
or disposing of the Fund's portfolio securities; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of obtaining quotations on the Fund's portfolio
securities and pricing of the Fund's shares; expenses of maintaining the Fund's
legal existence and of shareholders' meetings; and expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses. The
Fund bears its own expenses associated with its establishment as a series of
Performance Funds Trust; these expenses are amortized over a five-year period
from the commencement of the Fund's operations. See "Management" in the SAI.
Trust expenses directly attributable to the Fund are charged to the Fund; other
expenses are allocated proportionately among all of the Funds in the Trust in
relation to the net assets of each Fund and are in turn allocated to each share
class based on the net assets of each share class. Class specific expenses
directly attributable to a specific class are charged to such class.
Portfolio Transactions. Pursuant to the Investment Advisory Contract, the
Adviser places orders for the purchase and sale of portfolio investments for the
Fund's accounts with brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Adviser will seek the best execution of the Fund's orders.
Purchases and sales of portfolio debt securities for the Fund are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter. Purchases and sales of common stocks are generally placed by
the Adviser with broker-dealers which, in the Adviser's judgment, provide prompt
and reliable execution at favorable security prices and reasonable commission
rates. Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Adviser on behalf of the Fund. The Adviser may
cause the Fund to pay commissions higher than another broker-dealer would have
charged if the Adviser believes the commission paid is reasonable in relation to
the value of the brokerage and research services received on behalf of the Fund.
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FUND SHARE VALUATION
The net asset value per share is calculated at 4:15 p.m. (eastern time) for
the Fund, Monday through Friday, on each day the New York Stock Exchange is open
for trading (a "Business Day"), which excludes the following business holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of
the Fund is computed by dividing the value of each share class of the Fund's net
assets (i.e., the value of the assets less the liabilities) by the total number
of each share class of the Fund's outstanding shares. All expenses, including
fees paid to the Adviser and Furman Selz, are accrued daily and taken into
account for the purpose of determining the net asset value.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken for the exchange where the security is primarily traded.
Over-the-counter securities are valued on the basis of the bid price at the
close of business on each business day. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or at the direction of the Board of Trustees. Notwithstanding the above,
bonds and other fixed-income securities are valued by using market quotations
and may be valued on the basis of prices provided by a pricing service approved
by the Board of Trustees.
With respect to options contracts, the premium received is recorded as an
asset and equivalent liability, and thereafter adjusts the liability to the
market value of the option determined in accordance with the preceding
paragraph. The premium paid for an option purchased by the Fund is recorded as
an asset and subsequently adjusted to market value.
PURCHASE OF FUND SHARES
Orders for purchase of Consumer Service Class Shares will be executed at
the net asset value per share next determined after an order has been received.
All monies received by the Fund are invested in full and fractional shares of
the Fund. Certificates for shares are not issued. The Trust maintains records of
each shareholder's holdings of Fund shares, and each shareholder receives a
statement of transactions, holdings and dividends. The Fund reserves the right
to reject any purchase. The Fund does not accept third party checks.
Minimum Purchase Requirements. The minimum initial investment in the Fund
is $1,000, except that the minimum is $250 for an IRA, other than an IRA for
which Trustmark serves as trustee. Subsequent investments must be at least $100,
or $50 for an IRA. All initial investments should be accompanied by a completed
Purchase Application. A Purchase Application accompanies this Prospectus.
Different minimums apply, and a separate application is required for IRA
investments. PFD reserves the right to reject purchase orders.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisers and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment adviser or Service Organization with instructions as to
the amount you wish to invest. Your broker will then contact the Fund to place
the order on your behalf on that day.
Orders received by your broker or Service Organization for the Fund in
proper order prior to the determination of net asset value and transmitted to
the Fund prior to the close of its business day (which is currently 4:15 p.m.,
eastern time), will become effective that day. Brokers who receive orders are
obligated to
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transmit them promptly. You should receive written confirmation of your order
within a few days of receipt of instructions from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the Fund. In most cases, your bank will either be a member of the
Federal Reserve Banking System or have a relationship with a bank that is. Your
bank will normally charge you a fee for handling the transaction. To purchase
shares by a Federal funds wire, please first contact Furman Selz Mutual Funds
Client Services. They will establish a record of information for the wire to
insure the correct processing of funds. You can reach the Wire Desk at
1-800-737-3676.
Then, have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, Missouri 64105
ABA #1010-0362-1
Account #751-2996
Further Credit to: The Performance MidCap Growth
Fund
As long as you have received the Prospectus, you may establish a new
regular account through the Wire Desk; IRAs may not be opened in this way. When
new accounts are established by wire, the distribution options will be set to
reinvest all distributions and the social security or Tax Identification Number
("TIN") will not be certified until a signed application is received. Completed
applications should be forwarded immediately to the Fund. With the application,
the shareholder can specify other distribution options and add any special
features offered by the Fund. Should any dividend distributions or redemptions
be paid before the TIN is certified, they will be subject to 31% Federal tax
withholding.
By Automatic Investment. Investors may participate in the Automatic
Investment Program, which is an investment plan that automatically debits money
from the shareholder's designated bank account and invests it in the Fund
through the use of electronic fund transfers or automatic bank drafts.
Shareholders may elect to make investments by transfers of a minimum of $50.00
on either the fifth or twentieth day of each month into their established Fund
Account. No minimum initial investment applies when an account is established
through the Automatic Investment Program. Contact the Fund for more information
about the Automatic Investment Program.
By Payroll Direct Deposits. Investors may set up a payroll direct deposit
arrangement for amounts to be automatically invested in the Fund. Participants
in the Payroll Direct Deposit program may make periodic investments of at least
$20.00 per pay period. Contact the Fund for more information about Payroll
Direct Deposits.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment for new or existing IRAs. Shares may
also be purchased for IRAs established with Trustmark or other authorized
custodians. In addition, an IRA may be established through a custodial account
with Investors Fiduciary Trust Company. Completion of a special application is
required in order to create such an account, and the minimum initial investment
for an IRA is $250. Contributions to IRAs are subject to prevailing amount
limits set by the Internal Revenue Service. A $5.00 establishment fee and an
annual $12.00 maintenance and custody fee is payable with respect to each
shareholder, in addition, there will be charged a $10.00 termination fee when
the account is closed. For more information and IRA information, call Furman
Selz toll free at 1-800-737-3676.
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EXCHANGE PRIVILEGES
The Fund offers two convenient ways to exchange shares in one of the
Performance Funds for shares in another Performance Fund. Before engaging in an
exchange transaction, a shareholder should read carefully the portions of the
Prospectus describing the Fund into which the exchange will be made. A
shareholder may not exchange shares of one Fund for shares of another Fund if
both or either are not qualified for sale in the state of the shareholder's
residence. The minimum amount for an initial exchange is $1,000 and the minimum
amount for subsequent exchanges is $100. The Trust may terminate or amend the
terms of the exchange privilege at any time upon 60 days' written notice to
shareholders.
A new account opened by exchange must be established with the same name(s),
address and social security number or TIN as the existing account. All exchanges
will be made based on the net asset value next determined following receipt of
the request by a Fund in good order, plus any applicable sales charge.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of shares, equal to the excess of the sales load
applicable to the shares to be acquired, over the amount of any sales load
previously paid on the shares to be exchanged. No service fee is imposed.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to PFD. The letter of instruction must include: (i) your account
number; (ii) the Fund from and the Fund into which you wish to exchange your
investment; (iii) the dollar or share amount you wish to exchange; and (iv) the
signatures of all registered owners or authorized parties. All signatures must
be guaranteed by a member of a national securities exchange or by a commercial
bank or trust company.
Exchange by Telephone. To exchange Fund shares by telephone or if you have
any questions, simply call the Fund toll free at 1-800-737-3676. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security number or TIN and account registration;
(ii) the name of the Fund from and the Fund into which you wish to transfer your
investment; (iii) the dollar or share amount you wish to exchange. The Fund
employs reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Fund fails to employ such reasonable procedures,
it may be liable for any loss, damage or expense arising out of any telephone
transactions purporting to be on a shareholder's behalf. In order to assure the
accuracy of instructions received by telephone, the Fund requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions. Telephone exchanges are available only if the shareholder so
indicates by checking the box on the Purchase Application.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any Business
Day. Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received and accepted by the Fund. See
"Fund Share Valuation" A redemption may be a taxable transaction on which gain
or loss may be recognized.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
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Once the shares are redeemed, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day,
although the Fund may take up to seven days to make payment. Also, if the New
York Stock Exchange is closed (or when trading is restricted) for any reason
other than the customary weekend or holiday closing or if an emergency condition
as determined by the SEC merits such action, the Fund may suspend redemptions or
postpone payment dates.
Redemption Methods. To ensure acceptance of your redemption request, it is
important to follow the procedures described below. Although the Fund has no
present intention to do so, the Fund reserves the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Fund's services and their provisions may
be modified or terminated at any time by the Fund. If the Fund terminates any
particular service, it will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your broker or
investment adviser and instructing him to redeem your shares. He will then
contact PFD and place a redemption trade on your behalf. You will receive the
next determined net asset value per share after receipt of such request by your
broker or investment adviser. It will be the responsibility of such broker or
investment adviser to transmit your redemption request to the Fund in a timely
manner. A broker or investment adviser which has received any portion of a sales
load or 12b-1 fee for the sale of such shares may not also receive a fee for
this service.
By Mail. You may redeem your shares by sending a letter directly to the
Fund. To be accepted, a letter requesting redemption must include: (i) the
Fund's name and account registration from which you are redeeming shares, (ii)
your account number, (iii) the amount to be redeemed, (iv) the signatures of all
registered owners, and (v) a signature guarantee by a member of a national
securities exchange or a commercial bank or trust company (a signature guarantee
by a savings bank or a notary public is not acceptable). Corporations,
partnerships, trusts or other legal entities will be required to submit
additional documentation.
By Telephone. You may redeem your shares by calling the Fund toll free at
1-800-737-3676. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number or TIN
and account registration, (ii) the Fund's name from which you are redeeming
shares, and (iii) the amount to be redeemed. The conversation may be recorded to
protect you and the Fund. Telephone redemptions are available to the shareholder
unless otherwise indicated by the shareholder by checking the box on the
Purchase Application.
By Wire. You may redeem your shares by contacting the Fund by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Your instructions should include: (i) your account number, social security
number or TIN and account registration, (ii) the Fund's name from which you are
redeeming shares, and (iii) the amount to be redeemed. Wire redemptions are
available to the shareholder unless otherwise indicated by checking the box on
the Purchase Application. Please attach a copy of a void check of account where
proceeds are to be wired. Your bank may charge you a fee for receiving a wire
payment on your behalf.
The above mentioned services "Telephone" and, "Wire" are not available for
IRAs and trust clients of Trustmark.
Systematic Withdrawal Plan. An owner of $25,000 or more of shares of the
Fund may elect to have periodic redemptions from his account to be paid on a
monthly, quarterly, semi-annual or annual basis. The minimum periodic payment is
$100. A sufficient number of shares to make the scheduled redemption will
20
<PAGE> 159
normally be redeemed on the date selected by the shareholder. Depending on the
size of the payment requested and fluctuation in the net asset value, if any, of
the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
Reinstatement Privilege. A shareholder in the Fund who has redeemed shares
may reinvest, without a sales charge, up to the full amount of such redemption
at the net asset value determined at the time of the reinvestment within 30 days
of the original redemption. This privilege must be effected within 30 days of
the redemption. The shareholder must reinvest in the same Fund and account from
which the shares were redeemed. A redemption is a taxable transaction and gain
or loss may be recognized for Federal income tax purposes even if the
reinstatement privilege is exercised. Any loss realized upon the redemption will
not be recognized as to the number of shares acquired by reinstatement, except
through an adjustment in the tax basis of the shares so acquired.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Fund reserves the right to redeem, on not less
than 30 days' notice, an account in the Fund that has been reduced by
shareholder redemption of the account to $500 ($250 for IRAs) or less. However,
if during the 30-day notice period the shareholder purchases sufficient shares
to bring the value of the account above $500 ($250 for IRAs), this restriction
will not apply.
Redemption in Kind. All redemptions of shares of the Fund shall be made in
cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of the Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of the Fund
at the beginning of such period. Any such redemption in kind will be made in
readily marketable securities. This commitment is irrevocable without the prior
approval of the SEC and is a fundamental policy that may not be changed without
shareholder approval. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Trustees reserves the right to have the
Fund make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of
the Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund has qualified and intends to continue to qualify to be treated as
a regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, the Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses).
Investment company taxable income will be distributed by the Fund monthly. The
Fund intends to distribute, at least annually, substantially all net capital
gain (the excess of net long-term capital gains over net short-term capital
losses). In determining amounts of capital gains to be distributed, any capital
loss carryovers from prior years will be applied against capital gains.
21
<PAGE> 160
Shareholders may elect to receive distributions in additional Fund shares
based on the net asset value at the close of business on the payment date of the
distribution or may receive such distribution in cash. If no election is made,
distributions will be automatically reinvested in additional shares of the Fund.
Dividends declared in, and attributable to, the preceding month will be paid
within five business days after the end of each month.
Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of net investment income (regardless of whether derived from
dividends, interest or short-term capital gains) generally will be taxable to
shareholders as ordinary income. Distributions of net long-term capital gains
designated by the Fund as capital gain dividends will be taxable as long-term
capital gains, regardless of how long a shareholder has held his Fund shares.
Distributions are taxable in the same manner whether received in additional
shares or in cash.
A distribution, will be treated as paid on December 31 of the calendar year
if it is declared by the Fund during October, November, or December of that year
to shareholders of record in such a month and paid by the Fund during January of
the following calendar year. Such distributions will be taxable to shareholders
in the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Special tax rules may apply to the Fund's acquisition of financial futures
contracts, and options on futures contracts. Such rules may, among other things,
affect whether gains and losses from such transactions are considered to be
short-term or long-term, may have the effect of deferring losses and/or
accelerating the recognition of gains or losses, and, for purposes of qualifying
as a regulated investment company, may limit the extent to which the Fund may be
able to engage in such transactions.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares.
It is anticipated that a portion of the dividends paid by the Fund will
qualify for the dividends-received deduction available to corporations. Pending
tax law proposals may effect the dividends-received deduction.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amount, withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund. Depending on the residence of the
shareholder for tax purposes, distributions also may be subject to state and
local taxes, including withholding taxes. Foreign shareholders may, for example,
be subject to special withholding requirements. Special tax treatment, including
a penalty on certain pre-retirement distributions, is accorded to accounts
maintained as IRAs. Shareholders should consult their own tax advisers as to the
Federal, state and local tax consequences of ownership of shares of the Fund in
its particular circumstances.
22
<PAGE> 161
OTHER INFORMATION
CAPITALIZATION
Performance Funds Trust was organized as a Delaware business trust on March
11, 1992, and currently consists of multiple separate portfolios or series, one
of which is offered in this Prospectus. The Board of Trustees may establish
additional series in the future. The capitalization of the Trust consists solely
of an unlimited number of shares of beneficial interest with a par value of
$0.001 each. When issued, shares of the Fund are fully paid and non-assessable.
This Prospectus relates to the Consumer Service Class of the Fund's shares.
The Fund also offers Institutional Class shares which are offered only to
employees (and family members) of Trustmark, the Distributor, Administrator and
affiliates and correspondents, Trustees of the Trust (and family members),
Directors of Trustmark (and family members) and certain institutional investors,
which make an initial investment of one million dollars or more or who, at the
time of purchase, have a balance of one million dollars or more in the Fund or
which is a purchaser through (or with proceeds of a distribution from) a trust,
investment management or other fiduciary account managed or administered by the
Adviser, its affiliates or correspondents pursuant to a written contract (except
for asset allocation or "wrap" accounts). Institutional Class shares and
Consumer Service Class shares are identical in all respects with the exception
that the Consumer Service Class shares may be subject to Rule 12b-1 fees to
which the Institutional Class shares are not subject. Purchases may be made
through an authorized broker or financial institution, including the Fund, by
mail or by wire. Call 1-800-737-3676, or contact your sales representative,
broker-dealer or bank to obtain more information about the Fund's classes of
shares.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the Trust
Instrument disclaims liability of the shareholders, Trustees or officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of each series of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and should be considered remote
and is limited to the amount of the shareholder's investment in the Fund.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. The Trust is not required to hold
regular annual meetings of the Fund's shareholders and does not intend to do so.
The Fund may vote separately on items which affect the Fund and each class
within the Fund may vote separately on matters which affect only that class. For
example, only Consumer Service Class shareholders will vote on matters related
to the Fund's Distribution Plan under Rule 12b-1. See "Other Information--Voting
Rights" in the SAI.
The Trust Instrument provides that the holders of not less than two-thirds
of the outstanding shares of the Trust may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting of shareholders for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust or Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting if the
23
<PAGE> 162
holders of more than 50% of the outstanding shares are present in person or by
proxy; or (2) more than 50% of the outstanding shares of the Fund.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and/or total return in
advertisements or reports to shareholders or prospective investors. Shareholders
of the Consumer Service Class of shares may experience a lower net return on
their investment than shareholders of the Institutional Class of shares because
of Rule 12b-1 Plan distribution fees paid by such shareholders. The methods used
to calculate the yield and total return of the Fund are mandated by the SEC.
Quotations of "yield" for the Fund will be based on the investment income
per share during a particular 30-day (or one month) period (including dividends
and interest), less expenses accrued during the period ("net investment
income"), and will be computed by dividing net investment income by the net
asset value per share on the last day of the period.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), 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.
Performance information for the Fund may be compared to various unmanaged
indices, such as the S&P MidCap Index and the Standard & Poor's 500 Index.
Indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Fund 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. For a description of the
methods used to determine yield and total return for the Fund, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Fund has been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
The Fund retains Furman Selz as transfer agent. Furman Selz provides
personnel necessary to perform shareholder servicing functions. Pursuant to a
Shareholder Servicing Agreement between the Trust and the Administrator, Furman
Selz receives a fee of $15.00 per account, per year, and reimbursement for
certain expenses.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust,
c/o Furman Selz Mutual Funds Department, 237 Park Avenue, New York, New York
10017.
General and Account Information: (800) PERFORM (737-3676).
24
<PAGE> 163
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<PAGE> 164
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<PAGE> 165
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<PAGE> 166
[LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
SPONSOR AND ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Performance Funds Distributor, Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
PFMCCC0995
[LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MID CAP GROWTH FUND
CONSUMER SERVICE CLASS
PROSPECTUS
SEPTEMBER 27, 1996
Performance Funds'
Investment Adviser
<PAGE> 167
PERFORMANCE FUNDS TRUST
THE U.S. TREASURY MONEY MARKET FUND
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- INVESTMENT ADVISER
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
This Prospectus describes The U.S. Treasury Money Market Fund (the "Fund"),
a separate fund of Performance Funds Trust (the "Trust"), a Delaware business
trust and registered management investment company. The Trust consist of six
funds; the Money Market Fund, the Short Term Fixed Income Fund, the Mid Cap
Growth Fund, the Intermediate Term Fixed Income Fund, and the Equity Fund, which
are described in another prospectus and The U.S. Treasury Money Market Fund.
This Prospectus relates only to the "Institutional Class" of shares of the Fund
which only certain investors are qualified to purchase. The Fund also has a
"Consumer Service Class" of shares. See, "Other Information -- Capitalization."
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN THE VALUE OF ITS SHARES AT A CONSTANT
$1.00 PER SHARE, ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL ALWAYS BE ABLE
TO DO SO. SHARES OF THE FUND ARE NOT AN OBLIGATION OF OR GUARANTEED BY TRUSTMARK
NATIONAL BANK OR ITS AFFILIATES AND SUCH SHARES ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund.
A Statement of Additional Information (the "SAI"), dated September 27,
1996, containing additional and more detailed information about the Fund, has
been filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Fund at the address and
information numbers printed above.
------------------------
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.
------------------------
September 27, 1996
<PAGE> 168
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................................................................... 3
Fund Expenses......................................................................... 5
Fee Table............................................................................. 5
The Investment Policies of the Fund................................................... 6
Management of the Fund................................................................ 6
Fund Share Valuation.................................................................. 9
Pricing and Purchase of Fund Shares................................................... 9
Individual Retirement Accounts........................................................ 10
Exchange Privileges................................................................... 10
Redemption of Fund Shares............................................................. 11
Dividends, Distributions and Federal Income Tax....................................... 13
Other Information..................................................................... 14
</TABLE>
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
2
<PAGE> 169
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The investment objective of the U.S. Treasury Money Market Fund (the
"Fund") is to seek as high a level of current income as is consistent with
liquidity and maximum safety of principal. The Fund invests exclusively in
obligations of the United States Treasury, which are backed by the full faith
and credit of the United States Government as to payment of principal and
interest and which have remaining maturities not exceeding one year. United
States Treasury securities consist of bills, notes and bonds, which generally
differ only in their interest rates, maturities and times of issuance. The Fund
may purchase U.S. Treasury obligations on a when-issued basis, in which case
delivery and payment normally take place 15 to 45 days after the date of
commitment to purchase. The Fund does not purchase securities issued or
guaranteed by agencies or instrumentalities of the United States Government, nor
does it enter into repurchase agreements.
Interest on United States Treasury obligations is exempt from state and
local income taxes under federal law; the interest is not exempt from federal
income tax. However, shareholders of the Fund do not directly receive interest
on United States Treasury obligations, but rather receive dividends from the
Fund that are derived from such interest. Most, but not all, states allow the
character of the Fund's income to pass through to its shareholders, so that
distributions from the Fund derived from interest that is exempt from state and
local income taxes when received directly by a taxpayer also are exempt from
such taxes when earned as a shareholder of the Fund. See "Taxes."
RISK FACTORS
There is no assurance that the Fund will achieve its investment objective.
For additional information concerning the investment policies, practices and
risk considerations of the Fund, see "The Investment Policies and Practices of
the Fund." See also the SAI.
Changes in market interest rates will affect the market value of the Fund's
portfolio investments. When interest rates rise, the market value of the Fund's
securities may decline. Conversely, when interest rates decline, their market
values may rise. This fluctuation in market value may result in a gain or loss
to investors. The Fund may hold its investments to maturity and receive the
entire face amount of the securities, or the Fund may sell its investments at a
gain or loss before maturity.
MANAGEMENT OF THE FUND
Trustmark National Bank ("Trustmark" or the "Adviser") acts as investment
adviser to the Fund. Trustmark currently has assets in excess of $1 billion. It
was founded in 1890 and is the second largest commercial bank headquartered in
Mississippi. Trustmark has been managing trust monies for over 40 years. For its
services, the Adviser receives from the Fund fees at annual rates of the Fund's
average daily net assets. Trustmark manages three other mutual funds and has
been managing trust monies for over 40 years. See "Fee Table" and "Management of
the Funds" in this Prospectus.
Furman Selz acts as Administrator to the Fund and provides certain
management and administrative services to the Fund for which the Fund pays a fee
at an annual rate based upon the Fund's average daily net assets. Performance
Funds Distributor, Inc. ("PFD") is the Distributor for the Trust and distributes
the Fund's shares and may be reimbursed for certain of its distribution related
expenses.
PURCHASES
Shares of the Institutional Class and the Consumer Service Class of the
Fund are offered at net asset value without a sales load. However, Consumer
Service Class shares may be subject to certain Rule 12b-1
3
<PAGE> 170
distribution fees to which the Institutional Class is not subject. See "Fund
Share Valuation," "Pricing of Fund Shares" and "Purchase of Fund Shares."
Purchases of Institutional Class shares may only be made by one of the following
types of "Institutional Investors": employees (and family members) of Trustmark,
the Distributor, Administrator and affiliates and correspondents, Trustees of
the Trust (and family members), Directors of Trustmark (and family members) and
certain institutional investors, at net asset value without a sales load, which
make an initial investment of one million dollars or more or who, at the time of
purchase, have a balance of one million dollars or more in the Fund or which is
a purchaser through (or with proceeds of a distribution from) a trust,
investment management or other fiduciary account managed or administered by the
Adviser, its affiliate or correspondents pursuant to a written contract (except
for asset allocation or "wrap" accounts). Purchases may be made through an
authorized broker or financial institution, including the Fund, by mail or by
wire.
SERVICE ORGANIZATIONS
The Fund may pay fees to various banks (including Trustmark), trust
companies, broker-dealers and other financial organizations ("Service
Organizations") for providing administrative services for the Fund, such as
maintaining shareholder accounts and records. Investors are not required to
purchase Fund shares through or maintain an account with a Service Organization.
REDEMPTIONS
Shares may be redeemed at their next determined net asset value. See
"Redemption of Fund Shares" and "Fund Share Valuation." Redemptions may be made
by letter or if previously authorized by telephone. The Fund reserves the right
to redeem upon not less than 30 days' written notice all shares in the Fund
account which, as a result of shareholder redemption, has a value below $500
($250 for Individual Retirement Accounts ("IRAs")).
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays its net investment income to shareholders of
record in accordance with the schedule set forth under "Dividends, Distributions
and Federal Income Tax." Any net realized long-term capital gains will be
distributed annually. All dividends and distributions will be automatically
reinvested at net asset value in additional shares of the Fund unless cash
payment is requested.
4
<PAGE> 171
FUND EXPENSES
The following expense table lists the costs and expenses that an investor
in the Institutional Class of shares will incur either directly or indirectly as
a shareholder of the Fund based upon the Fund's projected operating expenses for
the first year of operations. Shareholders in the Consumer Service Class of the
Fund are subject to Rule 12b-1 Plan distribution fees (annually up to 0.35% of
average net asset of the Fund) to which the Institutional Class is not subject.
The Institutional Class of shares is only available to certain qualified
investors.
FEE TABLE
<TABLE>
<CAPTION>
THE FUND
--------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a percentage price).................... none
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering
price)........................................................................... none
Deferred Sales Load (as a percentage of redemption proceeds)....................... none
Redemption Fees.................................................................... none
Exchange Fees...................................................................... none
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets annualized)
Investment Advisory Fees........................................................... 0.30%
12b-1 Fees(1)...................................................................... none
Other Expenses(3).................................................................. 0.28%
Total Fund Operating Expenses...................................................... 0.58%
</TABLE>
- ---------------
(1) The Consumer Service Class of shares may be subject to certain Rule 12b-1
Plan distribution fees (annually up to 0.35% of average net assets of the
Fund) to which the Institutional Class is not subject.
(2) Shares of the Institutional Class of the Fund may be available through a
trust, investment management or other fiduciary account managed or
administered by the Adviser, its correspondents or affiliates. Such
institutions may provide a variety of services at varying fees to customers
and, although such fees are not fund-related, the fees must be paid by
customers in order to purchase Fund shares.
(3) Certain Service Organizations may receive additional fees from the Fund in
amounts up to an annual rate of 0.35% of the daily net asset value of the
Fund's shares owned by shareholders with whom the Service Organization has a
servicing relationship. The Fund currently pays no such fees to any Service
Organizations. See "Servicing Organizations" on Page 7.
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Fund might bear.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
THE
FUND
----
<S> <C>
1 year................................................................ $ 6
3 years............................................................... $19
</TABLE>
- ---------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF ACTUAL EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE ANNUAL
RETURNS. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
5
<PAGE> 172
THE INVESTMENT POLICIES OF THE FUND
The investment objective of the Fund is to achieve as high a level of
current income as is consistent with preservation of capital and liquidity. The
Fund will invest exclusively in direct obligations of the United States Treasury
which have remaining maturities not exceeding one year and a dollar-weighted
average maturity not exceeding 90 days. There is no assurance that this
objective will be attained. There is no assurance that this objective will be
attained. The SAI contains specific investment restrictions which govern the
Fund's investments. Those restrictions and the Fund's investment objective are
fundamental policies, which means that they may not be changed without a
majority vote of shareholders specifically identified as fundamental, all other
investment policies and practices described in this Prospectus and in the SAI
are not fundamental and may be changed by the Board of Trustees without
shareholder approval.
WHEN-ISSUED SECURITIES
The Fund may purchase U.S. Treasury obligations on a when-issued basis, in
which case delivery and payment normally take place 15 to 45 days after the date
of the commitment to purchase. The Fund will only make commitments to purchase
obligations on a when-issued basis with the intention of actually acquiring the
securities but may sell them before the settlement date if it is deemed
advisable. The when-issued securities are subject to market fluctuation and no
interest accrues to the purchaser during this period. The payment obligation and
the interest rate that will be received on the securities are each fixed at the
time the purchaser enters into the commitment. For purposes of determining the
Fund's weighted average maturity, the maturity of a when-issued security is
calculated from its commitment date. Purchasing U.S. Treasury obligations on a
when-issued basis is a form of leveraging and can involve a risk that the yields
available in the market when the delivery takes place may actually be higher
than those obtained in the transaction itself in which case there could be an
unrealized loss at the time of delivery.
The Fund will establish a segregated account with its custodian in which it
will maintain liquid assets in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will place additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
Loans of Portfolio Securities. The Fund may loan its portfolio securities
to brokers, dealers, and financial institutions to increase current income. All
loans of securities must be continuously secured by collateral consisting of
U.S. Government securities, cash or letters of credit maintained on a daily
mark-to-market basis in an amount at least equal to the current market value of
the securities loaned plus the interest payable with respect to the loan.
As a condition of the loan, the Fund must have the right to call the loan
and obtain the return of the securities loaned within five business days.
Moreover, the Fund will receive any interest or dividends paid on the loaned
securities. The Fund will not lend portfolio securities to Trustmark National
Bank, or to any affiliate of Trustmark National Bank or to any other affiliate
of the Fund. Loans of securities involve a risk that the borrower may fail to
return the securities or may fail to provide additional collateral.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. Additional information about the Trustees, as well as the
Trust's executive officers, may be found in the SAI under the heading
"Management -- Trustees and Officers."
The Investment Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201, serves as investment adviser to the Fund. Trustmark
manages the investment and reinvestment of the assets of
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the Fund and continuously reviews, supervises and administers the Fund's
investments. Trustmark is responsible for placing orders for the purchase and
sale of the Fund's investments directly with brokers and dealers selected by it
in its discretion.
Trustmark currently has under management assets in excess of $1 billion. It
was founded in 1890 and is the second largest commercial bank headquartered in
Mississippi. Trustmark has been managing trust monies for over 40 years. Shares
of the Fund are not guaranteed by Trustmark, its parent or affiliates, nor are
they insured by the FDIC, the Federal Reserve Board or any other agency.
For the advisory services it provides to the Fund, Trustmark will receive
monthly fees based on average daily net assets at the annual rate of 0.30%.
Based upon the advice of its counsel, Trustmark believes that the
performance of investment advisory services for the Fund 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 Trustmark from continuing to perform such services
for the Fund. If Trustmark were prohibited from acting as investment adviser to
the Fund, it is expected that the Board of Trustees would recommend to
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.
The Sponsor, Distributor and LLC. Furman Selz Incorporated, 230 Park
Avenue, New York, New York 10169, acts as the Sponsor and Administrator of the
Fund. PFD, an affiliate of Furman Selz, acts as Distributor of the Fund's
shares. Furman Selz is primarily an institutional brokerage firm with membership
on the New York, American, Boston, Midwest, Pacific and Philadelphia Stock
Exchanges. Furman Selz also serves as administrator and distributor of other
mutual funds.
Administrative Services. The Fund has entered into an Administrative
Services Contract with Furman Selz pursuant to which Furman Selz provides
certain management and administrative services necessary for the Fund's
operations including: (i) general supervision of the operation of the Fund
including coordination of the service performed by the Fund's Adviser, transfer
agent, custodian, independent accountants and legal counsel, regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions, and
preparation of proxy statements and shareholder reports for the Fund, and (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Fund's officers and Board of
Trustees, and (iii) furnishing office space and certain facilities required for
conducting the business of the Fund. For these services, Furman Selz receives
from the Fund a monthly fee at the annual rate of 0.15% of the average daily net
assets of the Fund. Pursuant to a Shareholder Servicing Agreement between the
Trust and the Administrator, Furman Selz receives a fee of $15.00 per account
per year plus out-of-pocket expenses. Pursuant to a Fund Accounting Agreement
between the Trust and the Administrator, the Administrator assists the Trust in
calculating net asset values and provides certain other accounting services for
the Fund described therein, for an annual fee of $30,000 plus out-of-pocket
expenses.
On June 28, 1996, Furman Selz and BISYS Group, Inc. ("BISYS") announced a
definitive agreement which provides that by the end of 1996 Furman Selz will
exit the mutual funds business and recommend BISYS to Furman Selz's existing
fund clients to replace Furman Selz for mutual fund administration,
distribution, fund accounting and transfer agency services, and BISYS to
compensate Furman Selz for its efforts.
BISYS, headquartered in Little Falls, N.J., supports more than 5,000
financial institutions and corporate clients through two strategic business
units. BISYS Information Services Group provides image and data
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processing outsourcing, and pricing analysis to more than 600 banks nationwide.
BISYS Investment Services Group designs, administers, and distributes over 30
families of proprietary mutual funds consisting of more than 365 portfolios, and
provides 401(k) marketing support, administration, and recordkeeping services in
partnership with 18 of the nation's leading bank and investment management
companies. BISYS trades on NASDAQ under the symbol BISYS.
As of the date of this prospectus the Board of Trustees of the Fund is
considering alternatives to Furman Selz LLC as service provider to the Fund. The
Board will decide on Furman Selz's replacement by January 1, 1997. Shareholders
of the Fund will be notified of such decision.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services for the Fund, such as maintaining shareholder accounts
and records. The Fund may pay fees to Service Organizations (which vary
depending upon the services provided) in amounts up to an annual rate of 0.35%
of the daily net asset value of the Fund's shares owned by shareholders with
whom the Service Organization has a servicing relationship. Investors are not
required to purchase shares through or maintain an account with a Service
Organization.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the Fund's
minimum initial or subsequent investments or charging a direct fee for
servicing. A Service Organization or broker or other sales-person within such
Service Organization may be compensated at varying rates for the sale of one
class of Fund shares as opposed to another. If imposed, these fees would be in
addition to any amounts which might be paid to the Service Organization by the
Fund. Each Service Organization has agreed to transmit to its clients a schedule
of any such fees. Shareholders using Service Organizations are urged to consult
with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. if a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. In addition, state
securities law on this issue may differ from interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, Performance Funds Distributor, Inc. or the Adviser. The
costs borne by the Fund include legal and accounting expenses; Trustees' fees
and expenses; insurance premiums; custodian and transfer agent fees and
expenses; expenses incurred in acquiring or disposing of the Fund's portfolio
securities; expenses of registering and qualifying the Fund's shares for sale
with the SEC and with various state securities commissions; expenses of
obtaining quotations on the Fund's portfolio securities and pricing of the
Fund's shares; expenses of maintaining the Fund's legal existence and of
shareholders' meetings; and expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses. The Fund bears its own
expenses
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associated with its establishment as a series of Performance Funds Trust; these
expenses are amortized over a five-year period from the commencement of the the
Fund's operations. See "Management" in the SAI. Trust expenses directly
attributable to the Fund are charged to the Fund; other expenses are allocated
proportionately among all of the Funds in the Trust in relation to the net
assets of each Fund.
Portfolio Transactions. Pursuant to the Investment Advisory Contract, the
Adviser places orders for the purchase and sale of portfolio investments for the
Fund's accounts with brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Adviser will seek the best execution of the Fund's orders.
Purchases and sales of portfolio debt securities for the Fund are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases and
sales of portfolio securities are generally placed by the Adviser with
broker-dealers which, in the Adviser's judgment, provide prompt and reliable
execution at favorable security prices and reasonable commission rates.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Adviser. The Adviser may cause the Fund to pay
commissions higher than another broker-dealer would have charged if the Adviser
believes the commission paid is reasonable in relation to the value of the
brokerage and research services received by the Adviser.
FUND SHARE VALUATION
The net asset value per share of the Fund is calculated at 12:00 Noon
(Eastern time) Monday through Friday, on each day the New York Stock Exchange is
open for trading. The net asset value per share of the Fund is computed by
dividing the value of the Fund's net assets (i.e., the value of the assets less
the liabilities) by the total number of the Fund's outstanding shares. All
expenses, including fees paid to the Adviser, Furman Selz and the Fund, are
accrued daily and taken into account for the purpose of determining the net
asset value. The Fund uses the amortized cost method to value its portfolio
securities and seeks to maintain a constant net asset value of $1.00 per share,
although there is no assurance that a net asset value of $1.00 per share can be
maintained.
PRICING AND PURCHASE OF FUND SHARES
Orders for purchases of shares of the Fund will be executed at the net
asset value per share next determined after an order has been received. All
monies received by the Fund are invested in full and fractional shares of the
Fund. Certificates for shares are not issued. Furman Selz maintains records of
each shareholder's holdings of Fund shares, and each shareholder receives a
statement of transactions, holdings and dividends. The Fund reserves the right
to reject any purchase.
Minimum Purchase Requirements. The minimum initial investment in the Fund
is $1,000, except that the minimum is $250 for an IRA, other than an IRA for
which Trustmark serves as trustee. Subsequent investments must be at least $100,
or $50 for an IRA. All initial investments should be accompanied by a completed
Purchase Application. A Purchase Application accompanies this Prospectus.
Different minimums apply, and a separate application is required for IRA
investments. the Fund reserves the right to reject purchase orders.
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An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisers and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment adviser or Service Organization with instructions as to
the amount you wish to invest. Your broker will then contact the Fund to place
the order on your behalf on that day.
Orders received by your broker or Service Organization for the Fund in
proper order prior to the determination of net asset value and transmitted to
the Fund prior to the close of its business day (which is currently 12:00 noon,
Eastern time), will become effective that day. Brokers who receive orders are
obligated to transmit them promptly. You should receive written confirmation of
your order within a few days of receipt of instruction from your broker.
By Wire. Investments may be made directly through the use of wire transfers
of Federal funds. Contact your bank and request it to wire Federal funds to the
Fund. In most cases, your bank will either be a member of the Federal Reserve
Banking Systems or have a relationship with a bank that is. Your bank will
normally charge you a fee for handling the transaction. To purchase shares by a
Federal funds wire, please first contact Furman Selz Mutual Funds Client
Services. They will establish a record of information for the wire to insure the
correct processing of funds. You can reach the Wire Desk at 1-800-737-3676.
Then, have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, Missouri 64105
ABA #1010-0362-1
Account #751-2996
Further Credit to: The U.S. Treasury Money Market
Fund
As long as you have received the Prospectus, you may establish a new
regular account through the Wire Desk; IRAs may not be opened in this way. When
new accounts are established by wire, the distribution options will be set to
reinvest all distributions and social security or tax identification number
("TIN") will not be certified until a signed application is received. Completed
applications should be forwarded immediately to the Fund. With the application,
the shareholder can specify other distribution options and add any special
features offered by the Fund. Shoud any dividend distributions or redemptions be
paid before the TIN is certified, they will be subject to 31% Federal tax
withholding.
By Automatic Investment. Investors may participate in the Automatic
Investment Program, which is an investment plan that automatically debits money
from the shareholder's designated bank account and invests it in the Fund
through the use of electronic fund transfers or automatic bank drafts.
Shareholders may elect to make investments by transfers of a minimum of $50.00
on either the fifth or twentieth day of each month into their established Fund
Account. No minimum initial investment applies when an account is established
through the Automatic Investment Program. Contact the Fund for more information
about the Automatic Investment Program.
By Payroll Direct Deposits. Investors may set up a payroll direct deposit
arrangement for amounts to be automatically invested in the Fund. Participants
in the Payroll Direct Deposit program may make periodic investments of at least
$20.00 per pay period. Contact the Fund for more information about Payroll
Direct Deposits.
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INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment for new or existing IRAs. Shares may
also be purchased for IRAs established with Trustmark or other authorized
custodians. In addition, an IRA may be established through a custodial account
with Investors Fiduciary Trust Company. Completion of a special application is
required in order to create such an account, and the minimum initial investment
for an IRA is $250. Contributions to IRAs are subject to prevailing amount
limits set by the Internal Revenue Service. A $5.00 establishment fee and an
annual $12.00 maintenance and custody fee is payable with respect to each
shareholder; in addition there will be charged a $10.00 termination fee when the
account is closed. For more information and IRA information, call Furman Selz
toll free at 1-800-737-3676.
EXCHANGE PRIVILEGES
The Fund offers two convenient ways to exchange shares in one of the
Performance Funds for shares in another Performance Fund. Before engaging in an
exchange transaction, a shareholder should read carefully the portions of this
Prospectus describing the Fund into which the exchange will be made. A
shareholder may not exchange shares of one Fund for shares of another Fund if
both or either are not qualified for sale in the state of the shareholder's
residence. The minimum amount for an initial exchange is $1,000 and the minimum
for subsequent exchanges is $100. The Trust may terminate or amend the terms of
the exchange privilege at any time upon 60 days' written notice to shareholders.
A new account opened by exchange must be established with the same name(s),
address and social security number or TIN as the existing account. All exchanges
will be made based on the net asset value next determined following receipt of
the request by the Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to PFD. The letter of instruction must include: (i) your account
number; (ii) the Fund from and the Fund into which you wish to exchange your
investment; (iii) the dollar or share amount you wish to exchange; and (iv) the
signatures of all registered owners or authorized parties. All signatures must
be guaranteed by a member of a national securities exchange or by a commercial
bank or trust company.
Exchange by Telephone. To exchange Fund shares by telephone or if you have
any questions, simply call the Fund toll free at 1-800-737-3676. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security number or TIN and account registration;
(ii) the name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The Fund
employs reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Fund fails to employ such reasonable procedures,
it may be liable for any loss, damage or expense arising out of any telephone
transactions purporting to be on a shareholder's behalf. In order to assure the
accuracy of instructions received by telephone, the Fund requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions. Telephone exchanges are available to the shareholder unless
otherwise indicated by the shareholder by checking the box on the Purchase
Application.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any business
day. Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received and accepted by the Fund. If
shares are redeemed through a broker-dealer or investment adviser, such
redemption is complete upon receipt by the broker-dealer or investment adviser
of the shareholder's redemption request.
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See "Determination of Net Asset Value." A redemption may be a taxable
transaction on which gain or loss may be recognized.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day,
although the Fund may take up to seven days to make payment. Also, if the New
York Stock Exchange is closed (or when trading is restricted) for any reason
other than the customary weekend or holiday closing or if an emergency condition
as determined by the SEC merits such action, the Fund may suspend redemptions or
postpone payment dates.
Redemption Methods. To ensure acceptance of your redemption request, it is
important to follow the procedures described below. Although the Fund has no
present intention to do so, the Fund reserves the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Fund's services and its provisions may be
modified or terminated at any time by the Fund. If the Fund terminates any
particular service, it will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service Organization.
You may redeem your shares by contacting your broker or investment adviser and
instructing him to redeem your shares. He will then contact the Fund, and place
a redemption trade on your behalf. You will receive the next determined net
asset value per share after receipt of such request by your broker or investment
adviser. It will be the responsibility of such broker or investment adviser to
transmit your redemption request to the Fund in a timely manner. A broker or
investment adviser which has received any portion of a sales load or 12b-1 fee
for the sale of such shares may not also receive a fee for this service.
By Mail. You may redeem your shares by sending a letter directly to the
Fund. To be accepted, a letter requesting redemption must include: (i) the Fund
name and account registration from which you are redeeming shares, (ii) your
account number, (iii) the amount to be redeemed, (iv) the signatures of all
registered owners, and (v) a signature guarantee by a member of a national
securities exchange or a commercial bank or trust company (a signature guarantee
by a savings bank or a notary public is not acceptable). Corporations,
partnerships, trusts or other legal entities will be required to submit
additional documentation.
By Telephone. You may redeem your shares by calling the Fund toll free at
1-800-737-3676. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number or TIN
and account registration, (ii) the Fund name from which you are redeeming
shares, and (iii) the amount to be redeemed. The conversation may be recorded to
protect you and the Fund. Telephone redemptions are available to the shareholder
unless otherwise indicated by the shareholder by checking the box on the
Purchase Application.
By Wire. You may redeem your shares by contacting the Fund by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Your instructions should include: (i) your account number, social security
number or TIN and account registration, (ii) the Fund name from which you are
redeeming shares, and (iii) the amount to be redeemed. Wire redemptions are
available to the shareholder unless otherwise indicated by checking the box on
the Purchase Application. Please attach a copy of a void
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check of account where proceeds are to be wired. Your bank may charge you a fee
for receiving a wire payment on your behalf.
Check Writing. A check redemption ($100 minimum, no maximum) feature is
available. Checks are free and may be obtained from the Fund. It is not possible
to use a check to close out your account since additional shares accrue daily.
The above mentioned services "Telephone, Wire and Check Writing" are not
available for IRAs and trust clients of Trustmark.
Systematic Withdrawal Plan. An owner of $25,000 or more of shares of the
Fund may elect to have periodic redemptions from his account to be paid on a
monthly, quarterly, semi-annual or annual basis. The minimum periodic payment is
$100. A sufficient number of shares to make the scheduled redemption will
normally be redeemed on the date selected by the shareholder. Depending on the
size of the payment requested and fluctuation in the net asset value, if any, of
the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Fund reserves the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced by shareholder
redemption of the account to $500 ($250 for IRAs) or less. However, if during
the 30-day notice period the shareholder purchased sufficient shares to bring
the value of the account above $500 ($250 for IRAs), this restriction will not
apply.
Redemption in Kind. All redemptions of shares of the Fund shall be made in
cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of the Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of the Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy that may not be changed
without shareholder approval. In the case of redemption requests by shareholders
in excess of such amounts, the Board of Trustees reserves the right to have the
Fund make payment, in whole or in part, in securities or other assets, in case
of any emergency or any time a cash distribution would impair the liquidity of
the Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund intends to elect and to qualify to be treated as a regulated
investment company pursuant to the provisions of Subchapter M of the Code. By so
qualifying and electing, the Fund generally will not be subject to Federal
income tax to the extent that it distributes investment company taxable income
and net capital gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses). The
Fund intends to distribute, at least annually, substantially all net capital
gain (the excess of net long-term capital gains over net short-term capital
losses). In determining amounts of capital gains to be distributed, any capital
loss carryovers from prior years will be applied against capital gains.
Shareholders may elect to receive distributions in additional Fund shares
based on the net asset value at the close of business on the payment date of the
distribution or may receive such distribution in cash. If no election is made,
distributions will be automatically reinvested in additional shares of the Fund.
Dividends declared in, and attributable to, the preceding month will be paid
within five business days after the end of each month.
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Shares purchased will begin earning dividends on the day the purchase order
is executed and shares redeemed will earn dividends through the previous day.
Net investment income for a Saturday, Sunday or a holiday will be declared as a
dividend on the previous business day.
Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Dividends of investment income (regardless of whether derived from
dividends, interest or short-term capital gains) will be taxable to shareholders
as ordinary income. Distributions of net long-term capital gains designated by
the Fund as capital gain dividends will be taxable as long-term capital gains,
regardless of how long a shareholder has held his Fund shares. Distributions are
taxable in the same manner whether received in additional shares or in cash.
A distribution, including an "exempt-interest" dividend, will be treated as
paid on December 31 of the calendar year if it is declared by the Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by the Fund during January of the following calendar year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distribution are received.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares.
The dividends paid by the Fund are not expected to qualify for the
dividends-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amount, withhold may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund in which they invest. Depending on the
residence of the shareholder for tax-purposes, distributions also may be subject
to state and local taxes, including withholding taxes. Foreign shareholders may,
for example, be subject to special withholding requirements. Special tax
treatment, including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. Shareholders should consult their own
tax advisers as to the Federal, state and local tax consequences of ownership of
shares of the Funds in their particular circumstances.
OTHER INFORMATION
CAPITALIZATION
Performance Funds Trust was organized as a Delaware business trust on March
11, 1992, and currently consists of six separate portfolios or series, two money
market funds, one of which is described in this Prospectus, and four other
investment funds, which are described in a separate prospectus. The Board of
Trustees may establish additional series in the future. The capitalization of
the Trust consists solely of an unlimited number of shares of beneficial
interest with a par value of $0.001 each. When issued, shares of the Funds are
fully paid, non-assessable and freely transferable.
This Prospectus relates to the Institutional Class of the Fund's shares.
The Fund also offers Consumer Service Class shares sold with a sales load.
Institutional Class shares are offered only to employees (and family members) of
Trustmark, the Distributor, Administrator and affiliates and correspondents,
Trustees of
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the Trust (and family members), Directors of Trustmark (and family members) and
certain institutional investors, at net asset value without a sales load, which
make an initial investment of one million dollars or more or who, at the time of
purchase, have a balance of one million dollars or more in the Fund or which is
a purchaser through (or with proceeds of a distribution from) a trust,
investment management or other fiduciary account managed or administered by the
Adviser, its affiliate or correspondents pursuant to a written contract (except
for asset allocation or "wrap" accounts). Purchases may be made through an
authorized broker or financial institution, including the Fund, by mail or by
wire.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the Trust
Instrument disclaims liability of the shareholders, Trustees or officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of each series of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and should be considered remote
and is limited to the amount of the shareholder's investment in the Fund.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. The Trust is not required to hold
regular annual meetings of the Fund's shareholders and does not intend to do so.
The Fund may vote separately on items which affect only the Fund and each class
within the Fund may vote separately on matters which affect only that class. For
example, only Consumer Service Class shareholders will vote on matters related
to the Fund's Distribution Plan under Rule 12b-1. See "Other
Information -- Voting Rights" in the SAI.
The Trust Instrument provides that the holders of not less than two-thirds
of the outstanding shares of the Trust may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting of shareholders for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust or Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of the Fund (or the Trust) present a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of the Fund.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and/or total return in
advertisements or reports to shareholders or prospective investors. Shareholders
in the Consumer Service Class of shares may experience a lower net return on
their investment than shareholders of the Institutional Class of shares because
of Rule 12b-1 Plan distribution fees paid by such shareholders. The methods used
to calculate the yield and total return of the Funds are mandated by the SEC.
Quotations of "yield" for the Fund will be based on the investment income
per share during a particular 7-day period (including dividends and interest),
less expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the maximum public offering price
per share on the last day of the period.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over the periods of 1, 5 and 10 years (up
15
<PAGE> 182
to the life of the Fund), reflect the deduction of a proportional share of Fund
expenses (on an annual basis), and assume that will dividends and distributions
are reinvested when paid.
Performance information for the Fund may be compared to various unmanaged
indices, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Fund 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. For a description of the
methods used to determine yield and total return for the Fund, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Fund has been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
Furman Selz acts as the Trust's transfer agent. The Trust compensates
Furman Selz, the Trust's administrator, for providing personnel and facilities
to perform shareholder servicing and transfer agency related services for the
Trust at a rate intended not to exceed the cost of providing such services.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust c/o
Furman Selz Mutual Funds Department, 237 Park Avenue, New York, New York 10017.
General and Account Information: (800) PERFORM (737-3676).
16
<PAGE> 183
[LOGO]
INVESTMENT ADVISER
Trustmark National Bank
348 East Capitol Street
Jackson, Mississippi 39201
SPONSOR AND ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Performance Funds Distributor, Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
Trustmark National Bank
348 East Capitol Street
Jackson, Mississippi 39201
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
[LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE U.S. TREASURY MONEY
MARKET FUND
INSTITUTIONAL CLASS
PROSPECTUS
SEPTEMBER 27, 1996
[LOGO]
Performance Funds'
Investment Adviser
<PAGE> 184
PERFORMANCE FUNDS TRUST
THE U.S. TREASURY MONEY MARKET FUND
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- INVESTMENT ADVISER
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
The Prospectus describes The U.S. Treasury Money Market Fund (the "Fund"),
a separate fund of Performance Funds Trust (the "Trust"), a Delaware business
trust and registered management investment company. The Trust consists of six
funds; the Money Market Fund, the Short Term Fixed Income Fund, the Mid Cap
Growth Fund, the Intermediate Term Fixed Income Fund, and the Equity Fund, which
are described in another prospectus, and The U.S. Treasury Money Market Fund.
This Prospectus relates only to the "Consumer Service Class" of shares of the
Fund; certain investors may qualify to invest in the Fund's "Institutional
Class," which is not offered hereby. See, "Other Information -- Capitalization."
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN THE VALUE OF ITS SHARES AT A CONSTANT
$1.00 PER SHARE, ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL ALWAYS BE ABLE
TO DO SO. SHARES OF THE FUND ARE NOT AN OBLIGATION OF OR GUARANTEED BY TRUSTMARK
NATIONAL BANK OR ITS AFFILIATES AND THE SHARES ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund.
A Statement of Additional Information (the "SAI"), dated September 27,
1996, containing additional and more detailed information about the Fund, has
been filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Fund at the address and
information numbers printed above.
------------------------
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.
------------------------
September 27, 1996
<PAGE> 185
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................................................................... 3
Fund Expenses........................................................................ 5
Fee Table............................................................................ 5
Investment Policies of the Fund...................................................... 6
Management of the Fund............................................................... 6
Fund Share Valuation................................................................. 9
Pricing of and Purchase of Fund Shares............................................... 9
Individual Retirement Accounts....................................................... 11
Exchange Privileges.................................................................. 11
Redemption of Fund Shares............................................................ 12
Dividends, Distributions and Federal Income Tax...................................... 13
Other Information.................................................................... 15
</TABLE>
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
2
<PAGE> 186
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The investment objective of the U.S. Treasury Money Market Fund (the
"Fund") is to seek as high a level of current income as is consistent with
liquidity and maximum safety of principal. The Fund invests exclusively in
obligations of the United States Treasury, which are backed by the full faith
and credit of the United States Government as to payment of principal and
interest and which have remaining maturities not exceeding one year. United
States Treasury securities consist of bills, notes and bonds, which generally
differ only in their interest rates, maturities and times of issuance. The Fund
may purchase U.S. Treasury obligations on a when-issued basis, in which case
delivery and payment normally take place 15 to 45 days after the date of
commitment to purchase. The Fund does not purchase securities issued or
guaranteed by agencies or instrumentalities of the United States Government, nor
does it enter into repurchase agreements.
Interest on United States Treasury obligations is exempt from state and
local income taxes under federal law; the interest is not exempt from federal
income tax. However, shareholders of the Fund do not directly receive interest
on United States Treasury obligations, but rather receive dividends from the
Fund that are derived from such interest. Most, but not all, states allow the
character of the Fund's income to pass through to its shareholders, so that
distributions from the Fund derived from interest that is exempt from state and
local income taxes when received directly by a taxpayer also are exempt from
such taxes when earned as a shareholder of the Fund. See "Taxes."
RISK FACTORS
There is no assurance that the Fund will achieve its investment objective.
For additional information concerning the investment policies, practices and
risk considerations of the Fund, see "The Investment Policies and Practices of
the Fund." See also the SAI.
Changes in market interest rates will affect the market value of the Fund's
portfolio investments. When interest rates rise, the market value of the Fund's
securities may decline. Conversely, when interest rates decline, their market
value may rise. This fluctuation in market value may result in a gain or loss to
investors. The Fund may hold its investments to maturity and receive the entire
face amount of the securities, or the Fund may sell its investments at a gain or
loss before maturity.
MANAGEMENT OF THE FUND
Trustmark National Bank ("Trustmark" or the "Adviser") acts as investment
adviser to the Fund. Trustmark currently has assets in excess of $1 billion. It
was founded in 1890 and is the second largest commercial bank headquartered in
Mississippi. Trustmark has been managing trust monies for over 40 years. For its
services, the Adviser receives from the Fund fees at annual rates of the Fund's
average daily net assets. Trustmark manages three other mutual funds and has
been managing trust monies for over 40 years. See "Fee Table" and "Management of
the Funds" in this Prospectus.
Furman Selz Incorporated ("Furman Selz") acts as Administrator to the Fund
and provides certain management and administrative services to the Fund for
which the Fund pays a fee at an annual rate based upon the Fund's average daily
net assets. Performance Funds Distributor, Inc. ("PFD") is the Distributor for
the Trust and distributes the Fund's shares and may be reimbursed for certain of
its distribution related expenses.
PURCHASES
Shares of the Institutional Class of the Funds are offered at net asset
value without a sales load. Shares of the Consumer Service Class of the Funds
are offered at net asset value plus a sales load, where applicable. See
3
<PAGE> 187
"Fund Share Valuation," "Pricing of Fund Shares" and "Purchase of Fund Shares."
Purchases of Institutional Class shares may only be made by one of the following
types of "Institutional Investors": trusts, or investment management and other
fiduciary accounts managed or administered by Trustmark or its affiliates or
correspondents pursuant to a written agreement (except asset allocation or
"wrap" accounts), Trustees of the Trust (and family members), Directors of
Trustmark (and family members), employees (and family members) of Trustmark, the
Distributor, Administrator, and affiliates and correspondents and any persons
purchasing shares with the proceeds of a distribution from a trust, investment
management and other fiduciary account managed or administered by Trustmark or
its affiliates or correspondents, pursuant to a written agreement, who make an
initial investment of one million dollars or more or who, at the time of
purchase have a balance of one million dollars or more in the Funds. Purchases
may be made through an authorized broker or financial institution, including the
Fund, by mail or by wire.
SERVICE ORGANIZATIONS
The Fund may pay fees to various banks (including Trustmark), trust
companies, broker-dealers and other financial organizations ("Service
Organizations") for providing administrative services for the Fund, such as
maintaining shareholder accounts and records. Investors are not required to
purchase Fund shares through or maintain an account with a Service Organization.
REDEMPTIONS
Shares may be redeemed at their next determined net asset value. See
"Redemption of Fund Shares" and "Fund Share Valuation." Redemptions may be made
by letter or if previously authorized by telephone. The Fund reserves the right
to redeem upon not less than 30 days' written notice all shares in the Fund
account which, as a result of shareholder redemption, has a value below $500
($250 for Individual Retirement Accounts ("IRAs")).
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays its net investment income to shareholders of
record in accordance with the schedule set forth under "Dividends, Distributions
and Federal Income Tax." Any net realized long-term capital gains will be
distributed annually. All dividends and distributions will be automatically
reinvested at net asset value in additional shares of the Fund unless cash
payment is requested.
4
<PAGE> 188
FUND EXPENSES
The following expense table lists the costs and expenses that an investor
in the Consumer Service Class of shares will incur either directly or indirectly
as a shareholder of the Fund based upon the Fund's projected operating expenses
for the first year of operations. Shareholders in the Consumer Service Class of
the Fund are subject to Rule 12b-1 Plan distribution fees (annually up to 0.35%
of average net assets of the Fund) to which the Institutional Class is not
subject. The Institutional Class of shares is only available to certain
qualified investors.
FEE TABLE
<TABLE>
<CAPTION>
THE FUND
--------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage price)............ none
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price).......................................................... none
Deferred Sales Load (as a percentage of redemption proceeds)............... none
Redemption Fees............................................................ none
Exchange Fees.............................................................. none
ANNUAL FUND OPERATING EXPENSES(1)
(as a percentage of average net assets annualized)
Investment Advisory Fees(2)................................................ 0.30%
12b-1 Fees(3).............................................................. 0.25%
Other Expenses(4).......................................................... 0.20%
--------
Total Fund Operating Expenses.............................................. 0.75%
=======
</TABLE>
- ---------------
(1) Shares of the Consumer Service Class of the Fund are available only through
banks or other financial institutions which have entered into a dealer
agreement with Furman Selz. Such institutions may provide a variety of
services at varying fees to customers and, although such fees are not
fund-related, the fees must be paid by customers in order to purchase Fund
shares.
(2) The Adviser has agreed to limit its fees during the first six months of Fund
operations to the following annualized rate: .
(3) The Distributor has agreed to limit 12b-1 fees to 0.25% of the Fund's
average net assets during the first six months of operations after which
such fees may be increased to no more than 0.35% for the Fund.
(4) Certain Service Organizations may receive additional fees from the Fund in
amounts up to an annual rate of 0.35% of the daily net asset value of the
Fund's shares owned by shareholders with whom the Service Organization has a
servicing relationship. The Fund currently pays no such fees to any Service
Organizations. See "Service Organizations" on page 8.
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Fund might bear.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
THE
FUND
----
<S> <C>
1 year................................................................ $ 8
3 years............................................................... $24
</TABLE>
- ---------------
* This example should not be considered a representation of actual expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of future annual
returns. Actual return may be greater or less than the assumed amount.
5
<PAGE> 189
THE INVESTMENT POLICIES OF THE FUND
The investment objective of the Fund is to achieve as high a level of
current income as is consistent with preservation of capital and liquidity. The
Fund will invest exclusively in direct obligations of the United States Treasury
which have remaining maturities not exceeding one year and a dollar-weighted
average maturity not exceeding 90 days. There is no assurance that this
objective will be obtained. The SAI contains specific investment restrictions
which govern the Fund's investments. Those restrictions and the Fund's
investment objective are fundamental policies, which means that they may not be
changed without a majority vote of shareholders of the Fund. Except for the
objective and those restrictions specifically identified as fundamental, all
other investment policies and practices described in this Prospectus and in the
SAI are not fundamental and may be changed by the Board of Trustees without
shareholder approval.
WHEN-ISSUED SECURITIES
The Fund may purchase U.S. Treasury obligations on a when-issued basis, in
which case delivery and payment normally take place 15 to 45 days after the date
of the commitment to purchase. The Fund will only make commitments to purchase
municipal obligations on a when issued basis with the intention of actually
acquiring the securities but may sell them before the settlement date if it is
deemed advisable. Any gains realized in such sales would produce taxable income.
The when-issued securities are subject to market fluctuation and no interest
accrues to the purchaser during this period. The payment obligation and the
interest rate that will be received on the securities are each fixed at the time
the purchaser enters into the commitment. For purposes of determining the Fund's
weighted average maturity, the maturity of a when-issued security is calculated
from its commitment date. Purchasing U.S. Treasury obligations on a when-issued
basis is a form of leveraging and can involve a risk that the yields available
in the market when the delivery takes place may actually be higher than those
obtained in the transaction itself in which case there could be an unrealized
loss at the time of delivery.
The Fund will establish a segregated account with its custodian in which it
will maintain liquid assets in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will place additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
LOANS OF PORTFOLIO SECURITIES
The Fund may loan its portfolio securities to brokers, dealers and
financial institutions to increase current income. All loans of securities must
be continuously secured by collateral consisting of U.S. Government securities,
cash or letters of credit maintained on a daily mark-to-market basis in an
amount at least equal to the current market value of the securities loaned plus
the interest payable with interest to the loan.
As a condition of the loan, the Fund must have the right to call the loan
and obtain the return of the securities loaned within five business days.
Moreover, the Fund will receive any interest or dividends paid on the loaned
securities. The Fund will not lend portfolio securities to Trustmark National
Bank, or to any affiliate of Trustmark National Bank or to any other affiliate
of the Fund. Loans of securities involve a risk that the borrower may fail to
return the securities or may fail to provide additional collateral.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. Additional information about the Trustees, as well as the
Trust's executive officers, may be found in the SAI under the heading
"Management -- Trustees and Officers."
6
<PAGE> 190
The Investment Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201, serves as investment adviser to the Fund. Trustmark
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments.
Trustmark is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
Trustmark currently has under management assets in excess of $1 billion. It
was founded in 1890 and is the second largest commercial bank headquartered in
Mississippi. Trustmark has been managing trust monies for over 40 years. Shares
of the Fund are not guaranteed by Trustmark, its parent or affiliates, nor are
they insured by the FDIC, the Federal Reserve Board or any other agency.
For the advisory services it provides to the Fund, Trustmark will receive
monthly fees based on average daily net assets at the annual rate of 0.30%.
Based upon the advice of its counsel, Trustmark believes that the
performance of investment advisory services for the Fund 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 Trustmark from continuing to perform such services
for the Fund. If Trustmark were prohibited from acting as investment adviser to
the Fund, it is expected that the Board of Trustees would recommend to
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.
The Sponsor, Distributor and Administrator. Furman Selz Incorporated, 230
Park Avenue, New York, New York 10169, acts as the Sponsor and Administrator of
the Fund. Performance Funds Distributor, Inc., an affiliate of Furman Selz, acts
as distributor of the Fund's shares. Furman Selz is primarily an institutional
brokerage firm with membership on the New York, American, Boston, Midwest,
Pacific and Philadelphia Stock Exchanges. Furman Selz also serves as
administrator and distributor of other mutual funds.
Under the Distribution Plan ("the Plan") adopted by the Trust, the Fund may
pay directly or reimburse Performance Funds Distributor, Inc. monthly (subject
to a limit of 0.25% per annum of the Fund's average daily net assets during the
first six months of the Fund's operations and up to 0.35% per annum thereafter)
for costs and expenses of Performance Funds Distributor, Inc. in connection with
the distribution of Fund shares. These costs and expenses include (i)
advertising by radio, television, newspapers, magazines, brochures, sales
literature, direct mail or any other form of advertising, (ii) expenses of sales
employees or agents of Furman Selz, including salary, commissions, travel and
related expenses, (iii) payments to broker-dealers and financial institutions
for services in connection with the distribution of shares, including
promotional incentives and fees calculated with reference to the average daily
net asset value of shares held by shareholders who have a brokerage or other
service relationship with the broker-dealer or other institution receiving such
fees, (iv) costs of printing prospectuses and other materials to be given or
sent to prospective investors and (v) such other similar services as the
Trustees determine to be reasonably calculated to result in the sale of shares
of the Fund. The Fund will pay all costs and expenses in connection with the
preparation, printing and distribution of its Prospectus to current shareholders
and the operation of its Plan, including related legal and accounting fees. The
Fund will not be liable for distribution expenditures made by Performance Funds
Distributor, Inc. in any given year in excess of the maximum amount payable
under the Plan for the Fund in that year.
Administrative Services. The Fund has entered into an Administrative
Services Contract with Furman Selz pursuant to which Furman Selz provides
certain management and administrative services necessary for the Fund's
operations including: (i) general supervision of the operation of the Fund
including coordination of the service performed by the Fund's Investment
Adviser, transfer agent, custodian, independent accountants
7
<PAGE> 191
and legal counsel, regulatory compliance, including the compilation of
information for documents such as reports to, and filings with, the SEC and
state securities commissions, and preparation of proxy statements and
shareholder reports for the Fund, and (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Fund's officers and Board of Trustees, and (iii) furnishing office space
and certain facilities required for conducting the business of the Fund. For
these services, Furman Selz receives from the Fund a monthly fee at the annual
rate of 0.15% of the average daily net assets of the Fund. Pursuant to a
Shareholder Servicing Agreement between the Trust and the Administrator, Furman
Selz receives a fee of $15.00 per account per year plus out-of-pocket expenses.
Pursuant to a Fund Accounting Agreement between the Trust and the Administrator,
the Administrator assists the Trust in calculating net asset values and provides
certain other accounting services for the Fund described therein, for an annual
fee of $30,000 plus out-of-pocket expenses.
On June 28, 1996, Furman Selz and BISYS Group, Inc. ("BISYS") announced a
definitive agreement which provides that by the end of 1996 Furman Selz will
exit the mutual funds business and recommend BISYS to Furman Selz's existing
fund clients to replace Furman Selz for mutual fund administration,
distribution, fund accounting and transfer agency services, and BISYS to
compensate Furman Selz for its efforts.
BISYS, headquartered in Little Falls, N.J., supports more than 5,000
financial institutions and corporate clients through two strategic business
units. BISYS Information Services Group provides image and data processing
outsourcing, and pricing analysis to more than 600 banks nationwide. BISYS
Investment Services Group designs, administers, and distributes over 30 families
of proprietary mutual funds consisting of more than 365 portfolios, and provides
401(k) marketing support, administration, and recordkeeping services in
partnership with 18 of the nation's leading bank and investment management
companies. BISYS trades on NASDAQ under the symbol BISYS.
As of the date of this prospectus the Board of Trustees of the Fund is
considering alternatives to Furman Selz LLC as service provider to the Fund. The
Board will decide on Furman Selz's replacement by January 1, 1997. Shareholders
of the Fund will be notified of such decision.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative service for the Fund, such as maintaining shareholder accounts
and records. The Fund may pay fees to Service Organizations (which vary
depending upon the services provided) in amounts up to an annual rate of 0.35%
of the daily net asset value of the Fund's shares owned by shareholders with
whom the Service Organization has a servicing relationship. Investors are not
required to purchase shares through or maintain an account with a Service
Organization.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the Fund's
minimum initial or subsequent investments or charging a direct fee for
servicing. A Service Organization or broker or other sales-person within such
Service Organization may be compensated at varying rates for the sale of one
class of Fund shares as opposed to another. Each Service Organization has agreed
to transmit to its clients a schedule of any such fees. Shareholders using
Service Organizations are urged to consult with them regarding any such fees or
conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
8
<PAGE> 192
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. In addition, state
securities law on this issue may differ from interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, Performance Funds Distributor, Inc. or the Adviser. The
costs borne by the Fund include legal and accounting expenses; Trustees' fees
and expenses; insurance premiums; custodian and transfer agent fees and
expenses; expenses incurred in acquiring or disposing of the Fund's portfolio
securities; expenses of registering and qualifying the Fund's shares for sale
with the SEC and with various state securities commissions; expenses of
obtaining quotations on the Fund's portfolio securities and pricing of the
Fund's shares; expenses of maintaining the Fund's legal existence and of
shareholders' meetings; and expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses. The Fund bears its own
expenses associated with its establishment as a series of Performance Funds
Trust; these expenses are amortized over a five-year period from the
commencement of the Fund's operations. See "Management" in the SAI. Trust
expenses directly attributable to the Fund are charged to the Fund; other
expenses are allocated proportionately among all of the Funds in the Trust in
relation to the net assets of each Fund.
Portfolio Transactions. Pursuant to the Investment Advisory Contract, the
Adviser places orders for the purchase and sale of portfolio investments for the
Fund's accounts with brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Adviser will seek the best execution of the Fund's orders.
Purchases and sales of portfolio debt securities for the Fund are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases and
sales of portfolio securities are generally placed by the Adviser with
broker-dealers which, in the Adviser's judgment, provide prompt and reliable
execution at favorable security prices and reasonable commission rates.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Adviser. The Adviser may cause the Fund to pay
commissions higher than another broker-dealer would have charged if the Adviser
believes the commission paid is reasonable in relation to the value of the
brokerage and research services received by the Adviser.
FUND SHARE VALUATION
The net asset value per share of the Fund is calculated at 12 noon (eastern
time) Monday through Friday, on each day the New York Stock Exchange is open for
trading. The net asset value per share of the Fund is computed by dividing the
value of the Fund's net assets (i.e., the value of the assets less the
liabilities) by the total number of the Fund's outstanding shares. All expenses,
including fees paid to the Adviser, Furman Selz and PFD, are accrued daily and
taken into account for the purpose of determining the net asset value. The Fund
uses the amortized cost method to value its portfolio securities and seeks to
maintain a constant net
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asset value of $1.00 per share, although there is no assurance that a net asset
value of $1.00 per share can be maintained.
PRICING AND PURCHASE OF FUND SHARES
Orders for purchases of shares of the Fund will be executed at the net
asset value per share next determined after an order has been received. All
monies received by the Fund are invested in full and fractional shares of the
Fund. Certificates for shares are not issued. The Fund maintains records of each
shareholder's holdings of Fund shares, and each shareholder receives a statement
of transactions, holdings and dividends. The Fund reserves the right to reject
any purchase.
Minimum Purchase Requirements. The minimum initial investment in the Fund
is $1,000, except that the minimum is $250 for an IRA, other than an IRA for
which Trustmark serves as trustee. Subsequent investments must be at least $100,
or $50 for an IRA. All initial investments should be accompanied by a completed
Purchase Application. A Purchase Application accompanies this Prospectus.
Different minimums apply, and a separate application is required for IRA
investments. The Fund reserves the right to reject purchase orders.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisers and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment adviser or Service Organization with instructions as to
the amount you wish to invest. Your broker will then contact the Fund to place
the order on your behalf on that day.
Orders received by your broker or Service Organization for the Fund in
proper order prior to the determination of net asset value and transmitted to
the Fund prior to the close of its business day (which is currently 12:00 noon,
eastern time), will become effective that day. Brokers who receive orders are
obligated to transmit them promptly. You should receive written confirmation of
your order within a few days of receipt of instruction from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the Fund. In most cases, your bank will either be a member of the
Federal Reserve Banking System or have a relationship with a bank that is. Your
bank will normally charge you a fee for handling the transaction. To purchase
shares by a Federal funds wire, please first contact the Fund. They will
establish a record of information for the wire to insure the correct processing
of funds. You can reach the Wire Desk at 1-800-737-3676.
Then, have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, Missouri 64105
ABA #1010-0362-1
Account #751-2996
Further Credit to: The US Treasury Money Market
Fund
As long as you have received the Prospectus, you may establish a new
regular account through the Wire Desk; IRAs may not be opened in this way. When
new accounts are established by wire, the distribution options will be set to
reinvest all distributions and social security or tax identification number
("TIN") will not be certified until a signed application is received. Completed
applications should be forwarded immediately to the Fund. With the application,
the shareholder can specify other distribution options and add any special
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features offered by the Fund. Should any dividend distributions or redemptions
be paid before the TIN is certified, they will be subject to 31% Federal tax
withholding.
By Automatic Investment. Investors may participate in the Automatic
Investment Program, which is an investment plan that automatically debits money
from the shareholder's designated bank account and invests it in the Fund
through the use of electronic fund transfers or automatic bank drafts.
Shareholders may elect to make investments by transfers of a minimum of $50.00
on the fifth and/or twentieth day of each month into their established Fund
Account. No minimum initial investment applies when an account is established
through the Automatic Investment Program. Contact the Fund for more information
about the Automatic Investment Program.
By Payroll Direct Deposits. Investors may set up a payroll direct deposit
arrangement for amounts to be automatically invested in the Fund. Participants
in the Payroll Direct Deposit program may make periodic investments of at least
$20.00 per pay period. Contact the Fund for more information about Payroll
Direct Deposits.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment for new or existing IRAs. Shares may
also be purchased for IRAs established with Trustmark or other authorized
custodians. In addition, an IRA may be established through a custodial account
with Investors Fiduciary Trust Company. Completion of a special application is
required in order to create such an account, and the minimum initial investment
for an IRA is $250. Contributions to IRAs are subject to prevailing amount
limits set by the Internal Revenue Service. A $5.00 establishment fee and an
annual $12.00 maintenance and custody fee is payable with respect to each
shareholder; in addition there will be charged a $10.00 termination fee when the
account is closed. For more information and IRA information, call Furman Selz
toll free at 1-800-737-3676.
EXCHANGE PRIVILEGES
The Fund offers two convenient ways to exchange shares in one of the
Performance Funds for shares in another Performance Fund. Before engaging in an
exchange transaction, a shareholder should read carefully the portions of this
Prospectus describing the Fund into which the exchange will be made. A
shareholder may not exchange shares of one Fund for shares of another Fund if
both or either are not qualified for sale in the state of the shareholder's
residence. The minimum amount for an initial exchange is $1,000 and the minimum
for subsequent exchanges is $100. Shareholders exchanging shares of the Fund for
shares of the Equity, Fixed Income and Short-Term Fixed Income Funds will be
subject to a sales load. Before making an exchange, shareholders should review
the Prospectus of the Fund into which the exchange is being made. The Trust may
terminate or amend the terms of the exchange privilege at any time upon 60 days'
written notice to shareholders.
A new account opened by exchange must be established with the same name(s),
address and social security number or TIN as the existing account. All exchanges
will be made based on the net asset value next determined following receipt of
the request by the Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to the Fund. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which you wish to exchange
your investment; (iii) the dollar or share amount you wish to exchange; and (iv)
the
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<PAGE> 195
signatures of all registered owners or authorized parties. All signatures must
be guaranteed by a member of a national securities exchange or by a commercial
bank or trust company.
Exchange by Telephone. To exchange Fund shares by telephone or if you have
any questions, simply call the Fund toll free at 1-800-737-3676. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security number or TIN and account registration;
(ii) the name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The Fund
employs reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Fund fails to employ such reasonable procedures,
it may be liable for any loss, damage or expense arising out of any telephone
transactions purporting to be on a shareholder's behalf. In order to assure the
accuracy of instructions received by telephone, the Fund requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions. Telephone exchanges are available to the shareholder unless
otherwise indicated by the shareholder by checking the box on the Purchase
Application.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any business
day. Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received and accepted by the Fund. If
shares are redeemed through a broker-dealer or investment adviser, such
redemption is complete upon receipt by the broker-dealer or investment adviser
of the shareholder's redemption request. See "Determination of Net Asset Value."
A redemption may be a taxable transaction on which gain or loss may be
recognized.
Where the shares to be redeemed have been purchased by check, the
redemption request will be returned if the purchasing check has not cleared,
which may take up to 15 days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day,
although the Fund may take up to seven days to make payment. Also, if the New
York Stock Exchange is closed (or when trading is restricted) for any reason
other than the customary weekend or holiday closing or if an emergency condition
as determined by the SEC merits such action, the Fund may suspend redemptions or
postpone payment dates.
Redemption Methods. To ensure acceptance of your redemption request, it is
important to follow the procedures described below. Although the Fund has no
present intention to do so, the Fund reserves the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Fund's services and its provisions may be
modified or terminated at any time by the Fund. If the Fund terminates any
particular service, it will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your broker or investment
adviser and instructing him to redeem your shares. He will then contact the Fund
and place a redemption trade on your behalf. You will receive the next
determined net asset value per share after receipt of such request by our broker
or investment adviser. It will be the
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<PAGE> 196
responsibility of such broker or investment adviser to transmit your redemption
request to the Fund in a timely manner. A broker or investment adviser which has
received any portion of a sales load or 12b-1 fee for the sale of such shares
may not also receive a fee for this service.
By Mail. You may redeem your shares by sending a letter directly to the
Fund. To be accepted, a letter requesting redemption must include: (i) the Fund
name and account registration from which you are redeeming shares, (ii) your
account number, (iii) the amount to be redeemed, (iv) the signatures of all
registered owners, and (v) a signature guarantee by a member of a national
securities exchange or a commercial bank or trust company (a signature guarantee
by a savings bank or a notary public is not acceptable). Corporations,
partnerships, trusts or other legal entities will be required to submit
additional documentation.
By Telephone. You may redeem your shares by calling the Fund toll free at
1-800-737-3676. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number or TIN
and account registration, (ii) the Fund name from which you are redeeming
shares, and (iii) the amount to be redeemed. The conversation may be recorded to
protect you and the Fund. Telephone redemptions are available to the shareholder
unless otherwise indicated by the shareholder by checking the box on the
Purchase Application.
By Wire. You may redeem your shares by contacting the Fund by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Your instructions should include: (i) your account number, social security
number or TIN and account registration, (ii) the Fund name from which you are
redeeming shares, and (iii) the amount to be redeemed. Wire redemptions are
available to the shareholder unless otherwise indicated by checking the box on
the Purchase Application. Please attach a copy of a void check of account where
proceeds are to be wired. Your bank may charge you a fee for receiving a wire
payment on your behalf.
Check Writing. A check redemption ($100 minimum, no maximum) feature is
available. Checks are free and may be obtained from the Fund. It is not possible
to use a check to close out your account since additional shares accrue daily.
The above mentioned services "Telephone, Wire and Check Writing" are not
available for IRAs and trust clients of Trustmark.
Systematic Withdrawal Plan. An owner of $25,000 or more of shares of the
Fund may elect to have periodic redemptions from his account to be paid on a
monthly, quarterly, semi-annual or annual basis. The minimum periodic payment is
$100. A sufficient number of shares to make the scheduled redemption will
normally be redeemed on the date selected by the shareholder. Depending on the
size of the payment requested and fluctuation in the net asset value, if any, of
the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing accounts, the Fund reserves the right to redeem, on not less than 30
days' notice, an account in a Fund that has been reduced by shareholder
redemption of the account to $500 ($250 for IRAs) or less. However, if during
the 30-day notice period the shareholder purchased sufficient shares to bring
the value of the account above $500 ($250 for IRAs), this restriction will not
apply.
Redemption in Kind. All redemptions of shares of the Fund shall be made in
cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of the Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of the Fund
at the
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beginning of such period. This commitment is irrevocable without the prior
approval of the SEC and is a fundamental policy that may not be changed without
shareholder approval. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Trustees reserves the right to have the
Fund make payment, in whole or in part, in securities or other assets, in case
of any emergency or any time a cash distribution would impair the liquidity of
the Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund intends to elect and to qualify to be treated as a regulated
investment company pursuant to the provisions of Subchapter M of the Code. By so
qualifying and electing, the Fund generally will not be subject to Federal
income tax to the extent that it distributes investment company taxable income
and net capital gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses). The
Fund intends to distribute, at least annually, substantially all net capital
gain (the excess of net long-term capital gains over net short-term capital
losses). In determining amounts of capital gains to be distributed, any capital
loss carryovers from prior years will be applied against capital gains.
Shareholders may elect to receive distributions in additional Fund shares
based on the net asset value at the close of business on the payment date of the
distribution or may receive such distribution in cash. If no election is made,
distributions will be automatically reinvested in additional shares of the Fund.
Dividends declared in, and attributable to, the preceding month will be paid
within five business days after the end of each month.
Shares purchased will begin earning dividends on the day the purchase order
is executed and shares redeemed will earn dividends through the previous day.
Net investment income for a Saturday, Sunday or a holiday will be declared as a
dividend on the previous business day.
Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Dividends of investment income (regardless of whether derived from
dividends, interest or short-term capital gains) will be taxable to shareholders
as ordinary income. Distributions of net long-term capital gains designated by
the Fund as capital gain dividends will be taxable as long-term capital gains,
regardless of how long a shareholder has held his Fund shares. Distributions are
taxable in the same manner whether received in additional shares or in cash.
A distribution, including an "exempt-interest" dividend, will be treated as
paid on December 31 of the calendar year if it is declared by the Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by the Fund during January of the following calendar year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares.
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<PAGE> 198
The dividends paid by the Fund are not expected to qualify for the
dividends-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amount, withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund in which they invest. Depending on the
residence of the shareholder for tax-purposes, distributions also may be subject
to state and local taxes, including withholding taxes. Foreign shareholders may,
for example, be subject to special withholding requirements. Special tax
treatment, including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. Shareholders should consult their own
tax advisers as to the Federal, state and local tax consequences of ownership of
shares of the Funds in their particular circumstances.
OTHER INFORMATION
CAPITALIZATION
Performance Funds Trust was organized as a Delaware business trust on March
11, 1992, and currently consists of six separate portfolios or series, two money
market funds, one of which is described in this Prospectus, and four investment
funds, which are described in a separate prospectus. The Board of Trustees may
establish additional series in the future. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of Funds are fully paid,
non-assessable and freely transferable.
This Prospectus relates to the Consumer Service Class of the Fund's shares.
The Fund also offers Institutional Class shares which are offered only to the
following types of institutional investors: trusts, or investment management and
other fiduciary accounts managed or administered by Trustmark or its affiliates
or correspondents pursuant to a written agreement (except asset allocation or
"wrap" accounts), Trustees of the Trust (and family members), Directors of
Trustmark (and family members), employees (and family members) of Trustmark, the
Distributor, Administrator, and affiliates and correspondents and any persons
purchasing shares with the proceeds of a distribution from a trust, investment
management and other fiduciary account managed or administered by Trustmark or
its affiliates or correspondents, pursuant to a written agreement, who make an
initial investment of one million dollars or more or who, at the time of
purchase have a balance of one million dollars or more in the Funds. Purchases
may be made through an authorized broker or financial institution, including the
Fund, by mail or by wire.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the Trust
Instrument disclaims liability of the shareholders, Trustees or officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of each series of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and should be considered remote
and is limited to the amount of the shareholder's investment in the Fund.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. The Trust is not required to
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<PAGE> 199
hold regular annual meetings of the Fund's shareholders and does not intend to
do so. The Fund may vote separately on items which affect only the Fund and each
class within the Fund may vote separately on matters which affect only that
class. For example, only Consumer Service Class shareholders will vote on
matters related to the Fund's Distribution Plan under Rule 12b-1. See "Other
Information -- Voting Rights" in the SAI.
The Trust Instrument provides that the holders of not less than two-thirds
of the outstanding shares of the Trust may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting of shareholders for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust or Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of the Fund.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and/or total return in
advertisements or reports to shareholders or prospective investors. Shareholders
of the Consumer Service Class of shares may experience a lower net return on
their investment than shareholders of the Institutional Class of shares because
of Rule 12b-1 Plan distribution fees paid by such shareholders. The methods used
to calculate the yield and total return of the Funds are mandated by the SEC.
Quotations of "yield" for the Fund will be based on the investment income
per share during a particular 7-day period (including dividends and interest),
less expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the maximum public offering price
per share on the last day of the period.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), 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.
Performance information for the Fund may be compared to various unmanaged
indices, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Fund 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. For a description of the
methods used to determine yield and total return for the Fund, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Fund has been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
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Furman Selz acts as the Trust's transfer agent. The Trust compensates
Furman Selz, the Trust's administrator, for providing personnel and facilities
to perform shareholder servicing and transfer agency related services for the
Trust at a rate intended not to exceed the cost of providing such services.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust c/o
Furman Selz Mutual Funds Department, 237 Park Avenue, New York, New York 10017.
General and Account Information: (800) PERFORM (737-3676).
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<PAGE> 201
[LOGO]
INVESTMENT ADVISER
Trustmark National Bank
348 East Capitol Street
Jackson, Mississippi 39201
SPONSOR AND ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Performance Funds Distributor, Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
Trustmark National Bank
348 East Capitol Street
Jackson, Mississippi 39201
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
[LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
U.S. TREASURY MONEY
MARKET FUND
CONSUMER SERVICE CLASS
PROSPECTUS
SEPTEMBER 27, 1996
[LOGO]
Performance Funds'
Investment Adviser
<PAGE> 202
PERFORMANCE FUNDS TRUST
Telephone: 1-800 PERFORM (737-3676)
STATEMENT OF ADDITIONAL INFORMATION - September 27, 1996
THE MONEY MARKET FUND
Performance Funds Trust (the "Trust") is an open-end, management investment
company of the series type. This Statement of Additional Information ("SAI")
contains information about both the "Consumer Service Class" and the
"Institutional Class" of the Trust's MONEY MARKET FUND (THE "FUND"). The
investment objective of the Fund is described in the Prospectus. See "The
Investment Policies and Practices of the Fund."
This SAI is not a prospectus and should be read in conjunction with
the Fund's Prospectus, dated September 27, 1996. All terms used in this SAI
that are defined in the Prospectus will have the meanings assigned in the
Prospectus. Copies of the Prospectus may be obtained without charge by writing
to Performance Funds Distributor, Inc. ("PFD"), the Trust's distributor, at 230
Park Avenue, New York, New York 10169; or by calling the Fund at the telephone
number indicated above.
__________________________________
<PAGE> 203
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Additional Permitted Investment
Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Rule 12b-1 Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . 8
Calculation of Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . 11
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Shares of Beneficial Interest . . . . . . . . . . . . . . . . . . . . . . . 16
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
- i -
<PAGE> 204
INVESTMENT RESTRICTIONS
The Fund is subject to the following investment restrictions, all of
which are fundamental policies:
The Fund may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Fund's investments in that industry would
exceed 25% of the current value of the Fund's total assets, provided that there
is no limitation with respect to investments in (i) obligations of the United
States Government, its agencies or instrumentalities, and (ii) the obligations
of domestic banks (for the purposes of this restriction, domestic bank
obligations do not include obligations of U.S. branches of foreign banks or
obligations of foreign branches of U.S. banks);
(2) purchase or sell real estate (other than securities secured by
real estate or interests therein or securities issued by companies that invest
in real estate or interests therein), commodities or commodity contracts;
except that the Fund may enter into financial futures contracts and may write
call options and purchase call and put options on financial futures contracts
as generally described in the Prospectus and this SAI;
(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and except for "margin" payments in
connection with financial futures contracts and options on futures contracts)
or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent
that the purchase of otherwise permitted investments directly from the issuer
thereof or from an underwriter for an issuer and the later disposition of such
securities in accordance with the Fund's investment program may be deemed to be
an underwriting;
(5) invest more than 10% of the current value of its net assets in
repurchase agreements maturing in more than seven days, in fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, or in securities or other assets which the Board of Trustees
determines to be illiquid securities or assets. For purposes of this
restriction, securities issued pursuant to Rule 144A may be considered to be
liquid pursuant to guidelines adopted by the Board of Trustees.
<PAGE> 205
(6) acquire securities for the purpose of exercising control or
management over the issues thereof; or
(7) issue senior securities, except that the Fund may borrow from
banks up to 10% of the current value of its net assets for temporary purposes
only in order to meet redemptions, and these borrowings may be secured by the
pledge of up to 15% of the current value of its net assets (but new investments
may not be purchased while any such borrowing exists); and provided further
that the Fund may acquire when-issued securities, enter into other forward
contracts to acquire securities, and enter into or acquire financial futures
contracts and options thereon when the Fund's obligation thereunder, if any, is
"covered" (i.e., the Fund establishes a segregated account in which it
maintains liquid assets in an amount at least equal in value to the Fund's
obligations and marks-to-market daily such collateral).
(8) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs.
(9) invest in shares of other open-end, management investment
companies beyond the limitations of the Investment Company Act of 1940 (the
"1940 Act") and subject to such investments being consistent with the overall
objective and policies of the Fund making such investment, provided that any
such purchases will be limited to short-term investments in shares of
unaffiliated investment companies and the Adviser will waive its advisory fees
for that portion of the Fund's assets so invested, except when such purchase is
part of a plan of merger, consolidation, reorganization or acquisition.
The Fund may not, with respect to 75% of its total assets, purchase
securities of any issuer (except securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities) if, as a result, more than 5%
of the value of its total assets would be invested in the securities of any one
issuer or, with respect to 100% of its assets, the Fund's ownership would be
more than 10% of the outstanding voting securities of such issuer. In
addition, the Fund is subject to additional diversification obligations
pursuant to Rule 2a-7 under the 1940 Act.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Unrated Investments. The Fund may purchase instruments that are not
rated if such obligations are of investment quality comparable to
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other rated investments that are permitted to be purchased by such Fund and if
they are purchased in accordance with the Fund's procedures adopted by the
Board of Trustees in accordance with Rule 2a-7 under the 1940 Act.
After purchase by the Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require a sale of such security by the Fund, provided that,
when a security ceases to be rated, the Board of Trustees determines that such
security presents minimal credit risks, and provided further that, when a
security rating is downgraded below eligible quality or no longer presents
minimal credit risks, the Board of Trustees finds that the sale of such
security would not be in the Fund's best interest. To the extent the ratings
given by S&P or Moody's may change as a result of changes in such organizations
or their rating systems, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in the Prospectus and in this SAI. The ratings of S&P and Moody's are more
fully described in the Appendix to this SAI.
Letters of Credit. The Fund may purchase debt obligations backed by
an irrevocable letter of credit of a bank, savings and loan association or
insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies which, in the opinion of the Adviser are
of investment quality comparable to other permitted investments of the Fund may
be used for letter of credit-backed investments.
MANAGEMENT
Trustees and Officers. The trustees and executive officers of the Trust, and
their principal occupations during the past five years, are listed below. The
Trustees who are deemed to be an "interested person" of the Trust for purposes
of the 1940 Act are marked with an asterisk "*".
James H. Johnston, III, M.D., age 50, Trustee - 1421 North State Street Suite
203, Jackson, Mississippi 39202. Physician (Gastroenterologist) with
Gastrointestinal Associates, P.A., Jackson, Mississippi since 1984.
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John J. Pileggi, age 37, Trustee* and Principal Executive Officer - 237 Park
Avenue,New York, New York 10017. Senior Managing Director, Furman Selz LLC.
James T. Mallette, age 37, Trustee*, 111 East Capitol Street, Jackson,
Mississippi 39215. Attorney, Daniel Coker Horton and Bell, P.A., P.O. Box
1084, Jackson, Mississippi since July 1987. Prior thereto, Mr. Mallette was
employed as Counsel with the law firm of Crockett, Neeld and Starling, Jackson,
Mississippi 39201. President and Director of Rollingwood, Beautiful
Association, Inc., Director of Easter Seal Society of Jackson, Mississippi,
Inc.
Walter P. Neely, age 51, Ph.D., CFA, Trustee, 1701 North State Street, Jackson,
Mississippi 39210. Professor and Consultant, Millsaps College, Jackson,
Mississippi, since 1980. Director, KLLM Transport Systems, Jackson,
Mississippi.
Charles M. Carr, age 65, Trustee - 1451 Highland Park Drive, Jackson, MS
39211. Petroleum Consultant since 1992. From 1991 to April, 1992 Managing
Director at Amoco (U.K.) Exploration Co., West Gate, London, U.K.
John William Head*, age 71, Trustee, - 46 Avery Circle, Jackson, MS 39211.
Retired. From 1975-1990 Executive Vice President - CEO of Southern Farm Bureau
Casualty Insurance Co.
Donald Brostrom, age 37, Principal Financial and Accounting Officer. - 237 Park
Avenue, New York, New York 10017. Director/Fund Services, Furman Selz LLC.
Joan V. Fiore, age 40, Secretary - 237 Park Avenue, New York, New York 10017.
Managing Director and Counsel, Furman Selz LLC. Attorney with the Securities
and Exchange Commission from 1986 to 1991.
Sheryl Hirschfeld, age 36, Assistant Secretary - 237 Park Avenue, New York, New
York 10017. Director, Corporate Secretary Services, Furman Selz LLC, since
1994. Assistant to Corporate Secretary and General Counsel of The Dreyfus
Corporation from 1982 to 1994.
As required by law, for as long as the Trust has a Distribution Plan,
the selection and nomination of trustees who are not "interested persons" of
the Trust will be made by such disinterested trustees. See "Rule 12b-1
Distribution Plan" in this SAI.
Trustees of the Trust who are not affiliated with the Distributor or
the Adviser receive from the Trust an annual fee of $5,000 and a
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fee for each Board of Trustees and Board committee meeting attended of $1,000.
Trustees who are affiliated with the Distributor or the Adviser do not receive
compensation from the Trust but all trustees are reimbursed for all
out-of-pocket expenses relating to attendance at meetings.
The following table sets forth total compensation paid to Trustees for
the fiscal year ended May 31, 1996. Except as disclosed below, no executive
officer or person affiliated with the Fund received compensation from the Fund
for the fiscal year ended May 31, 1996 in excess of $60,000.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Person, Position Aggregate Pension or Estimated Annual Total Compensation
Compensation from Retirement Benefits Benefits Upon from Registrant and
the Registrant Accrued as Part of Retirement Fund Complex
Fund Expenses
<S> <C> <C> <C> <C>
John J. Pileggi None 0 N/A None
Trustee and Principal
Executive Officer
James H. Johnston, III, $7,833 0 N/A $7,833
M.D.
Trustee
James T. Mallette $7,833 0 N/A $7,833
Trustee
Walter P. Neely, Ph.D., $7,833 0 N/A $7,833
CFA, Trustee
Charles M. Carr, Trustee* $7,833 0 N/A $7,833
John William Head, Trustee* $7,833 0 N/A $7,833
</TABLE>
______________________
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* Messrs. Carr and Head were elected as Trustees on September 6,
1996. Amount shown represents the total compensation estimated to be
paid to such person during a complete fiscal year.
As of the date of this SAI, trustees and officers of the Trust as a
group beneficially owned less than 1% of the outstanding shares of the Trust.
The Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201 (the "Adviser") serves as the investment adviser to
the Fund pursuant to a Master Investment Advisory Contract (the "Advisory
Contract"). The Advisory Contract provides that the Adviser shall furnish to
the Fund investment guidance and policy direction in connection with the daily
portfolio management of the Fund. Pursuant to the Advisory Contract, the
Adviser furnishes to the Board of Trustees periodic reports on the investment
strategy and performance of the Fund.
The Adviser has agreed to provide to the Fund, among other things,
money market security and fixed-income research, and analysis and statistical
and economic data and information concerning interest rate and security market
trends, portfolio composition and credit conditions.
The Advisory Contract will continue in effect for more than two years
provided the continuance is approved annually, (i) by the holders of a majority
of the respective Fund's outstanding voting securities (as defined in the 1940
Act) or by the Trust's Board of Trustees and (ii) by a majority of the trustees
of the Trust who are not parties to the Advisory Contract or "interested
persons" (as defined in the 1940 Act) of any such party. The Advisory Contract
may be terminated on 60 days' written notice by either party and will terminate
automatically if assigned.
For the advisory services it provides to the Fund Trustmark may
receive fees based on average daily net assets up to the following annualized
rates: The Money Market Fund, 0.30%.
For the period September 30, 1993 (commencement of operations) through
May 31, 1994 and for the fiscal years ended May 31, 1995 and May 31, 1996
Trustmark was entitled to and waived advisory fees as listed below:
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The Money Market Fund
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Trustmark Entitled $188,396 $640,105 $1,151,421
Trustmark Waived $188,396 $525,439 $782,328
</TABLE>
Trustmark National Bank also serves as custodian for the Fund. See
"Custodian." Furman Selz serves as the Funds' transfer agent and provides
certain administrative, shareholder servicing and fund accounting services for
the Fund.
Counsel has advised the Trust that the Adviser should be able to
perform the services contemplated by the Advisory Contract with the Trust, the
Prospectus and this SAI, without violation of the Glass-Steagall Act. Such
counsel have pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes and regulations relating to the permissible activities of banks
and their subsidiaries or affiliates, as well as future changes in federal or
state statutes and regulations and judicial or administrative decisions or
interpretations thereof, could prevent the Adviser or its Affiliates from
continuing to perform, in whole or in part, such services. If the Adviser were
prohibited from performing the services, it is expected that new agreements
would be proposed or entered into with another entity or entities qualified to
perform such services.
Administrator. The Trust has retained Furman Selz LLC as
administrator on behalf of the Fund. Under the Administration Agreements with
the Trust, the Administrator, in connection therewith, furnishes the Trust with
office facilities, together with those ordinary clerical and bookkeeping
services that are not being furnished by the Adviser.
For the period September 30, 1993 (commencement of operations) through
May 31, 1994 and for the fiscal years ended May 31, 1995 and May 31, 1996, the
Administrator was entitled to receive fees totaling $94,198, $320,053 and
$575,832 respectively, and waived $94,198, $242,643 and $352,869,
respectively, from the Money Market Fund pursuant to the Fund's Administration
Agreement with Furman Selz.
Expense Limitation. Currently, California is the only state imposing
limitations on the expenses of the Fund. Those expense limitations are 2-1/2
percent of the first $30 million of the Fund's
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average net assets, 2 percent of the next $70 million and 1-1/2 percent of the
Fund's remaining average net assets. If in any fiscal year expenses of the
Fund (excluding taxes, interest, expenses under the Plan, brokerage commissions
and other portfolio transaction expenses, other expenditures which are
capitalized in accordance with generally accepted accounting principles and
extraordinary expenses, but including the advisory and administration fees)
exceed the expense limitations applicable to the Fund imposed by the securities
regulations of any state, Furman Selz and Trustmark will reimburse the Funds
for a portion of the excess with Trustmark paying 60% and Furman Selz the
remaining 40% of the excess.
RULE 12B-1 DISTRIBUTION PLAN
As described in the Prospectus, the Trust has adopted, for the
Consumer Service Class of the Fund, a Distribution Plan under Section 12(b) of
the 1940 Act and Rule 12b-1 thereunder (the "Rule"). The Distribution Plan was
adopted by the Board of Trustees, including a majority of the trustees who were
not "interested persons" (as defined in the 1940 Act) of the Trust and who had
no direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the "Qualified Trustees").
Under the Distribution Plan, the Fund may, with respect to its
Consumer Service Class, reimburse the Distributor monthly subject to a limit of
0.35% per annum for costs and expenses of the Distributor in connection with
the distribution of Fund shares of the Consumer Service Class. These costs and
expenses include: (i) advertising by radio, television, newspapers, magazines,
brochures, sales literature, direct mail or any other form of advertising, (ii)
expenses of sales employees or agents of the Distributor, including salary,
commissions, travel and related expenses, (iii) payments to broker-dealers and
financial institutions for services in connection with the distribution of
shares, including promotional incentives and fees calculated with reference to
the average daily net asset value of shares held by shareholders who have a
brokerage or other service relationship with the broker-dealer or other
institution receiving such fees, (iv) costs of printing prospectuses and other
materials to be given or sent to prospective investors, and (v) such other
similar services as the Board of Trustees determines to be reasonably
calculated to result in the sale of shares of the Fund. The actual fee payable
to the Distributor shall, within such limit, be determined from time to time by
mutual agreement between the Trust and the Distributor. The Distributor may
enter into selling agreements with one or more selling agents under which such
agents may receive
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<PAGE> 212
compensation for distribution-related services from the Distributor, including,
but not limited to, commissions or other payments to such agents based on the
average daily net assets of Fund shares attributable to them. The Distributor
may retain any portion of the total distribution fee payable under the Plan to
compensate it for the distribution-related services provided by it or to
reimburse it for other distribution-related expenses. The SEC has proposed
certain amendments to the Rule. If the proposed amendments are adopted, the
distribution arrangement described above may have to be modified to ensure that
all payments of distribution expenses are attributable to specific sales or
promotional services or activities. Any other amendments to the Rule also
could require amendments or revisions to the distribution arrangements
described above.
The Distribution Plan will continue in effect from year to year if
such continuance is approved by a majority vote of both the trustees of the
Trust and the Qualified Trustees. Such agreements will terminate automatically
if assigned, and may be terminated at any time, without payment of any penalty,
by a vote of a majority of the outstanding voting securities of the Fund. The
Distribution Plan may not be amended to increase materially the amounts payable
thereunder by the Fund without the approval of a majority of the outstanding
voting securities of the Fund, and no material amendment to the Distribution
Plan may be made except by a majority of both the trustees of the Trust and the
Qualified Trustees.
For the period September 30, 1993 (commencement of operations) through
May 31, 1994 and for the fiscal years ended May 31, 1995 and May 31, 1996, the
Consumer Service Class of the Money Market Fund paid $1,459, $5,740 and
$26,694, respectively, pursuant to the Fund's Distribution Plan.
CALCULATION OF YIELD
As indicated in the Prospectus, the Fund may advertise certain yield
information.
Current yield for the Fund will be calculated based on the net
changes, exclusive of capital changes, over a seven-day period, in the value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the
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base period return by (365/7) with the resulting yield figure carried to at
least the nearest hundredth of one percent.
Based on the seven day period ended May 31, 1996, the seven day yield
of the Consumer Service and Institutional Class Shares of the Money Market was
2.85% and 5.10%, respectively.
Effective yield for the Fund will be calculated by determining the net
changes, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding one, raising the sum to a power
equal to 365 divided by seven, and subtracting one from the result, according
to the following formula:
Effective Yield = [[Base Period Return + 1]365/7]-1.
The yield for the Fund will fluctuate from time to time, unlike bank
deposits or other investments that pay a fixed yield for a stated period of
time, and does not provide a basis for determining future yield or total return
since it is based on historical data. Yield and total return are functions of
portfolio quality, composition, maturity and market conditions as well as the
expenses allocated to the Fund.
From time to time, the Trust may quote the Fund's performance in
advertising and other types of literature as compared to the performance of the
S&P Index, the Dow Jones Industrial Average or any other commonly quoted index
of common stock prices. The S&P Index and the Dow Jones Industrial Average are
unmanaged indices of selected common stock prices. The Fund's performance also
may be compared to those of other mutual funds having similar objectives. This
comparative performance could be expressed as a ranking prepared by Lipper
Analytical Services, Inc., an independent service which monitors the
performance of mutual funds, or as a comparison with other money market funds
rated by Donohue's Money Fund Report, a reporting service on mutual funds.
The Fund's comparative performance for such purposes may be calculated
by relating net asset value per share at the beginning of a stated period to
the net asset value of the investment, assuming reinvestment of all gains,
distributions and dividends paid, at the end of the period. Any such
comparisons may be useful to investors who wish to compare the Fund's past
performance with that of its
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competitors. Of course, past performance cannot be a guarantee of future
results.
The Trust also may discuss in advertising and other types of
literature that the Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as S&P or Moody's. Such rating
would assess the creditworthiness of the investments held by the Fund. The
assigned rating would not be a recommendation to purchase, sell or hold the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of a Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information
relating to a Fund or its investments. The Trust may compare the Fund's
performance with other investments which are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare a Fund's past
performance with other rated investments.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for the Fund is determined by the
Administrator of the Fund on each day the New York Stock Exchange is open for
trading.
As indicated under "Fund Share Valuation" in the Prospectus, the Fund
uses the amortized cost method to determine the value of its portfolio
securities pursuant to Rule 2a-7 under the 1940 Act. The amortized cost method
involves valuing a security at its cost and amortizing any discount or premium
over the period until maturity, regardless of the impact of fluctuating
interest rates on the market value of the security. While this method provides
certainty in valuation, it may result in periods during which the value, as
determined by amortized cost, is higher or lower than the price that the Fund
would receive if the security were sold. During these periods the yield to a
shareholder may differ somewhat from that which could be obtained from a
similar fund that uses a method of valuation based upon market prices. Thus,
during periods of declining interest rates, if the use of the amortized cost
method resulted in a lower value of the Fund's portfolio on a particular day, a
prospective investor in the Fund would be able to obtain a somewhat higher
yield than would result from investment in a fund using solely market values,
and existing shareholders of the Fund would receive correspondingly less
income. The converse would apply during periods of rising interest rates.
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<PAGE> 215
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Fund must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities (as defined in Rule 2a-7) of 13 months or less and invest only in
Eligible Securities determined by the Board of Trustees to present minimal
credit risks. The maturity of an instrument is generally deemed to be the
period remaining until the date when the principal amount thereof is due or the
date on which the instrument is to be redeemed. However, Rule 2a-7 provides
that the maturity of an instrument may be deemed shorter in the case of certain
instruments, including certain variable and floating rate instruments subject
to demand features. Pursuant to the Rule, the Board is required to establish
procedures designed to stabilize, to the extent reasonably possible, the Fund's
price per share as computed for the purpose of sales and redemptions at $1.00.
The extent of any deviations from $1.00 per share will be examined by the Board
of Trustees. If such deviation exceeds 1/2 of 1%, the Board will promptly
consider what action, if any, will be initiated. In the event the Board
determines that a deviation exists that may result in material dilution or
other unfair results to investors or existing shareholders, the Board will take
such corrective action as it regards as necessary and appropriate, including
the sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity, withholding dividends or
establishing a net asset value per share by using available market quotations.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any broker/dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Trust's Board of Trustees, the Adviser is
responsible for the Fund's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Trust to obtain the
best execution taking into account the broker/dealer's general execution and
operational facilities, the type of transaction involved and other factors.
While the Adviser generally seeks reasonably competitive spreads or
commissions, the Fund will not necessarily be paying the lowest spread or
commission available.
The Adviser may, in circumstances in which two or more broker/dealers
are in a position to offer comparable results for a
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<PAGE> 216
Fund portfolio transaction, give preference to a broker/dealer that has
provided statistical or other research services to the Adviser. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of securities firms. Information so
received may be in addition to, and not in lieu of, the services required to be
performed by the Adviser under the Advisory Contract, and the expenses of the
Adviser will not necessarily be reduced as a result of the receipt of this
supplemental research information. Furthermore, research services furnished by
broker/dealers through which the Adviser places securities transactions for the
Fund may be used by the Adviser in servicing its other accounts, and not all of
these services may be used by the Adviser in connection with advising the Fund.
In so allocating portfolio transactions, the Adviser may, in compliance with
Section 28(e) of the Securities Exchange Act of 1934, cause the Trust to pay an
amount of commission that exceeds the amount of commission that another
broker/dealer would have charged for effecting the same transaction.
Purchases and sales of portfolio securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. The
Fund also may purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, money market
securities and other debt obligations are traded on a net basis and do not
involve brokerage commissions. The costs associated with executing the Fund's
portfolio securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with the
Trust are prohibited from dealing with the Trust as a principal in the purchase
and sale of securities unless an exemptive order allowing such transactions is
obtained from the SEC or an exemption is otherwise available. The Fund may
purchase obligations from underwriting syndicates of which the Distributor (or
its affiliate) is a member under certain conditions in accordance with the
provisions of a rule adopted under the 1940 Act and in compliance with
procedures adopted by the Board of Trustees.
The Fund did not pay any brokerage commissions for the fiscal years
ended May 31, 1994, May 31, 1995 and May 31, 1996.
Portfolio Turnover. Because the portfolio of the Fund consists of
securities with relatively short-term maturities, the Fund can expect to
experience high portfolio turnover. A high portfolio turnover rate should not
adversely affect the Fund, however, because the portfolio securities will in
most cases be held to maturity and
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will not be resold. Also, it is not anticipated that the Fund will incur
brokerage commissions in connection with any of its portfolio transactions.
FEDERAL INCOME TAXES
The Prospectus describes generally the tax treatment of dividends and
distributions made by the Trust. This section of the SAI includes additional
information concerning federal income taxes.
Qualification by the Fund as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended, (the "Code") requires, among
other things, that (a) at least 90% of the Fund's annual gross income be
derived from interest, payments with respect to securities loans, dividends and
gains from the sale or other disposition of stock or securities or options,
futures, forward contracts, foreign currencies, and other income derived with
respect to its business of investing in stock or securities; (b) the Fund
derives less than 30% of its gross income from the sale or other disposition of
certain assets (namely, (i) stock or securities; options, futures or forward
contracts on foreign currencies), or foreign currencies(or options, futures or
forward contracts on foreign currencies)but only if such currencies (or
options, futures or forward contracts) are not directly related to the Fund's
principle business of investing in stock or securities (or options and futures
with respect to stock or securities thereon held for less than three months;
and (c) the Fund diversifies its holdings so that, at the end of each quarter
of the taxable year, (i) at least 50% of the market value of the Fund's assets
is represented by cash and cash items (including receivables), U.S. government
securities, securities of other regulated investment companies and other
securities (except that such other securities must be limited in respect of any
one issuer to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer), and (ii) not more than 25% of
the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities and the securities of other regulated
investment companies), or of two or more issuers which the taxpayer controls
and which are determined to be engaged in the same or similar trades or
businesses or related trades or businesses. The Fund will not be subject to
federal income tax on its net investment income and net capital gains which are
distributed to its shareholders, provided that it distributes to its
stockholders at least 90% of its net investment income and tax-exempt income
earned in each year. If the Fund does not meet all of these Code
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requirements, it will be taxed as an ordinary corporation and its distributions
will be taxed to shareholders as ordinary income.
Under the Code, a nondeductible excise tax of 4% is imposed on the
excess of a regulated investment company's "required distribution" for the
calendar year ending within the regulated investment company's taxable year
over the "distributed amount" for such calendar year. The term "required
distribution" means the sum of (i) 98% of its ordinary income for the calendar
year, (ii) 98% of capital gain net income for the one year period ending on
October 31 and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the regulated investment company from its current
year's ordinary income and capital gain net income and (ii) any amount on which
the regulated investment company pays income tax for the year.
For this purpose, any income or gain retained by the Fund that is
subject to tax will be considered to have been distributed by year-end. In
addition, dividends and distributions declared payable as of a date in October,
November or December of any calendar year are deemed under the Code to have
been received by the shareholders on December 31 of that calendar year if the
dividend is actually paid in the following January. Such dividends will,
accordingly, be subject to income tax for the year in which the record date
falls. The Fund intends to distribute substantially all of its net investment
income and net capital gains and, thus, expects not to be subject to the excise
tax.
A capital gains distribution will be a return of invested capital to
the extent the net asset value of an investor's shares is thereby reduced below
his or her cost, even though the distribution will be taxable to the
shareholder. A redemption of shares by a shareholder under these circumstances
could result in a capital loss for federal tax purposes.
Any loss realized on a redemption or exchange of shares of a Fund will
be disallowed to the extent shares are reacquired within the 60-day period
beginning 30 days before and ending 30 days after the day the shares are
disposed.
Shareholders will be notified annually by the Trust as to the Federal
tax status of distributions made by the Fund. Depending on the residence of
the shareholder for tax purposes, distributions also may be subject to state
and local taxes. Special tax treatment,
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<PAGE> 219
including a penalty on certain pre-retirement distributions, is accorded to
accounts maintained as IRAs. Shareholders should consult their own tax
advisers as to the Federal, state and local tax consequences of ownership of
shares of the Fund in their particular circumstances.
Foreign Shareholders Under the Code, distributions of net investment
income by the Fund to a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation, or foreign partnership (a
"foreign shareholder") will be subject to U.S. withholding tax (at a rate of
30% or a lower treaty rate). Withholding will not apply if a dividend paid by
the Fund to a foreign shareholder is "effectively connected" with a U.S. trade
or business, in which case the reporting and withholding requirements
applicable to U.S. citizens or domestic corporations will apply. Distributions
of net long-term capital gains are not subject to tax withholding, but in the
case of a foreign shareholder who is a nonresident alien individual, such
distributions ordinarily will be subject to U.S. income tax at a rate of 30% if
the individual is physically present in the U.S. for more than 182 days during
the taxable year.
SHARES OF BENEFICIAL INTEREST
The Trust consists of multiple investment portfolios or funds, each of
which is comprised of two classes of shares -- the "Institutional Class" and
the "Consumer Service Class." When certain matters affect one class but not
another, the shareholders would vote as a class regarding such matters. Subject
to the foregoing, on any matter submitted to a vote of shareholders, all shares
then entitled to vote will be voted separately by Fund or portfolio unless
otherwise required by the 1940 Act, in which case all shares will be voted in
the aggregate. For example, a change in the Fund's fundamental investment
policies would be voted upon only by shareholders of the Fund involved.
Additionally, approval of the Advisory Contract is a matter to be determined
separately by each Fund. Approval by the shareholders of one Fund is effective
as to that Fund whether or not sufficient votes are received from the
shareholders of the other Funds to approve the proposal as to those Funds. As
used in the Prospectus and in this SAI, the term "majority," when referring to
approvals to be obtained from shareholders of a Fund or class means the vote of
the lesser of (i) 67% of the shares of the Fund or class represented at a
meeting if the holder of more than 50% of the outstanding shares of the Fund or
class are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of the Fund or class. The term
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<PAGE> 220
"majority," when referring to the approvals to be obtained from shareholders of
the Trust as a whole means the vote of the lesser of (i) 67% of the Trust's
shares represented at a meeting if the holders of more than 50% of the Trust's
outstanding shares are present in person or proxy, or (ii) more than 50% of the
Trust's outstanding shares. Shareholders are entitled to one vote for each
full share held and fractional votes for fractional shares held.
The Trust may dispense with annual meetings of shareholders in any
year in which it is not required to elect trustees under the 1940 Act.
However, the Trust undertakes to hold a special meeting of its shareholders if
the purpose of voting on the question of removal of a director or trustees is
requested in writing by the holders of at least 10% of the Trust's outstanding
voting securities, and to assist in communicating with other shareholders as
required by Section 16(c) of the 1940 Act.
Each share of the Fund represents an equal proportional interest in
the Fund with each other share and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of the Trustees. In the event of the
liquidation or dissolution of the Trust, shareholders of the Fund are entitled
to receive the assets attributable to that Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular Fund that are available for distribution in such manner and on such
basis as the Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Trust.
As of the date of this SAI, the Trustees and officers of the Trust as
a group owned less than 1% of the outstanding shares of the Fund.
As of September 12, 1996, the following were five percent or greater
shareholders of the Fund:
<TABLE>
<CAPTION>
Consumer
<S> <C>
Trust for Mississippi Baptist Medical Center 5.82%
1225 N State Street
Jackson, MS 39202-2002
</TABLE>
-17-
<PAGE> 221
<TABLE>
<S> <C>
W.G. Yates & Sons Cons. Co. 11.40%
P.O. Box 456
Philadelphia, PA 39350-0455
St. Dominic Jackson Memorial Hospital 15.15%
969 Lakeland Drive
Jackson, MS 39216-4602
</TABLE>
<TABLE>
<CAPTION>
Institutional
<S> <C>
Harmon & Co. 85.60%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
First Union National Bank 14.13%
401 South Tryon Street
Charlotte, NC 28202
</TABLE>
OTHER MATTERS
The Trust's Registration Statement, including the Prospectus, the SAI
and the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C. Statements contained in the Prospectus or the SAI as to the
contents of any contract or other document referred to herein or in the
Prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
CUSTODIAN
Trustmark also acts as Custodian for the Fund. The Custodian, among
other things, maintains a custody account or accounts in the name of the Fund;
receives and delivers all assets for the Fund upon purchase and upon sale or
maturity; collects and receives all income and other payments and distributions
on account of the assets of the Fund and pays all expenses of the Fund. For
its services as Custodian, Trustmark receives an asset-based fee and
transaction charges.
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<PAGE> 222
For the period September 30, 1993 (commencement of operations) through
May 31, 1994 and for the fiscal years ended May 31, 1995 and May 31, 1996, the
Money Market Fund paid $25,119, $83,988 and $153,662 to the Custodian.
EXPERTS
Price Waterhouse LLP has been selected as the independent accountants
for the Trust. Price Waterhouse LLP provides audit services, tax return
preparation and assistance and consultation in connection with certain SEC
filings. Price Waterhouse LLP's address is 1177 Avenue of the Americas, New
York, New York, 10036.
FINANCIAL STATEMENTS
Financial Statements for the Fund as of May 31, 1996 and for the
period then ended including the Report of Price Waterhouse LLP independent
accountants, are incorporated by reference.
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<PAGE> 223
APPENDIX
The following is a description of the ratings by Moody's and Standard
& Poor's.
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or 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 fluctuations
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; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
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<PAGE> 224
B: Bonds which are rated B generally lack characteristics of
a desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are 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 which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating
has been suspended or withdrawn, it may be for reasons unrelated to the quality
of the issue.
Should no rating be assigned, the reason may be one of the following:
(1) An application for rating was not received or accepted.
(2) The issue or issuer belongs to a group of securities that are
not rated as a matter of policy.
(3) There is a lack of essential data pertaining to the issue or
issuer.
(4) The issue was privately placed, in which case the rating is
not published in Moody's Investors Services, Inc.'s
publications.
Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude satisfactory analysis; if
there is no longer available reasonable up-to-date data to permit a judgment to
be formed; if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated by
the symbols Aa-1, A-1, Baa-1 and B-1.
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<PAGE> 225
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA have the highest rating assigned by
Standard & Poor's Corporation ("S&P"). Capacity to pay interest and repay
principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher rated issues only in
small degree.
A: Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in the
highest rated categories.
BBB: Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they normally exhibit
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 bonds in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of this
obligation. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, they are outweighed by large uncertainties of major
risk exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no
interest is being paid.
D: Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
NR: Indicates that no rating has been requested, that there
is insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
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<PAGE> 226
PERFORMANCE FUNDS TRUST
Telephone: 1-800 PERFORM (737-3676)
STATEMENT OF ADDITIONAL INFORMATION - September 27, 1996
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE EQUITY FUND
Performance Funds Trust (the "Trust") is an open-end, management
investment company of the series type. This Statement of Additional
Information ("SAI") contains information about both the "Consumer Service
Class" and the "Institutional Class" of three of the Trust's investment
portfolios--THE SHORT TERM GOVERNMENT INCOME FUND (THE "SHORT TERM FUND"), THE
INTERMEDIATE TERM GOVERNMENT INCOME FUND (THE "INTERMEDIATE FUND") (THE SHORT
TERM FUND AND THE INTERMEDIATE FUND ARE TOGETHER REFERRED TO HEREIN AS THE
"GOVERNMENT INCOME FUNDS") AND THE EQUITY FUND (THE "EQUITY FUND") (each, a
"Fund" and collectively, the "Funds"). The investment objectives of each Fund
are described in the Prospectus. See "The Investment Policies of the Funds."
This SAI is not a prospectus and should be read in conjunction with
the Funds' Prospectus, dated September 27, 1996. All terms used in this SAI
that are defined in the Prospectus will have the meanings assigned in the
Prospectus. Copies of the Prospectus may be obtained without charge by writing
to Performance Funds Distributor, Inc. ("PFD"), the Trust's distributor, at 230
Park Avenue, New York, New York 10169; or by calling the Funds at the telephone
number indicated above.
________________________________
<PAGE> 227
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 1
Additional Permitted Investment Activities . . . . . . . . . . . . . . . 3
Management Of The Funds . . . . . . . . . . . . . . . . . . . . . . . . . 8
Rule 12b-1 Distribution Plan . . . . . . . . . . . . . . . . . . . . . . 12
Calculation Of Yield And Total Return . . . . . . . . . . . . . . . . . . 13
Determination Of Net Asset Value . . . . . . . . . . . . . . . . . . . . 15
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 16
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Shares Of Beneficial Interest . . . . . . . . . . . . . . . . . . . . . . 21
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<PAGE> 228
INVESTMENT RESTRICTIONS
The Funds are subject to the following investment restrictions, all of
which are fundamental policies:
None of the Funds may:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of any Fund's investments in that industry would
exceed 25% of the current value of such Fund's total assets, provided that
there is no limitation with respect to investments in obligations of the United
States Government, its agencies or instrumentalities;
(2) purchase or sell real estate (other than securities secured by
real estate or interests therein or securities issued by companies that invest
in real estate or interests therein), commodities or commodity contracts;
except that the Funds may enter into financial futures contracts and may write
call options and purchase call and put options on financial futures contracts
as generally described in the Prospectus and this SAI;
(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and except for "margin" payments in
connection with financial futures contracts and options on futures contracts)
or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent
that the purchase of otherwise permitted investments directly from the issuer
thereof or from an underwriter for an issuer and the later disposition of such
securities in accordance with the Funds' investment program may be deemed to be
an underwriting;
(5) invest more than 15% of the current value of its net assets in
repurchase agreements maturing in more than seven days, in fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, or in securities or other assets which the Board of Trustees
determines to be illiquid securities or assets. For purposes of this
restriction, securities issued pursuant to Rule 144A may be considered to be
liquid pursuant to guidelines adopted by the Board of Trustees;
(6) acquire securities for the purpose of exercising control or
management over the issuers thereof;
(7) issue senior securities or otherwise borrow, except that each
Fund may borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 15% of the current value of its net assets
(but new investments may not be purchased while any such borrowing exists); and
provided further that a Fund may acquire when-issued securities, enter into
other forward contracts to acquire securities, and enter into or acquire
financial futures contracts and options thereon when the Fund's obligation
thereunder, if any, is "covered" (i.e., the Fund establishes a segregated
account in which it maintains liquid assets in an amount at least equal in
value to the Fund's obligations and marks-to-market daily such collateral);
<PAGE> 229
(8) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;
(9) invest in shares of other open-end, management investment
companies, beyond the limitations of the Investment Company Act of 1940 (the
"1940 Act") and subject to such investments being consistent with the overall
objective and policies of the Fund making such investment, provided that any
such purchases will be limited to short-term investments in shares of
unaffiliated investment companies and the Adviser will waive its advisory fees
for that portion of the Fund's assets so invested, except when such purchase is
part of a plan of merger, consolidation, reorganization or acquisition; or
(10) lend its portfolio securities if, as a result, the aggregate
of such loans exceeds 5% of the value of a Fund's total assets.
No Fund may, with respect to 75% of its total assets, purchase
securities of any issuer (except securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities) if, as a result, more than 5%
of the value of its total assets would be invested in the securities of any
issuer or the Fund's ownership would be more than 10% of the outstanding voting
securities of such issuer.
- 2 -
<PAGE> 230
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Unrated Investments. Each Fund may purchase instruments that are not
rated if such obligations are of investment quality comparable to other rated
investments that are permitted to be purchased by such Fund in accordance with
procedures adopted by the Board of Trustees.
After purchase by a Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by such Fund.
Neither event will require a sale of such security by such Fund. The ratings
of S&P and Moody's are more fully described in the Appendix to this SAI.
Lending of Securities. Each Fund may lend its portfolio securities
to qualified institutional investors who need to borrow securities in order to
complete certain transactions, such as covering short sales, avoiding failures
to deliver securities or completing arbitrage operations. By lending its
portfolio securities, each Fund attempts to increase its income through the
receipt of interest on the loan. Any gain or loss in the market price of the
securities loaned might occur during the term of the loan would be for the
account of the Fund. Each Fund may lend its portfolio securities to qualified
brokers, dealers, domestic banks or other domestic financial institutions, so
long as the terms, and the structure of such loans are not inconsistent with
the 1940 Act or the Rules and Regulations or interpretations of the Securities
and Exchange Commission (the "SEC") thereunder, which currently require that
(a) the borrower pledge and maintain with the Fund collateral consisting of
cash, an irrevocable letter of credit or securities issued or guaranteed by a
domestic bank or the United States Government having a value at all times not
less than 100% of the value of the securities loaned, (b) the borrower add to
such collateral whenever the price of securities loaned rises (i.e., the
borrower "marks-to-market" on a daily basis), (c) the loan be made subject to
termination by the Fund at any time and (d) the Fund receives reasonable
interest on the loan (which may include the Fund's investing any cash
collateral in interest bearing short-term investments), any distributions on
the loaned securities and any increase in their market value. A Fund will not
lend portfolio securities if, as a result, the aggregate of such loans exceed
5% of the value of a Fund's total assets. Loan arrangements made will comply
with all other applicable regulatory requirements, including the rules of the
New York Stock Exchange, which rules presently require the borrower, after
notice, to redeliver the securities within the normal settlement time of five
business days. All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review
by the Board of Trustees.
Letters of Credit. Each Fund may purchase debt obligations backed by
an irrevocable letter of credit of a bank, savings and loan association or
insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies which, in the opinion of the Adviser are
of investment quality comparable to other permitted investments of such Fund
may be used for letter of credit-backed investments.
Interest Rate Futures Contracts and Options Thereon. The Government
Income Funds may use interest rate futures contracts ("futures contracts")
principally as a hedge against the effects of interest rate changes. A futures
contract is an agreement to purchase or sell a
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<PAGE> 231
specified amount of designated debt securities for a set price at a specified
future time. At the time a Government Income Fund enters into a futures
transaction, it is required to make a performance deposit (initial margin) of
cash or liquid securities with its custodian in a segregated account in the
name of the futures broker. Subsequent payments of "variation margin" are then
made on a daily basis, depending on the value of the futures which is
continually "marked-to-market."
The Government Income Funds may engage only in interest rate futures
contract transactions involving (i) the sale of the designated debt securities
underlying the futures contract (i.e., short positions) to hedge the value of
securities held by such Funds; (ii) the purchase of the designated debt
securities underlying the futures contract when such Funds hold a short
position having the same delivery month (i.e., a long position offsetting a
short position); or (iii) activities that are incidental to a Government Income
Fund's activities in the cash market in which such a Fund has determined to
invest. If the market moves favorably after a Government Income Fund enters
into an interest rate futures contract as a hedge against anticipated adverse
market movements, the benefits from such favorable market movements on the
value of the securities so hedged will be offset in whole or in part, by a loss
on the futures contract.
The Government Income Funds may engage in futures contract sales to
maintain the income advantage from continued holding of a long-term security
while endeavoring to avoid part or all of the loss in market value that would
otherwise accompany a decline in long-term security prices. If, however,
securities prices rise, a Government Income Fund would realize a loss in
closing out its futures contract sales that would offset any increases in
prices of the long-term securities it holds.
An option on a futures contract gives the purchaser the right, but not
the obligation, in return for the premium paid, to assume (in the case of a
call) or sell (in the case of a put) a position in a specified underlying
futures contract (which position may be a long or short position) at a
specified exercise price at any time during the option exercise period.
Sellers of options on futures contracts, like buyers and sellers of futures
contracts, make an initial performance deposit and are subject to calls for
variation margin.
Investment in Bond Options by the Government Income Funds. The
Government Income Funds may purchase put and call options and write covered put
and call options on securities in which each such Fund may invest directly and
that are traded on registered domestic securities exchanges or that result from
separate, privately negotiated transactions with primary U.S. Government
securities dealers recognized by the Board of Governors of the Federal Reserve
System (i.e., over-the-counter (OTC) options). The writer of a call option,
who receives a premium, has the obligation, upon exercise, to deliver the
underlying security against payment of the exercise price during the option
period. The writer of a put, who receives a premium, has the obligation to buy
the underlying security, upon exercise, at the exercise price during the option
period.
The Government Income Funds may write put and call options on bonds
only if they are covered, and such options must remain covered as long as the
Fund is obligated as a writer. A call option is covered if a Government Income
Fund owns the underlying security covered
- 4 -
<PAGE> 232
by the call or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional cash consideration if
the underlying security is held in a segregated account by its custodian) upon
conversion or exchange of other securities held in its portfolio. A put option
is covered if a Government Income Fund maintains cash, U.S. Treasury bills or
other high grade short-term obligations with a value equal to the exercise
price in a segregated account with its custodian.
The principal reason for writing put and call options is to attempt to
realize, through the receipt of premiums, a greater current return than would
be realized on the underlying securities alone. In return for the premium
received for a call option, the Government Income Funds forego the opportunity
for profit from a price increase in the underlying security above the exercise
price so long as the option remains open, but retains the risk of loss should
the price of the security decline. In return for the premium received for a
put option, the Government Income Funds assume the risk that the price of the
underlying security will decline below the exercise price, in which case the
put would be exercised and the Fund would suffer a loss. The Government Income
Funds may purchase put options in an effort to protect the value of a security
it owns against a possible decline in market value.
Writing of options involves the risk that there will be no market in
which to effect a closing transaction. An exchange-traded option may be closed
out only on an exchange that provides a secondary market for an option of the
same series. OTC options are not generally terminable at the option of the
writer and may be closed out only by negotiation with the holder. There is
also no assurance that a liquid secondary market on an exchange will exist. In
addition, because OTC options are issued in privately negotiated transactions
exempt from registration under the Securities Act of 1933, there is no
assurance that the Government Income Funds will succeed in negotiating a
closing out of a particular OTC option at any particular time. If a Government
Income Fund, as covered call option writer, is unable to effect a closing
purchase transaction in the secondary market or otherwise, it will not be able
to sell the underlying security until the option expires or it delivers the
underlying security upon exercise.
The staff of the SEC has taken the position that purchased options not
traded on registered domestic securities exchanges and the assets used as cover
for written options not traded on such exchanges are generally illiquid
securities. However, the staff has also opined that, to the extent a mutual
fund sells an OTC option to a primary dealer that it considers creditworthy and
contracts with such primary dealer to establish a formula price at which the
fund would have the absolute right to repurchase the option, the fund would
only be required to treat as illiquid the portion of the assets used to cover
such option equal to the formula price minus the amount by which the option is
in-the- money. Pending resolution of the issue, the Government Income Funds
will treat such options and, except to the extent permitted through the
procedure described in the preceding sentence, assets as subject to each such
Fund's limitation on investments in securities that are not readily marketable.
Index Futures Contracts. An index futures contract is a contract to
buy or sell units of an index at a specified future date at a price agreed upon
when the contract is made. Entering into a contract to buy units of an index
is commonly referred to as buying or purchasing a contract or holding a long
position in the index. Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a short position. A unit
is the
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<PAGE> 233
current value of the index. The Equity Fund may enter into stock index futures
contracts and may purchase and sell options thereon.
There are several risks in connection with the use by the Equity Fund
of index futures as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the index futures and movements
in the prices of securities which are the subject of the hedge. The Equity
Fund will attempt to reduce this risk by selling, to the extent possible,
futures on indices the movements of which will, in the Adviser's judgment, have
a significant correlation with movements in the prices of the Equity Fund's
portfolio securities sought to be hedged.
Successful use of the index futures by the Equity Fund for hedging
purposes is also subject to the Equity Fund's ability to predict correctly
movements in the direction of the market. It is possible that, where the
Equity Fund has sold futures to hedge its portfolio against a decline in the
market, the index on which the futures are written may advance and the value of
securities held in the Equity Fund's portfolio may decline. If this occurs,
the Equity Fund would lose money on the futures and also experience a decline
in the value in its portfolio securities. However, while this could occur to a
certain degree, the Adviser believes that over time the value of the Equity
Fund's portfolio will tend to move in the same direction as the market indices
which are intended to correlate to the price movements of the portfolio
securities sought to be hedged. It is also possible that, if the Equity Fund
has hedged against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices increase
instead, the Equity Fund will lose part or all of the benefit of the increased
value of those securities that it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the
Equity Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the index futures
and the securities of the portfolio being hedged, the prices of index futures
may not correlate perfectly with movements in the underlying index due to
certain market distortions. First, all participants in the futures markets are
subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions which would distort the normal relationship
between the index and futures markets. Second, margin requirements in the
futures market are less onerous than margin requirements in the securities
market, and as a result the futures market may attract more speculators than
the securities market. Increased participation by speculators in the futures
market may also cause temporary price distortions. Due to the possibility of
price distortions in the futures market and also because of the imperfect
correlation between movements in the index and movements in the prices of index
futures, even a correct forecast of general market trends by the Adviser may
still not result in a successful hedging transaction.
Options on Index Futures. Options on index futures are similar to
options on securities except that options on index futures give the purchaser
the right, in return for the premium paid, to assume a position in an index
futures contract (a long position if the option is a call and a short position
if the option is a put), at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the delivery of the futures
position by the writer of
- 6 -
<PAGE> 234
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which represents the
amount by which the market price of the index futures contract, at exercise,
exceeds (in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the index future. If an option is exercised on
the last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise
price of the option and the closing level of the index on which the future is
based on the expiration date. Purchasers of options who fail to exercise their
options prior to the exercise date suffer a loss of the premium paid.
Additional Limitations on Futures Contracts and Related Options. In
order to comply with undertakings made by the Trust pursuant to Commodity
Futures Trading Commission ("CFTC") Regulation 4.5, the Government Income Funds
and the Equity Fund will each use interest rate and stock index futures
contracts and options thereon, respectively, solely for bona fide hedging
purposes within the meaning and intent of CFTC Reg. 1.3(z)(1); provided,
however, that with respect to each long position in an interest rate futures
contract or option thereon that will be used as part of a portfolio management
strategy and that is incidental to such Fund's activities in the underlying
cash market but would not come within the meaning and intent of Reg. 1.3(z)(1),
the "underlying commodity value" (the size of the contract or option multiplied
by its current settlement price) of each such long position will not at any
time exceed the sum of:
(1) The value of short-term United States debt obligations or
other United States dollar-denominated high quality short term
money market instruments and cash set aside in an identifiable
manner, plus any funds deposited as margin on such contract or
option;
(2) Unrealized appreciation on such contract or option held at the
broker; and
(3) Cash proceeds from existing investments due in not more than
30 days.
No Fund will enter into interest rate futures contracts and options
thereon for which the aggregate initial margin and premiums exceed 5% of the
fair market value of its assets, after taking into account unrealized profits
and unrealized losses on any such contracts and options it has entered into;
provided, however, that the "in-the-money" amount of an option that was
"in-the-money" at the time of purchase will be excluded in computing such 5%.
Risks Involving Futures Transactions. Transactions by the Funds in
futures contracts and options thereon involve certain risks. One risk in
employing futures contracts and options thereon to protect against cash market
price volatility is the possibility that futures prices will correlate
imperfectly with the behavior of the prices of the securities in a Fund's
portfolio (the portfolio securities will not be identical to the securities
underlying the futures contracts). In addition, commodity exchanges generally
limit the amount of fluctuation permitted in futures contract and option prices
during a single trading day, and the existence of such limits may prevent the
prompt liquidation of futures and option positions in certain cases. Inability
to liquidate positions in a timely manner could result in the Fund's incurring
larger losses than would otherwise be the case.
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<PAGE> 235
MANAGEMENT OF THE FUNDS
Trustees and Officers. The trustees and executive officers of the
Trust, and their principal occupations during the past five years, are listed
below. The trustees who are deemed to be an "interested person" of the Trust
for purposes of the 1940 Act are marked with an asterisk "*".
John J. Pileggi, Age 37, Trustee and Principal Executive Officer* - 237 Park
Avenue, New York, New York 10017. Senior Managing Director, Furman Selz LLC.
Charles M. Carr, age 65, Trustee - 1451 Highland Park Drive, Jackson, MS
39211. Petroleum Consultant since 1992. From 1991 to April, 1992 Managing
Director at Amoco (U.K.) Exploration Co., West Gate, London, U.K.
John William Head*, age 71, Trustee, - 46 Avery Circle, Jackson, MS 39211.
Retired. From 1975-1990 Executive Vice President - CEO of Southern Farm Bureau
Casualty Insurance Co.
James H. Johnston, III, M.D., Age 50, Trustee - 1421 North State Street, Suite
203, Jackson, Mississippi 39202. Physician (Gastroenterologist) with
Gastrointestinal Associates, P.A., Jackson, Mississippi since 1984.
James T. Mallette, Age 37, Trustee*, 111 East Capitol Street, Jackson,
Mississippi 39215. Attorney, Daniel Coker Horton and Bell, P.A., P.O. Box
1084, Jackson, Mississippi since July 1987. Prior thereto, Mr. Mallette was
employed as Counsel with the law firm of Crockett, Neeld and Starling, Jackson,
Mississippi 39201. President and Director of Rollingwood Beautiful
Association, Inc., Director of Easter Seal Society of Jackson, Mississippi,
Inc.
Walter P. Neely, Age 51, Trustee, Ph.D., CFA, 1701 North State Street, Jackson,
Mississippi 39210. Professor and Consultant, Millsaps College, Jackson,
Mississippi, since 1980. Director, KLLM Transport Systems, Jackson,
Mississippi.
Donald Brostrom, Age 37, Principal Financial and Accounting Officer - 237 Park
Avenue, New York, New York 10017. Director/Fund Services, Furman Selz LLC.
Joan V. Fiore, Age 40, Secretary - 237 Park Avenue, New York, New York 10017.
Managing Director and Counsel, Furman Selz LLC. Attorney with the Securities
and Exchange Commission from 1986 to 1991.
Sheryl Hirschfeld, Age 36, Assistant Secretary - 237 Park Avenue, New York, New
York 10017. Director, Corporate Secretary Services, Furman Selz LLC since
1994. Assistant to Corporate Secretary and General Counsel of The Dreyfus
Corporation, 1982-1994.
As required by law, for as long as the Trust has a Distribution Plan,
the selection and nomination of trustees who are not "interested persons" of
the Trust will be made by such disinterested trustees. See "Rule 12b-1
Distribution Plan" in this SAI.
- 8 -
<PAGE> 236
Trustees of the Trust who are not affiliated with the Distributor or
the Adviser receive from the Trust an annual fee of $5000 and a fee for each
Board of Trustees and Board committee meeting attended of $1,000. Trustees who
are affiliated with the Distributor or the Adviser do not receive compensation
from the Trust but all trustees are reimbursed for all out-of-pocket expenses
relating to attendance at meetings.
The following table sets forth total compensation paid to Trustees for
the fiscal year ended May 31, 1996. Except as disclosed below, no executive
officer or person affiliated with the Fund received compensation from the Fund
for the fiscal year ended May 31, 1996 in excess of $60,000.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Person, Position Aggregate Pension or Estimated Annual Total Compensation
Compensation from Retirement Benefits Benefits Upon From Registrant and
the Registrant Accrued as Part of Retirement Fund Complex
Fund Expenses
<S> <C> <C> <C> <C>
John J. Pileggi None 0 N/A None
Trustee and Principal
Executive Officer
James H. Johnston, III, $7,833 0 N/A $7,833
M.D.
Trustee
James T. Mallette $7,833 0 N/A $7,833
Trustee
Walter P. Neely, Ph.D., $7,833 0 N/A $7,833
CFA, Trustee
Charles M. Carr, Trustee* $7,833 0 N/A $7,833
John William Head, Trustee* $7,833 0 N/A $7,833
</TABLE>
______________________
* Messrs. Carr and Head were elected as Trustees on September 6, 1996.
Amount shown represents the total compensation estimated to be paid to
such person during a complete fiscal year.
- 9 -
<PAGE> 237
As of the date of this SAI, trustees and officers of the Trust as a
group beneficially owned less than 1% of the outstanding shares of the Trust.
The Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201 (the "Adviser") serves as the investment adviser to
each of the Funds pursuant to a Master Investment Advisory Contract (the
"Advisory Contract"). The Advisory Contract provides that the Adviser shall
furnish to the Funds investment guidance and policy direction in connection
with the daily portfolio management of each Fund. Pursuant to the Advisory
Contract, the Adviser furnishes to the Board of Trustees periodic reports on
the investment strategy and performance of each Fund.
The Adviser has agreed to provide to the Funds, among other things,
money market security and fixed income research, and analysis and statistical
and economic data and information concerning interest rate and security market
trends, portfolio composition and credit conditions.
The Advisory Contract will continue in effect for more than two years
provided the continuance is approved annually, (i) by the holders of a majority
of the respective Fund's outstanding voting securities (as defined in the 1940
Act) or by the Trust's Board of Trustees and (ii) by a majority of the trustees
of the Trust who are not parties to the Advisory Contract or "interested
persons" (as defined in the 1940 Act) of any such party. The Advisory Contract
may be terminated on 60 days' written notice by either party and will terminate
automatically if assigned.
For the advisory services it provides to the Funds Trustmark may
receive fees based on average daily net assets up to the following annualized
rates: Short Term Fund, 0.40%; the Intermediate Fund, 0.50%; the Equity Fund,
0.60%.
For the fiscal years ended May 31, 1994, May 31, 1995 and May 31,
1996, Trustmark was entitled to and waived advisory fees as listed below:
<TABLE>
<CAPTION>
TRUSTMARK TRUSTMARK
ENTITLED WAIVED
---------------------------------- ----------------------------------
1994 1995 1996 1994 1995 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
The Short Term Government
Income Fund $536,429 $423,452 $449,285 $ 67,055 $ 31,838 $ 6,868
The Intermediate Term
Government Income Fund 868,024 701,678 396,037 260,408 157,708 38,724
The Equity Fund 671,658 570,256 750,188 167,919 123,672 125,235
</TABLE>
- 10 -
<PAGE> 238
Trustmark National Bank also serves as custodian for each of the
Funds. See "Custodian." Furman Selz serves as the Funds' transfer agent and
provides certain administrative, shareholder servicing and fund accounting
services for each Fund.
Counsel has advised the Trust that the Adviser should be able to
perform the services contemplated by the Advisory Contract with the Trust, the
Prospectus and this SAI, without violation of the Glass-Steagall Act. Such
counsel have pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes and regulations relating to the permissible activities of banks
and their subsidiaries or affiliates, as well as future changes in federal or
state statutes and regulations and judicial or administrative decisions or
interpretations thereof, could prevent the Adviser or its Affiliates from
continuing to perform, in whole or in part, such services. If the Adviser was
prohibited from performing the services, it is expected that new agreements
would be proposed or entered into with another entity or entities qualified to
perform such services.
Administrator. The Trust has retained Furman Selz as administrator on
behalf of each of its Funds. Under the Administration Agreements with the
Trust, the Administrator, in connection therewith, furnishes the Trust with
office facilities, together with those ordinary clerical and bookkeeping
services that are not being furnished by the Adviser.
For the fiscal year ended May 31, 1994, the Administrator earned fees
totalling $201,161, $260,407, and $167,917 from the Short Term Fund, the
Intermediate Fund, and the Equity Fund, respectively, pursuant to each Fund's
Administration Agreement with Furman Selz.
For the fiscal year ended May 31, 1995, the Administrator earned fees
totalling $158,805, $210,503, and $142,564 from the Short Term Fund, the
Intermediate Term Fund, and the Equity Fund, respectively, pursuant to each
Fund's Administration Agreement with Furman Selz.
For the fiscal year ended May 31, 1996, the Administrator earned fees
totalling $168,550, $119,104, and $187,486 from the Short Term Fund, the
Intermediate Term Fund, and the Equity Fund, respectively, pursuant to each
Fund's Administration Agreement with Furman Selz.
Expense Limitation. Currently, California is the only state imposing
limitations on the expenses of the Funds. Those expense limitations are 2-1/2
percent of the first $30 million of the Fund's average net assets, 2 percent of
the next $70 million and 1-1/2 percent of the Fund's remaining average net
assets. If in any fiscal year expenses of the Funds (excluding taxes,
interest, expenses under the Plan, brokerage commissions and other portfolio
transaction expenses, other expenditures which are capitalized in accordance
with generally accepted accounting principles and extraordinary expenses, but
including the advisory and administrative fees) exceed the expense limitations
applicable to the Funds imposed by the securities regulations of any state,
Furman Selz and Trustmark will reimburse the Fund for a portion of the excess
with Trustmark paying 60% and Furman Selz the remaining 40% of the excess.
- 11 -
<PAGE> 239
RULE 12B-1 DISTRIBUTION PLAN
As described in the Prospectus, the Trust has adopted, for the
Consumer Service Class of each of the Funds, a Distribution Plan under Section
12(b) of the 1940 Act and Rule 12b-1 thereunder (the "Rule"). The Distribution
Plan was adopted by the Board of Trustees, including a majority of the trustees
who were not "interested persons" (as defined in the 1940 Act) of the Trust and
who had no direct or indirect financial interest in the operation of the Plan
or in any agreement related to the Plan (the "Qualified Trustees").
Under the Distribution Plan, each Fund may, with respect to its
Consumer Service Class, reimburse the Distributor monthly (subject to a limit
of 0.35% per annum of the average daily net assets of each Fund's Consumer
Service Class) for costs and expenses of the Distributor in connection with the
distribution of Fund shares of the Consumer Service Class. These costs and
expenses include: (i) advertising by radio, television, newspapers, magazines,
brochures, sales literature, direct mail or any other form of advertising, (ii)
expenses of sales employees or agents of the Distributor, including salary,
commissions, travel and related expenses, (iii) payments to broker-dealers and
financial institutions for services in connection with the distribution of
shares, including promotional incentives and fees calculated with reference to
the average daily net asset value of shares held by shareholders who have a
brokerage or other service relationship with the broker-dealer or other
institution receiving such fees, (iv) costs of printing prospectuses and other
materials to be given or sent to prospective investors, and (v) such other
similar services as the Board of Trustees determines to be reasonably
calculated to result in the sale of shares of the Funds. The actual fee
payable to the Distributor shall, within such limit, be determined from time to
time by mutual agreement between the Trust and the Distributor. The
Distributor may enter into selling agreements with one or more selling agents
under which such agents may receive compensation for distribution-related
services from the Distributor, including, but not limited to, commissions or
other payments to such agents based on the average daily net assets of Fund
shares attributable to them. The Distributor may retain any portion of the
total distribution fee payable under the Plan to compensate it for the
distribution-related services provided by it or to reimburse it for other
distribution-related expenses. The SEC has proposed certain amendments to the
Rule. If the proposed amendments are adopted, the distribution arrangement
described above may have to be modified to ensure that all payments of
distribution expenses are attributable to specific sales or promotional
services or activities. Any other amendments to the Rule also could require
amendments or revisions to the distribution arrangements described above.
The Distribution Plan will continue in effect from year to year if
such continuance is approved by a majority vote of both the trustees of the
Trust and the Qualified Trustees. Such agreements will terminate automatically
if assigned, and may be terminated at any time, without payment of any penalty,
by a vote of a majority of the outstanding voting securities of the proper
Fund. The Distribution Plan may not be amended to increase materially the
amounts payable thereunder by any Fund without the approval of a majority of
the outstanding voting securities of the Fund, and no material amendment to the
Distribution Plan may be made except by a majority of both the trustees of the
Trust and the Qualified Trustees.
- 12 -
<PAGE> 240
For the fiscal year ended May 31, 1994, the Consumer Service Class of
the Short Term Fund, the Intermediate Fund, and the Equity Fund paid $1,884,
$8,726 and $11,664, respectively, pursuant to each Fund's Distribution Plan.
For the fiscal year ended May 31, 1995, the Consumer Service Class of
the Short Term Fund, the Intermediate Term Fund, and the Equity Fund paid
$1,853, $8,108 and $12,349, respectively, pursuant to each Fund's Distribution
Plan.
For the fiscal year ended May 31, 1996, the Consumer Service Class of
the Short Term Fund, the Intermediate Term Fund, and the Equity Fund paid
$2,396, $8,087 and $15,946, respectively, pursuant to each Fund's Distribution
Plan.
CALCULATION OF YIELD AND TOTAL RETURN
Quotations of average annual total return will be 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 and since inception (up to the life of
the Fund), calculated pursuant to the following formula:
P (1+T) = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of the maximum sales charge and a
proportional share of Fund expenses (net of certain reimbursed expenses) on an
annual basis, and will assume that all dividends and distributions are
reinvested when paid.
As indicated in the Prospectus, the Funds may advertise certain yield
information.
Yield for the Government Income Funds will be calculated based on a
30-day (or one month) period, computed by dividing the net investment income
per share earned during the period by the maximum offering price per share on
the last day of the period, according to the following formula:
YIELD = 2[((a-b)/cd+1)6-1]
where a = hypothetical dividends and interest earned during the 30-day period;
b = expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the net asset value per share on the last day of the
period. The net investment income of each of such Funds includes actual
interest income, plus or minus amortized purchase discount (which may include
original issue discount) or premium, less accrued expenses. Realized and
unrealized gains and losses on portfolio securities are not included in such
Funds' net investment income for this purpose. For purposes of sales
literature, such Funds' yield also may be calculated on the basis of the net
asset value per share rather than the public offering price, provided that the
yield data derived pursuant to the calculation described above also are
presented.
- 13 -
<PAGE> 241
Based on the thirty day period ended May 31, 1996 ("30-day base
period") the 30 day yield for the Consumer Service Class and the Institutional
Class of the Short Term Fund was 5.22% and 5.47%, respectively, and the 30 day
yield for the Consumer Service Class and the Institutional Class of the
Intermediate Fund was 5.76% and 6.03%, respectively.
The average annual total return information for Consumer Service Class
for the periods indicated below is as follows:
<TABLE>
<CAPTION>
Short Term Government Income Fund Total Return
--------------------------------- ------------
<S> <C>
One year ended May 31, 1996 4.38%
3-year 3.88%
Inception (6/1/92) to May 31, 1996 4.57%
Intermediate Term Government Income Fund
----------------------------------------
One year ended May 31, 1996 2.40%
3-year 3.77%
Inception (6/1/92) to May 31, 1996 5.91%
Equity Fund
-----------
One year ended May 31, 1996 28.42%
3-year 14.96%
Inception (6/1/92) to May 31, 1996 14.82%
</TABLE>
The average annual total return information for the
Institutional Class for the periods indicated below is as follows:
<TABLE>
<CAPTION>
Short Term Government Income Fund Total Return
--------------------------------- ------------
<S> <C>
One year ended May 31, 1996 4.65%
3-year 4.14%
Inception (6/1/92) to May 31, 1996 4.79%
Intermediate Term Government Income Fund
----------------------------------------
One year ended May 31, 1996 2.66%
3-year 4.03%
Inception (6/1/92) to May 31, 1996 6.13%
Equity Fund
-----------
One year ended May 31, 1996 28.73%
3-year 15.24%
Inception (6/1/92) to May 31, 1996 15.06%
</TABLE>
The yield or total return for each Fund will fluctuate from time to
time, unlike bank deposits or other investments that pay a fixed yield for a
stated period of time, and does not provide a basis for determining future
yield or total return since it is based on historical data. Yield and total
return are functions of portfolio quality, composition, maturity and market
conditions as well as the expenses allocated to a Fund.
- 14 -
<PAGE> 242
In addition, investors should recognize that changes in the net asset
values of shares of a Fund will affect the yield of such Fund for any specified
period, and such changes should be considered together with the Fund's yield in
ascertaining the Fund's total return to shareholders for the period. Yield and
total return information for the Funds may be useful in reviewing the
performance of a Fund and for providing a basis for comparison with investment
alternatives. The yield or total return of a Fund, however, may not be
comparable to the yields from investment alternatives because of differences in
the foregoing variables and differences in the methods used to value portfolio
securities, compute expenses and calculate yield or total return.
From time to time, the Trust may quote the Funds' performance in
advertising and other types of literature as compared to the performance of the
S&P Index, the Dow Jones Industrial Average or any other commonly quoted index
of common stock prices. The S&P Index and the Dow Jones Industrial Average are
unmanaged indices of selected common stock prices. The Funds' performance also
may be compared to those of other mutual funds having similar objectives. This
comparative performance could be expressed as a ranking prepared by Lipper
Analytical Services, Inc., an independent service which monitors the
performance of mutual funds.
The Funds' comparative performance for such purposes may be calculated
by relating net asset value per share at the beginning of a stated period to
the net asset value of the investment, assuming reinvestment of all gains,
distributions and dividends paid, at the end of the period. Any such
comparisons may be useful to investors who wish to compare a Fund's past
performance with that of its competitors. Of course, past performance cannot
be a guarantee of future results.
The Trust also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as S&P or Moody's. Such rating
would assess the creditworthiness of the investments held by a Fund. The
assigned rating would not be a recommendation to purchase, sell or hold the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of a Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information
relating to a Fund or its investments. The Trust may compare a Fund's
performance with other investments which are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare a Fund's past
performance with other rated investments.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for each Fund is determined by the
Administrator of the Funds on each day the New York Stock Exchange is open for
trading.
Securities of the Funds for which market quotations are available are
valued at latest prices. In the absence of any sale of such securities on the
valuation date and in the case of other securities, including U.S. Government
securities but excluding debt securities maturing in
- 15 -
<PAGE> 243
60 days or less, the valuations are based on latest quoted bid prices. Futures
contracts and options listed on a national exchange are valued at the last sale
price on the exchange on which they are traded at the close of the Exchange,
or, in the absence of any sale on the valuation date, at latest quoted bid
prices. Options not listed on a national exchange are valued at latest quoted
bid prices. Debt securities maturing in 60 days or less are valued at
amortized cost. In all cases, bid prices will be furnished by a reputable
independent pricing service approved by the Board of Trustees and are based on
yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to value from dealers; and general market conditions.
Prices provided by an independent pricing service may be determined without
exclusive reliance on quoted prices and may take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data. All other securities and other assets of the Funds for
which current market quotations are not readily available are valued at fair
value as determined in good faith by the Trust's Board of Trustees and in
accordance with procedures adopted by the Board of Trustees.
With respect to options contracts, the premium received is recorded as
an asset and equivalent liability, and thereafter adjusts the liability to the
market value of the option determined in accordance with the preceding
paragraph. The premium paid for an option purchased by a Fund is recorded as
an asset and subsequently adjusted to market value.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any broker or group of brokers
in the execution of transactions in portfolio securities. Subject to policies
established by the Trust's Board of Trustees, the Adviser is responsible for
each Fund's portfolio decisions and the placing of portfolio transactions. In
placing orders, it is the policy of the Trust to obtain the best execution
taking into account the broker's general execution and operational facilities,
the type of transaction involved and other factors. While the Adviser
generally seeks reasonably competitive spreads or commissions, the Funds will
not necessarily be paying the lowest spread or commission available.
The Adviser may, in circumstances in which two or more brokers are in a
position to offer comparable results for a Fund portfolio transaction, give
preference to a broker that has provided statistical or other research services
to the Adviser. By allocating transactions in this manner, the Adviser is able
to supplement its research and analysis with the views and information of
securities firms. Information so received may be in addition to, and not in
lieu of, the services required to be performed by the Adviser under the
Advisory Contracts, and the expenses of the Adviser will not necessarily be
reduced as a result of the receipt of this supplemental research information.
Furthermore, research services furnished by brokers through which the Adviser
places securities transactions for a Fund may be used by the Adviser in
servicing its other accounts, and not all of these services may be used by the
Adviser in connection with advising the Funds. In so allocating portfolio
transactions, the Adviser may, in compliance with Section 28(e) of the
Securities Exchange Act of 1934, cause the Trust to pay an amount of commission
that exceeds the amount of commission that another broker would have charged
for effecting the same transaction.
- 16 -
<PAGE> 244
Except in the case of equity securities purchased by the Equity Fund,
purchases and sales of portfolio securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. Each of
the Funds also may purchase portfolio securities in underwritten offerings and
may purchase securities directly from the issuer. Generally, money market
securities and other debt obligations are traded on a net basis and do not
involve brokerage commissions. The costs associated with executing a Fund's
portfolio securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with the
Trust are prohibited from dealing with the Trust as a principal in the purchase
and sale of securities unless an exemptive order allowing such transactions is
obtained from the SEC or an exemption is otherwise available. Any of the Funds
may purchase obligations from underwriting syndicates of which the Distributor
(or its affiliate) is a member under certain conditions in accordance with the
provisions of a rule adopted under the 1940 Act and in compliance with
procedures adopted by the Board of Trustees.
Purchases and sales of equity securities for the Equity Fund typically
are effected through brokers who charge a negotiated commission for their
services. Orders may be directed to any broker including, to the extent and in
the manner permitted by applicable law, the Distributor or its affiliates. In
the over-the-counter market, securities are generally traded on a "net" basis
with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed price
that includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount.
In placing orders for portfolio securities of the Equity Fund, the
Adviser is required to give primary consideration to obtaining the most
favorable price and efficient execution. This means that the Adviser will seek
to execute each transaction at a price and commission, if any, that provide the
most favorable total cost or proceeds reasonably attainable in the
circumstances. While the Adviser will generally seek reasonably competitive
spreads or commissions, the Equity Fund will not necessarily be paying the
lowest spread or commission available. Commission rates are established
pursuant to negotiations with the broker based on the quality and quantity of
execution services provided by the broker in the light of generally prevailing
rates. The allocation of orders among brokers and the commission rates paid
are reviewed periodically by the Board of Trustees.
For the fiscal years ended May 31, 1994, May 31, 1995 and May 31, 1996
the Short Term Fund and the Intermediate Fund did not pay any brokerage
commissions. During the same periods the Equity Fund paid $235,377, $354,214
and $50,303 respectively, in brokerage commissions.
Portfolio Turnover. The portfolio turnover rate for the Government
Income Funds generally is not expected to exceed 250%. The portfolio turnover
rate for the Equity Fund is not expected to exceed 100%. The portfolio
turnover rate will not be a limiting factor when the Adviser deems portfolio
changes appropriate. For the fiscal year ended May 31, 1996, the portfolio
turnover rates for the Short-Term Government Income Fund, the Intermediate Term
Government Income Fund and the Equity Fund were 120%, 183% and 6%,
respectively.
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<PAGE> 245
FEDERAL INCOME TAXES
The Prospectus describes generally the tax treatment of dividends and
distributions made by the Trust. This section of the SAI includes additional
information concerning federal income taxes.
Qualification by a Fund as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended, (the "Code") requires, among other
things, that (a) at least 90% of a Fund's annual gross income be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of stock or securities, options, futures, forward
contracts, foreign currencies, and other income derived with respect to its
business of investing in stock or securities; (b) a Fund derives less than 30%
of its gross income from gains from the sale or other disposition of securities
or options, futures or forward contracts (other than options, futures or
forward contracts on foreign currencies) and foreign currencies (including
options, futures or forwards thereon) not directly related to the Fund's
business of investing in stock or securities, thereon held for less than three
months; and (c) a Fund diversifies its holdings so that, at the end of each
quarter of the taxable year, (i) at least 50% of the market value of the Fund's
assets is represented by cash and cash items (including receivables), U.S.
government securities, securities of other regulated investment companies and
other securities (except that such other securities must be limited in respect
of any one issuer to an amount not greater than 5% of the value of the Fund's
assets and 10% of the outstanding voting securities of such issuer), and (ii)
not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. Government securities and the
securities of other regulated investment companies), or of two or more issuers
which the taxpayer controls and which are determined to be engaged in the same
or similar trades or businesses or related trades or businesses. A Fund will
not be subject to federal income tax on its net investment income and net
capital gains which are distributed to its shareholders, provided that it
distributes to its stockholders at least 90% of its net investment income and
tax-exempt income earned in each year. If the Fund does not meet all of these
Code requirements, it will be taxed as an ordinary corporation and its
distributions will be taxed to shareholders as ordinary income.
Under the Code, a nondeductible excise tax of 4%, is imposed on the
excess of a regulated investment company's "required distribution" for the
calendar year ending within the regulated investment company's taxable year
over the "distributed amount" for such calendar year. The term "required
distribution" means the sum of (i) 98% of ordinary income for the calendar
year, (ii) 98% of capital gain net income for the one year period ending on
October 31 and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the regulated investment company from its current
year's ordinary income and capital gain net income and (ii) any amount on which
the regulated investment company pays income tax for the year.
For this purpose, any income or gain retained by a Fund that is subject
to tax will be considered to have been distributed by year-end. In addition,
dividends and distributions declared payable as of a date in October, November
or December of any calendar year are
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<PAGE> 246
deemed under the Code to have been received by the shareholders on December 31
of that calendar year if the dividend is actually paid in the following
January. Such dividends will, accordingly, be subject to income tax for the
year in which the record date falls. Each Fund intends to distribute
substantially all of its net investment income and net capital gains and, thus,
expects not to be subject to the excise tax.
A capital gains distribution will be a return of invested capital to
the extent the net asset value of an investor's shares is thereby reduced below
his or her cost, even though the distribution will be taxable to the
shareholder. A redemption of shares by a shareholder under these circumstances
could result in a capital loss for federal tax purposes.
It is anticipated that a portion of the dividends paid by the Equity
Fund will qualify for the dividends-received deduction available to
corporations. The Equity Fund is required to notify shareholders of the amount
of dividends which will qualify for the deduction within 60 days of the close
of the Fund's taxable year. The dividends paid by the other Funds are not
expected to qualify. Pending tax law proposals may affect the dividends
received deduction.
If a shareholder exchanges or otherwise disposes of shares of a Fund
within 90 days of having acquired such shares, and if, as a result of having
acquired those shares the shareholder subsequently pays a reduced sales load
for shares of a Fund, the sales load previously incurred acquiring the Fund's
shares shall not be taken into account (to the Extent such previous sales loads
so not exceed the reduction in sales loads) for the purpose of determining the
amount of gain or loss on the exchange, but will be treated as having been
incurred in the acquisition of such other shares.
Any loss realized on a redemption or exchange of shares of a Fund will
be disallowed to the extent shares are reacquired within the 60-day period
beginning 30 days before and ending 30 days after the day the shares are
disposed.
If an option written by a Fund lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund will realize a short-term capital gain or loss, depending on
whether the premium income is greater or less than the amount paid by the Fund
in the closing transaction. If securities are sold by a Fund pursuant to the
exercise of a call option written by it, such Fund will add the premium
received to the sale price of the securities delivered in determining the
amount of gain or loss on the sale. If securities are purchased by a Fund
pursuant to the exercise of a put option written by it, such Fund will subtract
the premium received from its cost basis in the securities purchased. The
requirement that each Fund derive less than 30% of its gross income from gains
from the sale of securities held for less than three months may limit the
Fund's ability to write options.
The amount of any realized gain or loss on closing out a forward
contract will generally result in a realized capital gain or loss for tax
purposes. Under Code Section 1256, forward currency contracts held by a Fund
at the end of a fiscal year will be required to be "marked to market" for
federal income tax purposes, that is, deemed to have been sold at market value.
Any gain or loss recognized with respect to forward currency contracts is
considered to be 60% long term capital gain or loss and 40% short term capital
gain or loss, without regard to the holding period of the contract. Code
Section 988 may also apply to forward contracts. Under
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<PAGE> 247
Section 988, each foreign currency gain or loss is generally computed
separately and treated as ordinary income or loss. In the case of overlap
between Section 1256 and 988, special provisions determine the character and
timing of any income, gain or loss. The Funds will attempt to monitor Section
988 transactions to avoid an adverse tax impact.
Shareholders will be notified annually by the Trust as to the Federal
tax status of distributions made by the Fund(s) in which they invest.
Depending on the residence of the shareholder for tax purposes, distributions
also may be subject to state and local taxes. Special tax treatment, including
a penalty on certain pre-retirement distributions, is accorded to accounts
maintained as IRAs. Shareholders should consult their own tax advisers as to
the Federal, state and local tax consequences of ownership of shares of the
Funds in their particular circumstances.
Foreign Shareholders Under the Code, distributions of net investment
income by the Fund to a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation, or foreign partnership (a
"foreign shareholder") will be subject to U.S. withholding tax (at a rate of
30% or a lower treaty rate). Withholding will not apply if a dividend paid by
the Fund to a foreign shareholder is "effectively connected" with a U.S. trade
or business, in which case the reporting and withholding requirements
applicable to U.S. citizens or domestic corporations will apply. Distributions
of net long-term capital gains are not subject to tax withholding, but in the
case of a foreign shareholder who is a nonresident alien individual, such
distributions ordinarily will be subject to U.S. income tax at a rate of 30% if
the individual is physically present in the U.S. for more than 182 days during
the taxable year.
Investors should be aware that the investments to be made by the Funds
may involve sophisticated tax rules (such as the original issue discount,
marked to market and real estate mortgage investment conduit ("REMIC") rules)
that would result in income or gain recognition by the Funds without
corresponding current cash receipts. Although the Funds will seek to avoid
significant noncash income, such noncash income could be recognized by the
Funds, in which case a Fund may distribute cash derived from other sources in
order to meet the minimum distribution requirements described above. Investors
should consult their tax advisers with respect to such rules.
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<PAGE> 248
SHARES OF BENEFICIAL INTEREST
The Trust consists of multiple separate portfolios or funds, including
the Funds. Each Fund is comprised of two classes of shares -- the
"Institutional Class" and the "Consumer Service Class." When certain matters
affect one class but not another, the shareholders would vote as a class
regarding such matters. Subject to the foregoing, on any matter submitted to a
vote of shareholders, all shares then entitled to vote will be voted separately
by Fund or portfolio unless otherwise required by the 1940 Act, in which case
all shares will be voted in the aggregate. For example, a change in a Fund's
fundamental investment policies would be voted upon only by shareholders of the
Fund involved. Additionally, approval of the Advisory Contract is a matter to
be determined separately by each Fund. Approval by the shareholders of one
Fund is effective as to that Fund whether or not sufficient votes are received
from the shareholders of the other Funds to approve the proposal as to those
Funds. As used in the Prospectus and in this SAI, the term "majority," when
referring to approvals to be obtained from shareholders of a Fund or class
means the vote of the lesser of (i) 67% of the shares of the Fund or class
represented at a meeting if the holder of more than 50% of the outstanding
shares of the Fund or class are present in person or by proxy, or (II) more
than 50% of the outstanding shares of the Fund or class. The term "majority,"
when referring to the approvals to be obtained from shareholders of the Trust
as a whole means the vote of the lesser of (i) 67% of the Trust's shares
represented at a meeting if the holders of more than 50% of the Trust's
outstanding shares are present in person or proxy, or (ii) more than 50% of the
Trust's outstanding shares. Shareholders are entitled to one vote for each
full share held and fractional votes for fractional shares held.
The Trust may dispense with annual meetings of shareholders in any year
in which it is not required to elect trustees under the 1940 Act. However, the
Trust undertakes to hold a special meeting of its shareholders if the purpose
of voting on the question of removal of a director or trustees is requested in
writing by the holders of at least 10% of the Trust's outstanding voting
securities, and to assist in communicating with other shareholders as required
by Section 16(c) of the 1940 Act.
Each share of a Fund represents an equal proportional interest in that
Fund with each other share and is entitled to such dividends and distributions
out of the income earned on the assets belonging to that Fund as are declared
in the discretion of the Trustees. In the event of the liquidation or
dissolution of the Trust, shareholders of a Fund are entitled to receive the
assets attributable to that Fund that are available for distribution, and a
distribution of any general assets not attributable to a particular Fund that
are available for distribution in such manner and on such basis as the Trustees
in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Trust.
As of September 12, 1996, the following were five percent or greater
shareholders of the Funds:
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<PAGE> 249
Short Term Fund
<TABLE>
<CAPTION>
Institutional Class
<S> <C>
Harman & Co. 98.49%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
Consumer Service Class
Donaldson Lufkin Jenrette 41.55%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Aldine Lampton Wallace-Trust 6.42%
c/o Arch Dalrymple III
P.O. Box 210
Amory, MS 38821-0210
</TABLE>
Intermediate Fund
<TABLE>
<CAPTION>
Institutional Class
<S> <C>
Harman & Co. 99.09%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
Consumer Service Class
Donaldson, Lufkin Jenrette 23.70%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Cheryl E. Sizemore 6.21%
130 Highway 217
Tijeras, NM 87059-7803
</TABLE>
- 22 -
<PAGE> 250
Equity Fund
<TABLE>
<CAPTION>
Institutional Class
<S> <C>
Harman & Co. 92.88%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
First American Trust Co. 5.38%
421 North Main Street
Santa Ana, CA 92701
</TABLE>
OTHER INFORMATION
The Trust's Registration Statement, including the Prospectus, the SAI
and the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C. Statements contained in the Prospectus or the SAI as to the
contents of any contract or other document referred to herein or in the
Prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
CUSTODIAN
Trustmark also acts as Custodian for the Funds. The Custodian, among
other things, maintains a custody account or accounts in the name of each Fund;
receives and delivers all assets for each Fund upon purchase and upon sale or
maturity; collects and receives all income and other payments and distributions
on account of the assets of each Fund and pays all expenses of each Fund. For
its services as Custodian, Trustmark receives an asset-based fee and
transaction charges.
For the fiscal year ended May 31, 1994, the Short Term Fund, the
Intermediate Fund and the Equity Fund paid $60,238, $51,723 and $26,520,
respectively, to the Custodian.
For the fiscal year ended May 31, 1995, the Short Term Fund, the
Intermediate Term Fund and the Equity Fund paid $42,348, $56,134, and $37,704,
respectively, to the Custodian.
For the fiscal year ended May 31, 1996, the Short Term Fund, the
Intermediate Term Fund and the Equity Fund paid $44,947, $31,761, and $49,996,
respectively, to the Custodian.
- 23 -
<PAGE> 251
EXPERTS
Price Waterhouse LLP serves as the independent accountants for the
Trust. Price Waterhouse LLP provides audit services, tax return preparation
and assistance and consultation in connection with certain SEC filings. Price
Waterhouse LLP's address is 1177 Avenue of the Americas, New York, New York
10036.
FINANCIAL STATEMENTS
Financial Statements for the Funds as of May 31, 1996 and for
the period then ended including the Report of Price Waterhouse LLP, independent
accountants, are incorporated by reference.
- 24 -
<PAGE> 252
APPENDIX
The following is a description of the ratings by Moody's and S&P to
corporate and municipal bonds, corporate and municipal commercial paper and
municipal notes.
Corporate and Municipal Bonds
Moody's: The four highest ratings for corporate and municipal bonds
are "Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best
quality" and carry the smallest amount of investment risk. Bonds rated "Aa"
are of "high quality by all standards," but margins of protection or other
elements make long-term risks appear somewhat greater than "Aaa" rated bonds.
Bonds rated "A" possess many favorable investment attributes and are considered
to be upper medium grade obligations. Bonds rated "Baa" are considered to be
medium grade obligations; 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
have speculative characteristics as well. Moody's applies numerical modifiers:
1, 2 and 3 in each rating category from "Aa" through "Baa" in its rating
system. The modifier 1 indicates that the security ranks in the higher end of
its category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds are
"AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings assigned
by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the highest rated issued only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded as having an "adequate capacity" to
pay interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a "weakened capacity" to make such
repayments. The ratings from "AA" to "BBB" may be modified by the addition of
a plus or minus sign to show relative standing within the category.
Corporate and Municipal Commercial Paper
Moody's: The highest rating for corporate and municipal commercial
paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for
repayment of short-term promissory obligations." Issuers rated "P-2" (Prime-2)
"have a strong capacity for repayment of short-term promissory obligations,"
but earnings trends, while sound, will be subject to more variation. S&P: The
"A-1" rating for corporate and municipal commercial paper indicates that the
"degree of safety regarding timely payment is either overwhelming or very
strong." Commercial paper with "overwhelming safety characteristics" will be
rated "A-1+." Commercial paper with a strong capacity for timely payments on
issues will be rated "A-2."
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<PAGE> 253
Municipal Notes
Moody's: The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG
3" in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality." Notes rated "MIG
2" or "VMIG 2" are of "high quality," with margins of protections "ample
although not as large as in the preceding group." Notes rated "MIG 3" or "VMIG
3" are of "favorable quality," with all security elements accounted for, but
lacking the strength of the preceding grades. S&P: The "SP-1" rating reflects
a "very strong or strong capacity to pay principal and interest." Notes issued
with "overwhelming safety characteristics" will be rated "SP-1+." The "SP-2"
rating reflects a "satisfactory capacity" to pay principal and interest.
- 26 -
<PAGE> 254
PERFORMANCE FUNDS TRUST
Telephone: 1-800 PERFORM (737-3676)
STATEMENT OF ADDITIONAL INFORMATION - September 27, 1996
MID CAP GROWTH FUND
Performance Funds Trust (the "Trust") is an open-end, management
investment company of the series type. This Statement of Additional
Information ("SAI") contains information about both the "Consumer Service
Class" and the "Institutional Class" of one of the Trust's investment
portfolios--THE MID CAP GROWTH FUND (THE "FUND"). The investment objective of
the Fund is described in the Prospectus. See "The Investment Policies of the
Fund."
This SAI is not a prospectus and should be read in conjunction with
the Fund's Prospectus, dated September 27, 1996. All terms used in this SAI
that are defined in the Prospectus will have the meanings assigned in the
Prospectus. Copies of the Prospectus may be obtained without charge by writing
to Performance Funds Distributor, Inc. ("PFD"), the Trust's distributor, at 230
Park Avenue, New York, New York 10169; or by calling the Fund at the telephone
number indicated above.
________________________________
<PAGE> 255
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions............................................................................ 1
Additional Permitted Investment Activities......................................................... 2
Management of the Fund............................................................................. 5
Rule 12b-1 Distribution Plan....................................................................... 9
Calculation of Yield and Total Return.............................................................. 10
Determination of Net Asset Value................................................................... 12
Portfolio Transactions............................................................................. 13
Federal Income Taxes............................................................................... 14
Shares of Beneficial Interest...................................................................... 18
Other Information.................................................................................. 19
Custodian.......................................................................................... 19
Experts............................................................................................ 20
Financial Statements............................................................................... 20
Appendix........................................................................................... 21
</TABLE>
-i-
<PAGE> 256
INVESTMENT RESTRICTIONS
The Fund is subject to the following investment restrictions, all of
which are fundamental policies:
The Fund may not:
(1) Invest more than 15% of the market value of its total net assets in
illiquid investments including repurchase agreements maturing in more
than seven days;
(2) Invest more than 25% of the value of its total assets in any
particular industry;
(3) Purchase securities on margin or borrow money, except (a) from banks
for extraordinary or emergency purposes (not for leveraging or
investment) or (b) by engaging in reverse repurchase agreements,
provided that (a) and (b) in the aggregate do not exceed an amount
equal to one-third of the value of the total assets of the Fund less
its liabilities (not including the amount borrowed) at the time of the
borrowing, and further provided that 300% asset coverage is maintained
at all times;
(4) Make loans or lend fund securities of value exceeding in the aggregate
one-third of the market value of the Fund's total assets less
liabilities other than obligations created by these transactions;
(5) Mortgage, pledge or hypothecate any assets except that the Fund may
pledge not more than one-third of its total assets to secure
borrowings made in accordance with paragraph 3 above. However,
although not a fundamental policy of the Fund, as a matter of
operating policy in order to comply with certain state statutes, the
Fund will not pledge its assets in excess of an amount equal to 10% of
total net assets;
(6) Invest in shares of other open-end, management investment companies,
beyond the limitations of the Investment Company Act of 1940 (the
"1940 Act") and subject to such investments being consistent with the
overall objective and policies of the Fund, provided that any such
purchases will be limited to short-term investments in shares of
unaffiliated investment companies and the Adviser will waive its
advisory fees for that portion of the Fund's assets so invested,
except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition;
(7) Act as an underwriter of securities of other issuers, except insofar
as the Fund may be deemed an underwriter under the Securities Act of
1933 in disposing of a portfolio security;
(8) Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests in oil, gas or other mineral exploration
or development programs;
- 1 -
<PAGE> 257
(9) Purchase securities while borrowings exceed 5% of its total assets;
(10) Purchase or acquire commodities or commodity contracts;
(11) Issue senior securities, except insofar as the Fund may be deemed to
have issued a senior security in connection with any permitted
borrowing;
(12) Participate on a joint, or a joint and several, basis in any
securities trading account; or
(13) Invest in companies for the purpose of exercising control.
If a percentage restriction is adhered to at the time an
investment is made, a later change in percentage resulting from changes in the
value of the Fund's investment securities will not be considered a violation of
the Fund's restrictions.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
The material relating to the risk factors pertaining to the
securities invested in by the Fund set forth in the Prospectus is herein
incorporated by reference. The following discussion is additional disclosure
that supplements the Prospectus.
Mid Cap Common Stocks
Investing in the common stocks of mid-sized companies
generally entails greater risk and volatility than investing in large,
well-established companies. However, mid-sized companies seem to offer unique
competitive advantages because, unlike companies listed on the Standard &
Poor's Fortune 500 Index, these companies are still in the developmental stages
of their life cycle and are expected to offer the potential for more rapid
growth and for capital appreciation because of their higher growth rates. In
addition, in comparison with smaller companies, mid-sized companies tend to
have more diversified products, markets, and better financial resources.
Furthermore, mid-cap companies have a more defined organizational structure and
a plan for management succession. Finally, the stocks of such companies are
less actively followed by securities analysts and may, therefore, be
undervalued by investors.
Investments in Warrants and Rights
Warrants basically are options to purchase equity securities
at a specified price valid for a specific period of time. Their prices do not
necessarily move parallel to the prices of the underlying securities. Rights
are similar to warrants, but normally have a short duration and are distributed
directly by the issuer to its shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer.
2
<PAGE> 258
Convertible Securities
The Fund may, as an interim alternative to investment in
common stocks, purchase investment grade convertible debt securities having a
rating of, or equivalent to, at least "BBB" by Standard & Poor's Corporation
("S&P") or, if unrated, judged by the Adviser to be of comparable quality.
Securities rated less than "A" by S&P may have speculative characteristics.
Although lower rated bonds generally have higher yields, they are more
speculative and subject to a greater risk of default with respect to the
issuer's capacity to pay interest and repay principal than are higher rated
debt securities. See the Appendix for an explanation of different rating
categories.
In selecting convertible securities for the Fund, the Adviser
relies primarily on its own evaluation of the issuer and the potential for
capital appreciation through conversion. It does not rely on the rating of the
security or sell because of a change in rating absent a change in its own
evaluation of the underlying common stock and the ability of the issuer to pay
principal and interest or dividends when due without disrupting its business
goals. Interest or dividend yield is a factor only to the extent it is
reasonably consistent with prevailing rates for securities of similar quality
and thereby provides a support level for the market price of the security. The
Fund will purchase the convertible securities of highly leveraged issuers only
when, in the judgment of the Adviser, the risk of default is outweighed by the
potential for capital appreciation.
The issuers of debt obligations having speculative
characteristics may experience difficulty in paying principal and interest when
due in the event of a downturn in the economy or unanticipated corporate
developments. The market prices of such securities may become increasingly
volatile in periods of economic uncertainty. Moreover, adverse publicity or
the perceptions of investors over which the Adviser has no control, whether or
not based on fundamental analysis, may decrease the market price and liquidity
of such investments. Although the Adviser will attempt to avoid exposing the
Fund to such risks, there is no assurance that it will be successful or that a
liquid secondary market will continue to be available for the disposition of
such securities.
Investments in Small, Unseasoned Companies
The securities of small, unseasoned companies may have a
limited trading market, which may adversely affect their disposition and can
result in their being priced lower than might otherwise be the case. If other
investment companies and investors who invest in such issuers trade the same
securities when the Fund attempts to dispose of its holdings, the Fund may
receive lower prices than might otherwise be obtained.
3
<PAGE> 259
Corporate Reorganizations
The Fund may invest in securities for which a tender or
exchange offer has been made or announced and in securities of companies for
which a merger, consolidation, liquidation or reorganization proposal has been
announced if, in the judgment of the Adviser, there is reasonable prospect of
capital appreciation significantly greater than the brokerage and other
transaction expenses involved. The primary risk of such investments is that if
the contemplated transaction is abandoned, revised, delayed or becomes subject
to unanticipated uncertainties, the market price of the securities may decline
below the purchase price paid by the Fund.
In general, securities which are the subject of such an offer
or proposal sell at a premium to their historic market price immediately prior
to the announcement of the offer or proposal. However, the increased market
price of such securities may also discount what the stated or appraised value
of the security would be if the contemplated transaction were approved or
consummated. Such investments may be advantageous when the discount
significantly overstates the risk of the contingencies involved; significantly
undervalues the securities, assets or cash to be received by shareholders of
the prospective portfolio company as a result of the contemplated transaction;
or fails adequately to recognize the possibility that the offer or proposal may
be replaced or superseded by an offer or proposal of greater value. The
evaluation of such contingencies requires unusually broad knowledge and
experience on the part of the Adviser which must appraise not only the value of
the issuer and its component businesses as well as the assets or securities to
be received as a result of the contemplated transaction, but also the financial
resources and business motivation of the offerer as well as the dynamics of the
business climate when the offer or proposal is in process.
In making such investments, the Fund will not violate any of
its diversification requirements or investment restrictions including the
requirement that, except for the investment of up to 25% of its total assets in
any one company or industry, not more than 5% of its total assets may be
invested in the securities of any one issuer. Since such investments are
ordinarily short term in nature, they will tend to increase the turnover ratio
of the Fund, thereby increasing its brokerage and other transaction expenses as
well as make it more difficult for the Fund to meet the tests for favorable tax
treatment as a "Regulated Investment Company" specified by the Internal Revenue
Code of 1986, as amended ("the Code"). (See the Prospectus, "Dividends,
Distributions and Federal Income Taxes"). The Adviser intends to select
investments of the type described which, in its view, have a reasonable
prospect of capital appreciation which is significant in relation to both the
risk involved and the potential of available alternate investments as well as
monitor the effect of such investments on the tax qualification tests of the
Code.
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Repurchase Agreements
The Fund may engage in repurchase agreements as set forth in
the Prospectus. A repurchase agreement is an instrument under which the
purchaser (i.e., the Fund) acquires a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed upon
time and price, thereby determining the yield during the purchaser's holding
period. This results in a fixed rate of return insulated from market
fluctuations during such period. The underlying securities are ordinarily U.S.
Treasury or other government obligations or high quality money market
instruments. The Fund will require that the value of such underlying
securities, together with any other collateral held by the Fund, always equals
or exceeds the amount of the repurchase obligations of the vendor. While the
maturities of the underlying securities in repurchase agreement transactions
may be more than one year, the term of such repurchase agreements will always
be less than one year. The Fund's risk is primarily that, if the seller
defaults, the proceeds from the disposition of underlying securities and other
collateral for the seller's obligation are less than the repurchase price. If
the seller becomes bankrupt, the Fund might be delayed in selling the
collateral. Under the 1940 Act, repurchase agreements are considered loans.
Repurchase agreements usually are for short periods, such as one week or less,
but could be longer. The Fund will not enter into repurchase agreements of a
duration of more than seven days if, taken together with illiquid securities
and other securities for which there are no readily available quotations, more
than 15% of the total net assets of the Fund would be so invested.
MANAGEMENT OF THE FUND
Trustees and Officers. The trustees and executive officers of the
Trust, and their principal occupations during the past five years, are listed
below. The trustees who are deemed to be an "interested person" of the Trust
for purposes of the 1940 Act are marked with an asterisk "*".
John J. Pileggi, age 37, Trustee and Principal Executive Officer* - 237 Park
Avenue, New York, New York 10017. Senior Managing Director, Furman
Selz LLC.
James H. Johnston, III, M.D., age 50, Trustee - 1421 North State Street, Suite
203, Jackson, Mississippi 39202. Physician (Gastroenterologist) with
Gastrointestinal Associates, P.A., Jackson, Mississippi since 1984.
James T. Mallette, age 37, Trustee*, 111 East Capitol Street, Jackson,
Mississippi 39215. Attorney, Daniel Coker Horton and Bell, P.A., P.O.
Box 1084, Jackson, Mississippi since July 1987. Prior thereto, Mr.
Mallette was employed as Counsel with the law firm of Crockett, Neeld
and Starling, Jackson, Mississippi 39201. President and Director of
Rollingwood Beautiful Association, Inc., Director of Easter Seal
Society of Jackson, Mississippi, Inc.
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Walter P. Neely, age 51, Trustee, Ph.D., CFA, 1701 North State Street, Jackson,
Mississippi 39210. Professor and Consultant, Millsaps College,
Jackson, Mississippi, since 1980. Director, KLLM Transport Systems,
Jackson, Mississippi.
Charles M. Carr, age 65, Trustee - 1451 Highland Park Drive, Jackson, MS
39211. Petroleum Consultant since 1992. From 1991 to April, 1992
Managing Director at Amoco (U.K.) Exploration Co., West Gate, London,
U.K.
John William Head*, age 71, Trustee - 46 Avery Circle, Jackson, MS 39211.
Retired. From 1975-1990 Executive Vice President - CEO of Southern Farm
Bureau Casualty Insurance Co.
Donald Brostrom, age 37, Principal Financial and Accounting Officer - 237 Park
Avenue, New York, New York 10017. Director/Fund Services, Furman Selz
LLC.
Joan V. Fiore, age 40, Secretary - 237 Park Avenue, New York, New York 10017.
Managing Director and Counsel, Furman Selz LLC. Attorney with the
Securities and Exchange Commission from 1986 to 1991.
Sheryl Hirschfeld, age 36, Assistant Secretary - 237 Park Avenue, New York, New
York 10017. Director, Corporate Secretary Services, Furman Selz LLC
since 1994. Assistant to Corporate Secretary and General Counsel of The
Dreyfus Corporation, 1982 to 1994.
As required by law, for as long as the Trust has a Distribution Plan,
the selection and nomination of trustees who are not "interested persons" of
the Trust will be made by such disinterested trustees. See "Rule 12b-1
Distribution Plan" in this SAI.
Trustees of the Trust who are not affiliated with the Distributor or
the Adviser receive from the Trust an annual fee of $5000 and a fee for each
Board of Trustees and Board committee meeting attended of $1,000. Trustees who
are affiliated with the Distributor or the Adviser do not receive compensation
from the Trust but all trustees are reimbursed for all out-of-pocket expenses
relating to attendance at meetings.
The following table sets forth total compensation paid to Trustees for
the fiscal year ended May 31, 1996. Except as disclosed below, no executive
officer or person affiliated with the Fund received compensation from the Fund
for the fiscal year ended May 31, 1996 in excess of $60,000.
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COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Person, Position Aggregate Pension or Estimated Annual Total Compensation
Compensation from Retirement Benefits Benefits Upon From Registrant and
the Registrant Accrued as Part of Retirement Fund Complex
Fund Expenses
<S> <C> <C> <C> <C>
John J. Pileggi None 0 N/A None
Trustee and Principal
Executive Officer
James H. Johnston, III, $7,833 0 N/A $7,833
M.D.
Trustee
James T. Mallette $7,833 0 N/A $7,833
Trustee
Walter P. Neely, Ph.D., $7,833 0 N/A $7,833
CFA, Trustee
Charles M. Carr, Trustee* $7,833 0 N/A $7,833
John William Head, Trustee* $7,833 0 N/A $7,833
</TABLE>
______________________
* Messrs. Carr and Head were elected as Trustees on September 6, 1996.
Amount shown represents the total compensation estimated to be paid to
such person during a complete fiscal year.
As of the date of this SAI, trustees and officers of the Trust as a
group beneficially owned less than 1% of the outstanding shares of the Trust.
The Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201 (the "Adviser") serves as the investment adviser to
the Fund pursuant to a Master Investment Advisory Contract (the "Advisory
Contract"). The Advisory Contract provides that the Adviser shall furnish to
the Fund investment guidance and policy direction in connection with the daily
portfolio management of the Fund. Pursuant to the Advisory Contract, the
Adviser furnishes to the Board of Trustees periodic reports on the investment
strategy and performance of the Fund.
- 7 -
<PAGE> 263
The Adviser has agreed to provide to the Fund, among other things,
money market security and fixed-income research, and analysis and statistical
and economic data and information concerning interest rate and security market
trends, portfolio composition and credit conditions.
The Advisory Contract will continue in effect for more than two years
provided the continuance is approved annually, (i) by the holders of a majority
of the Fund's outstanding voting securities (as defined in the 1940 Act) or by
the Trust's Board of Trustees and (ii) by a majority of the trustees of the
Trust who are not parties to the Advisory Contract or "interested persons" (as
defined in the 1940 Act) of any such party. The Advisory Contract may be
terminated on 60 days' written notice by either party and will terminate
automatically if assigned.
For the advisory services it provides to the Fund, Trustmark may
receive fees based on average daily net assets up to an annualized rate of
0.75%.
Trustmark National Bank also serves as custodian for the Fund. See
"Custodian." Furman Selz serves as the Fund's transfer agent and provides
certain administrative, shareholder servicing and fund accounting services for
the Fund.
Counsel has advised the Trust that the Adviser should be able to
perform the services contemplated by the Advisory Contract with the Trust, the
Prospectus and this SAI, without violation of the Glass-Steagall Act. Such
counsel have pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes and regulations relating to the permissible activities of banks
and their subsidiaries or affiliates, as well as future changes in federal or
state statutes and regulations and judicial or administrative decisions or
interpretations thereof, could prevent the Adviser or its Affiliates from
continuing to perform, in whole or in part, such services. If the Adviser was
prohibited from performing the services, it is expected that new agreements
would be proposed or entered into with another entity or entities qualified to
perform such services.
For the period February 24, 1994 (commencement of operations) through
May 31, 1994, Trustmark was entitled to advisory fees of $59,505 and waived
advisory fees of $59,131.
For the fiscal years ended May 31, 1995 and May 31, 1996, Trustmark
National Bank was entitled to advisory fees of $304,754 and $468,219 and waived
advisory fees of $105,004 and $94,055.
Administrator. The Trust has retained Furman Selz LLC as administrator
on behalf of the Fund. Under the Administration Agreement with the Trust, the
Administrator, in connection therewith, furnishes the Trust with office
facilities, together
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with those ordinary clerical and bookkeeping services that are not being
furnished by the Adviser.
For the period February 24, 1994 (commencement of operations) through
May 31, 1994, the Administrator was entitled to administrative fees of $11,901
and waived administrative fees of $4,007.
For the fiscal years ended May 31, 1995 and May 31, 1996, the
Administrator earned fees totaling $60,908 and $93,541.
Expense Limitations. Currently, California is the only state imposing
limitations on the expenses of the Fund. Those expense limitations are 2-1/2
percent of the first $30 million of the Fund's average net assets, 2 percent of
the next $70 million and 1-1/2 percent of the Fund's remaining average net
assets. If in any fiscal year expenses of the Fund (excluding taxes, interest,
expenses under the Plan, brokerage commissions and other portfolio transaction
expenses, other expenditures which are capitalized in accordance with generally
accepted accounting principles and extraordinary expenses, but including the
advisory and administrative fees) exceed the expense limitations applicable to
the Fund imposed by the securities regulations of any state, Furman Selz and
Trustmark will reimburse the Fund for a portion of the excess with Trustmark
paying 60% and Furman Selz the remaining 40% of the excess.
RULE 12b-1 DISTRIBUTION PLAN
As described in the Prospectus, the Trust has adopted, for the Consumer
Service Class of the of the Fund, a Distribution Plan under Section 12(b) of
the 1940 Act and Rule 12b-1 thereunder (the "Rule"). The Distribution Plan was
adopted by the Board of Trustees, including a majority of the trustees who were
not "interested persons" (as defined in the 1940 Act) of the Trust and who had
no direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the "Qualified Trustees").
Under the Distribution Plan, the Fund may, with respect to its Consumer
Service Class, reimburse the Distributor monthly (subject to a limit of 0.35%
per annum of the average daily net assets of the Fund's Consumer Service Class)
for costs and expenses of the Distributor in connection with the distribution
of Fund shares of the Consumer Service Class. These costs and expenses
include: (i) advertising by radio, television, newspapers, magazines,
brochures, sales literature, direct mail or any other form of advertising, (ii)
expenses of sales employees or agents of the Distributor, including salary,
commissions, travel and related expenses, (iii) payments to broker-dealers and
financial institutions for services in connection with the distribution of
shares, including promotional incentives and fees calculated with reference to
the average daily net asset value of shares held by shareholders who have a
brokerage or other service relationship with the broker-dealer or other
institution receiving such fees, (iv) costs of printing prospectuses and other
materials to be given or sent to prospective investors, and (v) such other
similar services as the Board
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of Trustees determines to be reasonably calculated to result in the sale of
shares of the Fund. The actual fee payable to the Distributor shall, within
such limit, be determined from time to time by mutual agreement between the
Trust and the Distributor. The Distributor may enter into selling agreements
with one or more selling agents under which such agents may receive
compensation for distribution-related services from the Distributor, including,
but not limited to, commissions or other payments to such agents based on the
average daily net assets of Fund shares attributable to them. The Distributor
may retain any portion of the total distribution fee payable under the Plan to
compensate it for the distribution-related services provided by it or to
reimburse it for other distribution-related expenses. The SEC has proposed
certain amendments to the Rule. If the proposed amendments are adopted, the
distribution arrangement described above may have to be modified to ensure that
all payments of distribution expenses are attributable to specific sales or
promotional services or activities. Any other amendments to the Rule also
could require amendments or revisions to the distribution arrangements
described above.
The Distribution Plan will continue in effect from year to year if such
continuance is approved by a majority vote of both the trustees of the Trust
and the Qualified Trustees. Such agreement will terminate automatically if
assigned, and may be terminated at any time, without payment of any penalty, by
a vote of a majority of the outstanding voting securities of the Fund. The
Distribution Plan may not be amended to increase materially the amounts payable
thereunder by the Fund without the approval of a majority of the outstanding
voting securities of the Fund, and no material amendment to the Distribution
Plan may be made except by a majority of both the trustees of the Trust and the
Qualified Trustees.
For the period February 24, 1994 (commencement of operations) through
May 31, 1994 and for the fiscal years ended May 31, 1995 and May 31, 1996, the
Consumer Service Class of the Fund paid $13, $402 and $1,426 respectively,
pursuant to the Fund's Distribution Plan.
CALCULATION OF YIELD AND TOTAL RETURN
Quotations of average annual total return will be 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 and since inception (up to the life of
the Fund), calculated pursuant to the following formula:
P (1+T) = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of the maximum sales charge and a
proportional share of Fund expenses (net of
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<PAGE> 266
certain reimbursed expenses) on an annual basis, and will assume that all
dividends and distributions are reinvested when paid.
As indicated in the Prospectus, the Fund may advertise certain yield
information.
Yield for the Fund will be calculated based on a 30-day (or one month)
period, computed by dividing the net investment income per share earned during
the period by the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2[((a-b)/cd+1)6 - 1]
where a = hypothetical dividends and interest earned during the 30-day period;
b = expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the net asset value per share on the last day of the
period. The net investment income of such Fund includes actual interest
income, plus or minus amortized purchase discount (which may include original
issue discount) or premium, less accrued expenses. Realized and unrealized
gains and losses on portfolio securities are not included in such Fund's net
investment income for this purpose. For purposes of sales literature, such
Fund's yield also may be calculated on the basis of the net asset value per
share rather than the public offering price, provided that the yield data
derived pursuant to the calculation described above also are presented.
Based on the thirty day period ended May 31, 1996 ("30-day base
period") the 30 day yield for the Consumer Service Class and the Institutional
Class of the Fund was 0.79% and 1.04%, respectively.
The average annual total return for the Consumer Service Class and
Institutional Class shares of the Fund for the one year period ended May 31,
1996 was 32.76% and 33.06%, respectively. The average annual total return for
the Consumer Service Class and the Institutional Class shares of the Fund from
inception (February 24, 1994) to May 31, 1996 was 19.46% and 19.73%,
respectively.
The yield or total return for the Fund will fluctuate from time to
time, unlike bank deposits or other investments that pay a fixed yield for a
stated period of time, and does not provide a basis for determining future
yield or total return since it is based on historical data. Yield and total
return are functions of portfolio quality, composition, maturity and market
conditions as well as the expenses allocated to the Fund.
In addition, investors should recognize that changes in the net asset
value of shares of the Fund will affect the yield of the Fund for any specified
period, and such changes should be considered together with the Fund's yield in
ascertaining the Fund's total return to shareholders for the period. Yield and
total return information for the Fund may be
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<PAGE> 267
useful in reviewing the performance of the Fund and for providing a basis for
comparison with investment alternatives. The yield or total return of the
Fund, however, may not be comparable to the yields from investment alternatives
because of differences in the foregoing variables and differences in the
methods used to value portfolio securities, compute expenses and calculate
yield or total return.
From time to time, the Trust may quote the Fund's performance in
advertising and other types of literature as compared to the performance of the
S&P Index, the Dow Jones Industrial Average or any other commonly quoted index
of common stock prices. The S&P Index and the Dow Jones Industrial Average are
unmanaged indices of selected common stock prices. The Fund's performance also
may be compared to those of other mutual funds having similar objectives. This
comparative performance could be expressed as a ranking prepared by Lipper
Analytical Services, Inc., an independent service which monitors the
performance of mutual funds.
The Fund's comparative performance for such purposes may be calculated
by relating net asset value per share at the beginning of a stated period to
the net asset value of the investment, assuming reinvestment of all gains,
distributions and dividends paid, at the end of the period. Any such
comparisons may be useful to investors who wish to compare the Fund's past
performance with that of its competitors. Of course, past performance cannot
be a guarantee of future results.
The Trust also may discuss in advertising and other types of
literature that the Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as S&P or Moody's. Such rating
would assess the creditworthiness of the investments held by the Fund. The
assigned rating would not be a recommendation to purchase, sell or hold the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of a Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information
relating to a Fund or its investments. The Trust may compare the Fund's
performance with other investments which are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare a Fund's past
performance with other rated investments.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for the Fund is determined by the
Administrator of the Fund on each day the New York Stock Exchange is open for
trading.
Securities for which market quotations are available are valued at
latest prices. In the absence of any sale of such securities on the valuation
date and in the case of other securities, including U.S. Government securities
but excluding debt securities maturing in 60 days or less, the valuations are
based on latest quoted bid prices. Futures contracts and
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options listed on a national exchange are valued at the last sale price on the
exchange on which they are traded at the close of the Exchange, or, in the
absence of any sale on the valuation date, at latest quoted bid prices.
Options not listed on a national exchange are valued at latest quoted bid
prices. Debt securities maturing in 60 days or less are valued at amortized
cost. In all cases, bid prices will be furnished by a reputable independent
pricing service approved by the Board of Trustees and are based on yields or
prices of securities of comparable quality, coupon, maturity and type;
indications as to value from dealers; and general market conditions. Prices
provided by an independent pricing service may be determined without exclusive
reliance on quoted prices and may take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. All other securities and other assets of the Fund for which current
market quotations are not readily available are valued at fair value as
determined in good faith by the Trust's Board of Trustees and in accordance
with procedures adopted by the Board of Trustees.
With respect to options contracts, the premium received is recorded as
an asset and equivalent liability, and thereafter adjusts the liability to the
market value of the option determined in accordance with the preceding
paragraph. The premium paid for an option purchased by the Fund is recorded as
an asset and subsequently adjusted to market value.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any broker or group of
brokers in the execution of transactions in portfolio securities. Subject to
policies established by the Trust's Board of Trustees, the Adviser is
responsible for the Fund's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Trust to obtain the
best execution taking into account the broker's general execution and
operational facilities, the type of transaction involved and other factors.
While the Adviser generally seeks reasonably competitive spreads or
commissions, the Fund will not necessarily be paying the lowest spread or
commission available.
The Adviser may, in circumstances in which two or more brokers are in
a position to offer comparable results for the Fund's portfolio transactions,
give preference to a broker that has provided statistical or other research
services to the Adviser. By allocating transactions in this manner, the
Adviser is able to supplement its research and analysis with the views and
information of securities firms. Information so received may be in addition
to, and not in lieu of, the services required to be performed by the Adviser
under the Advisory Contract, and the expenses of the Adviser will not
necessarily be reduced as a result of the receipt of this supplemental research
information. Furthermore, research services furnished by brokers through which
the Adviser places securities transactions for the Fund may be used by the
Adviser in servicing its other accounts, and not all of these services may be
used by the Adviser in connection with advising the Fund. In so allocating
portfolio transactions, the Adviser may, in compliance with Section 28(e) of
the Securities Exchange Act of 1934, cause the Trust to pay an amount of
commission that exceeds the
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<PAGE> 269
amount of commission that another broker would have charged for effecting the
same transaction.
Purchases and sales of equity securities for the Fund typically are
effected through brokers who charge a negotiated commission for their services.
Orders may be directed to any broker including, to the extent and in the manner
permitted by applicable law, the Distributor or its affiliates. In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price that includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount.
In placing orders for portfolio securities of the Fund, the Adviser is
required to give primary consideration to obtaining the most favorable price
and efficient execution. This means that the Adviser will seek to execute each
transaction at a price and commission, if any, that provide the most favorable
total cost or proceeds reasonably attainable in the circumstances. While the
Adviser will generally seek reasonably competitive spreads or commissions, the
Fund will not necessarily be paying the lowest spread or commission available.
Commission rates are established pursuant to negotiations with the broker based
on the quality and quantity of execution services provided by the broker in the
light of generally prevailing rates. The allocation of orders among brokers
and the commission rates paid are reviewed periodically by the Board of
Trustees.
During the period February 24, 1994 (commencement of operations)
through May 31, 1994 and for the fiscal years ended May 31, 1995 and May 31,
1996, the Fund paid $134,794, $96,911 and $115,918, respectively, in brokerage
commissions.
Portfolio Turnover. During the fiscal year ended May 31, 1996, the
Fund's portfolio turnover rate was 28%. The portfolio turnover rate for the
Fund is not expected to exceed 200%.
FEDERAL INCOME TAXES
The Prospectus describes generally the tax treatment of dividends and
distributions made by the Trust. This section of the SAI includes additional
information concerning federal income taxes.
Qualification by the Fund as a "regulated investment company" under the
Code requires, among other things, that (a) at least 90% of the Fund's annual
gross income be derived from interest payments with respect to securities
loans, dividends and gains from the sale or other disposition of stock or
securities, options, futures, forward contracts, foreign currencies, and other
income derived with respect to its business of investing in stock or
securities; (b) the Fund derives less than 30% of its gross income from gains
from the sale or other disposition of securities or options, futures or forward
contracts (other
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than options, futures or forward contracts on foreign currencies) and foreign
currencies (including options, futures or forwards thereon) not directly
related to the Fund's business of investing in stock or securities, held for
less than three months; and (c) the Fund diversifies its holdings so that, at
the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash and cash items (including
receivables), U.S. government securities, securities of other regulated
investment companies and other securities (except that such other securities
must be limited in respect of any one issuer to an amount not greater than 5%
of the value of the Fund's assets and 10% of the outstanding voting securities
of such issuer), and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities and the securities of other regulated investment companies), or of
two or more issuers which the taxpayer controls and which are determined to be
engaged in the same or similar trades or businesses or related trades or
businesses. The Fund will not be subject to federal income tax on its net
investment income and net capital gains distributed to its shareholders,
provided that it distributes to its stockholders at least 90% of its net
investment income and tax-exempt income earned in each year. If the Fund does
not meet all of these Code requirements, it will be taxed as an ordinary
corporation and its distributions will be taxed to shareholders as ordinary
income.
Under the Code, a nondeductible excise tax of 4% is imposed on the
excess of a regulated investment company's "required distribution" for the
calendar year ending within the regulated investment company's taxable year
over the "distributed amount" for such calendar year. The term "required
distribution" means the sum of (i) 98% of ordinary income for the calendar
year, (ii) 98% of capital gain net income for the one year period ending on
October 31, and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the regulated investment company from its current
year's ordinary income and capital gain net income and (ii) any amount on which
the regulated investment company pays income tax for the year.
For this purpose, any income or gain retained by the Fund that is
subject to tax will be considered to have been distributed by year-end. In
addition, dividends and distributions declared payable as of a date in October,
November or December of any calendar year are deemed under the Code to have
been received by the shareholders on December 31 of that calendar year if the
dividend is actually paid in the following January. Such dividends will,
accordingly, be subject to income tax for the year in which the record date
falls. The Fund intends to distribute substantially all of its net investment
income and net capital gains and, thus, expects not to be subject to the excise
tax.
A capital gains distribution will be a return of invested capital to
the extent the net asset value of an investor's shares is thereby reduced below
his or her cost, even though the distribution will be taxable to the
shareholder. A redemption of shares by a shareholder under these circumstances
could result in a capital loss for federal tax purposes.
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It is anticipated that a portion of the dividends paid by the Fund will
qualify for the dividends-received deduction available to corporations. The
Fund is required to notify shareholders of the amount of dividends which will
qualify for the deduction within 60 days of the close of the Fund's taxable
year. Pending tax law proposals may affect the dividends received deduction.
If a shareholder exchanges or otherwise disposes of shares of the Fund
within 90 days of having acquired such shares, and if, as a result of having
acquired those shares the shareholder subsequently pays a reduced sales load
for shares of the Fund, the sales load previously incurred acquiring the Fund's
shares shall not be taken into account (to the extent such previous sales loads
do not exceed the reduction in sales loads) for the purpose of determining the
amount of gain or loss on the exchange, but will be treated as having been
incurred in the acquisition of such other shares.
Any loss realized on a redemption or exchange of shares of the Fund
will be disallowed to the extent shares are reacquired within the 60-day period
beginning 30 days before and ending 30 days after the day the shares are
disposed.
If an option written by the Fund lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund will realize a short-term capital gain or loss, depending on
whether the premium income is greater or less than the amount paid by the Fund
in the closing transaction. If securities are sold by the Fund pursuant to the
exercise of a call option written by it, the Fund will add the premium received
to the sale price of the securities delivered in determining the amount of gain
or loss on the sale. If securities are purchased by the Fund pursuant to the
exercise of a put option written by it, the Fund will subtract the premium
received from its cost basis in the securities purchased. The requirement that
the Fund derive less than 30% of its gross income from gains from the sale of
securities held for less than three months may limit the Fund's ability to
write options.
The amount of any realized gain or loss on closing out a forward
contract will generally result in a realized capital gain or loss for tax
purposes. Under Code Section 1256, forward currency contracts held by the Fund
at the end of a fiscal year will be required to be "marked to market" for
federal income tax purposes, that is, deemed to have been sold at market value.
Any gain or loss recognized with respect to forward currency contracts is
considered to be 60% long term capital gain or loss and 40% short term capital
gain or loss, without regard to the holding period of the contract. Code
Section 988 may also apply to forward contracts. Under Section 988, each
foreign currency gain or loss is generally computed separately and treated as
ordinary income or loss. In the case of overlap between Section 1256 and 988,
special provisions determine the character and timing of any income, gain or
loss. The Fund will attempt to monitor Section 988 transactions to avoid an
adverse tax impact.
16
<PAGE> 272
Shareholders will be notified annually by the Trust as to the Federal
tax status of distributions made by the Fund. Depending on the residence of the
shareholder for tax purposes, distributions also may be subject to state and
local taxes. Special tax treatment, including a penalty on certain
pre-retirement distributions, is accorded to accounts maintained as IRAs.
Shareholders should consult their own tax advisers as to the Federal, state and
local tax consequences of ownership of shares of the Fund in their particular
circumstances.
Foreign Shareholders Under the Code, distributions of net investment
income by the Fund to a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation, or foreign partnership (a
"foreign shareholder") will be subject to U.S. withholding tax (at a rate of
30% or a lower treaty rate). Withholding will not apply if a dividend paid by
the Fund to a foreign shareholder is "effectively connected" with a U.S. trade
or business, in which case the reporting and withholding requirements
applicable to U.S. citizens or domestic corporations will apply. Distributions
of net long-term capital gains are not subject to tax withholding, but in the
case of a foreign shareholder who is a nonresident alien individual, such
distributions ordinarily will be subject to U.S. income tax at a rate of 30% if
the individual is physically present in the U.S. for more than 182 days during
the taxable year.
Investors should be aware that the investments to be made by the Fund
may involve sophisticated tax rules (such as the original issue discount,
marked to market and real estate mortgage investment conduit ("REMIC") rules)
that would result in income or gain recognition by the Fund without
corresponding current cash receipts. Although the Fund will seek to avoid
significant noncash income, such noncash income could be recognized by the
Fund, in which case the Fund may distribute cash derived from other sources in
order to meet the minimum distribution requirements described above. Investors
should consult their tax advisers with respect to such rules.
17
<PAGE> 273
SHARES OF BENEFICIAL INTEREST
The Trust consists of multiple separate portfolios or funds, including
the Fund. The Fund is comprised of two classes of shares -- the "Institutional
Class" and the "Consumer Service Class." When certain matters affect one class
but not another, the shareholders would vote as a class regarding such matters.
Subject to the foregoing, on any matter submitted to a vote of shareholders,
all shares then entitled to vote will be voted separately by the Fund unless
otherwise required by the 1940 Act, in which case all shares will be voted in
the aggregate. For example, a change in the Fund's fundamental investment
policies would be voted upon only by shareholders of the Fund. Additionally,
approval of the Advisory Contract is a matter to be determined separately by
the Fund. Approval by the shareholders of one Performance Fund is effective as
to that Fund whether or not sufficient votes are received from the shareholders
of the other Performance Funds to approve the proposal as to those Funds. As
used in the Prospectus and in this SAI, the term "majority," when referring to
approvals to be obtained from shareholders of the Fund or class means the vote
of the lesser of (i) 67% of the shares of the Fund or class represented at a
meeting if the holder of more than 50% of the outstanding shares of the Fund or
class are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of the Fund or class. The term "majority," when referring
to the approvals to be obtained from shareholders of the Trust as a whole means
the vote of the lesser of (i) 67% of the Trust's shares represented at a
meeting if the holders of more than 50% of the Trust's outstanding shares are
present in person or proxy, or (ii) more than 50% of the Trust's outstanding
shares. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held.
The Trust may dispense with annual meetings of shareholders in any year
in which it is not required to elect trustees under the 1940 Act. However, the
Trust undertakes to hold a special meeting of its shareholders if the purpose
of voting on the question of removal of a director or trustees is requested in
writing by the holders of at least 10% of the Trust's outstanding voting
securities, and to assist in communicating with other shareholders as required
by Section 16(c) of the 1940 Act.
Each share of the Fund represents an equal proportional interest in the
Fund with each other share and is entitled to such dividends and distributions
out of the income earned on the assets belonging to the Fund as are declared in
the discretion of the Trustees. In the event of the liquidation or dissolution
of the Trust, shareholders of the Fund are entitled to receive the assets
attributable to the Fund that are available for distribution, and a
distribution of any general assets of the Trust not attributable to a
particular Fund that are available for distribution in such manner and on such
basis as the Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Trust.
18
<PAGE> 274
As of September 12, 1996, the following were five percent or greater
shareholders of the Fund:
<TABLE>
<CAPTION>
Institutional
<S> <C>
Harman & Co. 99.62%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
</TABLE>
<TABLE>
<CAPTION>
Consumer
<S> <C>
Donald Lufkin Jenrette 5.73%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-2052
</TABLE>
OTHER INFORMATION
The Trust's Registration Statement, including the Prospectus, the
Statement of Additional Information and the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C. Statements contained in
the Prospectus or the Statement of Additional Information as to the contents of
any contract or other document referred to herein or in the Prospectus are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
CUSTODIAN
Trustmark also acts as Custodian for the Fund. The Custodian, among
other things, maintains a custody account or accounts in the name of the Fund;
receives and delivers all assets for the Fund upon purchase and upon sale or
maturity; collects and receives all income and other payments and distributions
on account of the assets of the Fund and pays all expenses of the Fund. For
its services as Custodian, Trustmark receives an asset-based fee and
transaction charges.
For the period February 24, 1994 (commencement of operations) through
May 31, 1994 and for the fiscal years ended May 31, 1995 and May 31, 1996, the
Mid Cap Fund paid $3,107, $16,129 and $24,944, respectively, to the Custodian.
19
<PAGE> 275
EXPERTS
Price Waterhouse LLP has been selected as the independent accountants
for the Trust. Price Waterhouse LLP provides audit services, tax return
preparation and assistance and consultation in connection with certain SEC
filings. Price Waterhouse LLP's address is 1177 Avenue of the Americas, New
York, New York 10036.
FINANCIAL STATEMENTS
Financial Statements for the Fund as of May 31, 1996 and for the period
then ended including the Report of Price Waterhouse LLP, independent
accountants, are incorporated by reference.
20
<PAGE> 276
APPENDIX
The following is a description of the ratings by Moody's and Standard
& Poor's.
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or 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 fluctuations
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; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of
a desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are 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.
21
<PAGE> 277
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating
has been suspended or withdrawn, it may be for reasons unrelated to the quality
of the issue.
Should no rating be assigned, the reason may be one of the
following:
(1) An application for rating was not received or accepted.
(2) The issue or issuer belongs to a group of securities that are
not rated as a matter of policy.
(3) There is a lack of essential data pertaining to the issue or
issuer.
(4) The issue was privately placed, in which case the rating is
not published in Moody's Investors Services, Inc.'s
publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa-1, A-1, Baa-1 and B-1.
22
<PAGE> 278
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA have the highest rating assigned by
Standard & Poor's Corporation ("S&P"). Capacity to pay interest and repay
principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher rated issues only in
small degree.
A: Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in the
highest rated categories.
BBB: Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they normally exhibit
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 bonds in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of this
obligation. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, they are outweighed by large uncertainties of major
risk exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no
interest is being paid.
D: Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
NR: Indicates that no rating has been requested, that there
is insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
23
<PAGE> 279
PERFORMANCE FUNDS TRUST
TELEPHONE: (800) 524-2276
STATEMENT OF ADDITIONAL INFORMATION - SEPTEMBER 30, 1996
THE U.S. TREASURY MONEY MARKET FUND
Performance Funds Trust (the "Trust") is an open-end, management
investment company of the series type. This statement of Additional
Information ("SAI") contains information about both the "Consumer Service
Class" and the "Institutional Class" of the Trust's U.S. Treasury Money Market
Fund (the "Fund") investment portfolio. The investment objective of the Fund
is described in the Prospectus. See "The Investment Policies of the Fund."
This SAI is not a prospectus and should be read in conjunction with
the Fund's Prospectus, dated September 30, 1996. All terms used in this SAI
that are defined in the Prospectus will have the meanings assigned in the
Prospectus. Copies of the Prospectus may be obtained without charge by writing
to Performance Funds Distributor, Inc. ("PFD"), the Trust's distributor, at 230
Park Avenue, New York, New York 10169; or by calling the Fund at the telephone
number indicated above.
_________________
<PAGE> 280
TABLE OF CONTENTS
Page
----
Investment Restrictions . . . . . . . . . . . . . . . . . . 1
Management . . . . . . . . . . . . . . . . . . . . . . . . 3
Rule 12b-1 Distribution Plan . . . . . . . . . . . . . . . 7
Calculation of Yield and Total Return . . . . . . . . . . . 9
Determination of Net Asset Value . . . . . . . . . . . . . 12
Portfolio Transactions . . . . . . . . . . . . . . . . . . 14
Federal Income Taxes . . . . . . . . . . . . . . . . . . . 15
Shares of Beneficial Interest . . . . . . . . . . . . . . . 17
Other Matters . . . . . . . . . . . . . . . . . . . . . . . 19
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . 19
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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<PAGE> 281
INVESTMENT RESTRICTIONS
The Fund is subject to the following investment restrictions, all of
which are fundamental policies:
The Fund may not:
(1) borrow money or pledge or mortgage its assets, except that the
Fund may borrow from banks up to 10% of the current value of its total net
assets for temporary or emergency purposes and those borrowings may be secured
by the pledge of not more than 15% of the current value of the Fund's total net
assets (but investments may not be purchased by the Fund while any such
borrowings exist);
(2) make loans, except loans of portfolio securities;
(3) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof the value of the Fund's investments in that industry would
exceed 25% of the current value of the Fund's total assets, provided that there
is no limitation with respect to investments in (I) obligations of the United
States Government, its agencies or instrumentalities, and (ii) the obligations
of domestic banks (for the purposes of this restriction domestic bank
obligations do not include obligations of U.S. branches of foreign banks or
obligations of foreign branches of U.S. banks);
(4) purchase or sell real estate other than securities secured by
real estate or interests therein or securities issued by companies that invest
in real estate or interests therein), commodities or commodity contracts;
except that the Fund may enter into financial futures contracts and may write
call options and purchase call and put options on financial futures contracts
as generally described in the prospectus and this SAI;
(5) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and except for "margin" payments in
connection with financial futures contracts and options on futures contracts)
or make short sales of securities;
<PAGE> 282
(6) underwrite securities of other issuers, except to the extent
that the purchase of otherwise permitted investments directly from the issuer
thereof or from an underwriter for an issuer and the later disposition of such
securities in accordance with the Fund's investment program may be deemed to be
an underwriting;
(7) invest more than 15% of the current value of its net assets in
repurchase agreements maturing in more than seven days, in fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, or in securities or other assets which the Board of Trustees
determines to be illiquid securities or assets. For purposes of this
restriction, securities issued pursuant to Rule 144A may be considered to be
liquid pursuant to guidelines adopted by the Board of Trustees;
(8) acquire securities for the purpose of exercising control or
management over the issues thereof;
(9) issue senior securities, except that the Fund may borrow from
banks up to 10% of the current value of its net assets for temporary purposes
only in order to meet redemptions, and these borrowings may be secured by the
pledge of up to 15% of the current value of its net assets (but new investments
may not be purchased while any such borrowing exists); and provided further
that the Fund may acquire when-issued securities, enter into other forward
contracts to acquire securities, and enter into or acquire financial futures
contracts and options thereon when the Fund's obligation thereunder, if any, is
"covered" (i.e., the Fund establishes a segregated account in which it
maintains liquid assets in an amount at least equal in value to the Fund's
obligations and marks-to-market daily such collateral);
(10) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs; or
(11) invest in shares of other investment companies.
The Fund may not, with respect to 75% of its total assets, purchase
securities of any issuer (except securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities) if, as a result, more than 5%
of the value of its total assets would be invested in the securities of any one
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<PAGE> 283
issuer or the Fund's ownership would be more than 10% of the outstanding voting
securities of such issuer. In addition, the Fund is subject to diversification
obligations pursuant to Rule 2a-7 under the 1940 Act.
MANAGEMENT
Trustees and Officers. The trustees and executive officers of the
Trust, and their principal occupations during the past five years, are listed
below. The trustees who are deemed to be an "interested person" of the Trust
for purposes of the Act are marked with an asterisk "*".
John J. Pileggi, age 37, Trustee and Principal Executive Officer - 237 Park
Avenue, New York, New York 10017. Senior Managing Director, Furman Selz LLC.
Charles M. Carr, age __, Trustee - 1451 Highland Park Drive, Jackson MS 39211.
John William Head, age 71, Trustee - 46 Avery Circle, Jackson, MS 39211.
James H. Johnston, III, M.D., age 49, Trustee - 1421 North State Street, Suite
203, Jackson, Mississippi 39202. Physician (Gastroenterologist) with
Gastrointestinal Associates, P.A., Jackson, Mississippi since 1984.
James T. Mallette, age 37, Trustee*, - 111 East Capitol Street, Jackson,
Mississippi 39215. Attorney, Daniel Coker Horton and Bell, P.A., P.O. Box
1084, Jackson, Mississippi since July 1987. Prior thereto, Mr. Mallette was
employed as Counsel with the law firm of Crockett, Neeld and Starling, Jackson,
Mississippi 39201. President and Director of Rollingwood Beautiful Association,
Inc., Director of Easter Seal Society of Jackson, Mississippi, Inc.
Walter P. Neely, Ph.D., CFA, age 51, Trustee, - 1701 North State Street,
Jackson, Mississippi 39210. Professor and Consultant, Millsaps College,
Jackson, Mississippi, since 1980. Director, KLLM Transport Systems, Jackson,
Mississippi.
Donald Brostrom, age 37, Principal Financial and Accounting Officer - 237 Park
Avenue, New York, New York 10017. Director/Fund Services, Furman Selz LLC.
-3-
<PAGE> 284
Joan V. Fiore, age 40, Secretary - 237 Park Avenue, New York, New York 10017.
Managing Director and Counsel, Furman Selz LLC. Attorney with the Securities
and Exchange Commission from 1986 to 1991.
Sheryl Hirschfeld, age 36, Assistant Secretary - 237 Park Avenue, New York, New
York 10017. Director, Corporate Secretary Services, Furman Selz LLC since
1994. Assistant to Corporate Secretary and General Counsel of The Dreyfus
Corporation, 1982-1994.
As required by law, for as long as the Trust has a Distribution Plan,
the selection and nomination of trustees who are not "interested persons" of
the Trust will be made by such disinterested trustees. See "Rule 12b-1
Distribution Plan" in this SAI.
Trustees of the Trust who are not affiliated with the Distributor or
the Adviser receive from the Trust an annual fee of $5,000 and a fee for each
Board of Trustees and Board committee meeting attended of $1,000. Trustees who
are affiliated with the Distributor or the Adviser do not receive compensation
from the Trust but all trustees are reimbursed for all out-of-pocket expenses
relating to attendance at meetings.
The following table sets forth total compensation paid to Trustees for
the fiscal year ended May 31, 1996. Except as disclosed below, no executive
officer or person affiliated with the Fund received compensation from the Fund
for the fiscal year ended May 31, 1996 in excess of $60,000.
-4-
<PAGE> 285
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Person, Position Aggregate Pension or Retirement Estimated Annual Total Compensation
Compensation from the Benefits Accrued as Benefits Upon From Registrant and
Registrant Part of Fund Expenses Retirement Fund Complex
<S> <C> <C> <C> <C>
John J. Pileggi None 0 N/A None
Trustee and Principal
Executive Officer
James H. Johnston, III, $7,833 0 N/A $7,833
M.D.
Trustee
James T. Mallette $7,833 0 N/A $7,833
Trustee
Walter P. Neely, Ph.D., $7,833 0 N/A $7,833
CFA, Trustee
Charles M. Carr, Trustee* $7,833 0 N/A $7,833
John William Head, Trustee* $7,833 0 N/A $7,833
</TABLE>
______________________
* Messrs. Carr and Head were elected as Trustees on September 6th.
Amount shown represents the total compensation estimated to be paid
to such person during a complete fiscal year.
As of September 15, 1996, there no shareholders of the Fund each of
whom owned at least 5% of the shares outstanding.
As of the date of this SAI, trustees and officers of the Trust as a
group beneficially owned less than 1% of the outstanding shares of the Trust.
-5-
<PAGE> 286
The Adviser. Trustmark National Bank, 248 East Capitol Street,
Jackson, Mississippi 39201 (the "Adviser") serves as the investment adviser to
the Fund pursuant to a Master Investment Advisory Contract (the "Advisory
Contract"). The Advisory Contract provides that the Adviser shall furnish to
the Fund investment guidance and policy direction in connection with the daily
portfolio management of the Fund. Pursuant to the Advisory Contract, the
Adviser furnishes to the Board of Trustees periodic reports on the investment
strategy and performance of the Fund.
The Adviser has agreed to provide to the Fund, among other things,
money market security and fixed-income research, and analysis and statistical
and economic data and information concerning interest rate and security market
trends, portfolio composition and credit conditions.
The Advisory Contract will continue in effect for more than two years
provided the continuance is approved annually, (I) by the holders of a majority
of the Fund's outstanding voting securities (as defined in the 1940 Act) or by
the Trust's Board of Trustees and (ii) by a majority of the trustees of the
Trust who are not parties to the Advisory Contract or "interested persons" (as
defined in the 1940 Act) of any such party. The Advisory Contract may be
terminated on 60 days' written notice by either party and will terminate
automatically if assigned.
Trustmark National Bank also serves as custodian for the Fund. See
"Custodian." The Trust serves as its own transfer agent on behalf of the Fund
and Furman Selz provides certain administrative, shareholder servicing and fund
accounting services for the Fund.
Counsel has advised the Trust that the Adviser should be able to
perform the services contemplated by the Advisory Contract with the Trust, the
Prospectus and this SAI, without violation of the Glass-Steagall Act. Such
counsel have pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes and regulations relating to the permissible activities of banks
and their subsidiaries or affiliates, as well as future changes in federal or
state statutes
-6-
<PAGE> 287
and regulations and judicial or administrative decisions or interpretations
thereof, could prevent the Adviser or its Affiliates from continuing to perform,
in whole or in part, such services. If the Adviser were prohibited from
performing the services, it is expected that new agreements would be proposed or
entered into with another entity or entities qualified to perform such services.
Administrator. The Trust has retained Furman Selz LLC as
administrator on behalf of the Fund. Under the Administration Agreement with
the Trust, the Administrator, in connection therewith, furnishes the Trust with
office facilities, together with those ordinary clerical and bookkeeping
services that are not being furnished by the Adviser.
Currently, California is the only state imposing limitations on the
expenses of the Fund. Those expense limitations are 2-1/2 percent of the first
$30 million of the Fund's average net assets, 2 percent of the next $70 million
and 1-1/2 percent of the Fund's remaining average net assets. If in any fiscal
year expenses of the Fund (excluding taxes, interest, expenses under the Plan,
brokerage commissions and other portfolio transaction expenses, other
expenditures which are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, but including the advisory
and administrative fees) exceed the expense limitations applicable to the Fund
imposed by the securities regulations of any state, Furman Selz and Trustmark
will reimburse the Fund for a portion of the excess with Trustmark paying 60%
and Furman Selz the remaining 40% of the excess.
RULE 12b-1 DISTRIBUTION PLAN
As described in the prospectus, the Trust has adopted, for the
Consumer Service Class of the Fund, a Distribution Plan under Section 12(b) of
the 1940 Act and Rule l2b-1 thereunder (the "Rule"). The Distribution Plan was
adopted by the Board of Trustees, including a majority of the trustees who were
not "interested persons" (as defined in the 1940 Act) of the Trust and who had
no direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the "Qualified Trustees").
-7-
<PAGE> 288
Under the Distribution Plan, the Fund may, with respect to its
Consumer Service Class, reimburse the Distributor monthly (subject to a limit
of 0.25% per annum of the average daily net assets of the Fund's Consumer
Service Class for the first six months of Fund operations and up to 0.35% per
annum thereafter of the Fund's Consumer Service Class) for costs and expenses
of the Distributor in connection with the distribution of Fund shares of the
Consumer Service Class. These costs and expenses include: (I) advertising by
radio, television, newspapers, magazines, brochures, sales literature, direct
mail or any other form of advertising, (ii) expenses of sales employees or
agents of the Distributor, including salary, commissions, travel and related
expenses, (iii) payments to broker-dealers and financial institutions for
services in connection with the distribution of shares, including promotional
incentives and fees calculated with reference to the average daily net asset
value of shares held by shareholders who have a brokerage or other service
relationship with the broker-dealer or other institution receiving such fees,
(iv) costs of printing prospectuses and other materials to be given or sent to
prospective investors and (v) such other similar services as the Board of
Trustees determines to be reasonably calculated to result in the sale of shares
of the Fund. The actual fee payable to the Distributor shall, within such
limit, be determined from time to time by mutual agreement between the Trust
and the Distributor. The Distributor may enter into selling agreements with
one or more selling agents under which such agents may receive compensation for
distribution-related services from the Distributor, including, but not limited
to, commissions or other payment to such agents based on the average daily net
assets of Fund shares attributable to them. The Distributor may retain any
portion of the total distribution fee payable under the Plan to compensate it
for the distribution-related services provided by it or to reimburse it for
other distribution-related expenses. The SEC has proposed certain amendments to
the Rule. If the proposed amendments are adopted, the distribution arrangement
described above may have to be modified to ensure that all payments of
distribution expenses are attributable to specific sales or promotional
services or activities. Any other amendments to the Rule also could require
amendments or revisions to the distribution arrangements described above.
The Distribution Plan will continue in effect from year to year if
such continuance is approved by a majority vote of both
-8-
<PAGE> 289
the trustees of the Trust and the Qualified Trustees. Such agreements will
terminate automatically if assigned, and may be terminated at any time, without
payment of any penalty, by a vote of a majority of the outstanding voting
securities of the Fund. The Distribution Plan may not be amended to increase
materially the amounts payable thereunder by the Fund without the approval of a
majority of the outstanding voting securities of the Fund, and no material
amendment to the Distribution Plan may be made except by a majority of both the
trustees of the Trust and the Qualified Trustees.
CALCULATION OF YIELD AND TOTAL RETURN
As noted in the Prospectus, the Fund may advertise certain total
return information computed in the manner described in the Prospectus. As and
to the extent required by the SEC, an average annual compound rate of return
("T") will be computed by using the value at the end of a specified period
("EV") of a hypothetical initial investment ("P") over a period of years ("n")
according to the following formula:
P(1+T)n=EV
In addition, as indicated in the Prospectus, the Fund may also, at
times, calculate total return based on net asset value per share (rather than
the public offering price), in which case the figures would not reflect the
effect of any sales loads that would have been paid by an investor, or based on
the assumption that a sales load other than the maximum load (reflecting a
Volume Discount) was assessed, provided that total return data derived pursuant
to the calculation described above also are presented.
As indicated in the Prospectus, the Funds may advertise certain yield
information.
Current yield for the Fund will be calculated based on the net
changes, exclusive of capital changes, over a seven-day period, in the value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7)
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with the resulting yield figure carried to at least the nearest hundredth of
one percent.
Effective yield for the Fund will be calculated by determining the net
changes, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding one, raising the sum to a power
equal to 365 divided by seven[, and each class of shares for the Fixed Income
and subtracting one from the result. Yield for the Funds will be calculated
based on a 30-day (or one month) period, computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula: YIELD 2[((a-b)/cd+l)(6)-l], where a = dividends and interest earned
during the period; b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends; and d = the maximum offering price per share on
the last day of the period. The net investment income the Fund includes actual
interest income, plus or minus amortized purchase discount (which may include
original issue discount) or premium, less accrued expenses. Realized and
unrealized gains and losses on portfolio securities are not included in the
Fund's net investment income for this purpose. For purposes of sales
literature, the Fund's yield also may be calculated on the basis of the net
asset value per share rather than the public offering price, provided that the
yield data derived pursuant to the calculation described above also are
presented.
The yield or total return for the Fund will fluctuate from time to
time, unlike bank deposits or other investments that pay a fixed yield for a
stated period of time, and does not provide a basis for determining future
yield or total return since it is based on historical data. Yield and total
return are functions of portfolio quality, composition, maturity and market
conditions as well as the expenses allocated to the Fund.
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In addition, investors should recognize that changes in the net asset
value of shares of the Fund will affect the yield of the Fund for any specified
period, and such changes should be considered together with the Fund's yield in
ascertaining the Fund's total return to shareholders for the period. Yield and
total return information for the Fund may be useful in reviewing the
performance of the Fund and for providing a basis for comparison with
investment alternatives. The yield or total return of the Fund, however, may
not be comparable to the yields from investment alternatives because of
differences in the foregoing variables and differences in the methods used to
value portfolio securities, compute expenses and calculate yield or total
return.
From time to time, the Trust may quote the Fund's performance in
advertising and other types of literature as compared to the performance of the
S&P Index, the Dow Jones Industrial Average or any other commonly quoted index
of common stock prices. The S&P Index and the Dow Jones Industrial Average are
unmanaged indices of selected common stock prices. The Fund's performance also
may be compared to those of other mutual funds having similar objectives. This
comparative performance could be expressed as a comparison with other money
market funds rated by Donohue's Money Fund Report, a reporting service on
mutual funds.
The Fund's comparative performance for such purposes may be calculated
by relating net asset value per share at the beginning of a stated period to
the net asset value of the investment, assuming reinvestment of all gains,
distributions and dividends paid, at the end of the period. Any such
comparisons may be useful to investors who wish to compare the Fund's past
performance with that of its competitors. Of course, past performance cannot
be a guarantee of future results.
The Trust also may discuss in advertising and other types of
literature that the Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as S&P or Moody's. Such rating
would assess the creditworthiness of the investments held by the Fund. The
assigned rating would not be a recommendation to purchase, sell or hold the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of the Fund for a particular investor. In
addition, the assigned rating would
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be subject to change, suspension or withdrawal as a result of changes in, or
unavailability of, information relating to the Fund or its investments. The
Trust may compare the Fund's performance with other investments which are
assigned ratings by NRSROs. Any such comparisons may be useful to investors
who wish to compare the Fund's past performance with other rated investments.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Determination
of Net Asset Value."
Amortized Cost Pricing. The valuation of the Fund's portfolio
securities is based upon their amortized cost which does not take into account
unrealized capital gains or losses. This involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the instrument.
The Board of Trustees has agreed, as a particular responsibility
within the overall duty of care owed to the Fund's investors, to establish
procedures reasonably designed to stabilize the Fund's price per share as
computed for the purpose of sales and redemptions at $1.00. Such procedures
include review of the Fund's portfolio holdings by the Board of Trustees at
such intervals as they deem appropriate, to determine whether the Fund's net
assert value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. In such
review, investments for which market quotations are readily available will be
valued at the most recent bid price or yield equivalent for such securities or
for securities of comparable maturity, quality and type, as obtained from one
or more of the major market makers for the securities to be valued. Other
investments and assets will be valued at fair value as determined by the Board
of Trustees.
The extent of any deviation between the Fund's net asset value based
upon available market quotations or market equivalents
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and $1.00 per share based on amortized cost will be examined by the Board of
Trustees. If such deviation exceeds 1/2 and 1% the Board of Trustees will
consider promptly what action, if any, will be initiated. In the event the
Board of Trustees determines that a deviation exists which may result in
material dilution or other unfair results to investors or existing investors,
they have agreed to take such corrective action as they regard as necessary and
appropriate including: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
paying distributions from capital or capital gains; redeeming shares in kind;
or establishing a net asset value per share by using available market
quotations or market equivalents.
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PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any broker or group of
brokers in the execution of transactions in portfolio securities. Subject to
policies established by the Trust's Board of Trustees, the Adviser is
responsible for the Fund's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Trust to obtain the
best execution taking into account the broker's general execution and
operational facilities, the type of transaction involved and other factors.
While the Adviser generally seeks reasonably competitive spreads or
commissions, the Fund will not necessarily be paying the lowest spread or
commission available.
The Adviser may, in circumstances in which two or more brokers are in
a position to offer comparable results for a Fund portfolio transaction, give
preference to a broker that has provided statistical or other research services
to the Adviser. By allocating transactions in this manner, the Adviser is able
to supplement its research and analysis with the views and information of
securities firms. Information so received may be in addition to, and not in
lieu of, the services required to be performed by the Adviser under the
Advisory Contract, and the expenses of the Adviser will not necessarily be
reduced as a result of the receipt of this supplemental research information.
Furthermore, research services furnished by brokers through which the Adviser
places securities transactions for the Fund may be used by the Adviser in
servicing its other accounts, and not all of these services may be used by the
Adviser in connection with advising the Fund. In so allocating portfolio
transactions, the Adviser may, in compliance with Section 28(e) of the
Securities Exchange Act of 1934, cause the Trust to pay an amount of commission
that exceeds the amount of commission that another broker would have charged
for effecting the same transaction.
Purchases and sales of portfolio securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. The
Fund also may purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, money market
securities and other debt obligations are traded on a net basis
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and do not involve brokerage commissions. The costs associated with executing
the Fund's portfolio securities transactions will consist primarily of dealer
spreads and underwriting commissions. Under the 1940 Act, persons affiliated
with the Trust are prohibited from dealing with the Trust as a principal in the
purchase and sale of securities unless an exemptive order allowing such
transactions is obtained from the SEC or an exemption is otherwise available.
The Fund may purchase obligations from underwriting syndicates of which the
Distributor (or its affiliate) is a member under certain conditions in
accordance with the provisions of a rule adopted under the 1940 Act and in
compliance with procedures adopted by the Board of Trustees.
Portfolio Turnover. Because the portfolio of the Fund consists of
securities with relatively short-term maturities, the Fund can expect to
experience high portfolio turnover. A high portfolio turnover rate should not
adversely affect the Fund, however, because the portfolio securities will in
most cases be held to maturity and will not be resold. Also, it is not
anticipated that the Fund will incur brokerage commissions in connection with
any of its portfolio transactions.
FEDERAL INCOME TAXES
The prospectus describes generally the tax treatment of dividends and
distributions made by the Trust. This section of the SAI includes additional
information concerning federal income taxes.
Qualification by the Fund as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended, (the "Code", requires, among
other things, that (a) at least 90% of the Fund's annual gross income be
derived from interest, payments with respect to securities loans, dividends and
gains from the sale or other disposition of stock or securities, options,
futures, forward contracts, foreign currencies, and other income derived with
respect to its business of investing in stock or securities; (b) the Fund
derives less than 30% of its gross income from gains from the sale or other
disposition of securities or options, futures or forward contracts (other than
options, futures or
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forward contracts on foreign currencies) and foreign currencies (including
options, futures or forwards thereon) not directly related to the Fund's
business of investing in stock or securities, thereon held for less than three
months; and (C) the Fund diversifies its holdings so that, at the end of each
quarter of the taxable year, (I) at least 50% of the market value of the Fund's
assets is represented by cash, government securities, securities of other
regulated investment companies and other securities (except that such other
securities must be limited in respect of any one issuer to an amount not greater
than 5% of the value of the Fund's assets and 10% of the outstanding voting
securities of such issuer), and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government securities and the securities of other regulated investment
companies), or of two or more issuers which the taxpayer controls and which are
determined to be engaged in the same or similar trades or businesses or related
trades or businesses. As a regulated investment company, the Fund will not be
subject to federal income tax on its net investment income and net capital gains
distributed to its shareholders, provided that it distributes to its
stockholders at least 90% of its net investment income and tax-exempt income
earned in each year.
Under the Code, a nondeductible excise tax of 4% is imposed on the
excess of a regulated investment company's "required distribution" for the
calendar year ending within the regulated investment company's taxable year
over the "distributed amount" for such calendar year. The term "required
distribution" means the sum of (I) 98% of ordinary income (generally net
investment income) for the calendar year, (ii) 98% of capital gain net income
(both long term and short term) for the one year period ending on October 31
(as though the one year period ending on October 31 were the regulated
investment company's taxable year), and (iii) the sum of any untaxed,
undistributed net investment income and net capital gains of the regulated
investment company for prior periods. The term "distributed amount" generally
means the sum of (I) amounts actually distributed by the regulated investment
company from its current year's ordinary income and capital gain net income and
(ii) any amount on which the regulated investment company pays income tax for
the year.
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For this purpose, any income or gain retained by the Fund that is
subject to tax will be considered to have been distributed by year-end. In
addition, dividends and distributions declared payable as of a date in October,
November or December of any calendar year are deemed under the Code to have
been received by the shareholders on December 31 of that calendar year if the
dividend is actually paid in the following January. Such dividends will,
accordingly, be subject to income tax for the year in which the record date
falls. The Fund intends to distribute substantially all of its net investment
income and net capital gains and, thus, expects not to be subject to the excise
tax.
A capital gains distribution will be a return of invested capital to
the extent the net asset value of an investor's shares is thereby reduced below
his or her cost, even though the distribution will be taxable to the
shareholder. A redemption of shares by a shareholder under these circumstances
could result in a capital loss for federal tax purposes.
Any loss realized on a redemption or exchange of shares of the Fund
will be disallowed to the extent shares are reacquired within the 60-day period
beginning 30 days before and ending 30 days after the day the shares are
disposed.
Shareholders will be notified annually by the Trust as to the Federal
tax status of distributions made by the Fund. Depending on the residence of
the shareholder for tax purposes, distributions also may be subject to state
and local taxes. Special tax treatment, including a penalty on certain
preretirement distributions, is accorded to accounts maintained as IRAs.
Shareholders should consult their own tax advisers as to the Federal, state and
local tax consequences of ownership of shares of the Fund in their particular
circumstances.
SHARES OF BENEFICIAL INTEREST
Performance Funds Trust consists of shares representing interests in
six investment portfolios or Funds, including the Fund. The Fund, in turn, is
comprised of two classes of shares - the "Institutional Class" and the "Consumer
Service Class." When certain matters affect one class but not another, the
shareholders would vote as a class regarding such matters. Subject to the
foregoing, on any matter submitted to a vote of shareholders, all
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shares then entitled to vote will be voted separately by Fund or portfolio
unless otherwise required by the 1940 Act, in which case all shares will be
voted in the aggregate. For example, a change in the Fund's fundamental
investment policies would be voted upon only by shareholders of the Fund
involved. Additionally, approval of the Advisory Contract is a matter to be
determined separately by each Fund. Approval by the shareholders of one Fund
is effective as to that Fund whether or not sufficient votes are received from
the shareholders of any of the other Funds to approve the proposal as to those
Funds. As used in the Prospectus and in this SAI, the term "majority," when
referring to approvals to be obtained from shareholders of the Fund or class
means the vote of the lesser of (I) 67% of the shares of the Fund or class
represented at a meeting if the holders of more than 50% of the outstanding
shares of the Fund or class are present in person or by proxy, or (ii) more
than 50% of the outstanding shares of the Fund or class. The term "majority,"
when referring to the approvals to be obtained from shareholders of the Trust
as a whole means the vote of the lesser of (I) 67% of the Trust's shares
represented at a meeting if the holders of more than 50% of the Trust's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Trust's outstanding shares. Shareholders are entitled to one vote for each
full share held and fractional votes for fractional shares held.
The Trust may dispense with annual meetings of shareholders in any
year in which it is not required to elect trustees under the 1940 Act.
However, the Trust undertakes to hold a special meeting of its shareholders if
the purpose of voting on the question of removal of a director or trustees is
requested in writing by the holders of at least 10% of the Trust's outstanding
voting securities, and to assist in communicating with other shareholders as
required by Section 16(C) of the 1940 Act.
Each share of the Fund represents an equal proportional interest in
the Fund with each other share and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of the Trustees. In the event of the
liquidation or dissolution of the Trust, shareholders of the Fund are entitled
to receive the assets attributable to the Fund that are available for
distribution, and a distribution of any general assets not attributable to the
Fund
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that are available for distribution in such manner and on such basis as the
Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Trust.
OTHER MATTERS
The Trust's Registration Statement, including the Prospectus, the SAI
and the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C. Statements contained in the Prospectus or the SAI as to the
contents of any contract or other document referred to herein or in the
Prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
CUSTODIAN
Trustmark also acts as Custodian for the Fund. The Custodian, among
other things, maintains a custody account or accounts in the name of the Fund;
receives and delivers all assets for the Fund upon purchase and upon sale or
maturity; collects and receives all income and other payments and distributions
on account of the assets of the Fund and pays all expenses of the Fund. For
its services as Custodian, Trustmark receives an asset-based fee and
transaction charges.
EXPERTS
Price Waterhouse LLP has been selected as the independent accountants
for the Trust. Price Waterhouse LLP provides audit services, tax return
preparation and assistance and consultation in connection with certain SEC
filings. Price Waterhouse LLP's address is 1177 Avenue of the Americas, New
York, New York 10036.
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