<PAGE> 1
As filed with the Securities and Exchange Commission on September 26, 1997
Registration Nos. 33-46488
811-6603
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
----------
Post-Effective Amendment No. 8
---------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12
---------
(Check appropriate box or boxes)
PERFORMANCE FUNDS TRUST
(Exact name of Registrant as specified in charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices Zip Code)
Registrant's Telephone Number, including Area Code: (800) 737-3676
George O. Martinez, Esq.
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service)
Copy to:
Steven R. Howard, Esq.
Baker & McKenzie
805 Third Avenue
New York, New York 10022
----------------
It is proposed that this filing will become effective:
X immediately upon filing pursuant to Rule 485(b)
------
on , 1997 pursuant to Rule 485(b)
------ ------
60 days after filing pursuant to Rule 485(a)
------
on , 1997 pursuant to Rule 485(a)
------ ------
----------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has registered an indefinite number of shares of Capital Stock, $0.001 par value
per share, of all series of the Registrant, now existing or hereafter created. A
Rule 24f-2 Notice for the fiscal year ended May 31, 1997 was filed with the
Commission on July 29, 1997.
<PAGE> 2
PERFORMANCE FUNDS TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE LARGE CAP EQUITY FUND
THE MONEY MARKET FUND
THE MID CAP GROWTH FUND
THE SMALL CAP FUND
Institutional Class Prospectus
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C> <C>
Item 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus Summary; Fund Expenses
Item 3. Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . Financial Highlights
Item 4. General Description of Registrant . . . . . . . . . . . . . . . . . Prospectus Summary; The Investment Policies
and Practices of the Funds; Description of
Securities and Investment Practices
Item 5. Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . Management of the Funds; Purchase of Shares
Item 5(a). Management's Discussion of
Fund Performance . . . . . . . . . . . . . . . . . . . . . . . . . . Index Comparison
Item 6. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . Dividends, Distributions and Federal Income
Tax; Other Information
Item 7. Purchase of Securities Being Offered . . . . . . . . . . . . . . . . Fund Share Valuation; Purchase of Fund
Shares; Individual Retirement Accounts;
Exchange Privileges; Determination of Net
Asset Value (Part B)
Item 8. Redemption or Repurchase . . . . . . . . . . . . . . . . . . . . . . Redemption of Fund Shares; Redemptions (Part
B)
Item 9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 3
CROSS REFERENCE SHEET
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE LARGE CAP EQUITY FUND
THE MONEY MARKET FUND
THE MID CAP GROWTH FUND
THE SMALL CAP FUND
Consumer Service Class Prospectus
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C>
Item 1. Cover page . . . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . . . Prospectus Summary; Fund Expenses
Item 3. Financial Highlights . . . . . . . . . . . . . . . Financial Highlights
Item 4. General Description of Registrant . . . . . . . . . Prospectus Summary; The Investment Policies and Practices of the
Funds; Description of Securities and Investment Practices;
Item 5. Management of the Fund . . . . . . . . . . . . . . Management of the Fund; Purchase of Shares
Item 5(a). Management's Discussion of
Fund Performance . . . . . . . . . . . . . . . . . Index Comparison
Item 6. Capital Stock and Other Securities . . . . . . . . Dividends, Distributions and Federal Income Tax; Other
Information
Item 7. Purchase of Securities Being Offered . . . . . . . Fund Share Valuation; Purchase of Fund Shares; Individual
Retirement Accounts; Exchange Privileges; Determination of Net
Asset Value (Part B)
Item 8. Redemption or Repurchase . . . . . . . . . . . . . Redemption of Fund Shares; Redemptions (Part B)
Item 9. Legal Proceedings . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 4
CROSS REFERENCE SHEET
---------------------
MID CAP GROWTH FUND
LARGE CAP EQUITY FUND
Consumer Service Class Prospectus
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C>
Item 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus Summary; Fund Expenses
Item 3. Financial Highlights . . . . . . . . . . . . . . . . . . . Not Applicable
Item 4. General Description of Registrant . . . . . . . . . . . . . Prospectus Summary; Investment Objective, Policies and
Practices; Investment Restrictions
Item 5. Management of the Fund . . . . . . . . . . . . . . . . . . Management of the Fund; Purchase of Fund Shares
Item 5(a). Management's Discussion of
Fund Performance . . . . . . . . . . . . . . . . . . . . . Not Applicable
Item 6. Capital Stock and Other Securities . . . . . . . . . . . . Dividends, Distributions and Federal Income Tax; Other
Information
Item 7. Purchase of Securities Being Offered . . . . . . . . . . . Fund Share Valuation; Purchase of Fund Shares;
Individual Retirement Accounts; Exchange Privileges;
Determination of Net Asset Value (Part B)
Item 8. Redemption or Repurchase . . . . . . . . . . . . . . . . . Redemption of Fund Shares
Item 9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 5
CROSS REFERENCE SHEET
THE MONEY MARKET FUND
Institutional Class Prospectus
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C>
Item 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus Summary; Fund Expenses
Item 3. Financial Highlights . . . . . . . . . . . . . . . . . . . Not Applicable
Item 4. General Description of Registrant . . . . . . . . . . . . . Prospectus Summary; Investment Objective, Policies and
Practices; Investment Restrictions
Item 5. Management of the Fund . . . . . . . . . . . . . . . . . . Management of the Fund; Purchase of Fund Shares
Item 5(a). Management's Discussion of
Fund Performance . . . . . . . . . . . . . . . . . . . . . Not Applicable
Item 6. Capital Stock and Other Securities . . . . . . . . . . . . Dividends, Distributions and Federal Income Tax; Other
Information
Item 7. Purchase of Securities Being Offered . . . . . . . . . . . Fund Share Valuation; Purchase of Fund Shares;
Individual Retirement Accounts; Exchange Privileges;
Determination of Net Asset Value (Part B)
Item 8. Redemption or Repurchase . . . . . . . . . . . . . . . . . Redemption of Fund Shares
Item 9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 6
CROSS REFERENCE SHEET
THE MONEY MARKET FUND
Centura Shares of Consumer Service Class
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C>
Item 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus Summary; Fund Expenses
Item 3. Financial Highlights . . . . . . . . . . . . . . . . . . . Not Applicable
Item 4. General Description of Registrant . . . . . . . . . . . . . Prospectus Summary; Investment Objective, Policies and
Practices; Investment Restrictions
Item 5. Management of the Fund . . . . . . . . . . . . . . . . . . Management of the Fund; Purchase of Fund Shares
Item 5(a). Management's Discussion of
Fund Performance . . . . . . . . . . . . . . . . . . . . . Not Applicable
Item 6. Capital Stock and Other Securities . . . . . . . . . . . . Dividends, Distributions and Federal Income Tax; Other
Information
Item 7. Purchase of Securities Being Offered . . . . . . . . . . . Fund Share Valuation; Purchase of Fund Shares;
Individual Retirement Accounts; Exchange Privileges;
Determination of Net Asset Value (Part B)
Item 8. Redemption or Repurchase . . . . . . . . . . . . . . . . . Redemption of Fund Shares
Item 9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 7
CROSS REFERENCE SHEET
---------------------
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE LARGE CAP EQUITY FUND
THE MONEY MARKET FUND
THE MIDCAP GROWTH FUND
THE SMALL CAP FUND
<TABLE>
<CAPTION>
Part B Statement of Additional
- ------ Information Caption
-------------------
<S> <C> <C>
Item 10. Cover Page . . . . . . . . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . . . . . . . . . Table of Contents
Item 12. General Information and History . . . . . . . . . . Not Applicable
Item 13. Investment Objective and Policies . . . . . . . . . The Investment Policies and Practices of the Funds (Part A);
Investment Restrictions
Item 14. Management of the Registrant . . . . . . . . . . . Management of the Funds
Item 15. Control Persons and Principal
Holders of Securities . . . . . . . . . . . . . . Management of the Funds; Shares of Beneficial Interest
Item 16. Investment Advisory and
Other Services . . . . . . . . . . . . . . . . . Management of the Funds; Custodian; Experts
Item 17. Brokerage Allocation . . . . . . . . . . . . . . . Portfolio Transactions
Item 18. Capital Stock and Other Securities . . . . . . . . Shares of Beneficial Interest
Item 19. Purchase, Redemption and
Pricing of Securities Being Offered . . . . . . . Purchase of Shares (Part A); Redemptions; Redemption of Shares
(Part A); Exchange Privilege (Part A); Determination of Net
Asset Value
Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . Dividends, Distributions and Federal IncomeTax (Part A); Federal
Income Taxes
Item 21. Underwriters . . . . . . . . . . . . . . . . . . . Management of the Funds
Item 22. Calculation of Performance Data . . . . . . . . . . Calculation of Yield and Total Return; Other
Information-Performance Information
Item 23. Financial Statements . . . . . . . . . . . . . . . Financial Statements
</TABLE>
<PAGE> 8
PERFORMANCE FUNDS TRUST
3435 STELZER ROAD, COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- ADVISER
BISYS FUND SERVICES -- ADMINISTRATOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
This Prospectus describes six investment funds (the "Funds") managed by
Trustmark National Bank. The Funds are:
THE MONEY MARKET FUND
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE SMALL CAP FUND
THE MID CAP GROWTH FUND
THE LARGE CAP EQUITY FUND (FORMERLY, THE EQUITY FUND)
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." 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 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. SHARES IN THE FUNDS INVOLVE INVESTMENT RISK, INCLUDING LOSS OF
PRINCIPAL. THE MONEY MARKET FUND ATTEMPTS TO MAINTAIN THE VALUE OF ITS SHARES AT
A CONSTANT $1.00 PER SHARE, ALTHOUGH THERE CAN BE NO ASSURANCES THAT IT WILL
ALWAYS BE ABLE TO DO SO.
A Statement of Additional Information, dated September 26, 1997 (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 26, 1997
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses......................................................................... 3
Fee Table............................................................................. 3
Financial Highlights.................................................................. 4
Prospectus Summary.................................................................... 12
The Investment Policies and Practices of the Funds.................................... 15
Description of Securities and Investment Practices.................................... 20
Investment Restrictions............................................................... 31
Management of the Funds............................................................... 32
Fund Share Valuation.................................................................. 34
Purchase of Fund Shares............................................................... 35
Individual Retirement Accounts........................................................ 36
Exchange Privileges................................................................... 36
Redemption of Fund Shares............................................................. 37
Dividends, Distributions and Federal Income Tax....................................... 39
Other Information..................................................................... 41
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> 10
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 a Fund. The information is based on expenses incurred
during the fiscal year ended May 31, 1997 (except for the Small Cap Fund, whose
expenses are based on the Fund's projected operating expenses for its first
year of operation and for the Money Market Fund, Mid Cap Fund and Large Cap
Equity Fund, the reduction of voluntary waivers of advisory fees). 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 (see "Purchase of Fund
Shares").
FEE TABLE
<TABLE>
<CAPTION>
THE THE THE THE THE THE
MONEY MARKET SHORT TERM INTERMEDIATE SMALL CAP MID CAP LARGE CAP
FUND FUND TERM FUND FUND GROWTH FUND EQUITY FUND*
------------ ---------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases
(as a percentage price)............... none none none none none none
Maximum Sales Load Imposed on Reinvested
Dividends............................. none none none none none none
Deferred Sales Load..................... none none none none none none
Redemption Fees......................... none none none none none none
Exchange Fees........................... none none none none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets
annualized)
Investment Advisory Fees (after
waiver)(2)............................ 0.15% 0.40% 0.45% 1.00% 0.75% 0.60%
12b-1 Fees(3)........................... none none none none none none
Other Expenses(after waiver)(4)......... 0.14% 0.26% 0.41% 0.50% 0.32% 0.31%
---- ---- ---- ---- --- ---
Total Fund Operating Expenses
(after waiver)(5)..................... 0.29% 0.66% 0.86% 1.50% 1.07% 0.91%
==== ==== ==== ==== ==== ====
</TABLE>
- ---------------
* Formerly, the Equity Fund.
- ---------------
(1) 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.
(2) Reflects a voluntary reduction for the Money Market Fund and Intermediate
Fund in contractual fee. Had this reduction not been in effect, investment
advisory fees would have been: 0.30% for the Money Market Fund and 0.50% for
the Intermediate Fund.
(3) 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.
(4) Reflects voluntary reduction of administration fee of 0.09% for the Money
Market Fund. Each Fund has adopted, but not implemented, a Shareholder
Servicing Plan under which 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.
(5) Absent voluntary fee waivers, "Total Operating Expenses" for the Money
Market Fund and the Intermediate Fund would have been 0.53% and 0.91%,
respectively.
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 THE SMALL THE THE
MONEY MARKET SHORT TERM INTERMEDIATE CAP MID CAP LARGE CAP
PORTFOLIO FUND FUND TERM FUND FUND GROWTH FUND EQUITY FUND
- --------------------------------------- ------------ ---------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 year................................. $ 3 $ 7 $ 9 $ 15 $ 11 $ 9
3 years................................ $ 9 $ 21 $ 27 $ 47 $ 34 $ 29
5 years................................ $ 16 $ 37 $ 48 $ 82 $ 59 $ 50
10 years............................... $ 37 $ 82 $106 $179 $ 131 $ 112
</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> 11
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,
1997. 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' 1997 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.
No Financial Highlights are presented for Small Cap Fund since the Fund was not
in operation for the fiscal year ended May 31, 1997.
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
MONEY MARKET FUND
-------------------------------------------------
INSTITUTIONAL CLASS
-------------------------------------------------
YEAR YEAR YEAR FOR THE
ENDED ENDED ENDED PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1995 1994*
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Income from Investment Operations:
Net investment income......................... 0.05 0.05 0.05 0.02
-------- -------- -------- --------
Less Distributions:
Dividends from net investment income.......... (0.05) (0.05) (0.05) (0.02)
-------- -------- -------- --------
Net Asset Value, End of Period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Return.................................... 5.34% 5.60% 5.27% 2.17%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)...... $320,732 $366,966 $324,942 $139,157
Ratio of Expenses to Average Net Assets....... 0.25% 0.24% 0.23% 0.15%**
Effect of waivers/reimbursements on expense
ratio...................................... 0.26% 0.30% 0.36% 0.53%**
Ratio of Net Investment Income to Average Net
Assets..................................... 5.20% 5.42% 5.27% 3.30%**
</TABLE>
- ---------------
* Fund commenced operations on September 30, 1993
** Annualized
4
<PAGE> 12
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND INTERMEDIATE TERM GOVERNMENT INCOME FUND
INSTITUTIONAL CLASS INSTITUTIONAL CLASS
---------------------------------------------------- --------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1995 1994 1993* 1997 1996 1995 1994 1993*
-------- -------- -------- -------- -------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............. $ 9.75 $ 9.84 $ 9.77 $ 10.10 $ 10.00 $ 9.82 $10.11 $ 9.87 $ 10.56 $ 10.00
Income from
Investment
Operations:
Net investment
income........... 0.55 0.54 0.53 0.40 0.44 0.60 0.56 0.62 0.58 0.62
Net gain (loss) on
securities (both
realized and
unrealized)...... (0.01) (0.09) 0.07 (0.25) 0.22 0.09 (0.29) 0.25 (0.52) 0.61
-------- -------- -------- -------- -------- ------- ------- -------- -------- --------
Total from
Investment
Operations....... 0.54 0.45 0.60 0.45 0.66 0.69 0.27 0.87 0.06 1.23
-------- -------- -------- -------- -------- ------- ------- -------- -------- --------
Less Distributions:
Dividends from net
investment
income........... (0.54) (0.54) (0.53) (0.40) (0.44) (0.58) (0.56) (0.62) (0.58) (0.62)
Distributions from
net realized
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) (0.54) (0.53) (0.48) (0.56) (0.58) (0.56) (0.63) (0.75) (0.67)
-------- -------- -------- -------- -------- ------- ------- -------- -------- --------
Net Asset Value, End
of Period.......... $ 9.75 $ 9.75 $ 9.84 $ 9.77 $ 10.10 $ 9.93 $ 9.82 $ 10.11 $ 9.87 $ 10.56
======== ======== ======== ======== ======== ======= ======= ======== ======== ========
Total Return......... 5.70% 4.65% 6.37% 1.49% 6.74% 7.20% 2.66% 9.31% 0.34% 12.66%
Ratios/Supplemental
Data:
Net Assets, End of
Period (in
thousands)....... $126,428 $106,617 $104,730 $111,657 $138,822 $94,242 $77,677 $108,052 $158,420 $150,115
Ratio of Expenses
to Average Net
Assets........... 0.66% 0.71% 0.74% 0.69% 0.67% 0.86% 0.81% 0.71% 0.65% 0.67%
Effect of waivers/
reimbursements on
expense ratio.... -- 0.01% 0.03% 0.05% 0.05% 0.05% 0.05% 0.11% 0.15% 0.15%
Ratio of Net
Investment Income
to Average Net
Assets........... 5.63% 5.48% 5.43% 4.00% 4.32% 6.48% 5.55% 6.44% 5.50% 6.00%
Portfolio Turnover
Rate............. 86.21% 120.00% 267.65% 213.43% 216.52% 46.23% 183.00% 339.95% 102.46% 54.43%
</TABLE>
- ---------------
* Fund commenced operations on June 1, 1992.
5
<PAGE> 13
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
MID CAP GROWTH FUND
-----------------------------------------------
INSTITUTIONAL CLASS
-----------------------------------------------
YEAR YEAR YEAR FOR THE
ENDED ENDED ENDED PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1995 1994*
-------- ------- ------- ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 14.05 $ 11.11 $ 9.60 $ 10.00
-------- ------- ------- --------
Income from Investment Operations:
Net investment income........................... 0.13 0.13 0.13 0.03
Net gain/(loss) on securities (both realized and
unrealized).................................. 2.99 3.44 1.51 (0.40)
-------- ------- ------- --------
Total from Investment Operations................ 3.12 3.57 1.64 (0.37)
-------- ------- ------- --------
Less Distributions:
Dividends from net investment income............ (0.13) (0.13) (0.13) (0.03)
Distributions from net realized gains........... (0.33) (0.50) -- --
-------- ------- ------- --------
Total Distributions............................. (0.46) (0.63) (0.13) (0.03)
-------- ------- ------- --------
Net Asset Value, End of Period.................... $ 16.71 $ 14.05 $ 11.11 $ 9.60
======== ======= ======= ========
Total Return...................................... 22.62% 33.06% 17.31% (3.66)%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)........ $125,035 $80,704 $48,068 $ 33,779
Ratio of Expenses to Average Net Assets......... 0.92% 0.98% 0.96% 0.93%**
Effect of waivers/reimbursements on expense
ratio........................................ 0.14% 0.16% 0.26% 1.00%**
Ratio of Net Investment Income to Average
Net Assets................................... 0.89% 1.06% 1.37% 1.60%**
Portfolio Turnover Rate......................... 7.72% 28.00% 20.39% 5.88%
Average Commission Rate(a)...................... $ 0.0721 $0.1070 -- --
</TABLE>
- ---------------
* Fund commenced operations on February 24, 1994.
** 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.
6
<PAGE> 14
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
LARGE CAP EQUITY FUND*
----------------------------------------------------------
INSTITUTIONAL CLASS
----------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1995 1994 1993**
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 15.29 $ 12.51 $ 11.33 $ 11.21 $ 10.00
-------- -------- -------- ------- -------
Income from Investment Operations:
Net investment income............... 0.24 0.23 0.25 0.23 0.22
Net gain on securities (both
realized and unrealized)......... 4.13 3.29 1.42 0.12 1.21
-------- -------- -------- ------- -------
Total from Investment Operations.... 4.37 3.52 1.67 0.35 1.43
-------- -------- -------- ------- -------
Less Distributions:
Dividends from net investment
income........................... (0.25) (0.23) (0.24) (0.23) (0.22)
Distributions from net realized
gains............................ (0.25) (0.51) (0.25) -- --
-------- -------- -------- ------- -------
Total Distributions................. (0.50) (0.74) (0.49) (0.23) (0.22)
-------- -------- -------- ------- -------
Net Asset Value, End of Period........ $ 19.16 $ 15.29 $ 12.51 $ 11.33 $ 11.21
======== ======== ======== ======= =======
Total Return.......................... 29.06% 28.73% 15.35% 3.10% 14.48%
Ratios/Supplemental Data:
Net Assets, End of Period (in
thousands)....................... $233,454 $140,144 $110,110 $93,983 $87,755
Ratios of Expenses to Average Net
Assets........................... 0.83% 0.81% 0.79% 0.83% 0.83%
Effect of waivers/reimbursements on
expense ratio.................... 0.09% 0.10% 0.13% 0.15% 0.20%
Ratio of Net Investment Income to
Average Net Assets............... 1.43% 1.65% 2.15% 1.99% 2.20%
Portfolio Turnover Rate............. 1.41% 6.00% 58.08% 27.11% 2.61%
Average Commission Rate(a).......... $ 0.0899 $ 0.1067 -- -- --
</TABLE>
- ---------------
* Formerly, the Equity Fund.
** 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.
7
<PAGE> 15
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 unmanaged industry index since the commencement of each Fund's operations.
Each graph assumes all dividends and distributions were reinvested at net asset
value. Fund returns are net of all fees while the index returns are based solely
on market returns without deduction of fees or transaction costs.
SHORT TERM GOVERNMENT INCOME FUND
The investment performance of the Institutional Class of the Short Term
Government Income Fund is compared to the performance of the Lehman Bros. 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, May 31, 1996 and May 31, 1997.
[SHORT TERM FUND REDEMPTION VALUE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Redemption Value Shearson Lehman 1-3 Yr
(Fiscal Year Covered) ($10,000 Govt
<S> <C> <C>
Aug. 31, 10322 10300
Nov. 30, 10326 10326
Feb. 28, 10605 10611
May 31, 10674 10682
Aug. 31, 10847 10874
Nov. 30, 10889 10936
Feb. 28, 10921 10981
May 31, 10832 10898
Aug. 31, 10971 11059
Nov. 30, 10923 11014
Feb. 28, 11186 11338
May 31, 11522 11700
Aug. 31, 11690 11880
Nov. 30, 11912 12140
Feb. 29, 12046 12288
May 31, 12057 12318
Aug. 31, 12197 12501
Nov. 30, 12533 12851
Feb. 28, 1997 12591 12946
May 31, 12744 13132
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption
Value ($10,000
Investment)
Since Inception 10,322 10,326 10,605 10,674 10,847 10,889 10,921 10,832 10,971 10,923 11,186
- -----------------------------------------------------------------------------------------------------------------------------------
Lehman Bros.
1-3 Yr Govt 10,300 10,326 10,611 10,682 10,874 10,936 10,981 10,898 11,059 11,014 11,338
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Feb. 29, Feb. 28,
May 31, Aug. 31, Nov. 30, 1996 May 31, Aug. 31, Nov. 30, 1997 May 31,
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption
Value ($10,000
Investment)
Since Inception 11,522 11,690 11,912 12,046 12,057 12,197 12,533 12,591 12,744
- ---------------------------------------------------------------------------------------------------------------
Lehman Bros.
1-3 Yr Govt 11,700 11,880 12,140 12,288 12,318 12,501 12,851 12,946 13,132
</TABLE>
- --------------------------------------------------------------------------------
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
- ------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/97
- --------------------------------
SINCE INCEPTION
1 YEAR (6/1/92)
- --------------------------------
<S> <C>
5.70% 4.97%
- --------------------------------
</TABLE>
8
<PAGE> 16
INTERMEDIATE FUND
The investment performance of the Institutional Class of the Intermediate
Fund is compared to the performance of the Lehman Bros. 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,
May 31, 1996 and May 31, 1997.
[INTERMEDIATE FUND REDEMPTION VALUE GRAPH]
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption
Value ($10,000
Investment)
Since Inception 10,543 10,466 11,146 11,266 11,810 11,759 11,706 11,304 11,465 11,197 11,696
- ----------------------------------------------------------------------------------------------------------------------------------
Lehman Bros.
Gov't/Corp 10,494 10,471 11,108 11,226 11,819 11,774 11,742 11,339 11,544 11,336 11,900
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Feb. 29, Feb. 28,
May 31, Aug. 31, Nov. 30, 1996 May 31, Aug. 31, Nov. 30, 1997 May 31,
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption
Value ($10,000
Investment)
Since Inception 12,356 12,498 12,995 12,965 12,685 12,792 13,521 13,407 13,598
- ---------------------------------------------------------------------------------------------------------------
Lehman Bros.
Gov't/Corp 12,655 12,820 13,409 13,401 13,175 13,349 14,159 14,048 14,215
</TABLE>
- --------------------------------------------------------------------------------
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/97
- --------------------------------
SINCE INCEPTION
1 YEAR (6/1/92)
- --------------------------------
<S> <C>
7.20% 6.34%
- --------------------------------
</TABLE>
9
<PAGE> 17
MID CAP GROWTH FUND
The investment performance of the Institutional Class of shares of the Mid
Cap Growth Fund is compared to the Standard & Poors Mid Cap 400 Index in the
following chart from February 24, 1994 (commencement of operations) through May
31, 1994 and for the fiscal years ended May 31, 1995, 1996 and 1997.
[SMALL CAP GROWTH FUND REDEMPTION VALUE GRAPH]
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
May 31, Feb. 28, Feb. 29,
1994 Aug. 31, Nov. 30, 1995 May 31, Aug. 31, Nov. 30, 1996 May 31, Aug. 31,
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption Value ($10,000
Investment) Since Inception 9,634 10,100 9,563 10,500 11,301 12,676 13,180 13,849 15,037 14,925
- ----------------------------------------------------------------------------------------------------------------------------------
S&P MidCap 400 9,610 10,096 9,565 10,264 10,909 12,167 12,671 13,258 14,014 13,612
<CAPTION>
- ------------------------------------------------------------
Feb. 28,
Nov. 30, 1997 May 31,
- ------------------------------------------------------------
<S> <C> <C> <C>
Redemption Value ($10,000
Investment) Since Inception 16,480 17,345 18,439
- ------------------------------------------------------------
S&P MidCap 400 15,050 15,504 16,559
</TABLE>
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
- ------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/97
- --------------------------------
1 YEAR SINCE INCEPTION
- --------------------------------
<S> <C>
22.62% 20.61%
- --------------------------------
</TABLE>
10
<PAGE> 18
LARGE CAP EQUITY FUND
The investment performance of the Institutional Class of the Large Cap
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, May 31, 1996
and May 31, 1997.
[LARGE CAP FUND REDEMPTION VALUE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Redemption Value
(Fiscal Year Covered) ($10,000 S&P
<S> <C> <C>
Aug. 31, 9979 10047
Nov. 30, 10695 10543
Feb. 28, 10997 10908
May 31, 11448 11159
Aug. 31, 12014 11569
Nov. 30, 12061 11605
Feb. 28, 12156 11815
May 31, 11803 11633
Aug. 31, 12293 12200
Nov. 30, 11635 11726
Feb. 28, 12535 12683
May 31, 13615 13978
Aug. 30, 14329 14813
Nov. 30, 15665 16057
Feb. 29, 16793 17080
May 31, 17527 17949
Aug. 31, 17388 17586
Nov. 30, 20284 20529
Feb. 28, 21023 21546
May 31, 22620 23234
</TABLE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 10,047 10,543 10,908 11,159 11,569 11,605 11,815 11,633 12,200 11,726 12,683
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Feb. 29, Feb. 28,
May 31, Aug. 31, Nov. 30, 1996 May 31, Aug. 31, Nov. 30, 1997 May 31,
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption
Value ($10,000
Investment)
Since Inception 13,615 14,329 15,665 16,793 17,527 17,388 20,284 21,023 22,620
- ---------------------------------------------------------------------------------------------------------------
S&P 500 13,978 14,813 16,057 17,080 17,949 17,586 20,529 21,546 23,234
</TABLE>
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/97
- --------------------------------
SINCE INCEPTION
1 YEAR (6/1/92)
- --------------------------------
<S> <C>
29.06% 17.73%
- --------------------------------
</TABLE>
11
<PAGE> 19
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The Money Market Fund, the Short Term Government Income Fund (the "Short
Term Fund"), the Intermediate Term Government Income Fund (the "Intermediate
Fund") (the Short Term Fund and Intermediate Fund together referred to herein as
the "Government Income Funds"), the Small Cap Fund, the Mid Cap Growth Fund (the
"Mid Cap Fund") and the Large Cap Equity Fund (the Small Cap Fund, Mid Cap Fund
and Large Cap Equity Fund together referred to herein as the "Equity Funds") are
six separate investment funds managed by Trustmark National Bank.
The investment objective of the Funds, and certain of their investment
restrictions described herein and in the SAI are fundamental and may not be
changed without shareholder approval.
THE MONEY MARKET FUND
The investment objective of the Money Market 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 generally 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.
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 its 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 relative to other non-money market investments. 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.
12
<PAGE> 20
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 FUNDS:
THE SMALL CAP FUND
The investment objective of the Small Cap Fund is long term capital
appreciation. The Fund invests primarily in the universe of companies comprising
the Standard and Poor's SmallCap 600 Index (the "Index"). As a result, a
principal goal of the Fund is to be a broadly diversified portfolio of
smaller-capitalized common stocks with holdings in each of the major economic
sectors comprising the Index. Not an index fund, the Fund seeks to achieve its
objective by investing in publicly traded companies the Fund's Adviser believes
are likely to outperform the Index and other companies that the Adviser deems
necessary to maintain the Index's general sector weighting. Although the Fund
may also invest in the types of investment grade fixed income instruments
described under "The Investment Policies and Practices of the Funds" herein, and
may use various special investment techniques, under normal market conditions,
the Fund will invest at least 65% of its total assets in common stock of
companies that, at the time of purchase, fall within the Index. Under normal
market conditions, up to 35% of the Fund's total assets may be invested in
larger capitalization companies' equity securities and equivalents, preferred
stock, foreign securities, investment grade debt securities, securities
convertible into common or preferred stock, warrants, money market instruments
and stock or index options and futures contracts. See "The Investment Policies
and Practices of the Funds" in this Prospectus. There is no assurance the Fund
will achieve its investment objective.
THE MID CAP FUND
The investment objective of the Mid Cap Fund 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 at the time of purchase), including common stocks listed on the S&P
MidCap Index (collectively, "Mid Cap Common Stocks") which the Fund's 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 "The Investment Policies and Practices of the Funds" herein, and may use
various special investment techniques, under normal market conditions the Fund
will invest at least 65% of its total assets in Mid Cap Common Stocks. Under
normal market conditions, up to 35% of the Fund's total assets may be invested
in options, warrants, preferred stock, foreign securities and money market
instruments, investment grade debt securities and securities convertible into
common or preferred stock. See "The Investment Policies and Practices of the
Funds." There is no assurance that the Fund will achieve its investment
objective.
THE LARGE CAP EQUITY FUND
The investment objective of the Large Cap Equity Fund is to provide
investors with long-term capital appreciation. The Large Cap Equity Fund pursues
this objective by investing primarily (at least 65% of total assets) in common
stocks of large, well established U.S. companies with market capitalization
exceeding $1 billion at the time of purchase. The Fund may also invest in
smaller capitalization companies. It is anticipated that the Fund will invest
primarily in companies found in the S&P 500 Index. Income generation is a
secondary consideration for the Large Cap Equity Fund. However, the Large Cap
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
13
<PAGE> 21
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.
Under normal market conditions, up to 35% of the Fund's total assets may be
invested in preferred stock, investment grade debt securities, warrants,
securities convertible into common or preferred stock, money market instruments
and stock futures contracts.
RISK FACTORS
There is no assurance that the Funds will achieve their investment
objective. Except for the Money Market Fund, each Fund's net asset value is
expected to fluctuate, reflecting fluctuations in the market value of its
portfolio securities. Investors in the Short Term 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 Funds invest primarily in common stocks, each Fund 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- and mid-size company stocks in which the Small Cap Fund and the Mid
Cap Fund will, and the Large Cap 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 and mid size company stocks
are the less certain growth prospects of smaller firms, a low degree of
liquidity in the markets for small and mid size company stocks, and the small to
negligible dividends generally paid by small and mid size companies as compared
to a larger cap company. Besides exhibiting greater volatility, small and mid
size company stocks have at times fluctuated in value independently of the broad
stock market.
In addition, small and mid size companies in which the Equity Funds may
invest, may have limited product lines, markets or financial resources and may
lack management depth. The liquidity and marketability of such companies may be
limited and may be subject to more abrupt or erratic price movements than
securities of larger, more established companies or the market averages in
general. To possibly compensate for this risk exposure, the investor will have
an opportunity to participate, through a residual ownership interest, in
companies with potentially higher growth rates, versus those found in
larger-capitalization issues, and by locating value perhaps overlooked by
investment analysts and other investors. The Equity Funds may invest in options,
warrants and investment grade convertible securities, the Small Cap and Large
Cap Equity Funds may enter into futures transactions and the Mid Cap Fund and
Small Cap Fund may engage in short sales. Accordingly, an investment in the
Equity Funds may not be suitable for all investors.
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 acts as investment adviser to the Funds.
Trustmark's Trust Department, has assets in excess of $1.5 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.
14
<PAGE> 22
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services 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"), an affiliate of BISYS Fund Services, 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 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.
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 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 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, if any, 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 Statement
of Additional Information (the "SAI") contains specific investment restrictions
which govern the Funds' investments. Except as otherwise noted, those
15
<PAGE> 23
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 Money Market 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 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.
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 ("NRSRO"), or the only NRSRO rating the
security or, if not rated, are, in the opinion of the Adviser 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's 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.
The Government Income Funds. 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 its objective by investing at least 65% of its 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 of any individual security held by the Short Term Fund is approximately
five years.
The investment objective of the Intermediate Fund is to provide investors
with a high level of current income. Total return, within certain parameters, is
a secondary consideration. Under normal conditions the Intermediate Fund will
invest at least 65% of its total assets in intermediate term government income
securities.
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 S&P or Prime-2 or better by 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, including money market securities, which are of
comparable quality in the Adviser's opinion pursuant to guidelines adopted by
the Board of Trustees and in interest rate futures. 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
16
<PAGE> 24
Income Funds will generally not pay brokerage commissions when purchasing
portfolio securities but will incur certain transaction costs. For temporary
defensive purposes, e.g., during periods in which adverse market or economic
conditions warrant, or when, in the opinion of the Advisor it is in the best
interests of the Fund, the Fund may invest up to 100% of its assets in money
market instruments.
The Small Cap Fund. The investment objective of the Small Cap Fund is
long-term capital appreciation. Under normal market conditions, the Small Cap
Fund will invest at least 65% of its assets in the common stock of issuers
comprising the Standard & Poor's SmallCap 600 Index at the time of purchase. The
Fund may invest up to 35% of its total assets in foreign securities and American
Depository Receipts ("ADRs"), equity securities and equivalents of larger
capitalized companies, investment grade fixed income securities, such as
preferred stock, mortgage related and asset backed securities, debt securities
and securities convertible into common or preferred stock, and in obligations of
the U.S. government, its agencies or instrumentalities, (including such
obligations subject to repurchase agreements) and in options, warrants and
futures contracts as determined by the Adviser (see "Description of Securities
and Investment Practices"). Investment grade bonds, for example, are those rated
"Baa" or better by Moody's or "BBB" or better by S&P or of a comparable rating
by another nationally recognized statistical rating organization or, if unrated,
determined by the Adviser to be of comparable investment quality. While
"Baa"/"BBB" securities and comparable unrated securities may produce a higher
return, they are subject to a greater degree of market fluctuation and credit
risks than the higher quality securities in which the Fund may invest and may be
regarded as having speculative characteristics as well. The Fund may also invest
in short term (maturing in less than one year) money market instruments,
including commercial paper rated "A-1" or better by S&P or "P-1" or better by
Moody's. For temporary defensive purposes, e.g., during periods in which adverse
market or economic conditions warrant, or when, in the opinion of the Adviser it
is in the best interests of the Fund, the Fund may invest up to 100% of its
assets in non-equity securities and money market instruments and in equity
securities of larger capitalized companies.
On December 31, 1993, Standard and Poor's introduced the S&P Small Cap 600
Index covering smaller capitalized, publicly traded companies domiciled in the
United States. As of June 30, 1997 the Index contains 600 issues with market
capitalizations ranging from approximately $40 million to $3 billion. The median
market capitalization of the Index is approximately $425 million and complements
both the S&P 500 Index and the S&P 400 Mid Cap Index. The Index was developed in
response to a widespread interest in smaller capitalized issues, which, though
more volatile than larger capitalized indices, has historically provided for
periods of greater price appreciation.
The Adviser will rely extensively upon computer models developed by it for
stock selection. This disciplined approach, which is based on input of company
fundamentals, allows the model to rank the companies in the S&P Small Cap 600
Index in order of attractiveness. It is anticipated that in order to maintain
economic sector weightings comparable to that of the Index, the Fund, depending
on asset size, will contain anywhere from approximately 40 to 200 of the most
attractive companies ranked by the model. The Adviser may also rely upon other
factors, both qualitative and quantitative, 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) earnings volatility; (3)
relative valuation and earnings momentum; (4) composite rank; (5) dividend
yield; and (6) proprietary analysis of earnings momentum and valuation.
The common shares of small capitalization companies often pay no dividends,
thus current income is not a significant factor in the selection of stocks. The
Adviser will select portfolio securities based on characteristics such as the
financial strength and profitability of the company, the expertise of management
and the growth potential of the company. A majority of the companies in which
the Fund invests are expected
17
<PAGE> 25
to be traded in the over-the-counter market, although the common shares of many
companies are traded on the New York Stock Exchange or the American Stock
Exchange.
The securities of small capitalization companies may offer greater
potential for capital appreciation than the securities of larger companies since
they may be overlooked by investors or undervalued in relation to their earnings
power. Small capitalization companies generally are not as well known to the
investing public and have less of an investor following than larger companies,
thus they may provide greater opportunities for long-term capital appreciation
as a result of relative inefficiencies in the marketplace.
The Fund should not be considered suitable for investors who are unable or
unwilling to assume the risk of loss inherent in a program of investment in
small capitalization companies. Small capitalization companies are more volatile
than larger capitalization companies. The Fund may invest in relatively new or
unseasoned firms, which are in their early stages of development, or small
companies positioned in new and emerging industries. Securities of small and
unseasoned companies present greater risks than securities of larger, more
established companies. The companies in which the Fund may invest may have
limited revenues and product lines, and may have a small share of the market for
their products or services. Small companies may lack depth of management. They
may be unable to internally generate funds necessary for growth or potential
development or to generate such funds through external financing on favorable
terms. They may be developing or marketing new products or services for which
markets are not yet established and may never become established. Due to these
and other factors, small companies may incur significant losses, therefore,
investments in such companies are speculative.
Mid Cap Fund. The investment objective of the Mid Cap Fund is to seek to
achieve growth of capital by attempting to outperform the S&P MidCap Index. The
Mid Cap Fund will purchase common stocks of mid-sized companies (companies with
market capitalization ranging from $200 million to $5.2 billion at the time of
purchase), 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.
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 65% of the Fund's
total assets), the Fund may invest up to 35% of its assets in other types of
investment grade fixed income securities (primarily preferred stock, debt
securities and securities convertible into common or preferred stock), mortgage
related and asset backed securities, equity securities of larger capitalized
companies and foreign securities and ADRs, and in options and warrants, as
determined by the Adviser (see "Description of Securities and Investment
Practices"). When warranted by business or financial conditions, or when, in the
opinion of the Adviser, it is in the best interests of the Fund, the Fund may
invest temporarily or for defensive purposes without limitation in equity
securities of larger capitalized companies, 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 S&P or "P-1" or better by
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 as 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
18
<PAGE> 26
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.
Under normal market conditions, the Fund will invest at least 65% of the
value of its total 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.
The Large Cap Equity Fund. The investment objective of the Large Cap
Equity Fund is to provide investors with long-term capital appreciation. In
selecting equity investments (which include common stocks of U.S. companies and
ADRs of foreign companies) for the Large Cap 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 investments for the Large Cap
Equity Fund such as preferred stocks, high grade securities convertible into
common stocks, and warrants. The Large Cap 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 Large Cap Equity Fund will invest at least 65% of its total assets
in common stocks or securities convertible into common stocks of large, well
established companies with market capitalization in excess of $1 billion at the
time of purchase ("Large Cap Common Stocks"). Under normal conditions, up to 35%
of the Fund's total assets may be invested in investment grade fixed income
securities, mortgage related and asset backed securities, U.S. Government
securities, foreign securities and options and futures transactions. When
warranted by business or financial conditions, or when in the opinion of the
Adviser it is in the best interests of the Fund, the Fund may, for temporary or
defensive purposes, 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 following describes in greater detail different types of securities and
investment practices used by certain of the Funds.
19
<PAGE> 27
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities (all Funds). The Funds may invest in all types
of securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities or instrumentalities, including U.S.
Treasury obligations with varying interest rates, maturities and dates of
issuance, such as U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (generally maturities of one to ten years) and U.S. Treasury
bonds (generally maturities of greater than ten years) and obligations issued or
guaranteed by U.S. Government agencies or which are supported by the full faith
and credit pledge of the U.S. Government. In the case of U.S. Government
obligations which are not backed by the full faith and credit pledge of the
United States, the Fund must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States in the event the agency or instrumentality is
unable to meet its commitments. Such securities may also include securities for
which the payment of principal and interest is backed by an irrevocable letter
of credit issued by the U.S. Government, its agencies, authorities or
instrumentalities and participations in loans made to foreign governments or
their agencies that are substantially guaranteed by the U.S. Government (such as
Government Trust Certificates). See "Mortgage-Related Securities" and "Other
Asset-Backed Securities" below.
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). The Funds may invest in U.S.
dollar-denominated obligations issued or guaranteed by U.S. corporations or U.S.
commercial banks, U.S. dollar denominated obligations of foreign issuers,
including, for the Equity and Government Funds, those described below under
"Foreign Securities and American Depository Receipts." Such debt obligations
include, among others, bonds, notes, debentures, commercial paper and variable
rate demand notes. Bank obligations include, but are not limited to certificates
of deposit, bankers' acceptances, and fixed time deposits. The Adviser, in
choosing corporate debt securities on behalf of a Fund will evaluate each issuer
based on (i) general economic and financial conditions; (ii) the specific
issuer's (a) business and management, (b) cash flow, (c) earnings coverage of
interest and dividends, (d) ability to operate under adverse economic
conditions, (e) fair market value of assets, and (f) in the case of foreign
issuers, unique political, economic or social conditions to such issuer's
country; and, (iii) other considerations the Adviser deems appropriate.
Investment in obligations of foreign issuers may present a greater degree of
risk than investment in domestic securities (see "Foreign Securities and
American Depository Receipts" below for more details). The Money Market Fund's
investments in U.S. corporate debt securities are limited to corporate bonds,
debentures, notes and other similar corporate debt instruments which meet
previously disclosed minimum ratings or if unrated, are in the Adviser's opinion
comparable in quality to corporate debt securities in which the Fund may invest.
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
20
<PAGE> 28
into repurchase agreements only with dealers, domestic banks (members of the
Federal Reserve System having total assets in excess of $500 million) 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 income, the Funds
may lend their 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 (i) in the case of the Mid Cap and Small Cap Funds, one third of the
value of the Fund's assets and (ii) in the case of all other Funds, 5% of such
Fund's total 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.
Variable and Floating Rate Demand and Master Demand Notes (all Funds). The
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% (10% with respect to the Money Market Fund)
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
21
<PAGE> 29
standards, invest in them only if at the time of an investment, the issuer meets
the criteria set forth in this Prospectus for short term debt securities.
Foreign Securities and American Depository Receipts ("ADRs") (the Equity
Funds). The Equity Funds may invest in foreign securities through the purchase
of ADRs and may also invest directly in certain debt securities of foreign
issuers. The foreign debt securities in which the Equity Funds may invest
include securities issued by foreign branches of U.S. banks and foreign banks,
Canadian commercial paper and Europaper (U.S. dollar denominated commercial
paper of a foreign issuer). Each Equity Fund's investment in foreign debt
securities is limited to 5% of its total assets.
The Equity Funds may invest in securities represented by ADRs. 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 Funds
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. The Funds will
not invest more than 20% of their total assets in ADRs.
Investments in foreign securities and 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, including through ADRs, are subject to different economic,
financial, political and social factors. Individual foreign economics 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 security or 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.
When Issued Delayed, Delivery Securities and Forward Commitments (All
Funds, except Money Market Fund). The Funds 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 Funds will only enter into a forward commitment with
the intention of actually acquiring the security, the Funds 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 a Fund prior to the
settlement date. The Funds will segregate cash or liquid high-grade
22
<PAGE> 30
debt securities with the Fund's custodian in an aggregate amount at least equal
to the amount of its outstanding forward commitments.
Mortgage-Related Securities (all Funds). The Funds may invest in various
mortgage-related securities. Mortgage loans made by banks, savings and loans
institutions and other lenders are often assembled into pools, the interests in
which may be issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Interests in such pools are called "mortgage-related
securities" or "mortgage-backed securities."
Most mortgage securities are pass-through securities, which means they
provide investors with payments consisting of both principal and interest from
mortgages in the underlying mortgage pool. Investors receive a pro rata share of
both regular interest and principal payments (less issuer fees and applicable
loan servicing fees), as well as unscheduled early prepayments on the underlying
mortgage pool. The dominant issuers or guarantors of mortgage securities today
are the Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). GNMA guarantees mortgage-backed securities composed of
Government-guaranteed or insured (Federal Housing Authority, Veterans
Administration or Farmers Home Administration) mortgages originated by mortgage
bankers, commercial banks and savings and loan associations. GNMA and FHLMC
guarantee mortgage securities composed of pools of conventional and Federally
insured or guaranteed residential mortgages obtained from various entities,
including savings and loan associations, savings banks, commercial banks, credit
unions and mortgage bankers.
The principal and interest on GNMA pass-through securities are guaranteed
by GNMA and backed by the full faith and credit of the U.S. Government. FNMA
guarantees full and timely payment of all interest and principal, while FHLMC
currently guarantees timely payment and ultimate payment of interest and either
timely payment of principal or eventual payment of principal depending upon the
date of issue. Securities issued by FNMA and FHLMC are not backed by the full
faith and credit of the United States; however, they have a close relationship
with the U.S. Government. The yields provided by these mortgage securities have
historically exceeded the yields on other types of U.S. Government securities.
However, like most mortgage-backed securities, the experienced yield is
sensitive to interest rates and the rate of principal payments (including
prepayments). Prepayments on underlying mortgages result in a loss of
anticipated interest, and all or part of a premium if any has been paid, and the
actual yield (or total return) to the Fund may be different than the quoted
yield on the securities. Mortgage prepayments generally increase with falling
interest rates and decrease with rising interest rates. Like other fixed income
securities, when interest rates rise, the value of a mortgage pass-through
security generally will decline; however, when interest rates are declining, the
value of mortgage pass-through securities with prepayment features may not
increase as much as that of other fixed-income securities. Because the average
life of mortgage-related securities may lengthen with increases in interest
rates, the portfolio weighted average life of the mortgage-related securities in
which a Fund is invested may at times lengthen due to this effect. Under these
circumstances, the Adviser may, but is not required to, sell securities in order
to maintain an appropriate portfolio weighted average life.
In addition to GNMA, FNMA or FHLMC Certificates, through which the holder
receives a share of all interest and principal payments from the mortgages
underlying the Certificate, the Funds also may invest in mortgage pass-through
securities, where 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 particularly sensitive to interest rates and 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, the Funds may not fully recoup its initial investment
in IOs. Conversely, if the underlying mortgage assets experience less than
anticipated prepayments of principal, the return of POs
23
<PAGE> 31
could be adversely affected. The Funds will treat IOs and POs as illiquid
securities except for IOs and POs issued by the U.S. Government agencies and
instrumentalities backed by fixed-rate mortgages, whose liquidity is monitored
by the Adviser.
The Funds may also invest in certain Collateralized Mortgage Obligations
("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs") which are
hybrid instruments with characteristics of both mortgage-backed bonds and
mortgage pass-through securities. Interest and prepaid principal on a CMO or
REMIC are paid monthly or semi-annually. CMOs and REMICs 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 and
REMICs are structured into multiple classes, with each class bearing a different
expected maturity. Payments of principal, including repayments, are first
returned to investors holding the shortest maturity class; investors holding the
longer maturity classes generally receive principal only after the earlier
classes have been retired. To the extent a particular CMO or REMIC is issued by
an investment company, a Fund's ability to invest in such CMOs or REMICs will be
limited. The Funds will not invest in the residual interests of REMICs.
The Adviser expects that new types of mortgage-related securities may be
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.
The yield characteristics of mortgage-related securities differ from
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently, usually monthly, and that principal
may be prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. As a result, if a Fund purchases a
security at a premium, a prepayment rate that is faster than expected will
reduce yield to maturity, while a prepayment rate that is slower than expected
will have the opposite effect of increasing yield to maturity. Alternatively, if
a Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity. 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 Fund in calculating maturity for purposes of its
investment in mortgage-related securities.
Like other bond investments, the value of mortgage-backed securities will
tend to rise when interest rates fall and to fall when interest rates rise.
Their value may also be affected by changes in the market's perception of the
creditworthiness of the entity issuing or guaranteeing them or by changes in
government regulations and tax policies. Because of these factors, the Funds'
share value and yield are not guaranteed and the Government Income Funds' and
the Equity Funds' share values will fluctuate, and there can be no assurance
that each Fund's investment objective will be achieved. The magnitude of these
fluctuations generally will be greater when the average maturity of the Fund's
portfolio securities is longer.
Other Asset-Backed Securities (all Funds). The 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
24
<PAGE> 32
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 Fund in calculating maturity for purposes of its investment in asset-backed
securities.
Interest Rate Futures (the Government Income Funds and the Money Market
Fund only). The 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 decline (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 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 its 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 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 Funds only). Each
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 a Fund owns or has the
right to acquire the optioned securities and maintains, in a segregated account
with its custodian, liquid assets with a value sufficient to meet its
obligations under the call, or if a Fund owns an offsetting call option. When a
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, each Fund forgoes any gain from an increase in the market price of
the underlying security over the exercise price.
Each Fund also may purchase put options ("puts"). When a 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, a Fund will have lost
the premium and this will have the effect of reducing the Fund's return.
Each 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
25
<PAGE> 33
the premium, less commission costs, received on the sale of the call. A gain
also will be realized if a call which the Fund has written lapses unexercised,
because the Fund would retain the premium.
Each Fund will not purchase options if, as a result, the aggregate cost of
all outstanding options exceeds 10% of the Fund's total assets. 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 Small Cap and Large Cap Equity Funds
only). Each 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 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.
Each 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 Fund is unable to invest its cash (or cash equivalents) in
stock 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 a 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.
Each Fund may buy or sell stock index futures contracts to close out existing
futures positions.
Put Options on Stock Index Futures Contracts (the Small Cap and Large Cap
Equity Funds only). Each Fund may purchase put options on stock index futures as
another method of protecting the Large Cap 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
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 a Fund from liquidating an unfavorable
position and the Fund would remain obligated to meet margin requirements until
the position is closed. Each 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 Fund pursuant to such
contracts. To the extent that puts, calls, straddles and similar investment
strategies involve instruments regulated by the Commodity Futures Trading
Commission, each Fund is limited to an investment not in excess of 5% of its
total assets.
The use of stock index futures contracts and put options on stock index
futures contracts may impair the liquidity of the Fund's assets and the ability
to operate as an open-end investment company. The Adviser will
26
<PAGE> 34
monitor the Fund's use of such techniques and report to the Board of Trustees
concerning their impact, if any, on liquidity and the 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
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% (10% with
respect to the Money Market Fund) of the value of the total net assets of each
such Fund.
Illiquid securities include (a) securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market, (b) participation interests in loans that are not subject to
puts and (c) repurchase agreements not terminable within seven days. See
"Repurchase Agreements" above.
Securities that have legal or contractual restrictions on resale but have a
readily available market are not deemed illiquid for purposes of this
limitation. Consequently, investments in restricted securities eligible for
resale pursuant to Rule 144A of the Securities Act of 1933 which have been
determined to be liquid by the Fund's Board of Trustees based upon the trading
markets for the securities will not be included for purposes of this limitation.
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% (10% with respect to the Money Market Fund) 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%
(10% with respect to the Money Market Fund) 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.
Warrants and Rights (the Equity Funds). The Funds may invest in warrants
or rights of securities of 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
Funds. 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 Funds, the warrant will expire and the Funds will
suffer a loss on the price it paid for the warrant. The Funds 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.
The Small Cap Fund will only invest in warrants or rights when the security
is issued and distributed by a company found within the Index universe and only
then when it is owned by the Fund prior to the security's distribution of
record. For the foreseeable future, it is not anticipated warrants and rights
will be included as a security comprising the S&P Small Cap 600 Index.
Investment Company Securities (All Funds). Each Fund may invest up to 10%
of its total assets in securities issued by other investment companies. Such
securities will be acquired by the Funds within the
27
<PAGE> 35
limits prescribed by the Investment Company Act of 1940, as amended ("1940
Act"), which include a prohibition against a Fund investing more than 10% of the
value of its total assets in such securities. Investors should recognize that
the purchase of securities of other investment companies results in duplication
of expenses such that investors indirectly bear a proportionate share of the
expenses of such companies including operating costs, and investment advisory
and administrative fees.
Convertible Securities (the Equity Funds). 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 Funds 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 Funds 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 (the Equity Funds). Subject to the Small Cap
policy of investing at least 65% of its total assets in S&P SmallCap 600 Index,
the Mid Cap Fund's policy of investing at least 65% of its total assets in Mid
Cap Common Stocks and the Large Cap Equity Fund's policy of investing at least
65% of its total assets in Large Cap Common Stock, the Funds may invest without
limit in securities listed on the S&P SmallCap 600 Index, the S&P MidCap Index
and the S&P 500 Index, respectively, 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 Funds may sustain losses. For further information on
such investments, see "Description of the Fund's Investment Securities" in the
SAI.
Investments in Small, Unseasoned Companies (the Equity Funds). The Funds
may invest in small, less well known companies. Some of these companies may have
limited operating history and limited liquidity. To lessen the liquidity
concerns, the Funds will not invest in illiquid, nonmarketable securities of
small,
28
<PAGE> 36
unseasoned companies. The Mid Cap and Large Cap Equity Fund will not invest more
than 5% of its respective net assets in small, unseasoned companies.
Short Sales (Mid Cap Fund and Small Cap Fund). The Funds 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 Funds expect 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 a 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
Funds may have to pay a fee to borrow particular securities and is often
obligated to pay over any payments received on such borrowed securities.
A 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 Funds 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 a Fund on such security, such 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 a Fund replaces the borrowed security, such Fund will
incur a loss; conversely, if the price declines, a Fund will realize a capital
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. Although a 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 a Fund's total assets or 5% of such issuer's voting
securities. A 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. Each 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.
Reverse Repurchase Agreements (Small Cap Fund and Mid Cap Fund only). The
Funds may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, the Funds would sell portfolio securities to
financial institutions such as banks and broker-dealers, and agree to repurchase
them at a mutually agreed upon date and price. The Fund intends to enter into
reverse repurchase agreements only to avoid selling securities during market
conditions deemed unfavorable by the Adviser to meet redemptions. At the time a
Fund enters into a reverse repurchase agreement, it will place in a segregated
custodial account liquid assets such as are consistent with the Fund's
investment objective having a value not less than 100% of the repurchase price
(including accrued interest), and will subsequently monitor the account to
ensure that such required value is maintained. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the price at which the Fund is obligated to repurchase the
securities. Reverse repurchase agreements are considered to be borrowings by an
investment company under the 1940 Act.
29
<PAGE> 37
Zero Coupon Securities (all Funds). The Funds may invest in zero coupon
securities. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity. The market prices
of zero coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are more sensitive to changes in
interest rates than non-zero coupon securities having similar maturities and
credit qualities.
The Funds may invest in separately traded principal and interest components
of securities guaranteed or issued by the U.S. Treasury if such components are
traded independently. Under the STRIPS (Separate Trading of Registered Interest
and Principal of Securities) program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently.
Currently Federal income tax law requires that a holder of a zero coupon
security report as income each year the portion of the original issue discount
on such security that accrues that year, even though the holder receives no cash
payments of interest during the year.
Portfolio Turnover
Purchases and sales are made for the Funds whenever necessary, in the
Adviser's opinion, to meet each Fund's objectives. Portfolio turnover may
involve the payment by the Funds 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, except for fiscal years beginning after August, 1997, 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 Funds expect to satisfy the 30% income test. The
Small Cap Fund, Mid Cap Fund and Large Cap Equity Fund do not anticipate that
the portfolio turnover rate will exceed 200%, 200% and 100% respectively. The
portfolio turnover rate is not expected to exceed 250% for the Short Term Fund
and 150% for the Intermediate Fund.
30
<PAGE> 38
INVESTMENT RESTRICTIONS
(All Funds, except as indicated)
Each Fund is a diversified fund. As such, it will not, with respect to 75%
(100% with respect to the Money Market Fund) 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 (except that the
Money Market Fund 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 classification of each Fund as a diversified investment company is
a fundamental policy of each 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 outstanding shares" of each Fund means,
respectively, the vote of 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. In addition to other restrictions listed in the SAI, the
Funds may not (except where specified):
(1) borrow money or pledge or mortgage its assets, except that each Fund
may borrow from banks and the Small Cap and Mid Cap Funds may engage in reverse
repurchase agreements. The Money Market Fund, the Government Income Funds and
the Large Cap Equity Fund may borrow from banks up to 10% of the current value
of their 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 such Fund's total net assets (but investments may not be purchased by a
Fund while any such borrowings exist). The Small Cap and Mid Cap Funds may
borrow from banks for extraordinary or emergency purposes and engage in reverse
repurchase agreements provided that in the aggregate such borrowings do not
exceed an amount equal to one-third of the value of the total assets of the
Funds 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 and that the Mid Cap and Small Cap Funds may not purchase securities while
borrowings exceeds 5% of its total assets.
(2) make loans, except loans of portfolio securities and except that a Fund
may enter into repurchase agreements with respect to its portfolio securities;
(3) invest more than 15% (10% with respect to the Money Market Fund) of the
market value of the Fund's net assets in illiquid investments including
repurchase agreements maturing in more than seven days.
Except as indicated otherwise, 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."
The Money Market Fund's diversification tests are measured at the time of
initial purchase, and calculated as specified in Rule 2a-7 of the Investment
Company Act of 1940, which may allow the Fund to exceed the limits specified in
this Prospectus for certain securities subject to guarantees or demand features.
The Fund will be deemed to satisfy the maturity requirements described in this
Prospectus to the extent that the Fund satisfies Rule 2a-7's maturity
requirements.
It is the intention of the Funds, unless otherwise indicated, that with
respect to the Funds' policies that are the result of the application of law
(for example, Rule 2a-7 with respect to the Money Market Fund), the Funds will
take advantage of the flexibility provided by rules or interpretations of the
SEC currently in existence or promulgated in the future or changes to such laws.
31
<PAGE> 39
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 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 $1.5 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. 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. 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. Douglas P. Muenzenmay, who joined Trustmark in 1997 will be
responsible for day-to-day management of the Small Cap Fund with Douglas H.
Ralston, CFA acting as Associate Manager. Mr. Muenzenmay was previously employed
by Brenton Bank, Inc. as an equity fund portfolio manager. Mr. Ralston, Vice
President and Trust Officer with over 11 years investment experience joined
Trustmark in 1991. Prior to joining Trustmark, Mr. Ralston was employed by Third
National Bank of Nashville. Mr. Ralston is also responsible for the day-to-day
management of the Mid Cap Fund. Charles H. Windham, Jr., a Vice President of
Trustmark since 1970, is responsible for the day-to-day management of the Large
Cap Equity Fund's portfolio. Zachariah Wasson, CFA, a Senior Vice President of
Trustmark, serves as Chief Investment Officer and has overall supervisory
responsibilities. Mr. Wasson joined Trustmark in 1990.
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:
Money Market Fund, 0.30%; Short Term Fund, 0.40%; the Intermediate Fund, 0.50%;
Small Cap Fund, 1.00%; Mid Cap Fund, 0.75%; and the Large Cap 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 Distributor and Administrator. BISYS Fund Services Limited Partnership
d/b/a BISYS Fund Services ("BISYS") acts as the Administrator of the Funds. PFD
an affiliate of BISYS acts as the
32
<PAGE> 40
Distributor of the Funds' shares. BISYS is a subsidiary of BISYS Group, Inc.
which is headquartered in Little Falls, N.J. and 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 Group, Inc. trades on NASDAQ under the symbol BISYS.
Administrative Services. The Funds have entered into an Administration
Agreement with BISYS pursuant to which BISYS 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' 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, BISYS 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 Transfer Agency Agreement between the Trust and BISYS Fund
Services, Inc. (an affiliate of the Administrator), BISYS Fund Services, Inc.
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 BISYS Fund
Services, Inc., BISYS Fund Services, Inc. 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.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than BISYS) 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,
33
<PAGE> 41
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 BISYS, BISYS Fund Services, Inc. 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 12 noon (eastern time) for
the Money Market Fund and at 4:00 p.m. (eastern time) for all other 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, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor
34
<PAGE> 42
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of shares of the Fund is computed by dividing the net assets (i.e., the
value of the assets less the liabilities) attributable to such class of shares
by the total number of the outstanding shares of such class. All expenses,
including fees paid to the Adviser, BISYS and BISYS Fund Services, Inc. are
accrued daily and taken into account for the purpose of determining the net
asset value.
The Money Market 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.
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 or at the direction of 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 Institutional Class shares will be executed at the
net asset value next determined after an order has been received. All monies
received by the Funds for purchase 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 of transactions, holdings and
dividends. The Trust and the Funds reserve the right to waive or reduce the
minimum initial investment amount with respect to certain accounts. The Funds
reserve 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.
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 4:00 p.m.
(eastern time) (1:30 p.m. (eastern time) in the case of the Money Market Fund),
will
35
<PAGE> 43
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.
Please call 1-800-737-3676 for wiring instructions. A completed application
must be overnighted to the Fund in advance of the wire to Performance Funds
Trust c/o BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, OH 43219-8021.
Notification must be given to the Fund at 1-800-737-3676 prior to 4:00 p.m.
Eastern Standard Time, of the wire date.
By Mail. Payments to open new accounts should be sent to Performance Funds
Trust, P.O. Box 182484, Columbus, OH 43218-2484, together with a completed
application.
Where purchases are made by check in any Fund redemption proceeds will not
be available until payment of the purchase has been collected, which may take up
to fifteen days.
No third party or foreign checks are accepted.
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. For more information on IRAs, 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.
36
<PAGE> 44
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 the Funds. 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. No signature
guarantee is required.
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. Telephone redemption and telephone exchanges will be suspended for a
period of 10 days following a telephonic address change. During periods of
significant economic or market change, telephone exchanges may be difficult to
complete. If you are unable to contact the Fund by telephone, you may also mail
the exchange request to the Fund at the address listed under "Purchase of Fund
Shares."
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. Generally, gain or loss is not expected to be realized on a
redemption of shares of the Money Market Fund 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 Funds
will make redemption proceeds available immediately upon clearance of the
purchase check 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
37
<PAGE> 45
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
Performance Funds Trust, P.O. Box 182484, Columbus, Ohio 43218-2484. 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, and (iv) the signatures of all
registered owners. A signature guarantee will be required when redemptions
proceeds are to be sent to an address other than the registered address.
If you elect to receive distributions in cash and checks that (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically and your future dividend and
capital gains distributions will be reinvested in the Fund at the per share net
asset value determined as of the date of payment of the distribution. In
addition, any undeliverable checks or checks that remain uncashed for six months
will be cancelled and will be reinvested in the Fund at the per share net asset
value determined as of the date of cancellation.
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. Telephone redemption and telephone exchanges will be suspended for
a period of 10 days following a telephonic address change.
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.
Check Writing. A check redemption ($100 minimum, no maximum) feature is
available with respect to the Money Market 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.
38
<PAGE> 46
The above mentioned services "Telephone," "Wire" and "Checkwriting" 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.
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.
The Fund reserves the right to pay for redeemed shares within seven days
after receiving your redemption order if, in the judgment of the Adviser, an
earlier payment could adversely affect the Fund.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund has elected to qualify, has qualified (in case of the Small Cap
Fund, intends to qualify) 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). The Money Market Fund will declare dividends of such income daily and
pay those dividends monthly. Investment company taxable income will be
distributed by the Small Cap Fund, Mid Cap Fund and Large Cap 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.
39
<PAGE> 47
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 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 Money Market Fund, 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.
In the case of shares of the Government Income Fund and Large Cap Equity Fund,
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 Funds
will qualify for the dividends-received deduction available to corporations. The
dividends paid by the Money Market Fund and 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
40
<PAGE> 48
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, six 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 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 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.
41
<PAGE> 49
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 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 Money Market 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 Money Market 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.
Quotations of "yield" for all other 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 all Funds except the Money
Market 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 S&P Small Cap 600 Index, S&P MidCap Index, Standard &
Poor's 500 Stock Index or the Dow Jones Industrial Average. 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.
42
<PAGE> 50
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 BISYS Fund Services, Inc. as transfer agent. BISYS Fund
Services, Inc. provides personnel necessary to perform shareholder servicing
functions. Pursuant to a Transfer Agency Agreement between the Trust and BISYS
Fund Services, Inc., BISYS Fund Services, Inc. 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
BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219.
General and Account Information: (800) PERFORM (737-3676).
43
<PAGE> 51
(This Page Intentionally Left Blank)
<PAGE> 52
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> 53
(This Page Intentionally Left Blank)
<PAGE> 54
(This Page Intentionally Left Blank)
<PAGE> 55
[PERFORMANCE FUNDS LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
ADMINISTRATOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
DISTRIBUTOR
Performance Funds Distributor, Inc.
3435 Stelzer Road
Columbus, OH 43219
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
PFAFIC0997
[PERFORMANCE FUNDS LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MONEY MARKET FUND
THE SHORT TERM
GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM
GOVERNMENT INCOME FUND
THE SMALL CAP FUND
THE MID CAP GROWTH FUND
THE LARGE CAP EQUITY FUND
INSTITUTIONAL CLASS
PROSPECTUS
[TRUSTMARK LOGO]
National Bank
Performance Funds'
Investment Adviser
SEPTEMBER 26, 1997
<PAGE> 56
PERFORMANCE FUNDS TRUST
3435 STELZER ROAD, COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- ADVISER
BISYS FUND SERVICES -- ADMINISTRATOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
This Prospectus describes six investment funds (the "Funds") managed by
Trustmark National Bank. The Funds are:
THE MONEY MARKET FUND
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE SMALL CAP FUND
THE MID CAP GROWTH FUND
THE LARGE CAP EQUITY FUND (FORMERLY, 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. SHARES IN THE FUNDS INVOLVE INVESTMENT RISK, INCLUDING LOSS OF
PRINCIPAL. THE MONEY MARKET 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.
A Statement of Additional Information, dated September 26, 1997 (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 26, 1997
<PAGE> 57
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses......................................................................... 3
Fee Table............................................................................. 3
Financial Highlights.................................................................. 4
Prospectus Summary.................................................................... 12
The Investment Policies and Practices of the Funds.................................... 15
Description of Securities and Investment Practices.................................... 19
Investment Restrictions............................................................... 30
Management of the Funds............................................................... 31
Fund Share Valuation.................................................................. 35
Purchase of Fund Shares............................................................... 35
Individual Retirement Accounts........................................................ 36
Exchange Privileges................................................................... 37
Redemption of Fund Shares............................................................. 37
Dividends, Distributions and Federal Income Tax....................................... 39
Other Information..................................................................... 41
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> 58
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, 1997 (except for the Small Cap Fund, whose
expenses are based on the Fund's projected operating expenses for its first year
of operation and for the Money Market Fund, Mid Cap Fund and Large Cap Equity
Fund the reduction of voluntary waivers of advisory fees). 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 THE THE THE THE
MONEY MARKET SHORT TERM INTERMEDIATE SMALL CAP MID CAP LARGE CAP
FUND FUND TERM FUND FUND GROWTH FUND EQUITY FUND*
------------ ---------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a
percentage price).......................... none none none none none none
Maximum Sales Load Imposed on Reinvested
Dividends.................................. none none none none none none
Deferred Sales Load.......................... none none none none none none
Redemption Fees.............................. none none none none none none
Exchange Fees................................ none none none none none none
ANNUAL FUND OPERATING EXPENSES (as a
percentage of average net assets
annualized)
Investment Advisory Fees (after waiver)(2)... 0.15% 0.40% 0.45% 1.00% 0.75% 0.60%
12b-1 Fees(3)................................ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (after waiver)(4)............. 0.14% 0.22% 0.33% 0.50% 0.34% 0.31%
--- --- --- --- --- ---
Total Fund Operating Expenses (after
waiver)(5)................................. 0.54% 0.87% 1.03% 1.75% 1.34% 1.16%
============ ========= ========== ======== ========== ===========
</TABLE>
- ---------------
* Formerly, the Equity Fund.
- ---------------
(1) 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 Performance Funds Distributor, Inc. 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) Reflects a voluntary reduction for the Money Market Fund and Intermediate
Fund in contractual fee. Had this reduction not been in effect, investment
advisory fees would have been: 0.30% for the Money Market Fund and 0.50% the
Intermediate Fund.
(3) 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. Payment of
distribution fees currently is not expected to exceed 0.25%.
(4) Reflects voluntary reduction of administration fee of 0.09% for the Money
Market Fund. Each Fund has adopted, but not yet implemented, a Shareholder
Servicing Plan under which 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. See "Management of the
Funds -- Service Organizations" herein.
(5) Absent the reduction in investment advisory fees, administration fees and
12b-1 distribution fees, "Total Operating Expenses" as a percentage of
average daily net assets would be 0.88% for The Money Market Fund, 0.97% for
The Short Term Government Income Fund, 1.18% for The Intermediate Term
Government Income Fund, 1.85% for the Small Cap Investor Fund, 1.44% for the
Mid Cap Growth Fund and 1.26% for the Large Cap Equity Fund.
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 THE THE THE
MONEY MARKET SHORT TERM INTERMEDIATE SMALL CAP MID CAP LARGE CAP
PORTFOLIO FUND FUND TERM FUND FUND GROWTH FUND EQUITY FUND
- -------------------------------------- ------------ ---------- ------------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 year................................ $ 6 $ 9 $ 11 $ 18 $ 14 $ 12
3 years............................... $ 17 $ 28 $ 33 $ 55 $ 42 $ 37
5 years............................... $ 30 $ 48 $ 57 $ 95 $ 73 $ 64
10 years.............................. $ 68 $107 $126 $ 206 $ 161 $ 141
</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> 59
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,
1997. 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' 1997 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.
No Financial Highlights are presented for the Small Cap Fund since the Fund was
not in operations for the fiscal year ended May 31, 1997.
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
MONEY MARKET FUND
-----------------------------------------------------
CONSUMER SERVICE CLASS
-----------------------------------------------------
YEAR YEAR YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1995 1994*
------- ------- ------- -------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Income from Investment Operations:
Net investment income....................... 0.04 0.05 0.05 0.02
------- ------- ------- -------
Less Distributions:
Dividends from net investment income........ (0.04) (0.05) (0.05) (0.02)
------- ------- ------- -------
Net Asset Value, End of Period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ===============
Total Return.................................. 5.07% 5.33% 5.02% 2.03%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands).... $92,220 $25,216 $ 3,564 $ 797
Ratio of Expenses to Average Net Assets..... 0.38% 0.49% 0.48% 0.40%**
Effect of waivers/reimbursements on expense
ratio.................................... 0.10% 0.30% 0.36% 0.53%**
Ratio of Net Investment Income to Average
Net Assets............................... 5.23% 5.17% 5.02% 3.05%**
</TABLE>
- ---------------
* Fund commenced operations on September 30, 1993
** Annualized
4
<PAGE> 60
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INTERMEDIATE TERM GOVERNMENT
INCOME FUND INCOME FUND
CONSUMER SERVICE CLASS CONSUMER SERVICE CLASS
----------------------------------------------- -----------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1995 1994 1993* 1997 1996 1995 1994 1993*
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.75 $ 9.84 $ 9.77 $10.10 $10.00 $ 9.82 $10.11 $ 9.87 $10.56 $10.00
Income from Investment
Operations:
Net investment
income............... 0.49 0.51 0.50 0.37 0.43 0.57 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 0.10 (0.29) 0.25 (0.52) 0.61
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations........... 0.49 0.42 0.57 0.12 0.65 0.67 0.25 0.85 0.03 1.23
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net
investment income.... (0.49) (0.51) (0.50) (0.37) (0.43) (0.56) (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.... (0.49) (0.51) (0.50) (0.45) (0.55) (0.56) (0.54) (0.61) (0.72) (0.67)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 9.75 $ 9.75 $ 9.84 $ 9.77 $10.10 $ 9.93 $ 9.82 $10.11 $ 9.87 $10.56
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return............. 5.44% 4.38% 6.12% 1.23% 6.67% 6.92% 2.40% 9.06% 0.08% 12.58%
Ratios/Supplemental Data:
Net Assets, End of
Period (in
thousands)........... $1,205 $1,477 $ 739 $ 654 $1,125 $1,465 $2,174 $3,225 $3,384 $1,952
Ratio of Expenses to
Average Net Assets... 0.87% 0.95% 0.99% 0.94% 0.75% 1.03% 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% 0.05% 0.11% 0.15% 0.15%
Ratio of Net Investment
Income to Average Net
Assets............... 5.01% 5.23% 5.18% 3.75% 4.24% 5.60% 5.30% 6.19% 5.25% 5.89%
Portfolio Turnover
Rate................. 86.21% 120.00% 267.65% 213.43% 216.52% 46.23% 183.00% 339.95% 102.46% 54.43%
</TABLE>
- ---------------
* Fund commenced operations on June 1, 1992.
5
<PAGE> 61
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
MID CAP GROWTH FUND
-----------------------------------------------------
CONSUMER SERVICE CLASS
-----------------------------------------------------
YEAR YEAR YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1995 1994*
------- ------- ------- -------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 14.05 $ 11.11 $ 9.60 $ 10.00
------- ------- ------- ----------
Income from Investment Operations:
Net investment income....................... 0.09 0.10 0.11 0.03
Net gain/(loss) on securities (both realized
and unrealized).......................... 3.00 3.44 1.51 (0.40)
------- ------- ------- ----------
Total from Investment Operations............ 3.09 3.54 1.62 (0.37)
------- ------- ------- ----------
Less Distributions:
Dividends from net investment income........ (0.09) (0.10) (0.11) (0.03)
Distributions from net realized gains....... (0.33) (0.50) -- --
------- ------- ------- ----------
Total Distributions......................... (0.42) (0.60) (0.11) (0.03)
------- ------- ------- ----------
Net Asset Value, End of Period................ $ 16.72 $ 14.05 $ 11.11 $ 9.60
======= ======= ======= ===============
Total Return.................................. 22.33% 32.76% 17.06% (3.70)%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands).... $ 5,911 $ 1,437 $ 277 $ 35
Ratio of Expenses to Average Net Assets..... 1.19% 1.23% 1.21% 1.18%**
Effect of waivers/reimbursements on expense
ratio.................................... 0.11% 0.16% 0.26% 1.00%**
Ratio of Net Investment Income to Average
Net Assets............................... 0.65% 0.79% 1.12% 1.35%**
Portfolio Turnover Rate..................... 7.72% 28.00% 20.39% 5.88%
Average Commission Rate(a).................. $0.0721 $0.1070 -- --
</TABLE>
- ---------------
* Fund commenced operations on February 24, 1994
** 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.
6
<PAGE> 62
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
LARGE CAP EQUITY FUND*
-------------------------------------------------------
CONSUMER SERVICE CLASS
-------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1995 1994 1993**
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $ 15.29 $ 12.51 $ 11.33 $ 11.21 $ 10.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income.................. 0.20 0.19 0.22 0.20 0.21
Net gain on securities (both realized
and unrealized)..................... 4.13 3.29 1.42 0.12 1.21
------- ------- ------- ------- -------
Total from Investment Operations....... 4.33 3.48 1.64 0.32 1.42
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income... (0.21) (0.19) (0.21) (0.20) (0.21)
Distributions from net realized
gains............................... (0.25) (0.51) (0.25) -- --
------- ------- ------- ------- -------
Total Distributions.................... (0.46) (0.70) (0.46) (0.20) (0.21)
------- ------- ------- ------- -------
Net Asset Value, End of Period........... $ 19.16 $ 15.29 $ 12.51 $ 11.33 $ 11.21
======= ======= ======= ======= =======
Total Return............................. 28.75% 28.42% 15.10% 2.85% 14.37%
Ratios/Supplemental Data:
Net Assets, End of Period (in
thousands).......................... $19,531 $ 9,831 $ 5,234 $ 5,287 $ 3,348
Ratios of Expenses to Average Net
Assets.............................. 1.06% 1.06% 1.04% 1.08% 0.94%
Effect of waivers/reimbursements on
expense ratio....................... 0.08% 0.10% 0.13% 0.15% 0.20%
Ratio of Net Investment Income to
Average Net Assets.................. 1.18% 1.40% 1.90% 1.74% 2.09%
Portfolio Turnover Rate................ 1.41% 6.00% 58.08% 27.11% 2.61%
Average Commission Rate(a)............. $0.0899 $0.1067 -- -- --
</TABLE>
- ---------------
* Formerly, the Equity Fund.
** 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.
7
<PAGE> 63
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 unmanaged industry index since the commencement of each Fund's
operations. Each graph assumes all dividends and distributions were reinvested
at net asset value. The index returns are based solely on market returns without
deductions of fees or transaction costs.
SHORT TERM GOVERNMENT INCOME FUND
The investment performance of the Consumer Service Class of the Short Term
Fund is compared to the performance of the Lehman Bros. 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,
May 31, 1996 and May 31, 1997.
[SHORT TERM FUND REDEMPTION VALUE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Redemption Value Lehman Bros. 1-3 Yr
(Fiscal Year Covered) ($10,000 Investment Govt
<S> <C> <C>
Aug. 31, 1992 10322 10300
Nov. 30, 10326 10326
Feb. 28, 1993 10605 10611
May 31, 10667 10682
Aug. 31, 10833 10874
Nov. 30, 10868 10936
Feb. 28, 1994 10893 10981
May 31, 10798 10898
Aug. 31, 10929 11059
Nov. 30, 10875 11014
Feb. 28, 1995 11131 11338
May 31, 11457 11700
Aug. 31, 11617 11880
Nov. 30, 11830 12140
Feb. 29, 1996 11956 12288
May 31, 11959 12318
Aug. 31, 12091 12501
Nov. 30, 12446 12851
Feb. 28, 1997 12466 12946
May 31, 12610 13132
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
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 10,930 10,875 11,131
- ---------------------------------------------------------------------------------------------------------------------------------
Lehman Bros.
1-3 Yr Govt 10,300 10,326 10,611 10,682 10,874 10,936 10,981 10,898 11,059 11,014 11,338
<CAPTION>
Feb. 29, Feb. 28,
May 31, Aug. 31, Nov. 30, 1996 May 31, Aug. 31, Nov. 30, 1997 May 31,
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption
Value ($10,000
Investment)
Since Inception 11,457 11,617 11,830 11,956 11,959 12,091 12,416 12,466 12,610
- ---------------------------------------------------------------------------------------------------------------------------------
Lehman Bros.
1-3 Yr Govt 11,700 11,880 12,140 12,288 12,318 12,501 12,851 12,946 13,132
- -------------------------------------------------------------------------------
</TABLE>
Without fee waiver, performance would have been lower. Past performance does not
predict future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/97
- ----------------------------------------------
<S> <C>
SINCE INCEPTION
1 YEAR (6/1/92)
- ----------------------------------------------
5.44% 4.75%
- ----------------------------------------------
</TABLE>
8
<PAGE> 64
INTERMEDIATE TERM GOVERNMENT INCOME FUND
The investment performance of the Consumer Service Class of the
Intermediate Fund is compared to the performance of the Lehman Bros.
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, May 31, 1996 and May 31, 1997.
[INTERMEDIATE TERM FUND REDEMPTION VALUE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Redemption Value Lehman Bros.
(Fiscal Year Covered) ($10,000 Investment) Gov't/Corp
<S> <C> <C>
Aug. 31, 1992 10543 10499
Nov. 30, 10466 10471
Feb. 28, 1993 11146 11108
May 31, 11258 11226
Aug. 31, 11794 11819
Nov. 30, 11736 11774
Feb. 28, 1994 11676 11742
May 31, 11268 11339
Aug. 31, 11422 11544
Nov. 30, 11147 11336
Feb. 28, 1995 11637 11900
May 31, 12286 12655
Aug. 31, 12419 12870
Nov. 30, 12906 13409
Feb. 29, 1996 12868 13401
May 31, 12582 13175
Aug. 31, 12680 13349
Nov. 30, 13394 14159
Feb. 28, 1997 13272 14048
May 31, 13453 14215
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------------------
Lehman Bros.
Gov't/Corp 10,499 10,471 11,108 11,226 11,819 11,774 11,742 11,339 11,544 11,336 11,900
<CAPTION>
Feb. 29, Feb. 28,
May 31, Aug. 31, Nov. 30, 1996 May 31, Aug. 31, Nov. 30, 1997 May 31,
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption
Value ($10,000
Investment)
Since Inception 12,286 12,419 12,906 12,868 12,582 12,680 13,394 13,272 13,453
- ---------------------------------------------------------------------------------------------------------------
Lehman Bros.
Gov't/Corp 12,655 12,870 13,409 13,401 13,175 13,349 14,159 14,048 14,215
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Without fee waiver, performance would have been lower. Past performance does not
predict future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/97
- ------------------------------------------
<S> <C>
SINCE INCEPTION
1 YEAR (6/1/92)
- ------------------------------------------
6.92% 6.11%
- ------------------------------------------
</TABLE>
9
<PAGE> 65
MID CAP GROWTH FUND
The investment performance of the Consumer Service Class of shares of the
Mid Cap Growth Fund is compared to the Standard & Poors Mid Cap 400 Index in the
following chart from February 24, 1994 (commencement of operations) through May
31, 1994 and for the fiscal years ended May 31, 1995, 1996 and 1997.
[MID CAP FUND REDEMPTION VALUE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Redemption Value
(Fiscal Year Covered) ($10,000 Investment) S&P Mid Cap 400
<S> <C> <C>
May 31, 1994 9630 9610
Aug. 31, 10090 10096
Nov. 30, 9548 9565
Feb. 28, 1995 10478 10264
May 31, 11270 10909
Aug. 31, 12635 12167
Nov. 30, 13129 12671
Feb. 29, 1996 13787 13258
May 31, 14962 14014
Aug. 31, 14842 13612
Nov. 30, 16378 15050
Feb. 28, 1997 17228 15504
May 31, 18303 16559
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
May 31, Feb. 28, Feb. 29,
1994 Aug. 31, Nov. 30, 1995 May 31, Aug. 31, Nov. 30, 1996 May 31, Aug. 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 14,842
- ---------------------------------------------------------------------------------------------------------------------------------
S&P MidCap 400 9,610 10,096 9,565 10,264 10,909 12,167 12,671 13,258 14,014 13,612
<CAPTION>
Feb. 28,
Nov. 30, 1997 May 31,
- ------------------------------------------------------------
<S> <C> <C> <C>
Redemption Value ($10,000
Investment) Since Inception 16,378 17,228 18,303
- ------------------------------------------------------------
S&P MidCap 400 15,050 15,504 16,559
</TABLE>
- --------------------------------------------------------------------------------
Without fee waiver, performance would have been lower. Past performance does not
predict future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/97
- --------------------------------
<S> <C>
1 YEAR SINCE INCEPTION
- --------------------------------
22.33% 20.33%
- --------------------------------
</TABLE>
10
<PAGE> 66
LARGE CAP EQUITY FUND
The investment performance of the Consumer Service Class of the Large Cap
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, May 31, 1996
and May 31, 1997.
[LARGE CAP FUND REDEMPTION VALUE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Redemption Value
(Fiscal Year Covered) ($10,000 Investment) S&P 500
<S> <C> <C>
Aug. 31, 1992 9979 10044
Nov. 30, 10695 10543
Feb. 28, 1993 10997 10908
May 31, 11437 11159
Aug. 31, 11996 11569
Nov. 30, 12036 11605
Feb. 28, 1994 12123 11815
May 31, 11763 11633
Aug. 31, 12244 12200
Nov. 30, 11582 11726
Feb. 28, 1995 12468 12683
May 31, 13535 13978
Aug. 30, 14236 14813
Nov. 30, 15554 16057
Feb. 29, 1996 16664 17080
May 31, 17382 17949
Aug. 31, 17234 17586
Nov. 30, 20092 20529
Feb. 28, 1997 20811 21546
May 31, 22318 23234
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
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 12,469
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 10,044 10,543 10,908 11,159 11,569 11,605 11,815 11,633 12,200 11,726 12,683
<CAPTION>
Feb. 29, Feb. 28,
May 31, Aug. 31, Nov. 30, 1996 May 31, Aug. 31, Nov. 30, 1997 May 31,
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption
Value ($10,000
Investment)
Since Inception 13,535 14,236 15,554 16,664 17,382 17,234 20,092 20,811 22,378
- ---------------------------------------------------------------------------------------------------------------
S&P 500 13,974 14,813 16,057 17,080 17,949 17,586 20,529 21,546 23,234
- --------------------------------------------------------------------------------
</TABLE>
Without fee waiver, performance would have been lower. Past performance does not
predict future results.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/97
- ------------------------------------------
<S> <C>
SINCE INCEPTION
1 YEAR (6-1-92)
- ------------------------------------------
28.75% 17.48%
- ------------------------------------------
</TABLE>
11
<PAGE> 67
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The Money Market Fund, the Short Term Government Income Fund (the "Short
Term Fund"), the Intermediate Term Government Income Fund (the "Intermediate
Fund") (the Short Term Fund and Intermediate Fund together referred to herein as
the "Government Income Funds"), the Small Cap Fund, the Mid Cap Growth Fund (the
"Mid Cap Fund") and the Large Cap Equity Fund (the Small Cap Fund, Mid Cap Fund
and Large Cap Equity Fund together referred to herein as the "Equity Funds") are
six separate investment funds (the "Funds") managed by Trustmark National Bank.
The investment objective of the Funds, and certain of their investment
restrictions described herein and in the SAI are fundamental and may not be
changed without shareholder approval.
THE MONEY MARKET FUND
The investment objective of the Money Market 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 generally 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.
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 its 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 relative to other non-money market investments. 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.
12
<PAGE> 68
THE EQUITY FUNDS:
THE SMALL CAP FUND
The investment objective of the Small Cap Fund is long term capital
appreciation. The Fund invests primarily in the universe of companies comprising
the Standard and Poor's SmallCap 600 Index (the "Index"). As a result, a
principal goal of the Fund is to be a broadly diversified portfolio of
smaller-capitalized common stocks with holdings in each of the major economic
sectors comprising the Index. Not an index fund, the Fund seeks to achieve its
objective by investing in publicly traded companies the Fund's Adviser believes
are likely to outperform the Index and other companies that the Adviser deems
necessary to maintain the Index's general sector weighting. Although the Fund
may also invest in the types of investment grade fixed income instruments
described under "The Investment Policies and Practices of the Funds" herein, and
may use various special investment techniques, under normal market conditions,
the Fund will invest at least 65% of its total assets in common stock of
companies that, at the time of purchase, fall within the Index. Under normal
market conditions, up to 35% of the Fund's total assets may be invested in
larger capitalization companies' equity securities and equivalents, preferred
stock, foreign securities, investment grade debt securities, securities
convertible into common or preferred stock, warrants, money market instruments
and stock or index options and futures contracts. See "The Investment Policies
and Practices of the Funds" in this Prospectus. There is no assurance the Fund
will achieve its investment objective.
THE MID CAP FUND
The investment objective of the Mid Cap Fund 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 at the time of purchase), including common stocks listed on the S&P
MidCap Index (collectively, "Mid Cap Common Stocks") which the Fund's 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 "The Investment Policies and Practices of the Funds" herein, and may use
various special investment techniques, under normal market conditions the Fund
will invest at least 65% of its total assets in Mid Cap Common Stocks. Under
normal market conditions, up to 35% of the Fund's total assets may be invested
in options, warrants, preferred stock, foreign securities and money market
instruments, investment grade debt securities and securities convertible into
common or preferred stock. See "The Investment Policies and Practices of the
Funds." There is no assurance that the Fund will achieve its investment
objective.
THE LARGE CAP EQUITY FUND
The investment objective of the Large Cap Equity Fund is to provide
investors with long-term capital appreciation. The Large Cap Equity Fund pursues
this objective by investing primarily (at least 65% of total assets) in common
stocks of large, well established U.S. companies with market capitalization
exceeding $1 billion at the time of purchase. The Fund may also invest in
smaller capitalization companies. It is anticipated that the Fund will invest
primarily in companies found in the S&P 500 Index. Income generation is a
secondary consideration for the Large Cap Equity Fund. However, the Large Cap
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.
Under normal market conditions, up to 35% of the Fund's total assets may be
invested in preferred stock, investment grade debt securities, warrants,
securities convertible into common or preferred stock, money market instruments
and stock futures contracts.
13
<PAGE> 69
RISK FACTORS
There is no assurance that the Funds will achieve their investment
objective. Except for the Money Market Fund each Fund's net asset value is
expected to fluctuate, reflecting fluctuations in the market value of its
portfolio securities. Investors in the Short Term 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 Funds invest primarily in common stocks, each Fund 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- and mid-size company stocks in which the Small Cap Fund and the Mid
Cap Fund will, and the Large Cap 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 and mid size company stocks
are the less certain growth prospects of smaller firms, a low degree of
liquidity in the markets for small and mid size company stocks, and the small to
negligible dividends generally paid by small and mid size companies as compared
to a larger cap company. Besides exhibiting greater volatility, small and mid
size company stocks have at times fluctuated in value independently of the broad
stock market.
In addition, small and mid size companies in which the Equity Funds may
invest, may have limited product lines, markets or financial resources and may
lack management depth. The liquidity and marketability of such companies may be
limited and may be subject to more abrupt or erratic price movements than
securities of larger, more established companies or the market averages in
general. To possibly compensate for this risk exposure, the investor will have
an opportunity to participate, through a residual ownership interest, in
companies with potentially higher growth rates, versus those found in
larger-capitalization issues, and by locating value perhaps overlooked by
investment analysts and other investors. The Equity Funds may invest in options,
warrants and investment grade convertible securities, the Small Cap Fund and
Large Cap Equity Fund may enter into futures transactions and the Mid Cap Fund
and Small Cap Fund may engage in short sales. Accordingly, an investment in the
Equity Funds may not be suitable for all investors.
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 acts as investment adviser to the Funds.
Trustmark's Trust Department, has assets in excess of $1.5 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.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services 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"), an affiliate of BISYS Fund Services, is the Distributor for the Trust
and distributes the Funds' shares and may be reimbursed for certain of its
distribution related expenses.
14
<PAGE> 70
PURCHASES
Shares of the Consumer Service Class of the Funds are offered at net asset
value without a sales load. 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.
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, if any, 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 Statement
of Additional Information (the "SAI") contains specific investment restrictions
which govern the Funds' investments. Except as otherwise noted, 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 Money Market 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 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.
15
<PAGE> 71
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.
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 ("NRSRO"), or the only NRSRO rating the
security or, if not rated, are, in the opinion of the Adviser, 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's 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.
The Government Income Funds. 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 its objective by investing at least 65% of its 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 of any individual security held by the Short Term Fund is approximately
five years.
The investment objective of the Intermediate Fund is to provide investors
with a high level of current income. Total return, within certain parameters, is
a secondary consideration. Under normal conditions the Intermediate Fund will
invest at least 65% of its total assets in intermediate term government income
securities.
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 S&P or Prime-2 or better by 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, including money market securities, which are of
comparable quality in the Adviser's opinion pursuant to guidelines adopted by
the Board of Trustees and in interest rate futures. 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. For temporary defensive purposes, e.g.,
during periods in which adverse market or economic conditions warrant, or when,
in the opinion of the Adviser it is in the best interests of the Fund, the Fund
may invest up to 100% of its assets in money market instruments.
The Small Cap Fund. The investment objective of the Small Cap Fund is
long-term capital appreciation. Under normal market conditions, the Small Cap
Fund will invest at least 65% of its assets in the common stock of issuers
comprising the Standard & Poor's SmallCap 600 Index at the time of purchase. The
Fund may invest up to 35% of its total assets in foreign securities and American
Depository Receipts ("ADRs"), companies' equity securities and equivalents of
larger capitalized companies, investment grade fixed income securities, such as
preferred stock mortgage related and asset backed securities, debt securities
and securities convertible into common or preferred stock, and in obligations of
the U.S. government, its agencies or instrumentalities, (including such
obligations subject to repurchase agreements and in options, warrants and
futures contracts as determined by the Adviser (see "Description of Securities
and Investment Practices")). Investment grade bonds, for example, are those
rated "Baa" or better by Moody's or "BBB" or better by S&P
16
<PAGE> 72
or of a comparable rating by another nationally recognized statistical rating
organization or, if unrated, determined by the Adviser to be of comparable
investment quality. While "Baa"/"BBB" securities and comparable unrated
securities may produce a higher return, they are subject to a greater degree of
market fluctuation and credit risks than the higher quality securities in which
the Fund may invest and may be regarded as having speculative characteristics as
well. The Fund may also invest in short term (maturing in less than one year)
money market instruments, including commercial paper rated "A-1" or better by
S&P or "P-1" or better by Moody's. (See "Other Investments," "U.S. Government
Securities," "Corporate Debt Securities," "Mortgage-Related Securities," "Asset
Backed Securities," "Zero Coupon Securities," "Convertible Securities,"
"Repurchase Agreements," "Foreign Securities and American Depository Receipts.")
For temporary defensive purposes, e.g., during periods in which adverse market
or economic conditions warrant, or when, in the opinion of the Adviser, it is in
the best interests of the Fund, the Fund may invest up to 100% of its assets in
non-equity securities, money market instruments and, in the equity securities of
larger capitalized companies.
On December 31, 1993, Standard and Poor's introduced the S&P Small Cap 600
Index covering smaller capitalized, publicly traded companies domiciled in the
United States. As of June 30, 1997 the Index contains 600 issues with market
capitalizations ranging from approximately $40 million to $3 billion. The median
market capitalization of the Index is approximately $425 million and complements
both the S&P 500 Index and the S&P 400 Mid Cap Index. The Index was developed in
response to a widespread interest in smaller capitalized issues, which, though
more volatile than larger capitalized indices, has historically provided for
periods of greater price appreciation.
The Adviser will rely extensively upon computer models developed by it for
stock selection. This disciplined approach, which is based on input of company
fundamentals, allows the model to rank the companies in the S&P Small Cap 600
Index in order of attractiveness. It is anticipated that in order to maintain
economic sector weightings comparable to that of the Index, the Fund, depending
on asset size, will contain anywhere from approximately 40 to 200 of the most
attractive companies ranked by the model. The Adviser may also rely upon other
factors, both qualitative and quantitative, 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) earnings volatility; (3)
relative valuation and earnings momentum; (4) composite rank; (5) dividend
yield; and (6) proprietary analysis of earnings momentum and valuation.
The common shares of small capitalization companies often pay no dividends,
thus current income is not a significant factor in the selection of stocks. The
Adviser will select portfolio securities based on characteristics such as the
financial strength and profitability of the company, the expertise of management
and the growth potential of the company. A majority of the companies in which
the Fund invests are expected to be traded in the over-the-counter market,
although the common shares of many companies are traded on the New York Stock
Exchange or the American Stock Exchange.
The securities of small capitalization companies may offer greater
potential for capital appreciation than the securities of larger companies since
they may be overlooked by investors or undervalued in relation to their earnings
power. Small capitalization companies generally are not as well known to the
investing public and have less of an investor following than larger companies,
thus they may provide greater opportunities for long-term capital appreciation
as a result of relative inefficiencies in the marketplace.
The Fund should not be considered suitable for investors who are unable or
unwilling to assume the risk of loss inherent in a program of investment in
small capitalization companies. Small capitalization companies are more volatile
than larger capitalization companies. The Fund may invest in relatively new or
unseasoned firms, which are in their early stages of development, or small
companies positioned in new and emerging
17
<PAGE> 73
industries. Securities of small and unseasoned companies present greater risks
than securities of larger, more established companies. The companies in which
the Fund may invest may have limited revenues and product lines, and may have a
small share of the market for their products or services. Small companies may
lack depth of management. They may be unable to internally generate funds
necessary for growth or potential development or to generate such funds through
external financing on favorable terms. They may be developing or marketing new
products or services for which markets are not yet established and may never
become established. Due to these and other factors, small companies may incur
significant losses, therefore, investments in such companies are speculative.
Mid Cap Fund. The investment objective of the Mid Cap Fund is to seek to
achieve growth of capital by attempting to outperform the S&P MidCap Index. The
Mid Cap Fund will purchase common stocks of mid-sized companies (companies with
market capitalization ranging from $200 million to $5.2 billion, at the time of
purchase), 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.
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 65% of the Fund's
total assets), the Fund may invest up to 35% of its assets in other types of
investment grade fixed income securities (primarily preferred stock, debt
securities and securities convertible into common or preferred stock), mortgage
related and asset backed securities, equity securities of larger capitalized
companies and foreign securities and ADRs, and in options and warrants, as
determined by the Adviser (see "Description of Securities and Investment
Practices"). When warranted by business or financial conditions, or when, in the
opinion of the Adviser, it is in the best interests of the Fund, the Fund may
invest temporarily or for defensive purposes without limitation in equity
securities of larger capitalized companies, 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 S&P or "P-1" or better by
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 as 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; (5) proprietary analysis
of earnings momentum; (6) relative valuation and relative earnings momentum; and
(7) composite rank.
Under normal market conditions, the Fund will invest at least 65% of the
value of its total 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
18
<PAGE> 74
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.
The Large Cap Equity Fund. The investment objective of the Large Cap
Equity Fund is to provide investors with long-term capital appreciation. In
selecting equity investments (which include common stocks of U.S. companies and
ADRs of foreign companies) for the Large Cap 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 investments for the Large Cap
Equity Fund such as preferred stocks, high grade securities convertible into
common stocks and warrants. The Large Cap 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 Large Cap Equity Fund will invest at least 65% of its total assets
in common stocks or securities convertible into common stocks of large, well
established companies with market capitalization in excess of $1 billion at the
time of purchase("Large Cap Common Stocks). Under normal conditions, up to 35%
of the Fund's total assets may be invested in investment grade fixed income
securities, mortgage related and asset backed securities, foreign securities,
U.S. Government securities and options and futures transactions. When warranted
by business or financial conditions, temporarily or for defensive purposes, the
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 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). The Funds may invest in all types
of securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities or instrumentalities, including U.S.
Treasury obligations with varying interest rates, maturities and dates of
issuance, such as U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (generally maturities of one to ten years) and U.S. Treasury
bonds (generally maturities of greater than ten years) and obligations issued or
guaranteed by U.S. Government agencies or which are supported by the full faith
and credit pledge of the U.S. Government. In the case of U.S. Government
obligations which are not backed by the full faith and credit pledge of the
United States, the Fund must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States in the event the agency or instrumentality is
unable to meet its commitments. Such securities may also include securities for
which the payment of principal and interest is backed by an irrevocable letter
of credit issued by the U.S. Government, its agencies, authorities or
instrumentalities and participations in loans made to foreign governments or
their agencies that are substantially guaranteed by the U.S. Government (such as
Government Trust Certificates). See "Mortgage-Related Securities" and "Other
Asset-Backed Securities" below.
19
<PAGE> 75
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). The Funds may invest in U.S.
dollar-denominated obligations issued or guaranteed by U.S. corporations or U.S.
commercial banks, U.S. dollar denominated obligations of foreign issuers,
including, for the Equity and Government Funds, those described below under
"Foreign Securities and American Depository Receipts". Such debt obligations
include, among others, bonds, notes, debentures, commercial paper and variable
rate demand notes. Bank obligations include, but are not limited to certificates
of deposit, bankers' acceptances, and fixed time deposits. The Adviser, in
choosing corporate debt securities on behalf of a Fund will evaluate each issuer
based on (i) general economic and financial conditions; (ii) the specific
issuer's (a) business and management, (b) cash flow, (c) earnings coverage of
interest and dividends, (d) ability to operate under adverse economic
conditions, (e) fair market value of assets, and (f) in the case of foreign
issuers, unique political, economic or social conditions to such issuer's
country; and, (iii) other considerations the Adviser deems appropriate.
Investment in obligations of foreign issuers may present a greater degree of
risk than investment in domestic securities (see "Foreign Securities and
American Depository Receipts" below for more details). The Money Market Fund's
investments in U.S. corporate debt securities are limited to corporate bonds,
debentures, notes and other similar corporate debt instruments which meet
previously disclosed minimum ratings or if unrated, are in the Adviser's opinion
comparable in quality to corporate debt securities in which the Fund may invest.
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 (members of
the Federal Reserve System having total assets in excess of $500 million) 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 income, the Funds
may lend their 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 (i) in the case of the Mid
20
<PAGE> 76
Cap and Small Cap Funds, one third of the value of the Fund's assets and (ii) in
the case of all other Funds, 5% of such Fund's total 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.
Variable and Floating Rate Demand and Master Demand Notes (all Funds). The
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% (10% with respect to the Money Market Fund)
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 short term debt securities.
Foreign Securities and American Depository Receipts ("ADRs") (the Equity
Funds). The Equity Funds may invest in foreign securities through the purchase
of ADRs and may also invest directly in certain debt securities of foreign
issuers. The foreign debt securities in which the Equity Funds may invest
include securities issued by foreign branches of U.S. banks and foreign banks,
Canadian commercial paper and Europaper (U.S. dollar denominated commercial
paper of a foreign issuer). Each Fund's investment in foreign debt securities is
limited to 5% of its total assets.
The Equity Funds may invest in securities represented by ADRs. 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 Funds
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
21
<PAGE> 77
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. The Funds will
not invest more than 20% of their total assets in ADRs.
Investments in foreign securities and 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, including 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 security or 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.
When Issued Delayed, Delivery Securities and Forward Commitments (all
Funds, except Money Market Fund). The Funds 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 Funds will only enter into a forward commitment with
the intention of actually acquiring the security, the Funds 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 a Fund prior to the
settlement date. Each 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.
Mortgage-Related Securities (all Funds). The Funds may invest in various
mortgage-related securities. Mortgage loans made by banks, savings and loans
institutions and other lenders are often assembled into pools, the interests in
which may be issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Interests in such pools are called "mortgage-related
securities" or "mortgage-backed securities."
Most mortgage securities are pass-through securities, which means they
provide investors with payments consisting of both principal and interest from
mortgages in the underlying mortgage pool. Investors receive a pro rata share of
both regular interest and principal payments (less issuer fees and applicable
loan servicing fees), as well as unscheduled early prepayments on the underlying
mortgage pool. The dominant issuers or guarantors of mortgage securities today
are the Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). GNMA guarantees mortgage-backed securities composed of
Government-guaranteed or insured (Federal Housing Authority, Veterans
Administration or Farmers Home Administration) mortgages
22
<PAGE> 78
originated by mortgage bankers, commercial banks and savings and loan
associations. GNMA and FHLMC guarantee mortgage securities composed of pools of
conventional and Federally insured or guaranteed residential mortgages obtained
from various entities, including savings and loan associations, savings banks,
commercial banks, credit unions and mortgage bankers.
The principal and interest on GNMA pass-through securities are guaranteed
by GNMA and backed by the full faith and credit of the U.S. Government. FNMA
guarantees full and timely payment of all interest and principal, while FHLMC
currently guarantees timely payment and ultimate payment of interest and either
timely payment of principal or eventual payment of principal depending upon the
date of issue. Securities issued by FNMA and FHLMC are not backed by the full
faith and credit of the United States; however, they have a close relationship
with the U.S. Government The yields provided by these mortgage securities have
historically exceeded the yields on other types of U.S. Government securities.
However, like most mortgage-backed securities, the experienced yield is
sensitive to interest rates and the rate of principal payments (including
prepayments). Prepayments on underlying mortgages result in a loss of
anticipated interest, and all or part of a premium if any has been paid, and the
actual yield (or total return) to the Fund may be different than the quoted
yield on the securities. Mortgage prepayments generally increase with falling
interest rates and decrease with rising interest rates. Like other fixed income
securities, when interest rates rise, the value of a mortgage pass-through
security generally will decline; however, when interest rates are declining, the
value of a mortgage pass-through securities with prepayment features may not
increase as much as that of other fixed-income securities. Because the average
life of mortgage-related securities may lengthen with increases in interest
rates, the portfolio weighted average life of the mortgage-related securities in
which a Fund is invested may at times lengthen due to this effect. Under these
circumstances, the Adviser may, but is not required to, sell securities in order
to maintain an appropriate portfolio weighted average life.
In addition to GNMA, FNMA or FHLMC Certificates, through which the holder
receives a share of all interest and principal payments from the mortgages
underlying the Certificate, the Funds also may invest in mortgage pass-through
securities, where 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 particularly sensitive to interest rates and 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, the Funds may not fully recoup its initial investment
in IOs. Conversely, if the underlying mortgage assets experience less than
anticipated prepayments of principal, the return of POs could be adversely
affected. The Funds will treat IOs and POs as illiquid securities except for IOs
and POs issued by the U.S. Government agencies and instrumentalities backed by
fixed-rate mortgages, whose liquidity is monitored by the Adviser.
The Funds may also invest in certain Collateralized Mortgage Obligations
("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs") which are
hybrid instruments with characteristics of both mortgage-backed bonds and
mortgage pass-through securities. Interest and prepaid principal on a CMO or
REMIC are paid monthly or semi-annually. CMOs and REMICs 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 and
REMICs are structured into multiple classes, with each class bearing a different
expected maturity. Payments of principal, including repayments, are first
returned to investors holding the shortest maturity class; investors holding the
longer maturity classes generally receive principal only after the earlier
classes have been retired. To the extent a particular CMO or REMIC is issued by
an investment company, a Fund's ability to invest in such CMOs or REMICs will be
limited. The Funds will not invest in the residual interests of REMICs.
23
<PAGE> 79
The Adviser expects that new types of mortgage-related securities may be
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.
The yield characteristics of mortgage-related securities differ from
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently, usually monthly, and that principal
may be prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. As a result, if a Fund purchases a
security at a premium, a prepayment rate that is faster than expected will
reduce yield to maturity, while a prepayment rate that is slower than expected
will have the opposite effect of increasing yield to maturity. Alternatively, if
a Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity. 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 Fund in calculating maturity for purposes of its
investment in mortgage-related securities.
Like other bond investments, the value of mortgage-backed securities will
tend to rise when interest rates fall and to fall when interest rates rise.
Their value may also be affected by changes in the market's perception of the
creditworthiness of the entity issuing or guaranteeing them or by changes in
government regulations and tax policies. Because of these factors, the Funds'
share value and yield are not guaranteed and the Government Income Funds' and
the Equity Funds' share values will fluctuate, and there can be no assurance
that each Fund's investment objective will be achieved. The magnitude of these
fluctuations generally will be greater when the average maturity of the Fund's
portfolio securities is longer.
Other Asset-Backed Securities (all Funds). The 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 Fund in calculating maturity for purposes of its investment in asset-backed
securities.
Interest Rate Futures (the Government Income Funds and the Money Market
Fund only). The 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 decline (and vice versa). Entering into a futures contract for the
sale of securities has an effect similar to the actual sale of
24
<PAGE> 80
securities, although sale of the futures contract might be accomplished more
easily and quickly. For example, if a 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 its 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 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 Funds only). Each
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 Fund owns or has
the right to acquire the optioned securities and the Fund maintains, in a
segregated account with its custodian liquid assets with a value sufficient to
meet its obligations under the call, or if the Fund owns an offsetting call
option. When a 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, each Fund forgoes any gain from an increase in the market
price of the underlying security over the exercise price.
Each Fund also may purchase put options ("puts"). When a 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, a Fund will have lost
the premium and this will have the effect of reducing the Fund's return.
Each 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 Fund has written lapses unexercised,
because the Fund would retain the premium.
Each Fund will not purchase options if, as a result, the aggregate cost of
all outstanding options exceeds 10% of the Fund's total assets. 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 Small Cap and Large Cap Equity Funds
only). Each 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 the
purchaser will realize a gain in that amount. In the event the index level falls
below the level
25
<PAGE> 81
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.
Each 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 Fund is unable to invest its cash (or cash equivalents) in
stock 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 a 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.
Each Fund may buy or sell stock index futures contracts to close out existing
futures positions.
Put Options on Stock Index Futures Contracts (the Small Cap and Large Cap
Equity Funds only). Each 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 a Fund from liquidating an unfavorable
position and the Fund would remain obligated to meet margin requirements until
the position is closed. Each 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 Fund pursuant to such
contracts. To the extent that puts, calls, straddles and similar investment
strategies involve instruments regulated by the Commodity Futures Trading
Commission, each Fund is limited to an investment not in excess of 5% of its
total assets.
The use of stock index futures contracts and put options on stock index
futures contracts may impair the liquidity of the Fund's assets and the ability
to operate as an open-end investment company. The Adviser will monitor the
Fund's use of such techniques and report to the Board of Trustees concerning
their impact, if any, on liquidity and the 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
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% (10% with
respect to the Money Market Fund) of the value of the total net assets of each
such Fund.
Illiquid securities include (a) securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market, (b) participation interests in loans that are not subject to
puts and (c) repurchase agreements not terminable within seven days. See
"Repurchase Agreements" above.
Securities that have legal or contractual restrictions on resale but have a
readily available market are not deemed illiquid for purposes of this
limitation. Consequently, investments in restricted securities eligible for
resale pursuant to Rule 144A of the Securities Act of 1933 which have been
determined to be liquid by the
26
<PAGE> 82
Fund's Board of Trustees based upon the trading markets for the securities will
not be included for purposes of this limitation. 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% (10% with respect to the
Money Market Fund) 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% (10% with respect
to the Money Market Fund) 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.
Warrants and Rights (the Equity Funds). The Funds may invest in warrants
or rights of securities of 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
Funds. 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 Funds, the warrant will expire and the Funds will
suffer a loss on the price it paid for the warrant. The Funds 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.
The Small Cap Fund will only invest in warrants or rights when the security
is issued and distributed by a company found within the Index universe and only
then when it is owned by the Fund prior to the security's distribution of
record. For the foreseeable future, it is not anticipated warrants and rights
will be included as a security comprising the S&P Small Cap 600 Index.
Investment Company Securities (All Funds). Each Fund may invest up to 10%
of its total assets in securities issued by other investment companies. Such
securities will be acquired by the Funds within the limits prescribed by the
Investment Company Act of 1940, as amended ("1940 Act"), which include a
prohibition against a Fund investing more than 10% of the value of its total
assets in such securities. Investors should recognize that the purchase of
securities of other investment companies results in duplication of expenses such
that investors indirectly bear a proportionate share of the expenses of such
companies including operating costs, and administrative fees.
Convertible Securities (the Equity Funds). 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
27
<PAGE> 83
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 Funds 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 Funds 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 (the Equity Funds). Subject to the SmallCap
policy of investing at least 65% of its total assets in S&P SmallCap 600 Index,
the Mid Cap Fund's policy of investing at least 65% of its total assets in Mid
Cap Common Stocks and the Large Cap Equity Fund's policy of investing at least
65% of its total assets in Large Cap Common Stock, the Funds may invest without
limit in securities listed on the S&P SmallCap 600 Index, the S&P MidCap Index
and the S&P 500 Index, respectively, 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 Funds may sustain losses. For further information on
such investments, see "Description of the Fund's Investment Securities" in the
SAI.
Investments in Small, Unseasoned Companies (the Equity Funds). The Funds
may invest in small, less well known companies. Some of these companies may have
limited operating history and limited liquidity. To lessen the liquidity
concerns, the Funds will not invest in illiquid, nonmarketable securities of
small, unseasoned companies. The Mid Cap Fund and Large Cap Equity Fund will not
invest more than 5% of its respective net assets in small, unseasoned companies.
Short Sales (Mid Cap Fund and Small Cap Fund). The Funds 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 Funds expect 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 a 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. Each
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.
Each 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. Each 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
28
<PAGE> 84
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 a 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 a 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 each 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 each Fund's total assets or 5% of such issuer's voting
securities. Each 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. Each 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, each Fund owns or has the
immediate and unconditional right to acquire at no additional cost the identical
security.
Reverse Repurchase Agreements (Small Cap Fund and Mid Cap Fund only). The
Funds may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, the Funds would sell portfolio securities to
financial institutions such as banks and broker-dealers, and agree to repurchase
them at a mutually agreed upon date and price. The Funds intend to enter into
reverse repurchase agreements only to avoid selling securities during market
conditions deemed unfavorable by the Adviser to meet redemptions. At the time a
Fund enters into a reverse repurchase agreement, it will place in a segregated
custodial account liquid assets such as are consistent with the Fund's
investment objective having a value not less than 100% of the repurchase price
(including accrued interest), and will subsequently monitor the account to
ensure that such required value is maintained. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the price at which the Fund is obligated to repurchase the
securities. Reverse repurchase agreements are considered to be borrowings by an
investment company under the 1940 Act.
Zero Coupon Securities (all Funds). The Funds may invest in zero coupon
securities. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity. The market prices
of zero coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are more sensitive to changes in
interest rates than non-zero coupon securities having similar maturities and
credit qualities.
The Funds may invest in separately traded principal and interest components
of securities guaranteed or issued by the U.S. Treasury if such components are
traded independently. Under the STRIPS (Separate Trading of Registered Interest
and Principal of Securities) program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently.
Currently Federal income tax law requires that a holder of a zero coupon
security report as income each year the portion of the original issue discount
on such security that accrues that year, even though the holder receives no cash
payments of interest during the year.
29
<PAGE> 85
Portfolio Turnover
Purchases and sales are made for the Funds whenever necessary, in the
Adviser's opinion, to meet each Fund's objectives. Portfolio turnover may
involve the payment by the Funds 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, except for fiscal years beginning after August, 1997, 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 Funds expect to satisfy the 30% income test. The
Small Cap Fund, Mid Cap Fund and Large Cap Equity Fund do not anticipate that
the portfolio turnover rate will exceed 200%, 200% and 100% respectively. The
portfolio turnover rate is not expected to exceed 250% for the Short Term Fund
and 150% for the Intermediate Fund.
INVESTMENT RESTRICTIONS
(All Funds, except as indicated)
Each Fund is a diversified fund. As such, it will not, with respect to 75%
(100% with respect to the Money Market Fund) 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 (except that the
Money Market Fund 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 classification of each Fund as a diversified investment company is
a fundamental policy of each 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 outstanding shares" of each Fund means,
respectively, the vote of 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. In addition to other restrictions listed in the SAI, the
Funds may not (except where specified):
(1) borrow money or pledge or mortgage its assets, except that each Fund
may borrow from banks and the Small Cap and Mid Cap Funds may engage in reverse
repurchase agreements. The Money Market Fund, the Government Income Funds and
the Large Cap Equity Fund may borrow from banks up to 10% of the current value
of their 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 such Fund's total net assets (but investments may not be purchased by a
Fund while any such borrowings exist). The Small Cap and Mid Cap Funds may
borrow from banks for extraordinary or emergency purposes and engage in reverse
repurchase agreements provided that in the aggregate such borrowings do not
exceed an amount equal to one-third of the value of the total assets of the
Funds 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 and that the Mid Cap and Small Cap Funds may not purchase securities while
borrowing exceed 5% of its total assets.
(2) make loans, except loans of portfolio securities and except that a Fund
may enter into repurchase agreements with respect to its portfolio securities;
(3) invest more than 15% (10% with respect to the Money Market Fund) of the
market value of the Fund's net assets in illiquid investments including
repurchase agreements maturing in more than seven days.
30
<PAGE> 86
The Money Market Fund's diversification tests are measured at the time of
initial purchase, and calculated as specified in Rule 2a-7 of the Investment
Company Act of 1940, which may allow the Fund to exceed the limits specified in
this Prospectus for certain securities subject to guarantees or demand features.
The Fund will be deemed to satisfy the maturity requirements described in this
Prospectus to the extent that the Fund satisfies Rule 2a-7's maturity
requirements.
It is the intention of the Funds, unless otherwise indicated, that with
respect to the Funds' policies that are the result of the application of law
(for example, Rule 2a-7 with respect to the Money Market Fund), the Funds will
take advantage of the flexibility provided by rules or interpretations of the
SEC currently in existence or promulgated in the future or changes to such laws.
Except as indicated otherwise, 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 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. 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. 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. Douglas P. Muenzenmay, who joined Trustmark in 1997 will be
responsible for day-to-day management of the Small Cap Fund with Douglas H.
Ralston, CFA acting as Associate Manager. Mr. Muenzenmay was previously employed
by Brenton Bank, Inc. as an equity fund portfolio manager. Mr. Ralston, Vice
President and Trust Officer with over 11 years investment experience joined
Trustmark in 1991. Prior to joining Trustmark, Mr. Ralston was employed by Third
National Bank of Nashville. Mr. Ralston is also responsible for the day-to-day
management of the Mid Cap Fund. Charles H. Windham, Jr., a Vice President of
Trustmark since 1970, is responsible for the day-to-day management of the Large
Cap Equity Fund's portfolio. Zachariah Wasson, CFA, a Senior Vice President of
Trustmark, serves as Chief Investment Officer and has overall supervisory
responsibility. Mr. Wasson joined Trustmark in 1990.
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:
Money Market Fund, 0.30%; Short Term Fund, 0.40%; the
31
<PAGE> 87
Intermediate Fund, 0.50%; Small Cap Fund, 1.00%; Mid Cap Fund, 0.75%; and the
Large Cap 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 Distributor and Administrator. BISYS Fund Services Limited Partnership
d/b/a BISYS Fund Services ("BISYS") acts as the Administrator of the Funds. PFD
an affiliate of BISYS acts as the Distributor of the Funds' shares. BISYS is a
subsidiary of BISYS Group, Inc. which is headquartered in Little Falls, N.J.,
and 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 Group, Inc. trades on NASDAQ under the
symbol BISYS.
Administrative Services. The Funds have entered into an Administration
Agreement with BISYS pursuant to which BISYS 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' 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, BISYS 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 Transfer Agency Agreement between the Trust and BISYS Fund
Services, Inc., an affiliate of BISYS, BISYS Fund Services, Inc. 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 BISYS Fund Services, Inc., BISYS Fund
Services, Inc. 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.
DISTRIBUTION PLAN AND AGREEMENT
The Board of Trustees of the Trust has adopted a Distribution Plan and
related Shareholder Servicing Agreement (the "Plan") for the Consumer Service
Class shares pursuant to Rule 12b-1 of the 1940 Act, after having concluded that
there is a reasonable likelihood that the Plan will benefit the Funds and the
Consumer Service Class shareholders. The Plan provides with respect to the
Consumer Service Class shares only for a monthly payment by the Fund to
reimburse the Distributor in such amounts that they may request for expenses
such as the printing and distribution of prospectuses sent to prospective
investors, the preparation,
32
<PAGE> 88
printing and distribution of sales literature and expenses associated with media
advertisements and telephone services and other direct and indirect
distribution-related expenses, including the payment of a monthly fee to
broker-dealers for rendering distribution-related asset introduction and asset
retention services. The Funds may also make payments to other broker-dealers or
financial institutions for their assistance in distributing shares of the Funds
and otherwise promoting the sale of the Funds shares. The total monthly payment
is based on each Fund's Consumer Service Class shares average daily net assets
value during the preceding month and is calculated at an annual rate not to
exceed 0.35%.
The Plan provides for the Distributor to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plan and the purpose for which such expenditures were made. The Plan may
not be amended to increase materially the amount spent for distribution expenses
without approval by a majority of the Fund's outstanding shares subject to the
Plan and approval of a majority of the non-interested Trustees. Distribution
expenses incurred in one year will not be carried forward into and reimbursed in
the next year for actual expenses incurred in the previous year.
The Distributor, at its expense, will provide additional compensation to
dealers in connection with sales of Shares of any of the Funds. Such
compensation will include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one or more Funds of the Trust, and/or
other deal-sponsored special events. In some instances, this compensation will
be made available only to certain dealers whose representatives have sold a
significant amount of such Shares. Compensation will include payment for travel
expenses, including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to location within
outside the United States for meetings or seminars of a business nature.
Compensation will also include the following types of non-cash compensation
offered through sales contests: (1) vacation trips, including the provision of
travel arrangements and lodging at luxury resorts at an exotic location, (2)
tickets for entertainment events (such as concerts, cruises and sporting events)
and (3) merchandise (such as clothing, trophies, clocks and pens). Dealers may
not use sales of a Fund's Shares to qualify for this compensation to the extent
such may be prohibited by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by any Fund or its Shareholders.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than BISYS) 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
33
<PAGE> 89
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 BISYS, BISYS Fund Services, Inc. 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.
34
<PAGE> 90
FUND SHARE VALUATION
The net asset value per share is calculated at 12 noon (eastern time) for
the Money Market Fund and at 4:00 p.m. (eastern time) for all other 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, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net
asset value per share of each class of shares of the Fund is computed by
dividing the net assets (i.e., the value of the assets less the liabilities)
attributable to such class of shares by the total number of the outstanding
shares of such class. All expenses, including fees paid to the Adviser, BISYS
and BISYS Fund Services, Inc. are accrued daily and taken into account for the
purpose of determining the net asset value.
The Money Market 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.
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 or at the direction of 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 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.
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.
35
<PAGE> 91
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 4:00 p.m.
(eastern time) (1:30 p.m. (eastern time) in the case of the Money Market Fund),
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.
Please call 1-800-737-3676 for wiring instructions. A completed application
must be overnighted to the Fund in advance of the wire to Performance Funds
Trust c/o BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, OH 43219-8021.
Notification must be given to the Fund at 1-800-737-3676 prior to 4:00 p.m.
Eastern Standard Time, of the wire date.
Payments to open new accounts should be sent to Performance Funds Trust,
P.O. Box 182484, Columbus, OH 43218-2484, together with a completed application.
Where purchases are made by check in any Fund redemption proceeds will not
be available until payment of the purchase has been collected, which may take up
to fifteen days.
No third party or foreign checks are accepted.
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. For more information on IRAs, call the Fund toll free at
1-800-737-3676.
36
<PAGE> 92
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. 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 the Funds. 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. No signature
guarantee is required.
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. Telephone redemption and telephone exchanges will be suspended for a
period of 10 days following a telephonic address change. During periods of
significant economic or market change, telephone exchanges may be difficult to
complete. If you are unable to contact the Fund by telephone, you may also mail
the exchange request to the Fund at the address listed under "Purchase of Fund
Shares."
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. Generally, gain or loss is not expected to be realized on a
redemption of shares of the Money Market Fund 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 Funds
will make redemption proceeds available immediately upon clearance of the
purchase check 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.
37
<PAGE> 93
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. 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
Performance Funds Trust, P.O. Box 182454, Columbus, Ohio 43218-2487. 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, and (iv) the signatures of all
registered owners. A signature guarantee will be required when redemptions
proceeds are to be sent to an address other than the registered address.
If you elect to receive distributions in cash and checks that (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically and your future dividend and
capital gains distributions will be reinvested in the Fund at the per share net
asset value determined as of the date of payment of the distribution. In
addition, any undeliverable checks or checks that remain uncashed for six months
will be cancelled and will be reinvested in the Fund at the per share net asset
value determined as of the date of cancellation.
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. Telephone redemption and telephone exchanges will be suspended for
a period of 10 days following a telephonic address change.
38
<PAGE> 94
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.
Check Writing. A check redemption ($100 minimum, no maximum) feature is
available with respect to the Money Market 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 "Checkwriting" 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.
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.
The Fund reserves the right to pay for redeemed shares within seven days
after receiving your redemption order if, in the judgment of the Adviser, an
earlier payment could adversely affect the Fund.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund has elected to qualify, has qualified (in the case of the Small
Cap Fund, intends to qualify) 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
39
<PAGE> 95
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). The Money Market Fund will declare dividends of such income daily and
pay those dividends monthly. Investment company taxable income will be
distributed by the Small Cap Fund, Mid Cap Fund and Large Cap 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.
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 Money Market Fund, 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.
In the case of shares of the Government Income Funds and the Equity 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
40
<PAGE> 96
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 Funds
will qualify for the dividends-received deduction available to corporations. The
dividends paid by the Money Market Fund and 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 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, six 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.
Shares of the Fund's Institutional Class and Consumer Service Class are
offered at net asset value without a sales load. Shares of the Consumer Services
Class of the Fund are also offered at net asset value without a sales load but
may be subject to 12b-1 fees to which the Institutional Class is not. 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 (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
(iii) correspondents pursuant to a written agreement; and (iv) persons who make
an initial investment of one million dollars or more or who, at the time of
purchase,
41
<PAGE> 97
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.
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 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 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 Money Market 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 Money Market 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.
42
<PAGE> 98
Quotations of "yield" for all other 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 all Funds except the Money
Market 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 S&P Small Cap 600 Index, S&P MidCap Index, Standard &
Poor's 500 Stock Index, or the Dow Jones Industrial Average for the Large Cap
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 BISYS Fund Services, Inc. as transfer agent. BISYS Fund
Services, Inc. provides personnel necessary to perform shareholder servicing
functions. Pursuant to a Transfer Agency Agreement between the Trust and BISYS
Fund Services, Inc., BISYS Fund Services, Inc. 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
BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219.
General and Account Information: (800) PERFORM (737-3676).
43
<PAGE> 99
(This Page Intentionally Left Blank)
<PAGE> 100
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> 101
(This Page Intentionally Left Blank)
<PAGE> 102
[PERFORMANCE FUNDS LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
ADMINISTRATOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
DISTRIBUTOR
Performance Funds Distributor, Inc.
3435 Stelzer Road
Columbus, OH 43219
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
PFAFCC0997
[PERFORMANCE FUNDS LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MONEY MARKET FUND
THE SHORT TERM
GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM
GOVERNMENT INCOME FUND
THE SMALL CAP FUND
THE MID CAP GROWTH FUND
THE LARGE CAP EQUITY FUND
CONSUMER SERVICE CLASS
PROSPECTUS
[TRUSTMARK LOGO]
National Bank
Performance Funds'
Investment Adviser
SEPTEMBER 26, 1997
<PAGE> 103
PERFORMANCE FUNDS TRUST
3435 STELZER ROAD, COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- ADVISER
BISYS FUND SERVICES -- ADMINISTRATOR
PERFORMANCE FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
This Prospectus describes two investment funds (the "Funds") managed by
Trustmark National Bank. The Funds are:
THE MID CAP GROWTH FUND
THE LARGE CAP EQUITY FUND (FORMERLY, 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 AND MAY INVOLVE INVESTMENT RISK, INCLUDING LOSS OF PRINCIPAL.
A Statement of Additional Information, dated September 26, 1997 (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 26, 1997
<PAGE> 104
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses......................................................................... 3
Fee Table............................................................................. 3
Financial Highlights.................................................................. 4
Prospectus Summary.................................................................... 8
The Investment Policies and Practices of the Funds.................................... 10
Description of Securities and Investment Practices.................................... 12
Investment Restrictions............................................................... 19
Management of the Funds............................................................... 20
Fund Share Valuation.................................................................. 23
Purchase of Fund Shares............................................................... 23
Individual Retirement Accounts........................................................ 24
Exchange Privileges................................................................... 25
Redemption of Fund Shares............................................................. 26
Dividends, Distributions and Federal Income Tax....................................... 28
Other Information..................................................................... 29
</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> 105
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, 1997 (except for each Fund, the reduction of
voluntary waiver of advisory fees). 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
MID CAP LARGE CAP
GROWTH FUND EQUITY FUND*
----------- ------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a percentage price)...................... none none
Maximum Sales Load Imposed on Reinvested Dividends................................... none none
Deferred Sales Load.................................................................. none none
Redemption Fees...................................................................... none none
Exchange Fees........................................................................ none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets annualized)
Investment Advisory Fees............................................................. 0.75% 0.60%
12b-1 Fees(2)........................................................................ 0.25% 0.25%
Other Expenses(3).................................................................... 0.34% 0.31%
--- ---
Total Fund Operating Expenses(4)..................................................... 1.34% 1.16%
============ ============
</TABLE>
- ---------------
* Formerly, the Equity Fund.
(1) 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 Performance Funds Distributor, Inc. 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 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. Payment of
distribution fees currently is not expected to exceed 0.25%.
(3) Each Fund has adopted, but not implemented, a Shareholder Servicing Plan
under which 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.
(4) Absent reduction in 12b-1 distribution fees, "Total Operating Expenses" as a
percentage of average daily net assets would be 1.44% for the Mid Cap Fund
and 1.26% for the Large Cap Equity Fund.
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
MID CAP LARGE CAP
PORTFOLIO GROWTH FUND EQUITY FUND
- -------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
1 year................................................................................ $ 14 $ 12
3 years............................................................................... $ 42 $ 37
5 years............................................................................... $ 73 $ 64
10 years.............................................................................. $ 161 $ 141
</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> 106
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,
1997. 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' 1997 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.
For a share of beneficial interest
outstanding for each period:
<TABLE>
<CAPTION>
MID CAP GROWTH FUND
-----------------------------------------------------
CONSUMER SERVICE CLASS
-----------------------------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED FOR THE PERIOD
MAY 31, MAY 31, MAY 31, ENDED MAY 31,
1997 1996 1995 1994*
------- ------- ------- -------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 14.05 $ 11.11 $ 9.60 $ 10.00
------- ------- ------- ----------
Income from Investment Operations:
Net investment income....................... 0.09 0.10 0.11 0.03
Net gain/(loss) on securities (both realized
and unrealized).......................... 3.00 3.44 1.51 (0.40)
------- ------- ------- ----------
Total from Investment Operations............ 3.09 3.54 1.62 (0.37)
------- ------- ------- ----------
Less Distributions:
Dividends from net investment income........ (0.09) (0.10) (0.11) (0.03)
Distributions from net realized gains....... (0.33) (0.50) -- --
------- ------- ------- ----------
Total Distributions......................... (0.42) (0.60) (0.11) (0.03)
------- ------- ------- ----------
Net Asset Value, End of Period................ $ 16.72 $ 14.05 $ 11.11 $ 9.60
======= ======= ======= ===============
Total Return.................................. 22.33% 32.76% 17.06% (3.70)%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands).... $ 5,911 $ 1,437 $ 277 $ 35
Ratio of Expenses to Average Net Assets..... 1.19% 1.23% 1.21% 1.18%**
Effect of waivers/reimbursements on expense
ratio.................................... 0.11% 0.16% 0.26% 1.00%**
Ratio of Net Investment Income to Average
Net Assets............................... 0.65% 0.79% 1.12% 1.35%**
Portfolio Turnover Rate..................... 7.72% 28.00% 20.39% 5.88%
Average Commission Rate(a).................. $0.0721 $0.1070 -- --
</TABLE>
- ---------------
* Fund commenced operations on February 24, 1994.
** 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> 107
For a share of beneficial interest
outstanding for each period:
<TABLE>
<CAPTION>
LARGE CAP EQUITY FUND*
-------------------------------------------------------
CONSUMER SERVICE CLASS
-------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1995 1994 1993**
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $ 15.29 $ 12.51 $ 11.33 $ 11.21 $ 10.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income.................. 0.20 0.19 0.22 0.20 0.21
Net gain on securities (both realized
and unrealized)..................... 4.13 3.29 1.42 0.12 1.21
------- ------- ------- ------- -------
Total from Investment Operations....... 4.33 3.48 1.64 0.32 1.42
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income... (0.21) (0.19) (0.21) (0.20) (0.21)
Distributions from net realized
gains............................... (0.25) (0.51) (0.25) -- --
------- ------- ------- ------- -------
Total Distributions.................... (0.46) (0.70) (0.46) (0.20) (0.21)
------- ------- ------- ------- -------
Net Asset Value, End of Period........... $ 19.16 $ 15.29 $ 12.51 $ 11.33 $ 11.21
======= ======= ======= ======= =======
Total Return............................. 28.75% 28.42% 15.10% 2.85% 14.37%
Ratios/Supplemental Data:
Net Assets, End of Period (in
thousands).......................... $19,531 $ 9,831 $ 5,234 $ 5,287 $ 3,348
Ratios of Expenses to Average Net
Assets.............................. 1.06% 1.06% 1.04% 1.08% 0.94%
Effect of waivers/reimbursements on
expense ratio....................... 0.08% 0.10% 0.13% 0.15% 0.20%
Ratio of Net Investment Income to
Average Net Assets.................. 1.18% 1.40% 1.90% 1.74% 2.09%
Portfolio Turnover Rate................ 1.41% 6.00% 58.08% 27.11% 2.61%
Average Commission Rate(a)............. $0.0899 $0.1067 -- -- --
</TABLE>
- ---------------
* Formerly, the Equity Fund.
** 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> 108
INDEX COMPARISONS
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 unmanaged industry index since the commencement of each Fund's
operations. The graphs assume reinvestment dividends and distributions at net
asset value. The index returns are based solely on market returns without
deduction of fees or transaction costs.
MID CAP GROWTH FUND
The investment performance of the Consumer Service Class of shares of the
Mid Cap Growth Fund is compared to the Standard & Poors Mid Cap 400 Index in the
following chart from February 24, 1994 (commencement of operations) through May
31, 1994 and for the fiscal years ended May 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
Measurement Period Redemption Value
(Fiscal Year Covered) ($10,000 S&P MidCap 400
<S> <C> <C>
May 31, 9630 9610
Aug. 31, 10090 10096
Nov. 30, 9548 9565
Feb. 28, 10478 10264
May 31, 11270 10909
Aug. 31, 12635 12167
Nov. 30, 13129 12671
Feb. 29, 13787 13258
May 31, 14962 14014
Aug. 31, 14842 13612
Nov. 30, 16378 15050
Feb. 28, 17228 15504
May 31, 18303 16559
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
May 31, Feb. 28, Feb. 29,
1994 Aug. 31, Nov. 30, 1995 May 31, Aug. 31, Nov. 30, 1996 May 31, Aug. 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 14,842
- ---------------------------------------------------------------------------------------------------------------------------
S&P MidCap 400 9,610 10,096 9,565 10,264 10,909 12,167 12,671 13,258 14,014 13,612
<CAPTION>
Feb. 28,
Nov. 30, 1997 May 31,
- ------------------------------
Redemption Value ($10,000
Investment) Since Inception 16,378 17,228 18,303
- ------------------------------
S&P MidCap 400 15,050 15,504 16,559
</TABLE>
- --------------------------------------------------------------------------------
Without fee waiver, performance would have been lower. Past performance does not
predict future results.
- ------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/97
- --------------------------------
1 YEAR SINCE INCEPTION
- --------------------------------
<S> <C>
22.33% 20.33%
- --------------------------------
</TABLE>
6
<PAGE> 109
LARGE CAP EQUITY FUND
The investment performance of the Consumer Service Class of the Large Cap
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, May 31, 1996
and May 31, 1997.
<TABLE>
<CAPTION>
Measurement Period Redemption Value
(Fiscal Year Covered) ($10,000 S&P
<S> <C> <C>
Aug. 31, 9979 10044
Nov. 30, 10695 10543
Feb. 28, 10997 10908
May 31, 11437 11159
Aug. 31, 11996 11569
Nov. 30, 12036 11605
Feb. 28, 12123 11815
May 31, 11763 11633
Aug. 31, 12244 12200
Nov. 30, 11582 11726
Feb. 28, 12468 12683
May 31, 13535 13978
Aug. 30, 14236 14813
Nov. 30, 15554 16057
Feb. 29, 16664 17080
May 31, 17382 17949
Aug. 31, 17234 17586
Nov. 30, 20092 20529
Feb. 28, 20811 21546
May 31, 22378 23234
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
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 12,469
- ---------------------------------------------------------------------------------------------------------------------------
S&P 500 10,044 10,543 10,908 11,159 11,569 11,605 11,815 11,633 12,200 11,726 12,683
<CAPTION>
Feb. 29, Feb. 28,
May 31, Aug. 31, Nov. 30, 1996 May 31, Aug. 31, Nov. 30, 1997 May 31,
- ---------------------
Redemption
Value ($10,000
Investment)
Since Inception 13,535 14,236 15,554 16,664 17,382 17,234 20,092 20,811 22,378
- ---------------------
S&P 500 13,978 14,813 16,057 17,080 17,949 17,586 20,529 21,546 23,234
</TABLE>
- --------------------------------------------------------------------------------
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
- ------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/97
- --------------------------------
SINCE INCEPTION
1 YEAR (6/1/92)
- --------------------------------
<S> <C>
28.75% 17.48%
- --------------------------------
</TABLE>
7
<PAGE> 110
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The Mid Cap Growth Fund (the "Mid Cap Fund") and the Large Cap Equity Fund
are two separate investment funds managed by Trustmark National Bank.
The investment objective of the Funds, and certain of their investment
restrictions described herein and in the SAI are fundamental and may not be
changed without shareholder approval.
THE MID CAP FUND
The investment objective of the Mid Cap Fund 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 at the time of purchase), including common stocks listed on the S&P
MidCap Index (collectively, "Mid Cap Common Stocks") which the Fund's 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 "The Investment Policies and Practices of the Funds" herein, and may use
various special investment techniques, under normal market conditions the Fund
will invest at least 65% of its total assets in Mid Cap Common Stocks. Under
normal market conditions, up to 35% of the Fund's total assets may be invested
in options, warrants, preferred stock, foreign securities and money market
instruments, investment grade debt securities and securities convertible into
common or preferred stock. See "The Investment Policies and Practices of the
Funds." There is no assurance that the Fund will achieve its investment
objective.
THE LARGE CAP EQUITY FUND
The investment objective of the Large Cap Equity Fund is to provide
investors with long-term capital appreciation. The Large Cap Equity Fund pursues
this objective by investing primarily (at least 65% of total assets) in common
stocks of large, well established U.S. companies with market capitalization
exceeding $1 billion at the time of purchase. The Fund may also invest in
smaller capitalization companies. It is anticipated that the Fund will invest
primarily in companies found in the S&P 500 Index. Income generation is a
secondary consideration for the Large Cap Equity Fund. However, the Large Cap
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.
Under normal market conditions, up to 35% of the Fund's total assets may be
invested in preferred stock, investment grade debt securities, warrants,
securities convertible into common or preferred stock, money market instruments
and stock futures contracts.
RISK FACTORS
There is no assurance that the Funds will achieve their investment
objectives. Each Fund's net asset value is expected to fluctuate, reflecting
fluctuations in the market values of its portfolio securities. Because the Funds
invest primarily in common stocks, each Fund 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.
8
<PAGE> 111
Small and mid size company stocks in which the Mid Cap Fund will, and the
Large Cap 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 and mid size company stocks are the less certain growth
prospects of smaller firms, a low degree of liquidity in the markets for small
and mid size company stocks, and the small to negligible dividends generally
paid by small and mid size companies as compared to a larger cap company.
Besides exhibiting greater volatility, small and mid size company stocks have at
times fluctuated in value independently of the broad stock market.
In addition, small and mid size companies in which the Funds may invest,
may have limited product lines, markets or financial resources and may lack
management depth. The liquidity and marketability of such companies may be
limited and may be subject to more abrupt or erratic price movements than
securities of larger, more established companies or the market averages in
general. To possibly compensate for this risk exposure, the investor will have
an opportunity to participate, through a residual ownership interest, in
companies with potentially higher growth rates, versus those found in
larger-capitalization issues, and by locating value perhaps overlooked by
investment analysts and other investors. The Funds may invest in options,
warrants, investment grade convertible securities, the Large Cap Equity Fund may
enter into futures transactions and the Mid Cap Fund may engage in short sales.
Accordingly, an investment in the Mid Cap Fund may not be suitable for all
investors.
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 acts as investment adviser to the Funds.
Trustmark's Trust Department, has assets in excess of $1.5 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.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services 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"), an affiliate of BISYS Fund Services, 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 without a sales load. 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.
9
<PAGE> 112
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, if any, 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 Statement
of Additional Information (the "SAI") contains specific investment restrictions
which govern the Funds' investments. Except as otherwise noted, 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.
Mid Cap Fund. The investment objective of the Mid Cap Fund is to seek to
achieve growth of capital by attempting to outperform the S&P MidCap Index. The
Mid Cap Fund will purchase common stocks of mid-sized companies (companies with
market capitalization ranging from $200 million to $5.2 billion at the time of
purchase), 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.
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 65% of the Fund's
total assets), the Fund may invest up to 35% of its assets in other types of
investment grade fixed income securities (primarily preferred stock, debt
securities and securities convertible into common or preferred stock), mortgage
related and asset backed securities, equity securities of large capitalized
companies, foreign securities and ADRs and in options and warrants, as
determined by the Adviser (see "Description of Securities and Investment
Practices"). When warranted by business or financial conditions, or when, in the
opinion of the Adviser, it is in the best interests of the Fund, the Fund may
invest temporarily or for defensive purposes without limitation in equity
securities of larger capitalized companies 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 S&P or "P-1" or better by
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
10
<PAGE> 113
$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 as 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; (5) proprietary analysis
of earnings momentum; (6) relative valuation and relative earnings momentum; and
(7) composite rank.
Under normal market conditions, the Fund will invest at least 65% 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.
The Large Cap Equity Fund. The investment objective of the Large Cap
Equity Fund is to provide investors with long-term capital appreciation. In
selecting equity investments (which include common stocks of U.S. companies and
ADRs of foreign companies) for the Large Cap 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 investments for the Large Cap
Equity Fund such as preferred stocks, high grade securities convertible into
common stocks and warrants. The Large Cap 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 Large Cap Equity Fund will invest at least 65% of its total assets
in common stocks or securities convertible into common stocks of large, well
established companies with market capitalization in excess of $1 billion at the
time of purchase ("Large Cap Common Stocks"). Under normal conditions, up to 35%
of the Fund's total assets may be invested in investment grade fixed income
securities, mortgage related and asset backed securities, U.S. Government
securities, foreign securities and options and futures transactions. When
warranted by business or financial conditions, or when in the opinion of the
Adviser it is in the best interests of the Fund, the Fund may, for temporary
defensive purposes, 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
11
<PAGE> 114
bonds, debentures, notes and other similar corporate debt instruments) which are
rated A or better by at least two rating organizations.
The following describes in greater detail different types of securities and
investment practices used by the Funds.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities (Both Funds). The Funds may invest in all types
of securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities or instrumentalities, including U.S.
Treasury obligations with varying interest rates, maturities and dates of
issuance, such as U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (generally maturities of one to ten years) and U.S. Treasury
bonds (generally maturities of greater than ten years) and obligations issued or
guaranteed by U.S. Government agencies or which are supported by the full faith
and credit pledge of the U.S. Government. In the case of U.S. Government
obligations which are not backed by the full faith and credit pledge of the
United States, the Fund must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States in the event the agency or instrumentality is
unable to meet its commitments. Such securities may also include securities for
which the payment of principal and interest is backed by an irrevocable letter
of credit issued by the U.S. Government, its agencies, authorities or
instrumentalities and participations in loans made to foreign governments or
their agencies that are substantially guaranteed by the U.S. Government (such as
Government Trust Certificates). See "Mortgage-Related Securities" in the SAI and
"Asset-Backed Securities" below.
Bank Obligations (Both 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 (Both 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 (Both Funds). The Funds may invest in U.S.
dollar-denominated obligations issued or guaranteed by U.S. corporations or U.S.
commercial banks, U.S. dollar denominated obligations of foreign issuers,
including those described below under "Foreign Securities and American
Depository Receipts" described below. Such debt obligations include, among
others, bonds, notes, debentures, commercial paper and variable rate demand
notes. Bank obligations include, but are not limited to certificates of deposit,
bankers' acceptances, and fixed time deposits. The Investment Adviser, in
choosing corporate debt securities on behalf of a Fund will evaluate each issuer
based on (i) general economic and financial conditions; (ii) the specific
issuer's (a) business and management, (b) cash flow, (c) earnings coverage of
interest and dividends, (d) ability to operate under adverse economic
conditions, (e) fair market value of assets, and (f) in the case of foreign
issuers, unique political, economic or social conditions to such issuer's
country; and, (iii) other considerations the Investment Adviser deems
appropriate. Investment in obligations of foreign issuers may present a greater
degree of risk than investment in domestic securities (see "Foreign Securities
and American Depository Receipts" below for more details).
12
<PAGE> 115
Repurchase Agreements (Both 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 (members of
the Federal Reserve System having total assets in excess of $500 million) 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 (Both Funds). 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 (i) in the case of the Mid Cap Fund, one-third of the value of the Fund's
assets and (ii) in the case of the Large Cap Fund, 5% of the Fund's total
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.
American Depository Receipts (Both Funds). Each Fund may invest in
securities represented by ADRs. 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. Each 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. The Funds will
not invest more than 20% of their total assets in ADRs.
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 economics may
13
<PAGE> 116
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.
When Issued Delayed, Delivery Securities and Forward Commitments (Both
Funds). The Funds 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 Funds will only enter into a forward commitment with the intention of
actually acquiring the security, the Funds 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 Funds prior to the
settlement date. The Funds 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.
Options on Common Stocks and Stock Indices (Both Funds). The 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 Fund owns or has the right to
acquire the optioned securities and the Fund maintains, in a segregated account
with its custodian, liquid assets with a value sufficient to meet its
obligations under the call, or if the Fund owns an offsetting call option. When
the 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 Fund forgoes any gain from an increase in the market price of the
underlying security over the exercise price.
The 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 Fund will have lost
the premium and this will have the effect of reducing the Fund's return.
The 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 Fund has written lapses unexercised,
because the Fund would retain the premium.
The Funds will not purchase options if, as a result, the aggregate cost of
all outstanding options exceeds 10% of the Fund's total assets. There can be no
assurance that a liquid secondary market will exist at any given time for a
particular option.
Stock Index Futures Contracts (Large Cap Equity Fund only). The 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
14
<PAGE> 117
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 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 Fund is unable to invest its cash (or cash equivalents) in
stock 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 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 Fund may buy or sell stock index futures contracts to close out existing
futures positions.
Put Options on Stock Index Futures Contracts (Large Cap Equity Fund only).
The 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
the 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 Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed. The 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 Fund
pursuant to such contracts. 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 use of stock index futures contracts and put options on stock index
futures contracts may impair the liquidity of the Fund's assets and the ability
to operate as an open-end investment company. The Adviser will monitor the
Fund's use of such techniques and report to the Board of Trustees concerning
their impact, if any, on liquidity and the Fund's ability to meet redemptions.
For additional information regarding options and futures contracts see,
"Additional Permitted Investment Activities" in the SAI.
Illiquid Investments (Both Funds). It is the policy of each Fund that
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.
15
<PAGE> 118
Illiquid securities include (a) securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market, (b) participation interests in loans that are not subject to
puts and (c) repurchase agreements not terminable within seven days. See
"Repurchase Agreements" above.
Securities that have legal or contractual restrictions on resale but have a
readily available market are not deemed illiquid for purposes of this
limitation. Consequently, investments in restricted securities eligible for
resale pursuant to Rule 144A of the Securities Act of 1993 which have been
determined to be liquid by the Fund's Board of Trustees based upon the trading
markets for the securities will not be included for purposes of this limitation.
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 net assets in illiquid
securities. A determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination 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 net 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.
Warrants and Rights (Both Funds). The Funds may invest in warrants or
rights of securities of 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
Funds. 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 Funds, the warrant will expire and the Fund will
suffer a loss on the price it paid for the warrant. The Funds 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.
Investment Company Securities (Both Funds). Each Fund may invest up to 10%
of its total assets in securities issued by other investment companies. Such
securities will be acquired by the Funds within the limits prescribed by the
Investment Company Act of 1940, as amended ("1940 Act"), which include a
prohibition against a Fund investing more than 10% of the value of its total
assets in such securities. Investors should recognize that the purchase of
securities of other investment companies results in duplication of expenses such
that investors indirectly bear a proportionate share of the expenses of such
companies including operating costs, and administrative fees.
Convertible Securities (Both Funds). 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
16
<PAGE> 119
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 (Both Funds). Subject to the Mid Cap Fund's
policy of investing at least 65% of its total assets in Mid Cap Common Stocks
and the Large Cap Equity Fund's policy of investing at least 65% of its total
assets in Large Cap Common Stocks, the Funds may invest without limit in
securities listed on the S&P MidCap Index and the S&P 500 Index, respectively,
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 Funds may sustain losses. For further information on such investments, see
"Description of the Fund's Investment Securities" in the SAI.
Investments in Small, Unseasoned Companies (Both Funds). The Funds may
invest in small, less well known companies. Some of these companies may have
limited operating history and limited liquidity. To lessen the liquidity
concerns, the Funds will not invest in illiquid, nonmarketable securities of
small, unseasoned companies. The Fund will not invest more than 5% of its total
net assets in small, unseasoned companies.
Short Sales (Mid Cap Fund only). 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
17
<PAGE> 120
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 of 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.
Reverse Repurchase Agreements (Mid Cap Fund only). The Fund may borrow
funds for temporary purposes by entering into reverse repurchase agreements in
accordance with the investment restrictions described below. Pursuant to such
agreements, the Fund would sell portfolio securities to financial institutions
such as banks and broker-dealers, and agree to repurchase them at a mutually
agreed upon date and price. The Fund intends to enter into reverse repurchase
agreements only to avoid selling securities during market conditions deemed
unfavorable by the Adviser to meet redemptions. At the time the Fund enters into
a reverse repurchase agreement, it will place in a segregated custodial account
liquid assets such as are consistent with the Fund's investment objective having
a value not less than 100% of the repurchase price (including accrued interest),
and will subsequently monitor the account to ensure that such required value is
maintained. Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Fund may decline below the price at which the Fund
is obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by an investment company under the 1940 Act.
Asset-Backed Securities (Both Funds). The Funds may also invest in
asset-backed securities (unrelated to mortgage-backed securities discussed under
"U.S. Government Securities") such as Certificates for Automobile Receivables
("CARS"). CARS 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 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 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 under "Mortgage-Related Securities"
in the SAI. Either the PSA model, the ABS model or other similar models that are
standard in the
18
<PAGE> 121
industry will be used by a Fund in calculating maturity for purposes of its
investment in asset-backed securities.
Portfolio Turnover
Purchases and sales are made for the Funds whenever necessary, in the
Adviser's opinion, to meet each Fund's objectives. Portfolio turnover may
involve the payment by the Funds 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 Funds expect to satisfy
the 30% income test. The Mid Cap Fund and Large Cap Equity Fund do not
anticipate that the portfolio turnover rate will exceed 200% and 100%
respectively.
INVESTMENT RESTRICTIONS
(Both Funds, except as indicated)
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 classification of each Fund as a diversified investment company is a
fundamental policy of each 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 outstanding shares" of each Fund means,
respectively, the vote of 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. In addition to other restrictions listed in the SAI, the
Funds may not (except when specified):
(1) borrow money or pledge or mortgage its assets, except that each Fund
may borrow from banks and the Mid Cap Fund may engage in reverse repurchase
agreements. The Large Cap Equity 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). The Mid Cap Fund may
borrow from banks for extraordinary or emergency purposes and engage in reverse
repurchase agreements provided that in the aggregate such borrowings 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. The Mid Cap Fund may not purchase securities while borrowings exceed 5%
of its assets.
(2) make loans, except loans of portfolio securities and except that a Fund
may enter into repurchase agreements with respect to its portfolio securities.
(3) 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.
Except as indicated otherwise, 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
19
<PAGE> 122
holders of a majority of the applicable Fund's outstanding voting securities as
described under "Other Information -- Voting."
It is the intention of the Funds, unless otherwise indicated, that with
respect to the Funds' policies that are the result of the application of law,
the Funds will take advantage of the flexibility provided by rules or
interpretations of the SEC currently in existence or promulgated in the future
or changes to such laws.
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 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 $1.5 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. Douglas H. Ralston, Vice
President and Trust Officer with over 11 years investment experience joined
Trustmark 1991. Prior to joining Trustmark, Mr. Ralston was employed by Third
National Bank of Nashville. Mr. Ralston is also responsible for the day-to-day
management of the Fund. Charles H. Windham, Jr., a Vice President of Trustmark
since 1970, is responsible for the day-to-day management of the Large Cap Equity
Fund's portfolio. Zachariah Wasson, CFA, a Senior Vice President of Trustmark,
serves as Chief Investment Officer and has overall supervisory responsibility.
Mr. Wasson joined Trustmark in 1990.
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: Mid
Cap Fund, 0.75%; and the Large Cap 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 Distributor and Administrator. BISYS Fund Services Limited Partnership
d/b/a BISYS Fund Services ("BISYS") acts as the Administrator of the Funds. PFD
acts as the Distributor of the Funds' shares. BISYS is a subsidiary of BISYS
Group, Inc. which is headquartered in Little Falls, N.J., supports more than
20
<PAGE> 123
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 Group, Inc. trades on NASDAQ under the symbol BISYS.
Administrative Services. The Funds have entered into an Administration
Agreement with BISYS pursuant to which BISYS 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' 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, BISYS 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 Transfer Agency Agreement between the Trust and BISYS Fund
Services, Inc., an affiliate of BISYS, BISYS Fund Services, Inc. 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 BISYS Fund Services, Inc., BISYS Fund
Services, Inc. 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.
DISTRIBUTION PLAN AND AGREEMENT
The Board of Trustees of the Trust has adopted a Distribution Plan and
related Shareholder Servicing Agreement (the "Plan") for the Consumer Service
Class shares pursuant to Rule 12b-1 of the 1940 Act, after having concluded that
there is a reasonable likelihood that the Plan will benefit the Funds and the
Consumer Service Class shareholders. The Plan provides with respect to the
Consumer Service Class shares only for a monthly payment by the Fund to
reimburse the Distributor in such amounts that they may request for expenses
such as the printing and distribution of prospectuses sent to prospective
investors, the preparation, printing and distribution of sales literature and
expenses associated with media advertisements and telephone services and other
direct and indirect distribution-related expenses, including the payment of a
monthly fee to broker-dealers for rendering distribution-related asset
introduction and asset retention services. The Funds may also make payments to
other broker-dealers or financial institutions for their assistance in
distributing shares of the Funds and otherwise promoting the sale of the Funds
shares. The total monthly payment is based on each Fund's Consumer Service Class
shares average daily net assets value during the preceding month and is
calculated at an annual rate not to exceed 0.35%.
The Plan provides for the Distributor to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plan and the purpose for which such expenditures were made. The Plan may
not be amended to increase materially the amount spent for distribution expenses
without approval by a majority of the Fund's outstanding shares subject to the
Plan and approval of a majority of the non-interested Trustees. Distribution
expenses incurred in one year will not be carried forward into and reimbursed in
the next year for actual expenses incurred in the previous year.
21
<PAGE> 124
The Distributor, at its expense, will provide additional compensation to
dealers in connection with sales of Shares of the Funds. Such compensation will
include financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding one or more Funds of the Trust, and/or other deal-sponsored
special events. In some instances, this compensation will be made available only
to certain dealers whose representatives have sold a significant amount of such
Shares. Compensation will include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to location within outside the
United States for meetings or seminars of a business nature. Compensation will
also include the following types of non-cash compensation offered through sales
contests: (1) vacation trips, including the provision of travel arrangements and
lodging at luxury resorts at an exotic location, (2) tickets for entertainment
events (such as concerts, cruises and sporting events) and (3) merchandise (such
as clothing, trophies, clocks and pens). Dealers may not use sales of a Fund's
Shares to qualify for this compensation to the extent such may be prohibited by
the laws of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. None of the aforementioned compensation
is paid for by any Fund or its Shareholders.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than BISYS) 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.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by BISYS, BISYS Fund Services, Inc. or the Adviser. The
costs borne by the Funds include legal and accounting expenses;
22
<PAGE> 125
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 4:00 p.m. (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, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net
asset value per share of each class of shares of the Fund is computed by
dividing the net assets (i.e., the value of the assets less the liabilities)
attributable to such class of shares by the total number of the outstanding
shares of such class. All expenses, including fees paid to the Adviser, BISYS
and BISYS Fund Services, Inc. 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 or at the direction of the Board of Trustees.
23
<PAGE> 126
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.
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 Accounts.
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 4:00 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.
Please call 1-800-737-3676 for wiring instructions. A completed application
must be overnighted to the Fund in advance of the wire to Performance Funds
Trust c/o BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, OH 43219-8021.
Notification must be given to the Fund at 1-800-737-3676 prior to 4:00 p.m.
Eastern Standard Time, of the wire date.
Payments to open new accounts should be sent to Performance Funds Trust,
P.O. Box 182484, Columbus, OH 43218-2484, together with a completed application.
Where purchases are made by check in any Fund redemption proceeds will not
be available until payment of the purchase has been collected, which may take up
to fifteen days.
No third party or foreign checks are accepted.
24
<PAGE> 127
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. For more information on IRAs, 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.
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 the Funds. 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. No signature guarantee is required.
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. Telephone
25
<PAGE> 128
redemption and telephone exchanges will be suspended for a period of 10 days
following a telephonic address change.
During periods of significant economic or market change, telephone
exchanges may be difficult to complete. If you are unable to contact the Fund by
telephone, you may also mail the exchange request to the Fund at the address
listed under "Regular Redemption."
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 Funds
will make redemption proceeds available immediately upon clearance of the
purchase check 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. 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, and (iv) the signatures of all
26
<PAGE> 129
registered owners. A signature guarantee will be required when redemptions
proceeds are to be sent to an address other than the registered address.
If you elect to receive distributions in cash and checks that (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically and your future dividend and
capital gains distributions will be reinvested in the Fund at the per share net
asset value determined as of the date of payment of the distribution. In
addition, any undeliverable checks or checks that remain uncashed for six months
will be cancelled and will be reinvested in the Fund at the per share net asset
value determined as of the date of cancellation.
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. Telephone redemption and telephone exchanges will be suspended for
a period of 10 days following a telephonic address change.
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.
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
27
<PAGE> 130
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. Each Fund reserves the right to pay for redeemed
shares within seven days after receiving your redemption order if, in the
judgment of the Adviser, an earlier payment could adversely affect the Fund.
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 Mid Cap
Fund and Large Cap Equity Fund 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.
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.
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 each 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.
28
<PAGE> 131
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 each Fund will
qualify for the dividends-received deduction available to corporations. Pending
tax law proposals may affect the dividends-received deduction.
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, two 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.
Shares of the Fund's Institutional Class and Consumer Service Class are
offered at net asset value without a sales load. Shares of the Consumer Services
Class of the Fund are also offered at net asset value without a sales load but
may be subject to 12b-1 fees to which the Institutional Class is not. 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 (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
(iii) correspondents pursuant to a written agreement; and
29
<PAGE> 132
(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.
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 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 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 the Funds 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
30
<PAGE> 133
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 S&P MidCap Index, Standard & Poor's 500 Stock Index, the
Dow Jones Industrial Average 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 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 BISYS Fund Services, Inc. as transfer agent. BISYS Fund
Services, Inc. provides personnel necessary to perform shareholder servicing
functions. Pursuant to a Transfer Agency Agreement between the Trust and BISYS
Fund Services, Inc., BISYS Fund Services, Inc. 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
BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219.
General and Account Information: (800) PERFORM (737-3676).
31
<PAGE> 134
[PERFORMANCE FUNDS LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
ADMINISTRATOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
DISTRIBUTOR
Performance Funds Distributor, Inc.
3435 Stelzer Road
Columbus, OH 43219
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
PFMLCC0997
[PERFORMANCE FUNDS LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MID CAP GROWTH FUND
THE LARGE CAP EQUITY FUND
CONSUMER SERVICE CLASS
PROSPECTUS
[TRUSTMARK LOGO]
National Bank
Performance Funds'
Investment Adviser
SEPTEMBER 26, 1997
<PAGE> 135
PERFORMANCE FUNDS TRUST
3435 STELZER ROAD, COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION:
(800) PERFORM (737-3676)
TRUSTMARK NATIONAL BANK -- ADVISER
BISYS FUND SERVICES -- ADMINISTRATOR
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 AND
INVOLVE INVESTMENT RISK.
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 26,
1997, 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 26, 1997
<PAGE> 136
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<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................................................................. 10
Management of the Fund.................................................................. 11
Fund Share Valuation.................................................................... 14
Purchase of Fund Shares................................................................. 14
Individual Retirement Accounts.......................................................... 15
Exchange Privileges..................................................................... 15
Redemption of Fund Shares............................................................... 16
Dividends, Distributions and Federal Income Tax......................................... 18
Other Information....................................................................... 19
</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> 137
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, 1997.
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
(as a percentage of average net assets annualized)
Investment Advisory Fees (after waiver)(2)........................................ 0.15%
12b-1 Fees(3)..................................................................... none
Other Expenses (after waiver)(4).................................................. 0.14%
-----
Total Fund Operating Expenses (after waiver)(5)................................... 0.29%
=====
</TABLE>
(1) 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.
(2) Reflects a voluntary reduction in contractual fee. Had this reduction not
been in effect, the investment advisory fee would have been 0.30%.
(3) 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.
(4) Reflects a voluntary reduction of administration fee of 0.09%. The Fund has
adopted, but not implemented, a Shareholder Servicing Plan under which
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. See "Management of the Fund -- Service Organizations" herein.
(5) Absent the reduction in investment advisory fee and administration fee,
"Total Operating Expenses" would have been 0.53%.
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..................................................... $ 9
5 years..................................................... $16
10 years..................................................... $37
</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.
3
<PAGE> 138
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, 1997.
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 1997 Annual Report to Shareholders. This financial data
should be read in conjunction with the related financial statements and notes
thereto.
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
MONEY MARKET FUND
--------------------------------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED FOR THE PERIOD SEPTEMBER 30, 1993
MAY 31, MAY 31, MAY 31, (COMMENCEMENT OF OPERATIONS)
1997 1996 1995 THROUGH MAY 31, 1994
---------- ---------- ---------- ---------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- -----------
Income from Investment
Operations:
Net investment income....... 0.05 0.05 0.05 0.02
---------- ---------- ---------- -----------
Less Distributions:
Dividends from net
investment income........ (0.05) (0.05) (0.05) (0.02)
---------- ---------- ---------- -----------
Net Asset Value, End of
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========================
Total Return.................. 5.34% 5.60% 5.27% 2.17%
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands)........... $320,732 $366,966 $324,942 $ 139,157
Ratio of Expenses to Average
Net Assets............... 0.25% 0.24% 0.23% 0.15%*
Effect of waivers/
reimbursements on expense
ratio.................... 0.26% 0.30% 0.36% 0.53%*
Ratio of Net Investment
Income to Average Net
Assets................... 5.20% 5.42% 5.27% 3.30%*
</TABLE>
- ---------------
* Annualized
4
<PAGE> 139
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
This Prospectus describes The Money Market 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 $1.5
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 Large Cap Equity Fund since
June of 1992 and the Mid Cap Growth Fund since February of 1994. Trustmark has
also been managing trust monies for over 40 years. See "Fee Table" and
"Management of the Fund" in this Prospectus.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
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"), an affiliate of BISYS, 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 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: (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 (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 (iii) correspondents
pursuant to a written agreement; and (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.
5
<PAGE> 140
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. 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 ("NRSRO"), or, the only NRSRO rating the
security 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
6
<PAGE> 141
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.
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
7
<PAGE> 142
fully collateralized and the collateral will be marked-to-market daily. The Fund
will enter into repurchase agreements only with dealers, domestic banks (members
of Federal Reserve System having total assets in excess of $500 million) 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.
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
8
<PAGE> 143
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.
Asset-Backed Securities. The Fund may also invest in asset-backed
securities (unrelated to mortgage backed securities discussed under "U.S.
Government Securities") such as Certificates for Automobile Receivables
("CARS"). CARS 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 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 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 under "Mortgage-Related Securities"
in the SAI. Either the PSA model, the ABS model or other similar models that are
standard in the industry will be used by a Fund in calculating maturity for
purposes of its investment in asset-backed securities.
Interest Rate Futures. The Fund 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 decline (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,
9
<PAGE> 144
if the 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 the Fund's portfolio
securities declined, the value of the Fund's futures contracts would increase,
thereby protecting the Fund by preventing its 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 Fund will
maintain a segregated account when engaged in transactions regarding interest
rate futures contracts in an amount sufficient to cover the obligations of the
Fund pursuant to such contracts.
Zero Coupon Securities. The Fund may invest in zero coupon securities. A
zero coupon security pays no interest to its holder during its life and is sold
at a discount to its face value at maturity. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically and are more sensitive to changes in interest rates
than non-zero coupon securities having similar maturities and credit qualities.
The Fund may invest in separately traded principal and interest components
of securities guaranteed or issued by the U.S. Treasury if such components are
traded independently. Under the STRIPS (Separate Trading of Registered Interest
and Principal of Securities) program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently.
Currently Federal income tax law requires that a holder of a zero coupon
security report as income each year the portion of the original issue discount
on such security that accrues that year, even though the holder receives no cash
payments of interest during the year.
Investment Company Securities. The Fund may invest up to 10% of its total
assets in securities issued by other investment companies. Such securities will
be acquired by the Fund within the limits prescribed by the Investment Company
Act of 1940, as amended ("1940 Act"), which include a prohibition against the
Fund investing more than 10% of the value of its total assets in such
securities. Investors should recognize that the purchase of securities of other
investment companies results in duplication of expenses such that investors
indirectly bear a proportionate share of the expenses of such companies
including operating costs, and administrative fees.
INVESTMENT RESTRICTIONS
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 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
outstanding shares" means the vote of lesser of (i) 67% or more of the shares of
the Fund present at the meeting, if more than 50% of the
10
<PAGE> 145
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the outstanding shares of the Fund.
(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) The Fund may not invest more than 10% of the current value of its net
assets in repurchase agreements maturing in more than 7 days, in fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than 7 days, or in securities or other assets which the Board of Trustees
determines to be illiquid securities or assets.
The Money Market Fund's diversification tests are measured at the time of
initial purchase, and calculated as specified in Rule 2a-7 of the Investment
Company Act of 1940, which may allow the Fund to exceed the limits specified in
this Prospectus for certain securities subject to guarantees or demand features.
The Fund will be deemed to satisfy the maturity requirements described in this
Prospectus to the extent that the Fund satisfies Rule 2a-7's maturity
requirements.
It is the intention of the Fund, unless otherwise indicated, that with
respect to the Fund's policies that are the result of the application of law
(for example, Rule 2a-7), the Funds will take advantage of the flexibility
provided by rules or interpretations of the SEC currently in existence or
promulgated in the future or changes to such laws.
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 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 $1.5 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 Large Cap
Equity Fund since June 1992 and the Mid Cap Growth Fund since February 1994.
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.
11
<PAGE> 146
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 Distributor and Administrator. BISYS, 3435 Stelzer Road, Columbus,
Ohio 43219, acts as the Administrator of the Fund. Performance Funds
Distributor, Inc., an affiliate of BISYS, acts as the Distributor of the Fund's
shares.
Administrative Services. The Fund has entered into an Administration
Agreement with BISYS pursuant to which BISYS 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, BISYS 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 Transfer Agency Agreement between the Trust and BISYS Fund
Services, Inc. (an affiliate of the Administrator), BISYS Fund Services Inc.
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 BISYS Fund
Services, Inc., BISYS Fund Services, Inc. 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.
BISYS is a subsidiary of BISYS Group Inc. which is headquartered in Little
Falls, N.J., and 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 Group, Inc. trades on NASDAQ under the
symbol BISYS.
Service Organizations. Various banks (including Trustmark), trust
companies, broker-dealers (other than BISYS) 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
12
<PAGE> 147
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 BISYS 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 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
13
<PAGE> 148
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, Martin Luther King Jr.'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 class of shares of the Fund is computed by
dividing the net assets (i.e., the value of the assets less the liabilities)
attributable to such class of shares by the total number of the outstanding
shares of such class. All expenses, including fees paid to the Adviser, BISYS
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. BISYS 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 order. The Fund does not accept third party checks. 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.
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 1:30 pm,
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.
Where purchases are made by check, redemption proceeds will not be
available until payment of the purchase has been collected, which may take up to
15 days.
14
<PAGE> 149
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. Please call
1-800-737-3676 for wiring instructions. A completed application must be
overnighted to the Fund in advance of the wire to Performance Funds Trust c/o
BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, OH 43219-8021.
Notification must be given to the Fund at 1-800-737-3676 prior to 4:00 p.m.
Eastern Standard Time.
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.
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. 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, plus any applicable sales tax.
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 the Fund. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which
15
<PAGE> 150
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. No signature guarantee is required.
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. Telephone redemption
and telephone exchanges will be suspended for a period of 10 days following a
telephone address change. During periods of significant economic or market
change, telephone exchanges may be difficult to complete. If you are unable to
contact the Fund by telephone, you may also mail the request to the Fund at the
address listed under "Purchase of Fund Shares."
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 Fund will
make redemption proceeds available immediately upon clearance of the purchase
check. 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.
16
<PAGE> 151
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's name and account registration from which you are redeeming shares, (ii)
your account number, (iii) the amount to be redeemed, and (iv) the signatures of
all registered owners.
If you elect to receive distributions in cash and checks that (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically and your future dividend and
capital gains distributions will be reinvested in the Fund at the per share net
asset value determined as of the date of payment of the distribution. In
addition, any undeliverable checks or checks that remain uncashed for six months
will be canceled and will be reinvested in the Fund at the per share net asset
value determined as of the date of cancellation. To protect shareholder
accounts, the Funds and its transfer agent from fraud, a signature guarantee
will be required when redemption proceeds are to be sent to an address other
than the registered address.
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 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 provide written confirmation to investors of such transactions.
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. Telephone
redemptions will be suspended for a period of 10 days following a telephone
address change.
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.
17
<PAGE> 152
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.
The Fund reserves the right to pay for redeemed shares within seven days
after receiving your redemption order if, in the judgment of the Adviser, an
earlier payment could adversely affect the Fund.
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
18
<PAGE> 153
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 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
19
<PAGE> 154
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 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"
20
<PAGE> 155
(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.
The Fund retains BISYS Fund Services, Inc. as transfer agent. BYSIS Fund
Services, Inc. provides personnel necessary to perform shareholder servicing
functions. Pursuant to a Transfer Agency Agreement between the Trust and BISYS
Fund Services, Inc., BISYS Fund Services, Inc. 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 BISYS Fund Services, Inc. P.O. Box 182484, Columbus, Ohio, 43218-2484.
General and Account Information: (800) PERFORM (737-3676).
21
<PAGE> 156
[PERFORMANCE FUNDS LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
ADMINISTRATOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
DISTRIBUTOR
Performance Funds Distributor, Inc.
3435 Stelzer Road
Columbus, OH 43219
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
PFMMIC0997
[PERFORMANCE FUNDS LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MONEY MARKET FUND
INSTITUTIONAL CLASS
PROSPECTUS
[TRUSTMARK LOGO]
National Bank
Performance Funds'
Investment Adviser
SEPTEMBER 26, 1997
<PAGE> 157
CENTURA SHARES
3435 STELZER ROAD
COLUMBUS, OH 43219
(800) 44CENTURA (442-3688)
THE PERFORMANCE MONEY MARKET FUND
The Money Market Fund (the "Fund") a series of Performance Funds Trust, is
a registered management investment company. The Fund's objective is to provide
investors with as high a level of income as is consistent with preservation of
capital and liquidity. This prospectus relates exclusively to the Centura Shares
of 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." 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.
Trustmark National Bank acts as investment adviser of the Fund and an
affiliate of BISYS Fund Services, Inc. acts as the Fund's Administrator and
distributor of the Fund's shares (the "Distributor").
Investors should be aware that the Centura Shares may not be purchased
other than through certain securities dealers with whom the Distributor, has
entered into agreements for this purpose, directly from the Distributor or
through certain Service Organizations with whom they have accounts. Centura
Shares have been created for the primary purpose of providing a money market
fund product for shareholders of certain funds advised by Centura Bank
("Centura"). Consumer Service Class Shares of the Fund, other than the Centura
Shares, and Institutional Class Shares of the Fund are each offered pursuant to
a separate prospectus.
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, CENTURA BANK OR EITHER OF ITS AFFILIATES AND THE SHARES ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY AND INVOLVE INVESTMENT RISK.
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 26,
1997, 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 26, 1997
<PAGE> 158
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<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................................................................. 10
Management of the Fund.................................................................. 11
Fund Share Valuation.................................................................... 14
Purchase of Fund Shares................................................................. 15
Individual Retirement Accounts.......................................................... 16
Exchange Privileges..................................................................... 16
Redemption of Fund Shares............................................................... 17
Dividends, Distributions and Federal Income Tax......................................... 19
Other Information....................................................................... 20
</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> 159
FUND EXPENSES
The following expense table lists estimated costs and expenses that an
investor in the Centura Shares of 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, 1997. Actual expenses in the future may be greater or
less than those shown. Centura 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
(as a percentage of average net assets annualized)
Investment Advisory Fees (after waiver)(2)...................................... 0.15%
12b-1 Fees(3)................................................................... 0.25%
Other Expenses (after waiver)(4)................................................ 0.14%
------
Total Fund Operating Expenses (after waiver)(5)................................. 0.54%
======
</TABLE>
(1) 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 Distributor. 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) Reflects a voluntary reduction (which will remain in effect until further
notice) in contractual fee. Had this reduction and waivers not been in
effect, the investment advisory fee would have been 0.30%.
(3) 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. Payment of
distribution fees currently is not expected to exceed 0.25%.
(4) Reflects voluntary reduction of administration fee of 0.09%. Each Fund has
adopted, but not implemented, a Shareholder Servicing Plan under which
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.
(5) Absent the reduction in investment advisory fees, administration fees and
12b-1 fees, Total Fund Operating Expense would have been 0.88%.
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.
3
<PAGE> 160
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........................................................ $6
3 years....................................................... $17
5 years....................................................... $30
10 years...................................................... $68
</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, 1997.
The Financial Highlights for the periods ended May 31, 1997 have been audited by
Price Waterhouse LLP, independent accountants, whose report on the financial
statements, including this data, appears in the Fund's 1997 Annual Report to
Shareholders. This financial data should be read in conjunction with the related
financial statements and notes thereto.
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
MONEY MARKET FUND
---------------------------------------------------
CONSUMER SERVICE CLASS
---------------------------------------------------
FOR THE PERIOD
SEPTEMBER 30,
1993
YEAR YEAR YEAR (COMMENCEMENT OF
ENDED ENDED ENDED OPERATIONS)
MAY 31, MAY 31, MAY 31, THROUGH MAY 31,
1997 1996 1995 1994
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Income from Investment Operations:
Net investment income........................ 0.04 0.05 0.05 0.02
------- ------- ------- -------
Less Distributions:
Dividends from net investment income......... (0.04) (0.05) (0.05) (0.02)
------- ------- ------- -------
Net Asset Value, End of Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ====== ==============
Total Return................................... 5.07% 5.33% 5.02% 2.03%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)..... $92,220 $25,216 $3,564 $ 797
Ratio of Expenses to Average Net Assets...... 0.38% 0.49% 0.48% 0.40%*
Effect of waivers/reimbursements on expense
ratio..................................... 0.10% 0.30% 0.36% 0.53%*
Ratio of Net Investment Income to Average Net
Assets.................................... 5.23% 5.17% 5.02% 3.05%*
</TABLE>
- ---------------
* Annualized
4
<PAGE> 161
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.
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 $1.5
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 and the Mid Cap Growth Fund since February, 1994. Trustmark has also been
managing trust monies for over 40 years. See "Fee Table" and "Management of the
Fund" in this Prospectus.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
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"), an affiliate of BISYS, 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 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.
5
<PAGE> 162
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 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.
6
<PAGE> 163
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 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 (members of Federal Reserve System
having total assets in excess of $500 million) 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.
7
<PAGE> 164
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 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
8
<PAGE> 165
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.
Asset-Backed Securities. The Fund may also invest in asset-backed
securities (unrelated to mortgage-backed securities discussed under "U.S.
Government Securities") 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
under "Mortgage-Related Securities" in the SAI. Either the PSA model, the ABS
model or other similar models that are standard in the industry will be used by
a Fund in calculating maturity for purposes of its investment in asset-backed
securities.
Interest Rate Futures. The Fund 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 decline (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 the 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 its 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 Fund will
maintain a segregated account when engaged in transactions
9
<PAGE> 166
regarding interest rate futures contracts in an amount sufficient to cover the
obligations of the Fund pursuant to such contracts.
Zero Coupon Securities. The Fund may invest in zero coupon securities. A
zero coupon security pays no interest to its holder during its life and is sold
at a discount to its face value at maturity. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically and are more sensitive to changes in interest rates
than non-zero coupon securities having similar maturities and credit qualities.
The Fund may invest in separately traded principal and interest components
of securities guaranteed or issued by the U.S. Treasury if such components are
traded independently. Under the STRIPS (Separate Trading of Registered Interest
and Principal of Securities) program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently.
Currently Federal income tax law requires that a holder of a zero coupon
security report as income each year the portion of the original issue discount
on such security that accrues that year, even though the holder receives no cash
payments of interest during the year.
Investment Company Securities. The Fund may invest up to 10% of its total
assets in securities issued by other investment companies. Such securities will
be acquired by the Fund within the limits prescribed by the Investment Company
Act of 1940, as amended ("1940 Act"), which include a prohibition against the
Fund investing more than 10% of the value of its total assets in such
securities. Investors should recognize that the purchase of securities of other
investment companies results in duplication of expenses such that investors
indirectly bear a proportionate share of the expenses of such companies
including operating costs, and administrative fees.
INVESTMENT RESTRICTIONS
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 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.
(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.
(3) The Fund may not invest more than 10% of the current value of its net
assets in repurchase agreements maturing in more than 7 days, in fixed time
deposits that are subject to withdrawal penalties and
10
<PAGE> 167
that have maturities of more than 7 days, or in securities or other assets which
the Board of Trustees determines to be illiquid securities or assets.
The Money Market Fund's diversification costs are measured at the time of
initial purchase, and calculated as specified in Rule 2a-7 of the Investment
Company Act of 1940, which may allow the Fund to exceed the limits specified in
this Prospectus for certain securities subject to guarantees or demand features.
The Fund will be deemed to satisfy the maturity requirements described in this
Prospectus to the extent that the Fund satisfies Rule 2a-7's maturity
requirements.
It is the intention of the Funds, unless otherwise indicated, that with
respect to the Funds' policies that are the result of the application of law
(for example, Rule 2a-7 with respect to the Money Market Fund), the Funds will
take advantage of the flexibility provided by rules or interpretations of the
SEC currently in existence or promulgated in the future or changes to such laws.
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 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 $1.5 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 Distributor and Administrator. BISYS Fund Services Limited Partnership
d/b/a BISYS Fund Services ("BISYS"), 3435 Stelzer Road, Columbus, Ohio 43219,
acts as Administrator of the Fund. Performance Funds Distributor, Inc., an
affiliate of BISYS Fund Services, Inc. acts as the Distributor of the
11
<PAGE> 168
Fund's shares. BISYS is a subsidiary of BISYS Group, Inc. which is 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.
Administrative Services. The Fund has entered into an Administration
Agreement with BISYS pursuant to which BISYS 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. BISYS
is entitled to receive monthly fees up to 0.15% of average daily net assets of
the Fund.
Pursuant to a Transfer Agency Agreement between the Trust and BISYS Fund
Services, Inc. (an affiliate of the Administrator) the Administrator, BISYS Fund
Services, Inc. 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 BISYS
Fund Services, Inc., the BISYS Fund Services, Inc. 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.
DISTRIBUTION PLAN AND AGREEMENT
The Board of Trustees of the Trust has adopted a Distribution Plan and
related Shareholder Servicing Agreement (the "Plan") for the Consumer Service
Class shares pursuant to Rule 12b-1 of the 1940 Act, after having concluded that
there is a reasonable likelihood that the Plan will benefit the Funds and the
Consumer Service Class shareholders. The Plan provides with respect to the
Consumer Service Class shares only for a monthly payment by the Fund to
reimburse the Distributor in such amounts that they may request for expenses
such as the printing and distribution of prospectuses sent to prospective
investors, the preparation, printing and distribution of sales literature and
expenses associated with media advertisements and telephone services and other
direct and indirect distribution-related expenses, including the payment of a
monthly fee to broker-dealers for rendering distribution-related asset
introduction and asset retention services. The Fund may also make payments to
other broker-dealers or financial institutions for their assistance in
distributing shares of the Fund and otherwise promoting the sale of the Fund's
shares. The total monthly payment is based on the Fund's Consumer Service Class
shares average daily net assets value during the preceding month and is
calculated at an annual rate not to exceed 0.35%.
The Plan provides for the Distributor to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plan and the purpose for which such expenditures were made. The Plan may
not be amended to increase materially the amount spent for distribution expenses
without approval by a majority of the Fund's outstanding shares subject to the
Plan and approval of a majority of the non-interested Trustees. Distribution
expenses incurred in one year will not be carried forward into and reimbursed in
the next year for actual expenses incurred in the previous year.
12
<PAGE> 169
The Distributor, at its expense, will provide additional compensation to
dealers in connection with sales of Shares of any of the Funds. Such
compensation will include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one or more Funds of the Trust, and/or
other deal-sponsored special events. In some instances, this compensation will
be made available only to certain dealers whose representatives have sold a
significant amount of such Shares. Compensation will include payment for travel
expenses, including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to location within
outside the United States for meetings or seminars of a business nature.
Compensation will also include the following types of non-cash compensation
offered through sales contests: (1) vacation trips, including the provision of
travel arrangements and lodging at luxury resorts at an exotic location, (2)
tickets for entertainment events (such as concerts, cruises and sporting events)
and (3) merchandise (such as clothing, trophies, clocks and pens). Dealers may
not use sales of a Fund's Shares to qualify for this compensation to the extent
such may be prohibited by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by any Fund or its Shareholders.
Service Organizations. Various banks (including Trustmark and Centura),
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 BISYS or the Adviser. The costs borne by the Fund include legal and
accounting expenses; Trustees' fees and expenses;
13
<PAGE> 170
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.
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 12:00 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 Years' Day, Martin Luther King Jr.'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 class of shares of the Fund
is computed by dividing the net assets (i.e., the value of the assets less the
liabilities) attributable to such class of shares by the total number of the
outstanding shares of such class. All expenses, including fees paid to the
Adviser, BISYS 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.
14
<PAGE> 171
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. BISYS 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 or foreign 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 Centura Bank or
any subsidiaries thereof 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 1:30 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. Please call 1-800-442-3688 for wiring instructions. A completed
application must be overnighted to the Fund in advance of the wire to
Performance Funds Trust c/o BISYS Fund Services, Inc. 3435 Stelzer Road,
Columbus, OH 43219-8021. Notification must be given to the Fund at
1-800-442-3688 prior to 1:30 noon, Eastern Standard Time, of the wire date.
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
$50 per pay period. Contact the Fund for more information about Payroll Direct
Deposits.
By Mail: Mail completed application and check made payable to the Fund to:
Centura Shares of the
Performance Money Market Fund
PO Box 182484
Columbus, OH 43218-2484
15
<PAGE> 172
Purchases made by check are not permitted to be redeemed until payment has
been collected which may take up to fifteen days. No third party or foreign
checks are accepted.
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. 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. For more information and IRA information, call the
Fund toll free at 1-800-442-3688.
EXCHANGE PRIVILEGES
The Fund offers two convenient ways to exchange shares of mutual funds for
which Centura is the investment adviser ("Centura Funds".) Before engaging in an
exchange transaction, a shareholder should read carefully the portions of the
Prospectus describing the Centura Fund into which the exchange will be made. A
shareholder may not exchange shares of the Fund for shares of another Centura
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. Investments in Centura
Funds may be transferred to the Money Market Fund, then back to Class A shares
of the same Centura Fund without incurring an additional sales charge. 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 the Fund. The letter of instruction must include: (i) your
account number; (ii) the Centura Fund from and the Centura Fund into which you
wish to exchange your Centura Shares investment; (iii) the dollar or share
amount you wish to exchange; and (iv) the signatures of all registered owners or
authorized parties. No signature guarantee is required.
Exchange by Telephone. To exchange Fund shares by telephone or if you have
any questions, simply call the Fund toll free at 1-800-442-3688. 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.
Telephone exchanges will be suspended for a period of 10 days following a
telephonic address change.
16
<PAGE> 173
During periods of significant economic or market change, telephone
exchanges may be difficult to complete. If you are unable to contact the Fund by
telephone, you may also mail the exchange request to the Fund at the address
listed under "Regular Redemption."
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 Fund will
make redemption proceeds available immediately upon clearance of the purchase
check, 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
Performance Funds Trust, P.O. Box 182484, Columbus, OH 43218-2484. 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, and (iv) the signatures of all
registered owners. To protect shareholder accounts, the Funds and its transfer
agent from fraud, a signature guarantee will be required when redemption
proceeds are sent to an address other than the registered address.
If you elect to receive distributions in cash and checks that (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically and your future dividend and
capital gains distributions will be reinvested in the Fund at the per share net
asset value determined as of the date of payment of the distribution. In
addition, any undeliverable checks or checks
17
<PAGE> 174
that remain uncashed for six months will be cancelled and will be reinvested in
the Fund at the per share net asset value determined as of the date of
cancellation. To protect shareholder accounts, the Fund and its transfer agent
from fraud, a signature guarantee will be required when redemption proceeds are
to be sent to an address other than the registered address.
By Telephone. You may redeem your shares by calling the Fund toll free at
1-800-442-3688. 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. Telephone redemptions and exchanges will be suspended for a period
of 10 days following a telephonic address change.
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 ($500 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 Centura.
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.
Dollar-Cost-Averaging Option. Automatic transfers are available from the
Money Mark Fund to Funds advised by Centura Bank. Transfers may be made of
interest only from the Money Market Fund to other Funds ($10,000 money market
account minimum) or a fixed amount with the minimum being $100 per transaction.
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
18
<PAGE> 175
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.
The Fund reserves the right to pay for redeemed shares within seven days
after receiving your redemption order if, in the judgment of the Adviser, an
earlier payment could adversely affect the Fund.
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 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.
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
19
<PAGE> 176
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.
If you elect to receive distributions in cash and checks (1) are returned
and marked as "undeliverable" or (2) remain uncashed for six months, your cash
election will be changed automatically and your future dividend and capital
gains distributions will be reinvested in the Fund at the per share net asset
value determined as of the date of payment of the distribution. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation.
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 trust
or investment management and other fiduciary accounts managed or administered by
Centura or its affiliates or correspondents pursuant to a written agreement.
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 1-800-442-3688, or
contact your sales representative, broker-dealer or bank to obtain more
information about the Fund's classes of shares.
20
<PAGE> 177
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 (including Centura 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.
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
21
<PAGE> 178
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.
BISYS acts as the Trust's transfer agent. The Trust compensates BISYS, 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 and reimbursement for certain expenses.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust,
c/o BISYS Fund Services, Inc. PO Box 182484, Columbus, OH 43218-2484.
General and Account Information: (800) 44CENTURA (442-3688)
22
<PAGE> 179
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
ADMINISTRATOR
BISYS Fund Services
3435 Stelzer Rd.
Columbus, Ohio 43219
SPONSOR AND DISTRIBUTOR
An Affiliate of
BISYS Fund Services, Inc.
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
CSPMMCC 0997
CENTURA SHARES
OF
THE PERFORMANCE
MONEY MARKET FUND
CONSUMER SERVICE CLASS
PROSPECTUS
SEPTEMBER 26, 1997
<PAGE> 180
PERFORMANCE FUNDS TRUST
Telephone: 1-800 PERFORM (737-3676)
STATEMENT OF ADDITIONAL INFORMATION - September 26, 1997
THE MONEY MARKET FUND
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE SMALL CAP FUND
THE MID CAP GROWTH FUND
THE LARGE CAP EQUITY FUND (FORMERLY, 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 six of the Trust's investment portfolios--THE MONEY
MARKET FUND, 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"), THE SMALL CAP FUND (THE "SMALL CAP FUND"), THE MID
CAP GROWTH FUND (THE "MID CAP FUND") AND THE LARGE CAP EQUITY FUND (THE "LARGE
CAP 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 26, 1997. 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 the
Trust's distributor, at 3435 Stelzer Road, Columbus, Ohio 43219; or by calling
the Funds at the telephone number indicated above.
<PAGE> 181
TABLE OF CONTENTS
Investment Restrictions.................................................... 1
Additional Permitted Investment Activities................................. 3
Management Of The Funds.................................................... 13
Rule 12b-1 Distribution Plan............................................... 17
Calculation Of Yield And Total Return...................................... 18
Determination Of Net Asset Value........................................... 22
Portfolio Transactions..................................................... 23
Federal Income Taxes....................................................... 25
Shares Of Beneficial Interest.............................................. 28
Other Information.......................................................... 30
Custodian.................................................................. 31
Experts.................................................................... 31
Financial Statements....................................................... 31
Appendix................................................................... 32
1
<PAGE> 182
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies of all
Funds except as noted.
None of the Funds, except where indicated, 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 (i) in obligations of the United States
Government, its agencies or instrumentalities and (ii) with respect to the Money
Market Fund, the obligations of domestic banks (for the purposes of this
restriction, domestic bank obligations do not include obligations of U.S.
branches or foreign branches of U.S. banks);
(2) 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;
(3) invest more than 15% (10% in the case of the Money Market Fund) 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;
(4) acquire securities for the purpose of exercising control or management
over the issuers thereof (this restriction is not a fundamental policy of the
Small Cap Fund);
(5) purchase interests, leases, or limited partnership interests in oil,
gas, or other mineral exploration or development programs;
(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 making such investment, provided that for each Fund, except
the Small Cap Fund, 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 (this restriction is not a fundamental policy of the Small Cap
Fund);
(7) make loans or lend its portfolio securities if, as a result, the
aggregate of such loans exceeds 5% of the value of a Fund's total assets (or in
the case of the Small Cap and Mid Cap Funds one-third of the market value of the
Fund's total assets less liabilities other than obligations created by these
transactions); for purposes of this restriction, the Money Market Fund is
limited to 5% as a non-fundamental policy.
2
<PAGE> 183
All Funds with exception of the Small Cap Fund (unless noted otherwise)
and Mid Cap Fund may not:
(8) 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 (except for Small Cap
Fund which may enter into its financial futures contracts and options
transaction thereon) and may write call options and purchase call and put
options on financial futures contracts as generally described in the Prospectus
and this SAI;
(9) 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; or
(10) 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).
Neither the Small Cap Fund nor Mid Cap Fund may:
(11) 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 (this restriction is not a fundamental
policy of the Small Cap Fund);
(12) mortgage, pledge or hypothecate any assets except that a Fund may
pledge not more than one-third of its total assets to secure borrowings made in
accordance with paragraph 11 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 its total net assets(this restriction is not a fundamental policy of
the Small Cap Fund);
(13) purchase securities while borrowings exceed 5% of its total assets
(this restriction is not a fundamental policy of the Small Cap Fund); or
(14) participate on a joint, or a joint and several, basis in any
securities trading account (this restriction is not a fundamental policy of the
Small Cap Fund);
(15) purchase or acquire interests in real estate, real estate mortgage
loans or interest in oil, gas or other mineral exploration on development
programs;
3
<PAGE> 184
(16) issue senior securities, except insofar as the Fund may be deemed to
have issued a senior security in connection with any permitted borrowing.
Additionally the Mid Cap Fund may not:
(17) purchase or acquire commodities or commodity contracts.
No Fund may, with respect to 75% (100% with respect to the Money Market
Fund) 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.
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. However, in
the case of the Money Market Fund, if the security is downgraded to a level
below that permitted for money market funds under Rule 2a-7 of the 1940 Act ,
the Fund's Adviser must report such event to the Board of Trustees as soon as
possible to permit the Board to reassess the security promptly to determine
whether it may be retained as an eligible investment for the fund. To the
extent the ratings given by a NRSRO may change as a result of changes in such
organizations or their rating systems, the Money Market 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.
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 the fund may be
used for letter of credit-backed investments.
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
4
<PAGE> 185
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% (one-third in the case of the Small Cap and Mid Cap Funds) 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.
Interest Rate Futures Contracts and Options Thereon. The Government Income
Funds and The Money Market Fund 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 specified
amount of designated debt securities for a set price at a specified future time.
At the time a 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 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 Fund's activities in the cash market in which such a
Fund has determined to invest. If the market moves favorably after a 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 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, 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.
5
<PAGE> 186
Investment in Bond Options. 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 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
liquid assets 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
6
<PAGE> 187
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(Small Cap and Large Cap Funds). 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 current value of the index. The Funds 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 Funds 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 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 Fund's portfolio
securities sought to be hedged.
Successful use of the index futures by the Funds for hedging purposes is
also subject to a Fund's ability to predict correctly movements in the direction
of the market. It is possible that, where a 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 Fund's portfolio may
decline. If this occurs, the 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 a 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 a 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 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 a 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.
7
<PAGE> 188
Options on Index Futures(Small Cap and Large Cap Fund). 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 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 Funds except the Mid Cap
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 financial 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 Government
Income Funds, Money Market Fund, Small Cap Fund and Large Cap Fund) 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
8
<PAGE> 189
cases. Inability to liquidate positions in a timely manner could result in the
Funds' incurring larger losses than would otherwise be the case.
Repurchase Agreements. The Funds 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 a 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.
A 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 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.
Short-Term Trading. The Funds do not make a practice of short-term
trading; however, purchases and sales of securities will be made whenever
necessary in the management's view to achieve the investment objectives of the
Fund. The Adviser does not expect that in pursuing the Funds' investment
objectives unusual portfolio turnover will be required and intends to keep
turnover to a minimum consistent with such investment objective. The Adviser
believes unsettled market economic conditions during certain periods require
greater portfolio turnover in pursuing the Fund's investment objective than
would otherwise be the case. During periods of relatively stable market and
economic conditions, the Adviser expects the portfolio turnover of the Fund will
not exceed 250,%, 150%, 200%, 200% and 200% annually for the Short-Term Fund,
Intermediate Fund, Small Cap Fund, Mid Cap Fund and Large Cap Fund,
respectively.
American Depository Receipts. The Small Cap, Mid Cap and Large Cap Funds
may invest in American Depository Receipts ("ADRs"). Generally these are
receipts issued by a bank or trust company that evidence ownership of underlying
securities issued by a foreign corporation and that are designed for use in the
domestic securities market. The Funds intend to invest less than 20% of each
Fund's total assets in ADRs.
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
9
<PAGE> 190
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.
Mortgage-Related Securities. The Funds may, consistent with its
respective investment objective and policies, invest in mortgage-related
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
Mortgage-related securities, for purposes of the Funds' Prospectus and
this SAI, represent pools of mortgage loans assembled for sale to investors by
various governmental agencies such as the Government National Mortgage
Association and government-related organizations such as the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation, as well as
by nongovernmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party or
otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If a Fund purchases a mortgage-related security
at a premium, that portion may be lost if there is a decline in the market
value of the security whether resulting from changes in interest rates or
prepayments in the underlying mortgage collateral. As with other
interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment. For this and other reasons,
a mortgage-related securities stated maturity may be shortened by unscheduled
prepayments on the underlying mortgages and, therefore, it is not possible to
predict accurately the securities return to the Funds. In addition, regular
payments received in respect of mortgage-related securities include both
interest and principal. No assurance can be given as to the return a Fund will
receive when these amounts are reinvested.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities created by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest and such guarantee is backed by
the full faith and credit of the United States. GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA certificates also are supported by the authority of GNMA to borrow funds
from the U.S. Government to make payments under its guarantee. Mortgage-related
securities issued by the Federal National Mortgage Association ("FNMA") include
FNMA Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
which are solely the obligations of the FNMA and are not backed by or entitled
to the full faith and credit of the United States. The FNMA is a
government-sponsored organization owned entirely by private stock-holders.
Fannie Maes are guaranteed as to timely payment of the principal and interest by
FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as ("Freddie Macs" or "PCs"). The FHLMC is a corporate instrumentality of
the United States, created pursuant to an Act of Congress, which is owned
entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the
United
10
<PAGE> 191
States or by any Federal Home Loan Banks and do not constituted a debt or
obligation of the United States or of any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. The FHLMC currently guarantees timely payment of interest and either
timely payment of principal or eventual payment of principal, depending upon the
date of issue. When the FHLMC does not guarantee timely payment of principal.
FHLMC may remit the amount due on account of its guarantee of ultimate payment
of principal at any time after default on an underlying mortgage, but in no
event later than one year after it becomes payable.
In addition to GNMA, FNMA or FHLMC Certificates, through which the holder
receives a share of all interest and principal payments from the mortgages
underlying the Certificate, the Funds also may invest in mortgage pass-through
securities, where 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 particularly sensitive to interest rates and 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, the Funds may not fully recoup its initial investment
in IOs. Conversely, if the underlying mortgage assets experience less than
anticipated prepayments of principal, the return of POs could be adversely
affected. The Funds will treat IOs and POs as illiquid securities except for IOs
and POs issued by the U.S. Government agencies and instrumentalities backed by
fixed-rate mortgages, whose liquidity is monitored by the Adviser.
The Funds may also invest in certain Collateralized Mortgage Obligations
("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs") which are
hybrid instruments with characteristics of both mortgage-backed bonds and
mortgage pass-through securities. Interest and prepaid principal on a CMO or
REMIC are paid monthly or semi-annually. CMOs and REMICs 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 and
REMICs are structured into multiple classes, with each class bearing a different
expected maturity. Payments of principal, including repayments, are first
returned to investors holding the shortest maturity class; investors holding the
longer maturity classes generally receive principal only after the earlier
classes have been retired. To the extent a particular CMO or REMIC is issued by
an investment company, a Fund's ability to invest in such CMOs or REMICs will be
limited. The Funds will not invest in the residual interests of REMICs.
The Adviser expects that new types of mortgage-related securities may be
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.
The yield characteristics of mortgage-related securities differ from
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently, usually monthly, and that principal
may be prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. As a result, if a Fund purchases a
security at a premium, a prepayment rate that is faster than expected will
reduce yield to maturity, while a prepayment rate that is slower than expected
will have the opposite effect of increasing yield to maturity. Alternatively, if
a Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity. 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 Fund in calculating maturity for purposes of its
investment in mortgage-related securities.
Like other bond investments, the value of mortgage-backed securities will
tend to rise when interest rates fall and to fall when interest rates rise.
Their value may also be affected by changes in the market's perception of the
creditworthiness of the entity issuing or guaranteeing them or by changes in
government regulations and tax policies. Because of these factors, the Funds'
share value and yield are not guaranteed and the Government Income Funds' share
values will fluctuate, and there can be no assurance that each Fund's investment
objective will be achieved. The magnitude of these fluctuations generally will
be greater when the average maturity of the Fund's portfolio securities is
longer.
Illiquid Securities. The Funds have adopted a fundamental policy with
respect to investments in illiquid securities. Historically, illiquid securities
have included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933, as
amended ("Securities Acts"), securities that are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities that have not been registered under the Securities Act are
referred to as private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and uncertainty in
valuation. Limitations on resale may have an adverse effect on the marketability
of portfolio securities and a mutual fund might be unable to dispose of
restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemptions within seven days. A
mutual fund might also have to register such restricted securities in order to
dispose of them resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
The Funds may also invest in restricted securities issued under Section
4(2) of the Securities Act, which exempts from registration "transactions by an
issuer not involving any public offering." Section 4(2) instruments are
restricted in the sense that they can only be resold through the issuing dealer
and only to institutional investors; they cannot be resold to the general public
without registration. Restricted securities issued under Section 4(2) of the
Securities Act will be treated as illiquid and subject to the Fund's investment
restriction on illiquid securities.
The Commission has adopted Rule 144A, which allows a broader institutional
trading market for securities otherwise subject to restrictions on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act applicable to resales of certain securities
to qualified institutional buyers. The Adviser anticipates that the market for
certain restricted securities such as institutional commercial paper will expand
further as a result of this new regulation and the development of automated
systems for the trading clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc. (the "NASD"). Consequently, it
is the intent of the Fund to invest, pursuant to procedures established by the
Board of Trustees and
11
<PAGE> 192
subject to applicable investment restrictions, in securities eligible for resale
under Rule 144A which are determined to be liquid based upon the trading markets
for the securities.
The Adviser will monitor the liquidity of restricted securities in the
Funds' portfolio under the supervision of the Trustees. In reaching liquidity
decisions, the Adviser will consider, inter alia, the following factors: (1) the
frequency of trades and quotes for the security over the course of six months or
as determined in the discretion of the Adviser; (2) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers over the course of six months or as determined in the discretion of
the Adviser, (3) dealer undertakings to make a market in the security; (4) the
nature of the security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer), and (5) other factors, if any, which the Adviser
deems relevant. The Adviser will also monitor the purchase of Rule 144A
securities to assure that the total of all Rule 144A securities held by a Funds
do not exceed 15% (10% with respect to the Money Market Fund) of the Fund's
average daily net assets. Rule 144A securities which are determined to be liquid
based upon their trading markets will not, however, be required to be included
among the securities considered to be illiquid for purposes of Investment
Restriction No. 3.
Small Cap Common Stocks. Investing by the Small Cap and Mid Cap Funds in
the common shares of "smaller" companies generally entails greater risk and
volatility than investing in large, well-established companies. The securities
of small capitalization companies may offer greater potential for capital
appreciation than the securities of larger companies since they may be
overlooked by investors or undervalued in relation to their earnings power.
Small capitalization companies generally are not as well known to the investing
public and have less of an investor following than larger companies, thus they
may provide greater opportunities for long-term capital appreciation as a result
of relative inefficiencies in the marketplace.
Mid Cap Common Stocks. Investing by the Mid Cap Fund 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 & Poors 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. The Small Cap, Mid Cap and Large Cap
Funds may invest in warrants which in general 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.
Convertible Securities. The Small Cap, Mid Cap and Large Cap Funds 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,
12
<PAGE> 193
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 may 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 Small Cap, Large Cap and
Mid Cap Funds may invest in small unsecured 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.
Corporate Reorganizations. The Small Cap, Large Cap and Mid Cap Funds
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 Funds.
In general, securities which are the subject of such an offer or proposal
sell at a premium to their historic market price immediately after the
announcement of the offer or proposal. However, the increased market price of
such securities may still 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
13
<PAGE> 194
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, each 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 Funds, thereby increasing its brokerage and other transaction expenses as
well as make it more difficult for the Funds to meet the tests for favorable tax
treatment as a "Regulated Investment Company." specified by the Internal Revenue
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 Internal Revenue Code.
Short Sales. The Mid Cap and Small Cap Funds may make short sales of
securities. A short sale is a transaction in which the Funds sells a security it
does not own in anticipation that the market price of that security will
decline. The Funds expect 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 Funds make 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 Funds 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 Funds' 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 a 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 a Fund's gain is limited to the price at which
it sold the security short, its potential loss is theoretically unlimited.
14
<PAGE> 195
The market value of the securities sold short of any one issuer will not
exceed either 5% of a Fund's total assets or 5% of such issuer's voting
securities. Each 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. Each Fund
may also make short sales "against the box" with out 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.
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 38, Trustee - 230 Park Avenue, New York, New York 10169.
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, 3900 Lakeland Drive, Jackson, Mississippi
39208. Attorney, Stubblefield, Mallette & Harvey, P.A., since May 1, 1997. Prior
thereto Mr. Mallette was an attorney with the firm of Daniel Coker Horton and
Bell since July 1987. 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.
Wally Grimm, President, Senior Vice President & Client Services Executive, BISYS
Fund Services since June, 1992.
Michael Sakala, Treasurer, Vice President & Treasurer, BISYS Fund Services;
formerly, head of worldwide Fund Administration at Banque Paribas Luxemburg;
Accounting Manager at Fidelity Investments.
Ellen Stoutamire, Secretary,Vice President of Client Legal Services, BISYS Fund
Services; formerly, Associate Counsel for Franklin Templeton Mutual Funds; Vice
President and General Counsel for Pioneer Western Corporation.
15
<PAGE> 196
In addition, the following employees of BISYS Fund Services serve as
officers: Frank Deutchki as Vice President, Rick Ille as Vice President and
Assistant Secretary, Janelle Gellermann as Assistant Treasurer, and Jeanette
Peplowski as Assistant Secretary.
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, 1997. 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, 1997 in excess of $60,000.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Benefits Compensation
from the Benefits Upon From Registrant
Registrant Accrued as Part Retirement and Fund
of Fund Complex
Expenses
<S> <C> <C> <C> <C>
John J. Pileggi $6,812 0 N/A $6,812
Trustee
James H. Johnston, III, $12,774 0 N/A $12,774
M.D.
Trustee
James T. Mallette $14,498 0 N/A $14,498
Trustee
Walter P. Neely, Ph.D., $13,000 0 N/A $13,000
CFA, Trustee
Charles M. Carr, $13,046 0 N/A $13,046
Trustee*
John William Head, $11,639 0 N/A $11,639
Trustee*
</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. (Mr. Pileggi's compensation represents
fees received as a disinterested trustee for a portion of the fiscal year)
16
<PAGE> 197
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 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: Money
Market Fund, 0.30%; Short Term Fund, 0.40%; the Intermediate Fund, 0.50%; the
Small Cap Fund, 1.00%; the Mid Cap Fund, 0.75%;the Large Cap Fund, 0.60%.
For the fiscal years ended May 31, 1995, May 31, 1996 and May 31, 1997,
Trustmark was entitled to and waived advisory fees as listed below:
<TABLE>
<CAPTION>
TRUSTMARK TRUSTMARK
ENTITLED WAIVED
-------------------------------------- --------------------------------------
1995 1996 1997 1995 1996 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
The Money Market Fund $ 640,105 $1,151,421 $1,265,939 $ 525,439 $ 782,328 $ 826,237
The Short Term 423,452 449,285 473,742 31,838 6,868 -------
Government
Income Fund
The Intermediate 701,678 396,037 440,376 157,708 38,724 44,038
Term Government
Income Fund
The Mid Cap Growth Fund 304,754 468,219 762,354 105,004 94,055 136,382
The Large Cap Fund 570,256 750,188 1,154,404 123,672 125,235 171,304
</TABLE>
Trustmark National Bank also serves as custodian for each of the Funds.
See "Custodian." BISYS Fund Services and its affiliates serve as the Funds'
transfer agent and provides certain administrative, shareholder servicing and
fund accounting services for each Fund.
17
<PAGE> 198
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 Funds entered into an Administration Agreement with
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
effective November 11, 1996, following the acquisition by The BISYS Group, Inc.
of the Mutual Funds Division of Furman Selz LLC ("Furman Selz"). Under the
contract BISYS provides management and administrative services necessary for the
operation of the Funds, furnishes office space and facilities and pays the
compensation of the Trust's officers affiliated with BISYS. For these
administrative services, BISYS is entitled to a monthly fee at the annual rate
of 0.15% of the average daily net assets of each Fund under substantially the
same agreement as with Furman Selz.
For the year ended May 31, 1997, Furman Selz (the former
Administrator) and BISYS were entitled to and waived administrative services
fees as listed below:
<TABLE>
<CAPTION>
FURMAN FURMAN BISYS BISYS
ENTITLED WAIVED ENTITLED WAIVED
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Money Market Fund .......... $272,017 $163,210 $360,952 $216,573
Short Term Fund ............ 73,968 --- 104,914 ---
Intermediate Term Fund ..... 58,242 --- 73,871 ---
Large Cap Fund ............. 109,656 --- 178,945 ---
Mid Cap Fund ............... 59,126 --- 93,344 ---
</TABLE>
For the fiscal year ended May 31, 1996, Furman Selz earned fees totaling
$575,832, $168,550, $119,104, $93,541, and $187,486 from the Money Market Fund,
the Short Term Fund, the Intermediate Term Fund, the Mid Cap Fund and the Large
Cap Fund, respectively, pursuant to each Fund's Administration Agreement with
Furman Selz.
For the fiscal year ended May 31, 1995, Furman Selz earned fees totaling
$320,053, $158,805, $210,503, $60,908, and $142,564 from the Money Market Fund,
the Short Term Fund, the Intermediate Term Fund, the Mid Cap Fund and the Large
Cap Fund, respectively, pursuant to each Fund's Administration Agreement with
Furman Selz.
18
<PAGE> 199
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.
For the fiscal year ended May 31, 1997, the Consumer Service Class of the
Money Market Fund, the Short Term Fund, the Intermediate Fund, the Mid Cap Fund
and the Large Cap Fund
19
<PAGE> 200
paid $154,588, $3,163, $4,537, $6,659 and $34,041, respectively, pursuant to
each Fund's Distribution Plan. All such payments were made for dealer services.
CALCULATION OF YIELD AND TOTAL RETURN
Current yield for the Money Market 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) with the resulting yield
figure carried to at least the nearest hundredth of one percent.
Based on the seven day period ended May 31, 1997, the seven day yield of
the Consumer Service and Institutional Class Shares of the Money Market was
5.08% and 5.33%, respectively.
Effective yield for the Money Market 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 Money Market 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.
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.
20
<PAGE> 201
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)+1)(6)-1]
---
cd
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.
Based on the thirty day period ended May 31, 1997 ("30-day base period")
the 30 day yield for the Consumer Service Class and the Institutional Class of
the Short Term Fund was 5.40% and 5.64%, respectively, and the 30 day yield for
the Consumer Service Class and the Institutional Class of the Intermediate Fund
was 5.93% and 6.17%, respectively.
The average annual total return information for Consumer Service Class for
the periods indicated below is as follows:
Short Term Government Income Fund Total Return
One year ended May 31, 1997 5.44%
3-year 5.31%
Inception (6/1/92) to May 31, 1997 4.75%
Intermediate Term Government Income Fund
One year ended May 31, 1997 6.92%
3-year 6.09%
Inception (6/1/92) to May 31, 1997 6.11%
Large Cap Fund
One year ended May 31, 1997 28.75%
3-year 23.91%
Inception (6/1/92) to May 31, 1997 17.48%
21
<PAGE> 202
Mid Cap Fund
One year ended May 31, 1997 22.33%
3-year 23.87%
Inception (6/1/92) to May 31, 1997 20.33%
The average annual total return information for the Institutional Class
for the periods indicated below is as follows:
Short Term Government Income Fund Total Return
One year ended May 31, 1997 5.70%
3-year 5.57%
Inception (6/1/92) to May 31, 1997 4.97%
Intermediate Term Government Income Fund
One year ended May 31, 1997 7.20%
3-year 6.35%
Inception (6/1/92) to May 31, 1997 6.34%
Large Cap Fund
One year ended May 31, 1997 29.06%
3-year 24.21%
Inception (6/1/92) to May 31, 1997 14.57%
Mid Cap Fund
One year ended May 31, 1997 22.62%
3-year 24.16%
Inception (6/1/92) to May 31, 1997 20.61%
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.
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.
22
<PAGE> 203
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.
As indicated under "Fund Share Valuation" in the prospectus, the Money
Market 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 Money Market 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 Money Market Fund would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
23
<PAGE> 204
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Money Market 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 Money
Market 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.
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 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.
24
<PAGE> 205
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.
Except in the case of equity securities purchased by the Equity Funds,
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 Funds 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.
25
<PAGE> 206
In placing orders for portfolio securities for Equity Funds, 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 Funds 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, 1995, May 31, 1996 and May 31, 1997 the
Money Market Fund, the Short Term Fund and the Intermediate Fund did not pay any
brokerage commissions. During the same periods the Mid Cap Fund paid $96,911,
$115,918, and $152,907 and the Large Cap Fund paid $354,214 $50,303 and $88,895,
respectively, in brokerage commissions.
Portfolio Turnover. Because the portfolio of the Money Market 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 Money Market Fund will incur brokerage commissions in
connection with any of its portfolio transactions.
The portfolio turnover rate for the Government Income Funds generally is
not expected to exceed 250%. The portfolio turnover rate for the Small Cap, Mid
Cap and Large Cap Fund are not expected to exceed 200%, 200% and 100%,
respectively . The portfolio turnover rate will not be a limiting factor when
the Adviser deems portfolio changes appropriate. For the fiscal year ended May
31, 1997, the portfolio turnover rates for the Short-Term Fund, the Intermediate
Term Fund, the Mid Cap Fund and the Large Cap Fund were 86%, 46%, 8% and 1%,
respectively. For the fiscal year ended May 31, 1996 the portfolio turnover
rates for the Short Term Fund, Intermediate Term Fund, Mid Cap Fund and Large
Cap Fund were 120%, 183%, 28% and 6%, respectively.
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;
26
<PAGE> 207
and (b) 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. In August of this year,
President Clinton signed the Taxpayer Relief Act of 1997 which eliminated the
so-called "short/short test" for tax years beginning after the date of its
enactment. Therefore, up until a Fund's 1998 tax year, such Fund still must
derive 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, which are
held for less than three months. 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 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 Small Cap,
Mid Cap and Large Cap Funds will qualify for the dividends-received deduction
available to corporations. The Small Cap, Mid Cap and Large Cap Funds are
required to notify shareholders of the amount of dividends which will qualify
for the deduction within 60 days of the close of each Fund's taxable year. The
27
<PAGE> 208
dividends paid by the other Funds are not expected to qualify. Tax law
proposals introduced from time to time, may also 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 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 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.
28
<PAGE> 209
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.
SHARES OF BENEFICIAL INTEREST
The Trust consists of multiple separate portfolios or 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
29
<PAGE> 210
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 15, 1997, the following were five percent or greater
shareholders of the Funds:
SHORT TERM FUND
Institutional Class
Harman & Co. 99.01%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
Consumer Service Class
Donaldson Lufkin Jenrette 59.65%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
INTERMEDIATE FUND
Institutional Class
Harman & Co. 99.29%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
30
<PAGE> 211
Consumer Service Class
Donaldson, Lufkin Jenrette 8.907%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Cheryl E. Sizemore 10.86%
130 Highway 217
Tijeras, NM 87059-7803
MID CAP FUND
Institutional Class
Harman & Co. 99.48%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
LARGE CAP FUND
Institutional Class
Harman & Co. 83.11%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
First American Trust Co. 15.08%
421 North Main Street
Santa Ana, CA 92701
31
<PAGE> 212
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, 1995, the Money Market Fund, the Short
Term Fund, the Intermediate Term Fund, the Mid Cap Fund and the Large Cap Fund
paid $83,988, $42,348, $56,134, $16,129 and $37,704, respectively, to the
Custodian.
For the fiscal year ended May 31, 1996, the Money Market Fund, the Short
Term Fund, the Intermediate Term Fund, the Mid Cap Fund and the Large Cap Fund
paid $153,662, $44,947, $31,761, $24,944 and $49,996, respectively, to the
Custodian.
For the fiscal year ended May 31, 1997, the Money Market Fund, the Short
Term Fund, the Intermediate Fund, the Mid Cap Fund and the Large Cap Fund paid
$168,792, $47,702, $35,230, $40,659 and $76,961, respectively, to the Custodian.
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, 1997 and for the
period then ended including the Report of Price Waterhouse LLP, independent
accountants, as contained in the Annual Report to Shareholders are incorporated
by reference.
32
<PAGE> 213
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.
33
<PAGE> 214
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
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA have the highest rating assigned by Standard &
Poor's Corporation ("SAP"). 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
34
<PAGE> 215
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.
35
<PAGE> 216
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) (1) Financial Statements included in Part A of this Registration
Statement are the Financial Highlights for the following:
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE LARGE CAP EQUITY FUND
THE MONEY MARKET FUND
THE MID CAP GROWTH FUND
(2) Financial Statements included in Part B of this Registration
Statement are the audited financial statements including
Portfolio of Investments, Statement of Assets and Liabilities,
Statement of Changes in Net Assets, Statement of Operations,
Notes to Financial Statements and Independent Accountant's Report
contained in the Annual Report for the fiscal year ended May 31,
1997 which are incorporated by reference to the Statement of
Additional Information:
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE LARGE CAP EQUITY FUND
THE MONEY MARKET FUND
THE MID CAP GROWTH FUND
(b) Exhibits:
(1) Trust Instrument. (1)
(2) (a) Bylaws of Registrant. (1)
(2) (b) Amendment to Bylaws filed herein.
(3) None.
(4) None.
(5) (a) Revised Form of Master Investment Advisory Contract
between Registrant and Trustmark National Bank. (4)
(b) Master Administration Agreement
between Registrant and BISYS Fund Services
filed herein.
(c) Form of Investment Advisory Contract Supplement for The
Small Cap Fund filed herein.
(6) Form of Revised Distribution Agreement between Registrant and
Performance Funds Distributor, Inc. filed herein.
(7) None.
- ------------------------------
(1) Filed with original Registration Statement on March 12, 1992.
(2) Filed with Pre-Effective Amendment No. 3 on May 22, 1992.
(3) Filed with Pre-Effective Amendment No. 1 on April 29, 1992.
(4) Filed with Post-Effective Amendment No. 1 on November 23, 1992.
(5) Filed with Post-Effective Amendment No. 4 on September 30, 1994.
(6) Filed with Post-Effective Amendment No. 6 on September 27, 1996.
<PAGE> 217
(8) Custodian Agreement between Registrant and Trustmark National
Bank.(2)
(9) (a) Transfer Agency Agreement between Registrant and BISYS
Fund Services, Inc. filed herein.
(9) (b) Fund Accounting Agreement between Registrant and BISYS
Fund Services, Inc. filed herein.
(10) Consent of Counsel filed herein.
(11) Consent of Independent Accountants filed herein.
(12) None.
(13) Subscription Agreement. (3)
(14) None.
(15) (a) Amendment to Rule 12b-1 Distribution Plan and Agreement
between Registrant and Performance Funds Distributor,
Inc. filed herein.
(15) (b) Supplement to the Rule 12b-1 Distribution Plan and
Agreement between The Small Cap Fund and Performance
Funds Distributor, Inc. filed herein.
(15) (c) Form of Services Agreement between Performance Funds
Distributor, Inc. and BISYS FUND SERVICES LIMITED
PARTNERSHIP d/b/a BISYS Fund Services filed herein.
(15) (d) Form of Compensation Agreement between Trustmark National
Bank and BISYS FUND SERVICES LIMITED PARTNERSHIP d/b/a
BISYS Fund Services filed herein.
(15) (e) Form of Dealer and Selling Group Agreement with
Performance Funds Trust filed herein.
(16) Schedule of Computation of Performance Calculation filed herein.
(17) Financial Data Schedule filed herein.
(18) Rule 18f-3 Plan (6)
(a) Power of Attorney filed herein.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities at July 8, 1997.
<TABLE>
<S> <C>
Short-Term Government Income Fund (Institutional)...................................65
Short-Term Government Income Fund (Consumer)........................................46
Intermediate Term Government Fixed Income Fund (Institutional)...........................117
</TABLE>
- ------------------------------
(1) Filed with original Registration Statement on March 12, 1992.
(2) Filed with Pre-Effective Amendment No. 3 on May 22, 1992.
(3) Filed with Pre-Effective Amendment No. 1 on April 29, 1992.
(4) Filed with Post-Effective Amendment No. 1 on November 23, 1992.
(5) Filed with Post-Effective Amendment No. 4 on September 30, 1994.
(6) Filed with Post-Effective Amendment No. 6 on September 27, 1996.
<PAGE> 218
<TABLE>
<S> <C>
Intermediate Term Government Fixed Income Fund (Consumer).................................94
The Large Cap Equity Fund (Consumer).....................................................234
The Large Cap Equity Fund (Institutional)..............................................1,141
Money Market Fund (Consumer)..............................................................66
Money Market Fund (Institutional)........................................................437
Mid Cap Growth Fund (Consumer)............................................................45
Mid Cap Growth Fund (Institutional)......................................................514
</TABLE>
Item 27. Indemnification.
As permitted by Section 17(h) and (i) of the Investment Company Act
of 1940 (the "1940 Act") and pursuant to Article X of the Registrant's Trust
Instrument (Exhibit 1 to the Registration Statement), Section 4 of the Master
Investment Advisory Contract (Exhibit 5(a) to this Registration Statement) and
Section 1.12 of the Master Distribution Contract (Exhibit 6 to this Registration
Statement), officers, trustees, employees and agents of the Registration will
not be liable to the Registrant, any shareholder, officer, trustee, employee,
agent or other person for any action or failure to act, except for bad faith,
willful misfeasance, gross negligence or reckless disregard of duties, and those
individuals may be indemnified against liabilities in connection with the
Registrant, subject to the same exceptions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant understands that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, the settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
<PAGE> 219
The Registrant will purchase an insurance policy insuring its
officers and trustees against liabilities, and certain costs of defining claims
against such officers and trustees, to the extent such officers and trustees are
not found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers under certain circumstances.
Section 4 of the Master Investment Advisory Contract (Exhibit 5(a) to
this Registration Statement) and Section 1.12 of the Master Distribution
Contract (Exhibit 6 to this Registration Statement) limit the liability of
Trustmark National Bank to liabilities arising from willful misfeasance, bad
faith or gross negligence in the performance of their respective duties or from
reckless disregard by them of their respective obligations and duties under the
agreements.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Declaration of Trust, By-Laws, Investment
Advisory Contract and Distribution Contract in a manner consistent with Release
No. 11330 of the Securities and Exchange Commission under the 1940 Act so long
as the interpretations of Section 17(h) and 17(I) of such Act remain in effect
and are consistently applied.
Item 28. Business and Other Connections of Investment Adviser.
Trustmark National Bank is a subsidiary of Trustmark Corporation, a
one bank holding company located in Jackson, Mississippi. Trustmark National
Bank was founded in 1889 and offers a variety of deposit, credit and investment
products to its customers through its 170 locations and 58 off premise automated
teller machines in 46 Mississippi communities. As of June 30, 1997,
Trustmark had assets of approximately $5.3 billion and capital of approximately
$565 million.
The executive offices of Trustmark Corporation and Trustmark
National Bank and such executive officers positions during the past two years
are as follows:
Frank R. Day, Chairman of the Board, Trustmark
Corporation; Chairman of the Board, Trustmark National Bank; Director of
Mississippi Power & Light Company and South Central Bell Telephone Company.
Richard Hickson, chief Executive Officer of Trustmark
Corporation, joined Trustmark in 1997. Prior thereto, Mr. Hickson was employed
as the President of South Trust Bank of Georgia, N.A. since 1995.
Harry Walker, President of Trustmark National Bank.
Gerard Host, Executive Vice President and Chief
Financial Officer.
Item 29. Principal Underwriter.
(a) Performance Funds Distributor, Inc. acts as
Distributor/Underwriter for no other registered investment
company.
(b) Officers and Directors.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Positions and Offices
Business Address* Registrant with Underwriter
- ------------------ ---------- ---------------------
<S> <C> <C>
Lynn J. Magnum None Chairman/CEO
Robert J. McMullan None Executive Vice
President/Treasurer
J. David Huber None President
Kevin J. Del None Vice President/General
</TABLE>
- ------------------------------
* All addresses are 3435 Stelzer Road, Columbus, Ohio 43219.
<PAGE> 220
<TABLE>
<S> <C> <C>
Counsel/Secretary
Mark J. Rybarczyk None Senior Vice President
Dennis Sheehan None Senior Vice President
George O. Martinez None Senior Vice President
Sean Kelly None Vice President
Dale Smith None Vice President
Michael Burns None Vice President
Bruce Treff None Assistant Secretary
Annamaria Porcaro None Assistant Secretary
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records.
(a) All accounts, books and other documents required to be
maintained by the Investment Adviser and the Custodian pursuant to Section 31(a)
of the Investment Company Act of 1940 and the Rules thereunder are maintained at
the offices of Trustmark National Bank, 248 East Capitol Street, Jackson,
Mississippi, 39201.
(b) All accounts, books and other documents required to be
maintained by the Fund Accountant and Administrator pursuant to Section 31(a) of
the Investment Company Act of 1940 and the Rules thereunder are maintained at
the offices of BISYS Fund Services, Inc.*
(c) All accounts, books and other documents required to be
maintained by the Distributor pursuant to Section 31(a) of the Investment
Company Act of 1940 and the Rules thereunder are maintained at the offices of
Performance Funds Distributor, Inc., 125 West 55th Street, New York, New York,
10019.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings.
(a) Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the removal of a trustee
if requested to do so by the holders of at least 10% of
the Registrant's outstanding shares.
(b) Registrant undertakes to provide the support to
shareholders specified in Section 16(c) of the 1940 Act
as though that section applied to the Registrant.
(c) Registrant undertakes to file within 4 to 6 months
financial statements for The Small Cap Fund.
- ------------------------------
* All addresses are 3435 Stelzer Road, Columbus, Ohio 43219.
<PAGE> 221
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933, as amended and has duly caused
this Post-Effective Amendment No. 8 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Columbus, and State of Ohio, on September 26, 1997.
PERFORMANCE FUNDS TRUST (REGISTRANT)
By: /s/ Walter B. Grimm
---------------------------------
Walter B. Grimm, President
<PAGE> 222
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ John J. Pileggi Trustee September 26, 1997
- ----------------------------
John J. Pileggi
James H. Johnston, III* Trustee September 26, 1997
- ----------------------------
James H. Johnston, III
James T. Mallette* Trustee September 26, 1997
- ----------------------------
James T. Mallette
Walter P. Neely* Trustee September 26, 1997
- ----------------------------
Walter P. Neely
Charles M. Carr** Trustee September 26, 1997
- ----------------------------
Charles M. Carr
John William Head** Trustee September 26, 1997
- ----------------------------
John William Head
/s/ Walter B. Grimm President September 26, 1997
- ----------------------------
Walter B. Grimm
/s/ Michael Sakala Treasurer September 26, 1997
- ----------------------------
Michael Sakala
*By: /s/ John J. Pileggi
------------------------------
John J. Pileggi, Attorney-in-Fact pursuant to Power of
Attorney previously filed.
** /s/ Walter B. Grimm
------------------------------
Walter B. Grimm, Attorney-in-Fact pursuant to Power of
Attorney previously filed and filed herein.
<PAGE> 223
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<S> <C> <C>
2(b) -- Amendment to ByLaws
5(b) -- Administration Agreement
5(c) -- Investment Advisory Contract Supplement
6 -- Distribution Agreement
9(a) -- Transfer Agreement
9(b) -- Fund Accounting Agreement
10 -- Consent of Independent Counsel
11 -- Consent of Independent Accountants
15(a) -- Performance Funds Trust 12b-1 Amendment
15(b) -- Rule 12b-1 Distribution Plan + Agreement Supplement
15(c) -- Services Agreement
15(d) -- Compensation Agreement
15(e) -- The Form of Dealer and Selling Agreement
16 -- Aggregate Total Return
18(a) -- Power of Attorney
27(a) -- Financial Data Schedule
27(b) -- Financial Data Schedule
27(c) -- Financial Data Schedule
27(d) -- Financial Data Schedule
27(e) -- Financial Data Schedule
27(f) -- Financial Data Schedule
27(g) -- Financial Data Schedule
27(h) -- Financial Data Schedule
27(i) -- Financial Data Schedule
27(j) -- Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 2b
PERFORMANCE FUNDS TRUST
AMENDMENT TO BY-LAWS
The undersigned, Assistant Secretary of Performance Funds Trust (the
"Fund") does hereby certify that pursuant to Article XII of the By-Laws of the
Fund, dated March 11, 1992, the following votes were duly adopted by at least a
majority of the Trustees of the Fund at a meeting duly called and held on March
25, 1997:
VOTED: That Article II, Section 2 of the By-Laws shall be amended to read as
follows:
Section 2. The President, Treasurer and Secretary shall be chosen by
the Trustees. Two or more offices may be held by a single person.
Subject to the provisions of Section 12 hereof, the President, the
Treasurer and the Secretary shall each hold office until their
successors are chosen and qualified and all other officers shall hold
office at the pleasure of the Trustees.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 27th day
of March, 1997.
/s/ BRUCE TREFF
-------------------------
Bruce Treff
Assistant Secretary
<PAGE> 1
Exhibit 5b
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of October, 1996, by and between
the PERFORMANCE FUNDS TRUST, a Delaware business trust (the "Trust"), and BISYS
FUND SERVICES LIMITED PARTNERSHIP, d/b/a BISYS FUND SERVICES (the
"Administrator"), an Ohio limited partnership.
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"),
consisting of several series of shares of beneficial interest ("Shares"); and
WHEREAS, the Trust desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Trust as the Trust and the Administrator may agree on
("Portfolios") and as listed on Schedule A attached hereto and made a part of
this Agreement, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Administrator hereby agree as follows:
ARTICLE 1. Retention of the Administrator; Conversion to the Services. The
Trust hereby engages the Administrator to act as the administrator of the
Portfolios and to furnish the Portfolios with the management and administrative
services as set forth in Article 2 below (collectively, the "Services"), and, in
connection therewith, the Trust agrees to convert to the Administrator's data
processing systems and software (the "BISYS System") as necessary in order to
receive the Services. The Trust shall cooperate with the Administrator to
provide the Administrator with all necessary information and assistance required
to successfully convert to the BISYS System. The Administrator shall provide the
Trust with a schedule relating to such conversion and the parties agree that the
conversion may progress in stages. The date upon which all Services shall have
been converted to the BISYS System shall be referred to herein as the
"Conversion Date." The Administrator hereby accepts such engagement and agrees
to perform the Services commencing, with respect to each individual Service, on
the date that the conversion of such Service to the BISYS System has been
completed. The Administrator shall determine in accordance with its normal
acceptance procedures when the applicable Service has been successfully
converted.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way and shall
not be deemed an agent of the Trust.
ARTICLE 2. Administrative Services. The Administrator shall perform or
supervise the performance by others of administrative services in connection
with the operations of the Portfolios, and, on behalf of the Trust, will
investigate, assist in the selection of and conduct relations with
1
<PAGE> 2
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator shall provide the Trustees of the Trust with such reports
regarding investment performance as they may reasonably request but shall have
no responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities.
The Administrator shall provide the Trust with regulatory reporting, all
necessary office space, equipment, personnel, compensation and facilities
(including facilities for meetings of shareholders ("Shareholders") and Trustees
of the Trust) for handling the affairs of the Portfolios and such other services
as the Administrator shall, from time to time, determine to be necessary to
perform its obligations under this Agreement. In addition, at the request of the
Board of Trustees, the Administrator shall make reports to the Trust's Trustees
concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator shall:
(a) calculate contractual Trust expenses and control all disbursements
for the Trust, and as appropriate compute the Trust's yields, total
return, expense ratios, portfolio turnover rate and, if required,
portfolio average dollar-weighted maturity;
(b) prepare and file with the SEC Post-Effective Amendments to the
Trust's Registration Statement and supplements thereto, Notices of
Annual or Special Meetings of Shareholders and Proxy materials
relating to such meetings; coordinate (after consultation with the
Trust's investment adviser regarding printing costs) the printing of
such Post-Effective Amendments, supplements, and Proxy materials;
accumulate information for and, subject to the approval by the
Trust's Treasurer, prepare reports to the Trust's shareholders of
record and the SEC including, but not necessarily limited to, the
preparation and filing of (i) Semi-Annual Reports on Form N-SAR and
(ii) Notices pursuant to Rule 24f-2;
(c) prepare such reports, applications and documents (including reports
regarding the sale and redemption of Shares as may be required in
order to comply with Federal and state securities law) as may be
necessary or desirable to register the Trust's Shares with state
securities authorities, monitor the sale of Trust Shares for
compliance with state securities laws, and file with the appropriate
state securities authorities the registration statements and reports
for the Trust and the Trust's Shares and all amendments thereto, as
may be necessary or convenient to register and keep effective the
Trust and the Trust's Shares with state securities authorities to
enable the Trust to make a continuous offering of its Shares;
(d) review and provide advice and counsel on all sales literature (e.g.,
advertisements, brochures and shareholder communications) with
respect to each of the Portfolios;
2
<PAGE> 3
(e) administer contracts on behalf of the Trust with, among others, the
Trust's investment adviser, distributor, custodian, transfer agent
and fund accountant;
(f) supervise the Trust's transfer agent with respect to the payment of
dividends and other distributions to Shareholders;
(g) calculate performance data of the Trust and its Portfolios for
dissemination to information services covering the investment
company industry;
(h) coordinate and supervise the preparation and filing of the Trust's
tax returns;
(i) examine and review the operations and performance of the various
organizations providing services to the Trust or any Portfolio of
the Trust, including, without limitation, the Trust's investment
adviser, distributor, custodian, fund accountant, transfer agent,
outside legal counsel and independent public accountants, and at the
request of the Board of Trustees, report to the Board on the
performance of such organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing of
the Trust's semi-annual and annual reports to Shareholders;
(k) assist with the design, development, and operation of the Trust
Portfolios, including new classes, investment objectives, policies
and structure;
(l) provide individuals reasonably acceptable to the Trust's Board of
Trustees to serve as officers of the Trust, who will be responsible
for the management of certain of the Trust's affairs as determined
by the Trust's Board of Trustees;
(m) advise the Trust and its Board of Trustees on matters concerning the
Trust and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Trust in
accordance with the requirements of Rules 17g-1 and 17d-1(d)(7)
under the 1940 Act as such bonds and policies are approved by the
Trust's Board of Trustees;
(o) monitor and advise the Trust and its Portfolios on their regulated
investment company status under the Internal Revenue Code of 1986,
as amended;
(p) perform all administrative services and functions of the Trust and
each Portfolio to the extent administrative services and functions
are not provided to the Trust or such Portfolio pursuant to the
Trust's or such Portfolio's investment advisory agreement,
3
<PAGE> 4
distribution agreement, custodian agreement, transfer agent
agreement and fund accounting agreement;
(q) furnish advice and recommendations with respect to other aspects of
the business and affairs of the Portfolios as the Trust and the
Administrator shall determine desirable; and
(r) assist in monitoring and developing compliance procedures for each
Portfolio which will include, among other matters, procedures to
monitor compliance with each Portfolio's investment objective,
policies, restrictions, tax matters and applicable laws and
regulations;
(s) monitor the Company's arrangements with respect to services provided
by financial institutions which are, or wish to become, shareholder
servicing agents for the Company ("Shareholder Servicing Agents").
With respect to Shareholder Servicing Agents, the Administrator
shall specifically monitor and review the services rendered by the
Shareholder Servicing Agents to their customers, who are the
beneficial owners of Shares, pursuant to agreements between the
Company and such Shareholder Servicing Agents ("Shareholder
Servicing Agreements"), including, among other things, reviewing the
qualifications of financial institutions wishing to be Shareholder
Servicing Agents, assisting in the execution and delivery of
Shareholder Servicing Agreements, reporting to the Board of
Directors with respect to the amounts paid or payable by the Company
from time to time under the Shareholder Servicing Agreements and the
nature of the services provided by Shareholder Servicing Agents, and
maintaining appropriate records in connection with its monitoring
duties;
(t) provide legal advice and counsel to the Company with respect to
regulatory matters including: monitoring regulatory and legislative
developments which may affect the Company and assisting in the
strategic response to such developments, counseling and assisting
the Company in routine regulatory examinations or investigations of
the Company, and working closely with outside counsel to the Company
in response to any litigation or non-routine regulatory matters;
(u) assist each Company in preparing for Board meetings by (i)
coordinating board book production and distribution, (ii) preparing
Board agendas and minutes, (iii) preparing the BISYS section of
Board materials, (iv) preparing special Board meeting materials,
including but not limited to, materials relating to annual contract
approvals and 12b-1 plan approvals, as agreed upon by the parties,
and (v) such other Board meeting functions that are agreed upon by
the parties; and
4
<PAGE> 5
(v) perform internal audit examinations, mail annual reports of the
Portfolios, prepare an annual list of Shareholders and mail notices
of Shareholders' meetings, proxies and proxy statements.
The Administrator shall perform such other services for the Trust that are
mutually agreed upon by the parties from time to time for which the Trust will
pay the Administrator's out-of-pocket expenses.
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own expense
the executive, supervisory and clerical personnel necessary to perform its
obligations under this Agreement. The Administrator shall also provide the items
which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Trust as well as all Trustees of the
Trust who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Trust retained by the Trustees of the Trust
to perform services on behalf of the Trust.
(B) The Trust. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust not otherwise allocated herein, including, without
limitation, organization costs, taxes, expenses for legal and auditing services,
the expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing Shareholders, all expenses incurred in connection with
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration of the Shares under Federal and state
securities laws, fees and out-of-pocket expenses of Directors who are not
affiliated persons of the Administrator or the investment adviser to the Trust
or any affiliated corporation of the Administrator or the investment adviser,
insurance, interest, brokerage costs, litigation and other extraordinary or
nonrecurring expenses, and all fees and charges of investment advisers to the
Trust.
(C) Expense Limitations Under State Law.
(1) If the aggregate expenses of every character incurred by, or
allocated to, the Trust in any fiscal year, other than interest, taxes, expenses
under the 12b-1 Plans, brokerage commissions and other portfolio transaction
expenses, other expenditures which are capitalized in accordance with generally
accepted accounting principles and any extraordinary expense (including, without
limitation, litigation and indemnification expense), but including the fees
provided for in Article 3(B) of this Agreement and under the Investment Advisory
Agreement ("includable expenses"), shall exceed the expense limitations
applicable to the Trust imposed by state securities laws or regulations
thereunder, as these limitations may be raised or lowered from time to time, the
Trust may deduct from the fees to be paid to the Administrator, or the
Administrator will bear, to the extent required by state law, that portion of
such excess which bears the same relation to the total of such excess as the fee
to the Administrator bears to the total fee otherwise payable for the fiscal
5
<PAGE> 6
year by the Trust pursuant to this Agreement and the Advisory Agreement between
the Trust and the Adviser. The Administrator's obligation pursuant hereto will
be limited to the amount of the fees payable for the fiscal year by the Trust
pursuant to this Agreement.
(2) With respect to portions of a fiscal year in which this
Agreement shall be in effect, the limitation specified in subparagraph (1) above
shall be prorated according to the proportion which that portion of the fiscal
year bears to the full fiscal year. At the end of each month of the Trust's
fiscal year, the Administrator will review the includable expenses accrued
during that fiscal year to the end of the period and shall estimate the
contemplated includable expenses for the balance of that fiscal year. If, as a
result of that review and estimation, it appears likely that the includable
expenses will exceed the limitations referred to in this paragraph for a fiscal
year, the monthly fees relating to the Trust, payable to the Administrator under
this Agreement for such month shall be reduced, subject to later adjustments at
the end of each month through the end of the fiscal year to reflect actual
expenses, by an amount equal to the proportionate share attributable to the
Administrator as described in subparagraph (1) above, of a pro rata portion
(prorated on the basis of the remaining months of the fiscal year, including the
month just ended) of the amount by which the includable expenses for the fiscal
year (less an amount equal to the aggregate of actual reductions made pursuant
to this provision with respect to prior months of the fiscal year) are expected
to exceed the limitations provided in this paragraph. For purposes of the
foregoing, the value of the net assets of the Trust shall be computed in the
manner specified in Schedule A of this Agreement, and any payments required to
be made by the Administrator shall be made once a year promptly after the end of
the Trust's fiscal year.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. Commencing on the Conversion Date, for the
services to be rendered, the facilities furnished and the expenses assumed by
the Administrator pursuant to this Agreement, the Trust shall pay to the
Administrator compensation at an annual rate specified in Schedule A attached
hereto. Such compensation shall be calculated and accrued daily, and paid to the
Administrator monthly.
If the Conversion Date occurs subsequent to the first day of a month
or termination of this Agreement occurs before the last day of a month, the
Administrator's compensation for that part of the month in which this Agreement
is in effect shall be prorated in a manner consistent with the calculation of
the fees as set forth above. Payment of the Administrator's compensation for the
preceding month shall be made promptly.
(B) Survival of Compensation Rights. All rights of compensation under this
Agreement for services performed as of the termination date shall survive the
termination of this Agreement.
ARTICLE 5. Limitation of Liability of the Administrator. The duties of the
Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error
6
<PAGE> 7
of judgment or mistake of law or for any loss arising out of any act or omission
in carrying out its duties hereunder, except a loss resulting from willful
misfeasance, bad faith or negligence in the performance of its duties, or by
reason of reckless disregard of its obligations and duties hereunder, except as
may otherwise be provided under provisions of applicable law which cannot be
waived or modified hereby. (As used in this Article 5, the term "Administrator"
shall include partners, officers, employees and other agents of the
Administrator as well as the Administrator itself.)
So long as the Administrator acts in good faith and with due diligence and
without negligence or reckless disregard of its obligations hereunder, the Trust
assumes full responsibility and shall indemnify the Administrator and hold it
harmless from and against any and all actions, suits and claims, whether
groundless or otherwise, and from and against any and all losses, damages,
costs, charges, reasonable counsel fees and disbursements, payments, expenses
and liabilities (including reasonable investigation expenses) arising directly
or indirectly out of the Administrator's actions taken or nonactions with
respect to the performance of services hereunder. The Administrator agrees to
indemnify and hold harmless the Company, its employees, agents, Trustees,
officers and nominees from and against any and all actions, suits and claims,
whether groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, reasonable counsel fees and other
expenses of every nature and character arising out of or in any way relating to
the Administrator's bad faith, willful misfeasance, negligence or reckless
disregard by it of its obligations and duties, with respect to the performance
of services under this Agreement. The indemnity and defense provisions set forth
herein shall indefinitely survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provisions contained herein shall apply, however, it is
understood that if in any case the indemnifying party may be asked to indemnify
or hold the other party harmless, the indemnifying party shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the indemnified party will use all reasonable
care to identify and notify the indemnifying party promptly concerning any
situation which presents or appears likely to present the probability of such a
claim for indemnification against the indemnifying party, but failure to do so
in good faith shall not affect the rights hereunder.
The indemnifying party shall be entitled to participate at its own expense
or, if it so elects, to assume the defense of any suit brought to enforce any
claims subject to this indemnity provision. If the indemnifying party elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the indemnifying party and satisfactory to the other party, whose
approval shall not be unreasonably withheld. In the event that the indemnifying
party elects to assume the defense of any suit and retain counsel, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it. If the indemnifying party does not elect to assume the defense
of a suit, it will reimburse the other party for the reasonable fees and
expenses of any counsel retained by the other party.
7
<PAGE> 8
The Administrator may apply to the Trust at any time for instructions and
may consult counsel for the Trust or its own counsel and with accountants and
other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instructions or with the opinion of such counsel, accountants or other experts.
The Trust may consult counsel and accountants and other experts with
respect to any matter arising in connection with this Agreement, and the Trust
shall not be liable or accountable for any action taken or omitted by it in good
faith in accordance with such instructions or with the opinion of such counsel,
accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employees or agents of the
Trust until receipt of written notice thereof from the Trust.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that trustees, officers, employees
and Shareholders of the Trust are or may be or become interested in the
Administrator, as directors, officers, employees and shareholders or otherwise
and that partners, officers and employees of the Administrator and its counsel
are or may be or become similarly interested in the Trust, and that the
Administrator may be or become interested in the Trust as a Shareholder or
otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall be
as specified in Schedule A hereto.
ARTICLE 8. Assignment. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
upon the provision of advanced written notice to the Trust, the Administrator
may, at its expense, subcontract with any entity or person concerning the
provision of the services contemplated hereunder. The Administrator shall not,
however, be relieved of any of its obligations under this Agreement by the
appointment of such subcontractor and provided further, that the Administrator
shall be responsible, to the extent provided in Article 5 hereof, for all acts
of such subcontractor as if such acts were its own. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
ARTICLE 9. Amendments. This Agreement may be amended by the parties hereto
only if such amendment is specifically approved (i) by the vote of a majority of
the Trustees of the Trust, and (ii) by the vote of a majority of the Trustees of
the Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a Board of Trustees meeting called for the purpose
of voting on such approval.
8
<PAGE> 9
For special cases, the parties hereto may amend such procedures set forth
herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Trust does not conflict with or violate any requirements of its
Declaration of Trust or then current prospectuses, or any rule, regulation or
requirement of any regulatory body.
ARTICLE 10. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Trust shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Trust and will be made available
to or surrendered promptly to the Trust on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Trust and follow the Trust's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so, unless
(in cases involving potential exposure only to civil liability) the Trust has
agreed to indemnify the Administrator against such liability.
ARTICLE 11. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other party
at the following address: if to the Administrator, to it at 3435 Stelzer Road,
Columbus, Ohio 43219; if to the Trust, to it at 248 East Capitol Street,
Jackson, Mississippi, Attn: Mike Allen, with a copy to Steven Howard, Esq.,
Baker & McKenzie, 805 Third Avenue, New York, New York 10022, or at such other
address as such party may from time to time specify in writing to the other
party pursuant to this Section.
ARTICLE 13. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Ohio and the applicable provisions of the 1940
Act. To the extent that the applicable laws of the State of Ohio, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
ARTICLE 14. Multiple Originals. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
9
<PAGE> 10
ARTICLE 15. Confidential Information. Each party acknowledges that it may
acquire knowledge and information relating to the other party and its affiliates
including, but not limited to, information pertaining to business plans,
employees, customers and/or suppliers, shareholders and prospective
shareholders, and that all such knowledge and information acquired or developed
is and shall be confidential and proprietary information (all such confidential
and proprietary information herein collectively referred to as the "Confidential
Information"). Each party agrees to hold the Confidential Information in strict
confidence, to refrain from directly or indirectly disclosing it to others or
using it in any way except for purposes of performing services hereunder, and to
prevent any unauthorized person access to it either before or after termination
of this Agreement, without the prior written consent of the other party. Both
parties further agree to take all action reasonable and necessary to protect the
confidentiality of the Confidential Information. The parties shall use their
best efforts to have their officers, employees and agents agree to the terms of
this Section. The obligations of the parties contained in this Section shall
survive termination of this Agreement. Neither party's confidentiality
obligations under this provision shall apply to such information that (i) was in
the public domain or available to a third party without restrictions at or prior
to the time such information was made known to such party, (ii) had been
independently known to such party at the time of disclosure from persons who
were not subject to similar confidentiality obligations, or (iii) is required to
be disclosed by law (except that each party will use its best efforts to give
the other party written notice prior to any such disclosure).
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
PERFORMANCE FUNDS TRUST
By: /s/ JOHN J. PILEGGI
-----------------------------------
Title: Principal Executive Officer
--------------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
BY: BISYS FUND SERVICES,
GENERAL PARTNER
By: /s/ J. DAVID HUBER
-----------------------------------
Title: Executive Vice President
--------------------------------
10
<PAGE> 11
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF OCTOBER 1, 1996
BETWEEN PERFORMANCE FUNDS TRUST
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Portfolios: This Agreement shall apply to all Portfolios of Performance Funds
Trust, either now or hereafter created (collectively, the
"Portfolios"). The current Portfolios of the Trust are set forth
below:
The Short Term Government Income Fund;
The Intermediate Term Government Income Fund;
The Equity Fund;
The Money Market Fund;
The Mid Cap Growth Fund; and
The Treasury Fund.
Fees: Pursuant to Article 4, in consideration of services rendered and
expenses assumed pursuant to this Agreement, the Trust will pay the
Administrator on the first business day of each month, or at such
time(s) as the Administrator shall request and the parties hereto
shall agree, a fee computed daily at the annual rate of:
Fifteen one-hundredths of one percent (.15%) of the Trust's
average daily net assets up to $1 billion.
Twelve one-hundredths of one percent (.12%) of the Trust's
daily net assets in excess of $1 billion.
The fee for the period from the day of the month upon which the
Conversion Date occurs until the end of that month shall be prorated
according to the proportion which such period bears to the full
monthly period. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be prorated
according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of
this Agreement.
For purposes of determining the fees payable to the Administrator,
the value of the net assets of a particular Portfolio shall be
computed in the manner described in the Trust's Declaration of Trust
or in the Prospectus or Statement of Additional Information
respecting that Portfolio as from time to time is in effect for the
computation of the value of such net assets in connection with the
determination of the liquidating value of the shares of such
Portfolio.
A-1
<PAGE> 12
The parties hereby confirm that the fees payable hereunder shall be
applied to each Portfolio as a whole, and not to separate classes of
shares within the Portfolios.
Term: The initial term of this Agreement (the "Initial Term") shall be for
a period commencing on the date this Agreement is executed by both
parties and ending on the date that is 60 months after the
Conversion Date; provided, however, that the Trust shall have the
sole option of terminating this Agreement, without penalty, at the
conclusion of the first 24 months of such Initial Term. In the event
of a material breach of this Agreement by either party, the
non-breaching party shall notify the breaching party in writing of
such breach and upon receipt of such notice, the breaching party
shall have 45 days to remedy the breach. In the event the breach is
not remedied within such time period, the nonbreaching party may
immediately terminate this Agreement.
Unless 60 days advance written notice of nonrenewal is provided by
either party prior to the end of the Initial Term or the Agreement
is sooner terminated as set forth above, this Agreement shall
continue in effect following the Initial Term unless and until it is
terminated in the manner set forth in this paragraph. Either party
may terminate this Agreement after the Initial Term, without
penalty, by the provision of 60 days advance written notice to the
other party.
Notwithstanding the foregoing, after such termination for so long as
the Administrator, with the written consent of the Trust, in fact
continues to perform any one or more of the services contemplated by
this Agreement or any schedule or exhibit hereto, the provisions of
this Agreement, including without limitation the provisions dealing
with indemnification, shall continue in full force and effect.
Compensation due the Administrator and unpaid by the Trust upon such
termination shall be immediately due and payable upon and
notwithstanding such termination. The Administrator shall be
entitled to collect from the Trust, in addition to the compensation
described in this Schedule A, the amount of all of the
Administrator's cash disbursements for services in connection with
the Administrator's activities in effecting such termination,
including without limitation, the delivery to the Trust and/or its
designees of the Trust's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination, in
exchange for payment of its costs, the Administrator will provide
the Trust with reasonable access to any Trust documents or records
remaining in its possession.
If, during the Initial Term, for any reason other than (i)
nonrenewal, (ii) termination by the Trust at the conclusion of the
first 24 months of the Initial Term, or (iii) termination based upon
a material breach of this Agreement, the Administrator is replaced
as administrator, or if a third party is added to perform all or a
part of the services provided by the Administrator under this
Agreement
A-2
<PAGE> 13
(excluding any sub-administrator appointed by the Administrator as
provided in Article 7 hereof), then the Trust shall make a one-time
cash payment, as liquidated damages, to the Administrator equal to
the balance due the Administrator for (i) the lesser of (a) the next
12 months of the Initial Term or (b) the remainder of such Initial
Term, in the event such termination occurs after the first 24 months
of such Initial Term or (ii) the lesser of (a) the next 12 months of
the Initial Term or (b) the remaining time period within the first
24 months of the Initial Term, in the event such termination occurs
during the first 24 months of such Initial Term, assuming for
purposes of calculation of the payment that (i) the asset level of
the Trust on the date the Administrator is replaced, or a third
party is added, will remain constant for the balance of the Initial
Term and (ii) such payment shall be based upon the actual fee being
charged on such date (which may or may not be lower than the
contractual fee amount).
A-3
<PAGE> 1
EXHIBIT 5(c)
THE SMALLCAP INVESTOR FUND
A SERIES OF PERFORMANCE FUNDS TRUST
3435 STELZER ROAD
COLUMBUS, OHIO 43219
September 5, 1997
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
Investment Advisory Contract Supplement
Dear Sirs or Madams:
This will confirm the agreement between Performance Funds Trust (the
"Trust") and Trustmark National Bank (the "Adviser") as follows:
The SmallCap Investor Fund (the "Fund") is a series portfolio of the
Trust which has been organized as a business trust under the laws of the State
of Delaware and is an open-end management investment company. The Trust and
the Adviser have entered into a Master Investment Advisory Contract, dated
March 1, 1993 (as from time to time amended and supplemented, the "Master
Advisory Contract"), pursuant to which the Adviser has undertaken to provide or
make provision for the Trust for certain investment advisory and management
services identified therein and to provide certain other services, as more
fully set forth therein. Certain capitalized terms used without definition in
this Investment Advisory Contract Supplement have the meanings specified in the
Master Advisory Contract.
The Trust agrees with the Adviser as follows:
1. ADOPTION OF MASTER ADVISORY CONTRACT. The Master Advisory
Contract is hereby adopted for the Fund. The Fund shall be one of the "Funds"
referred to in the Master Advisory Contract; and its shares shall be a "Series"
of shares as referred to therein.
2. PAYMENT OF FEES. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Adviser as provided in the Master
Advisory Contract and herein, the Fund shall pay a monthly fee on the first
business day of each month, based upon the average daily value (as determined
on each business day at the time set forth in the Prospectus for determining
net asset value per share) of the net assets of the Fund during the preceding
month, at the annual rate of 1.00%.
<PAGE> 2
If the foregoing correctly sets forth the agreement between the Trust
and the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
The SmallCap Investor Fund, a Series
of Performance Funds Trust
By:
-----------------------------
Title:
The foregoing Contract is
hereby agreed to as of the
date hereof:
TRUSTMARK NATIONAL BANK
By:
-----------------------------
Title:
<PAGE> 1
Exhibit 6
DISTRIBUTION AGREEMENT
AGREEMENT made this 1st day of October, 1996, between PERFORMANCE FUNDS
TRUST (the "Trust"), a Delaware business trust, and PERFORMANCE FUNDS
DISTRIBUTOR, INC. ("Distributor"), a Delaware corporation.
WHEREAS, the Trust is an open-end management investment company, organized
as a Delaware business trust and registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Trust (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor; Conversion to the Services.
1.1 Distributor (i) will act as agent for the distribution of the
Shares covered by the registration statement and prospectus of the Trust then in
effect under the Securities Act of 1933, as amended (the "Securities Act") and
(ii) will perform such additional services as are provided in this Section 1
(collectively, the "Services"). In connection therewith, the Trust agrees to
convert to the Distributor's data processing systems and software (the "BISYS
System"). The Trust shall cooperate with the Distributor to provide the
Distributor with all necessary information and assistance required to
successfully convert to the BISYS System. The Distributor shall provide the
Trust with a schedule relating to such conversion and the parties agree that the
conversion may progress in stages. The date upon which all Services shall have
been converted to the BISYS System shall be referred to herein as the
"Conversion Date." The Distributor hereby accepts such engagement and agrees to
perform the Services commencing, with respect to each individual Service, on the
date that the conversion of such Service to the BISYS System has been completed.
The Distributor shall determine in accordance with its normal acceptance
procedures when the applicable Service has been successfully converted. As used
in this Agreement, the term "registration statement" shall mean Parts A (the
prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above-referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders
for the sale of the Shares and will undertake such advertising and promotion as
it believes reasonable in connection
<PAGE> 2
with such solicitation. The Trust understands that Distributor is now and may in
the future be the distributor of the shares of several investment companies or
series (together, "Investment Companies") including Investment Companies having
investment objectives similar to those of the Trust. The Trust further
understands that investors and potential investors in the Trust may invest in
shares of such other Investment Companies. The Trust agrees that Distributor's
duties to such Investment Companies shall not be deemed in conflict with its
duties to the Trust under this paragraph 1.2.
Distributor shall, at its own expense, finance appropriate
activities which it deems reasonable, which are primarily intended to result in
the sale of the Shares, including, but not limited to, advertising, compensation
of underwriters, dealers and sales personnel, the printing and mailing of
prospectuses to other than current Shareholders, and the printing and mailing of
sales literature.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all rules and regulations promulgated by the Commission thereunder and all
rules and regulations adopted by any securities association registered under the
Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust.
1.5 Distributor will transmit any orders received by it for purchase
or redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books and
2
<PAGE> 3
accounts prepared by the Trust, (b) a monthly itemized list of the securities in
the Funds, (c) monthly balance sheets as soon as practicable after the end of
each month, and (d) from time to time such additional information regarding the
financial condition of the Funds as Distributor may reasonably request.
1.10 The Trust represents to Distributor that, with respect to the
Shares, all registration statements and prospectuses filed by the Trust with the
Commission under the Securities Act have been carefully prepared in conformity
with requirements of said Act and rules and regulations of the Commission
thereunder. The registration statement and prospectus contain all statements
required to be stated therein in conformity with said Act and the rules and
regulations of said Commission and all statements of fact contained in any such
registration statement and prospectus are true and correct. Furthermore, neither
any registration statement nor any prospectus includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of the
Shares. The Trust may, but shall not be obligated to, propose from time to time
such amendment or amendments to any registration statement and such supplement
or supplements to any prospectus as, in the light of future developments, may,
in the opinion of the Trust's counsel, be necessary or advisable. If the Trust
shall not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Trust of a written request from
Distributor to do so, Distributor may, at its option, terminate this Agreement.
The Trust shall not file any amendment to any registration statement or
supplement to any prospectus without giving Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Trust's right to file at any time such amendments to
any registration statement and/or supplements to any prospectus, of whatever
character, as the Trust may deem advisable, such right being in all respects
absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares. The Trust agrees to indemnify, defend and hold Distributor, its
several partners and employees, and any person who controls Distributor within
the meaning of Section 15 of the Securities Act free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act or under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Trust's
agreement to indemnify Distributor, its partners or employees, and any such
controlling person shall not be deemed to cover any claims, demands, liabilities
or expenses arising out of any statements or representations as are contained in
any prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any
3
<PAGE> 4
omission or alleged omission to state a material fact in connection with the
giving of such information required to be stated in such answers or necessary to
make the answers not misleading; and further provided that the Trust's agreement
to indemnify Distributor and the Trust's representations and warranties
hereinbefore set forth in paragraph 1.10 shall not be deemed to cover any
liability to the Trust or its Shareholders to which Distributor would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of Distributor's reckless disregard
of its obligations and duties under this Agreement. The Trust's agreement to
indemnify Distributor, its partners and employees and any such controlling
person, as aforesaid, is expressly conditioned upon the Trust being notified of
any action brought against Distributor, its partners or employees, or any such
controlling person, such notification to be given by letter or by telegram
addressed to the Trust at its principal office specified in the first paragraph
of this Agreement and sent to the Trust by the person against whom such action
is brought, within 10 days after the summons or other first legal process shall
have been served. The failure to so notify the Trust of any such action shall
not relieve the Trust from any liability which the Trust may have to the person
against whom such action is brought by reason of any such untrue, or allegedly
untrue, statement or omission, or alleged omission, otherwise than on account of
the Trust's indemnity agreement contained in this paragraph 1.11. The Trust will
be entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen by the Trust and approved by Distributor, which
approval shall not be unreasonably withheld. In the event the Trust elects to
assume the defense of any such suit and retain counsel of good standing approved
by Distributor, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case
Distributor reasonably does not approve of counsel chosen by the Trust, the
Trust will reimburse Distributor, its partners and employees, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor or them. The Trust's
indemnification agreement contained in this paragraph 1.11 and the Trust's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Distributor, its partners and employees, or any controlling person, and shall
survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to
Distributor's benefit, to the benefit of its several partners and employees, and
their respective estates, and to the benefit of the controlling persons and
their successors. The Trust agrees promptly to notify Distributor of the
commencement of any litigation or proceedings against the Trust or any of its
officers or Trustees in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the Securities Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Trustees
or any such controlling person, may incur under the Securities Act or under
common law or otherwise, but
4
<PAGE> 5
only to the extent that such liability or expense incurred by the Trust, its
officers or Trustees or such controlling person resulting from such claims or
demands, shall arise out of or be based upon any untrue, or alleged untrue,
statement of a material fact contained in information furnished in writing by
Distributor to the Trust and used in the answers to any of the items of the
registration statement or in the corresponding statements made in the
prospectus, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by Distributor to the Trust required to be stated in such answers or
necessary to make such information not misleading. Distributor's agreement to
indemnify the Trust, its officers and Trustees, and any such controlling person,
as aforesaid, is expressly conditioned upon Distributor being notified of any
action brought against the Trust, its officers or Trustees, or any such
controlling person, such notification to be given by letter or telegram
addressed to Distributor at its principal office in Columbus, Ohio, and sent to
Distributor by the person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served.
Distributor shall have the right of first control of the defense of such action,
with counsel of its own choosing, satisfactory to the Trust, if such action is
based solely upon such alleged misstatement or omission on Distributor's part,
and in any other event the Trust, its officers or Trustees or such controlling
person shall each have the right to participate in the defense or preparation of
the defense of any such action. The failure to so notify Distributor of any such
action shall not relieve Distributor from any liability which Distributor may
have to the Trust, its officers or Trustees, or to such controlling person by
reason of any such untrue or alleged untrue statement, or omission or alleged
omission, otherwise than on account of Distributor's indemnity agreement
contained in this paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the Trust
under any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.13 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's prospectus,
Agreement and Declaration of Trust, or Bylaws.
1.14 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or
for additional information;
(b) in the event of the issuance by the Commission of any
stop order suspending the effectiveness of the
registration statement or prospectus then in effect or
the initiation by service of process on the Trust of any
proceeding for that purpose;
5
<PAGE> 6
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration
statement or prospectus then in effect or which requires
the making of a change in such registration statement or
prospectus in order to make the statements therein not
misleading; and
(d) of all action of the Commission with respect to any
amendment to any registration statement or prospectus
which may from time to time be filed with the
Commission.
For purposes of this section, informal requests by or acts of
the Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.15 Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and its prior, present
or potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except, after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where
Distributor may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust.
1.16 This Agreement shall be governed by the laws of the State of
Ohio.
2. Fee.
Distributor shall receive from the Funds identified in the
Distribution and Shareholder Service Plan attached as Schedule A hereto (the
"Distribution Plan Funds") a distribution fee at the rate and upon the terms and
conditions set forth in such Plan. The distribution fee shall be accrued daily
and shall be paid on the first business day of each month, or at such time(s) as
the Distributor shall reasonably request.
3. Sale and Payment.
Shares of a Fund may be subject to a sales load and may be subject
to the imposition of a distribution fee pursuant to the Distribution and
Shareholder Service Plan referred to above. To the extent that Shares of a Fund
are sold at an offering price which includes a sales load or at net asset value
subject to a contingent deferred sales load with respect to certain redemptions
(either within a single class of Shares or pursuant to two or more classes of
Shares), such Shares shall hereinafter be referred to collectively as "Load
Shares" (in the case of Shares that are sold with a front-end sales load or
Shares that are sold subject to a contingent deferred sales load), "Front-End
Load Shares" or "CDSL Shares" and individually as a "Load Share," a "Front-End
Load Share" or a "CDSL Share." A Fund that contains Front-End Load Shares shall
hereinafter be referred to
6
<PAGE> 7
collectively as "Load Funds" or "Front-End Load Funds" and individually as a
"Load Fund" or a "Front-end Load Fund." A Fund that contains CDSL Shares shall
hereinafter be referred to collectively as "Load Funds" or "CDSL Funds" and
individually as a "Load Fund" or a "CDSL Fund." Under this Agreement, the
following provisions shall apply with respect to the sale of, and payment for,
Load Shares.
3.1 Distributor shall have the right to purchase Load Shares at
their net asset value and to sell such Load Shares to the public against orders
therefor at the applicable public offering price, as defined in Section 4
hereof. Distributor shall also have the right to sell Load Shares to dealers
against orders therefor at the public offering price less a concession
determined by Distributor, which concession shall not exceed the amount of the
sales charge or underwriting discount, if any, referred to in Section 4 below.
3.2 Prior to the time of delivery of any Load Shares by a Load Fund
to, or on the order of, Distributor, Distributor shall pay or cause to be paid
to the Load Fund or to its order an amount in Boston or New York clearing house
funds equal to the applicable net asset value of such Shares. Distributor may
retain so much of any sales charge or underwriting discount as is not allowed by
Distributor as a concession to dealers.
4. Public Offering Price.
The public offering price of a Load Share shall be the net asset
value of such Load Share, plus any applicable sales charge, all as set forth in
the current prospectus of the Load Fund. The net asset value of Shares shall be
determined in accordance with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and the then-current prospectus of the Load Fund.
5. Issuance of Shares.
The Trust reserves the right to issue, transfer or sell Load Shares
at net asset value (a) in connection with the merger or consolidation of the
Trust or the Load Fund(s) with any other investment company or the acquisition
by the Trust or the Load Fund(s) of all or substantially all of the assets or of
the outstanding Shares of any other investment company; (b) in connection with a
pro rata distribution directly to the holders of Shares in the nature of a stock
dividend or split; (c) upon the exercise of subscription rights granted to the
holders of Shares on a pro rata basis; (d) in connection with the issuance of
Load Shares pursuant to any exchange and reinvestment privileges described in
any then-current prospectus of the Load Fund; and (e) otherwise in accordance
with any then-current prospectus of the Load Fund.
6. Term, Duration and Termination.
The initial term of this Agreement (the "Initial Term") shall be for
a period commencing on the date this Agreement is executed by both parties and
ending on the date that is
7
<PAGE> 8
one year after the Conversion Date. Thereafter, if not terminated, this
Agreement shall continue with respect to a particular Fund automatically for
successive one-year terms, provided that such continuance is specifically
approved at least annually by (a) by the vote of a majority of those members of
the Trust's Board of Trustees who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting for the
purpose of voting on such approval and (b) by the vote of the Trust's Board of
Trustees or the vote of a majority of the outstanding voting securities of such
Fund. This Agreement is terminable without penalty, on not less than sixty days'
prior written notice, by the Trust's Board of Trustees, by vote of a majority of
the outstanding voting securities of the Trust or by the Distributor. This
Agreement will also terminate automatically in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same meanings
as ascribed to such terms in the 1940 Act.)
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first written
above.
PERFORMANCE FUNDS TRUST PERFORMANCE FUNDS
DISTRIBUTOR, INC.
By:________________________________ By:__________________________________
Title:_____________________________ Title:_______________________________
Date:______________________________ Date:________________________________
8
<PAGE> 9
Dated: October 1, 1996
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
PERFORMANCE FUNDS TRUST
AND
PERFORMANCE FUNDS DISTRIBUTOR, INC.
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
A-1
<PAGE> 1
Exhibit 9(a)
TRANSFER AGENCY AGREEMENT
AGREEMENT made this 1st day of October, 1996, between PERFORMANCE FUNDS
TRUST (the "Trust"), a Delaware business trust, and BISYS FUND SERVICES, INC.
("BISYS"), a Delaware corporation.
WHEREAS, the Trust desires that BISYS perform certain services for each
series of the Trust (individually referred to herein as a "Fund" and
collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Retention of BISYS; Conversion to the Services.
The Trust hereby engages BISYS to act as the transfer agent for the
Funds to perform (i) the transfer agent services set forth in Schedule A hereto
(the "Initial Services"), (ii) such special services (the "Special Services")
incidental to the performance of such services as may be agreed to by the
parties from time to time (for such fees as the parties may agree as aforesaid)
and (iii) such additional services (collectively with the Initial Services and
the Special Services, the "Services"), as may be agreed to by the parties from
time to time and set forth in an amendment to said Schedule A (for such fees as
the parties may agree as aforesaid), and, in connection therewith, the Trust
agrees to convert to BISYS' data processing systems and software (the "BISYS
System") as necessary in order to receive the Services. The Trust shall
cooperate with BISYS to provide BISYS with all necessary information and
assistance required to successfully convert to the BISYS System. BISYS shall
provide the Trust with a schedule relating to such conversion and the parties
agree that the conversion may progress in stages. The date upon which all
Initial Services shall have been converted to the BISYS System shall be referred
to herein as the "Conversion Date." BISYS hereby accepts such engagement and
agrees to perform the Services commencing, with respect to each individual
Service, on the date that the conversion of such Service to the BISYS System has
been completed. BISYS shall determine in accordance with its normal acceptance
procedures when the applicable Service has been successfully converted.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency services reasonably acceptable to the Trust
(individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
Trust or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
<PAGE> 2
2. Fees.
Commencing on the Conversion Date, the Trust shall pay BISYS for the
services to be provided by BISYS under this Agreement in accordance with, and in
the manner set forth in, Schedule B hereto. Fees for any additional services to
be provided by BISYS pursuant to an amendment to Schedule A hereto shall be
subject to mutual agreement at the time such amendment to Schedule A is
proposed.
3. Reimbursement of Expenses.
In addition to paying BISYS the fees described in Section 2 hereof,
the Trust agrees to reimburse BISYS for BISYS' out-of-pocket expenses in
providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Trust and in
delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Trust, the Trust's investment adviser
or custodian, dealers, shareholders or others as required for
BISYS to perform the services to be provided hereunder;
(c) Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms,
proxies, notices or other form of printed material which shall
be required by BISYS for the performance of the services to be
provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses BISYS shall incur at the written direction of an
officer of the Trust thereunto duly authorized.
4. Effective Date.
This Agreement shall become effective as of the date first written
above (the "Effective Date").
5. Term.
The initial term of this Agreement (the "Initial Term") shall be for
a period commencing on the date this Agreement is executed by both parties and
ending on the date that is one year after the Conversion Date. Thereafter, it
shall be renewed automatically for successive one-
2
<PAGE> 3
year terms unless written notice not to renew is given by the non-renewing party
to the other party at least 60 days prior to the expiration of the then-current
term; provided, however, that after such termination, for so long as BISYS, with
the written consent of the Trust, in fact continues to perform any one or more
of the services contemplated by this Agreement or any Schedule or exhibit
hereto, the provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full force and
effect. Fees and out-of-pocket expenses incurred by BISYS but unpaid by the
Trust upon such termination shall be immediately due and payable upon and
notwithstanding such termination. BISYS shall be entitled to collect from the
Trust, in addition to the fees and disbursements provided by Sections 2 and 3
hereof, the amount of all of BISYS' actual costs incurred for services in
connection with BISYS' activities in effecting such termination, including
without limitation, the delivery to the Trust and/or its distributor or
investment adviser and/or other parties, of the Trust's property, records,
instruments and documents, or any copies thereof. To the extent that BISYS may
retain in its possession copies of any Trust documents or records subsequent to
such termination which copies had not been requested by or on behalf of the
Trust in connection with the termination process described above, BISYS, in
exchange for payment of its costs, will provide the Trust with reasonable access
to such copies.
In the event of a material breach of this Agreement by either party,
the non-breaching party shall notify the breaching party in writing of such
breach and, upon receipt of such notice, the breaching party shall have 45 days
to remedy the breach. In the event the breach is not remedied within such time
period, the nonbreaching party may immediately terminate this Agreement.
If, during the Initial Term, for any reason other than (i) nonrenewal
or (ii) termination based upon a material breach of this Agreement, BISYS is
replaced as transfer agent, or if a third party is added to perform all or a
part of the services provided by BISYS under this Agreement (excluding any
sub-transfer agent appointed by BISYS as provided in Section 1 hereof), then the
Trust shall make a one-time cash payment, as liquidated damages to, BISYS equal
to the balance due BISYS for the remainder of the term of this Agreement,
assuming for purposes of calculation of the payment that (i) the asset level of
the Trust on the date BISYS is replaced, or a third party is added, will remain
constant for the balance of the contract term and (ii) such payment shall be
based upon the actual fee being charged on such date (which may or may not be
lower than the contractual fee amount).
6. Uncontrollable Events.
BISYS assumes no responsibility hereunder, and shall not be liable
for any damage, loss of data, delay or any other loss whatsoever caused by
events beyond its reasonable control.
7. Legal Advice.
BISYS shall notify the Trust at any time BISYS believes that it is in
need of the advice of counsel (other than counsel in the regular employ of BISYS
or any affiliated companies) with regard to BISYS' responsibilities and duties
pursuant to this Agreement; and after so notifying the
3
<PAGE> 4
Trust, BISYS, at its discretion, shall be entitled to seek, receive and act upon
advice of legal counsel of its choosing, such advice to be at the expense of the
Trust or Funds unless relating to a matter involving BISYS' willful misfeasance,
bad faith, gross negligence or reckless disregard with respect to BISYS'
responsibilities and duties hereunder and BISYS shall in no event be liable to
the Trust or any Fund or any shareholder or beneficial owner of the Trust for
any action reasonably taken pursuant to such advice.
8. Instructions.
Whenever BISYS is requested or authorized to take action hereunder
pursuant to instructions from a shareholder, or a properly authorized agent of a
shareholder ("shareholder's agent"), concerning an account in a Fund, BISYS
shall be entitled to rely upon any certificate, letter or other instrument or
communication, believed by BISYS to be genuine and to have been properly made,
signed or authorized by an officer or other authorized agent of the Trust or by
the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Trust or
any other person authorized by the Trust's Board of Trustees or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Trust relating to the Funds to the extent that such services
are described therein unless BISYS receives written instructions to the contrary
in a timely manner from the Trust.
9. Standard of Care; Reliance on Records and Instructions;
Indemnification.
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Trust agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Trust, the investment adviser and on any records provided
by any fund accountant or custodian thereof; provided that this indemnification
shall not apply to actions or omissions of BISYS in cases of its own bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties; and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, BISYS shall give
the Trust written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
4
<PAGE> 5
BISYS agrees to indemnify and hold harmless the Trust, its employees,
agents, Trustees, officers and nominees from and against any and all actions,
suits and claims, whether groundless or otherwise, and from and against any and
all judgments, liabilities, losses, damages, costs, charges, reasonable counsel
fees and other expenses of every nature and character arising out of or in any
way relating to BISYS' bad faith, willful misfeasance, negligence or reckless
disregard by it of its obligations and duties, with respect to the performance
of services under this Agreement, provided, that, prior to confessing any claim
against it which may be the subject of this indemnification, the Trust shall
give BISYS written notice of and a reasonable opportunity to defend against said
claim in its own name or in the name of the Trust.
10. Record Retention and Confidentiality.
BISYS shall keep and maintain on behalf of the Trust all books and
records which the Trust or BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees that
all such books and records shall be the property of the Trust and to make such
books and records available for inspection by the Trust or by the Securities and
Exchange Commission (the "Commission") at reasonable times and otherwise to keep
confidential all books and records and other information relative to the Trust
and its shareholders, except when requested to divulge such information by
duly-constituted authorities or court process, or requested by a shareholder or
shareholder's agent with respect to information concerning an account as to
which such shareholder has either a legal or beneficial interest or when
requested by the Trust, the shareholder, or shareholder's agent, or the dealer
of record as to such account.
11. Reports.
BISYS will furnish to the Trust and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Trust in writing,
such reports at such times as are prescribed in Schedule C attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
C.
12. Rights of Ownership.
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Trust and all such other records and data will be
furnished to the Trust in appropriate form as soon as practicable after
termination of this Agreement for any reason.
5
<PAGE> 6
13. Return of Records.
BISYS may at its option at any time, and shall promptly upon the
Trust's demand, turn over to the Trust and cease to retain BISYS' files, records
and documents created and maintained by BISYS pursuant to this Agreement which
are no longer needed by BISYS in the performance of its services or for its
legal protection. If not so turned over to the Trust, such documents and records
will be retained by BISYS for six years from the year of creation. At the end of
such six-year period, such records and documents will be turned over to the
Trust unless the Trust authorizes in writing the destruction of such records and
documents.
14. Bank Accounts.
The Trust and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the services required to be performed hereunder.
To the extent that the performance of such services shall require BISYS directly
to disburse amounts for payment of dividends, redemption proceeds or other
purposes, the Trust and Funds shall provide such bank or banks with all
instructions and authorizations necessary for BISYS to effect such
disbursements.
15. Representations of the Trust.
The Trust certifies to BISYS that: (a) as of the close of business on
the Effective Date, each Fund which is in existence as of the Effective Date has
authorized unlimited shares, and (b) by virtue of its Declaration of Trust,
shares of each Fund which are redeemed by the Trust may be sold by the Trust
from its treasury, and (c) this Agreement has been duly authorized by the Trust
and, when executed and delivered by the Trust, will constitute a legal, valid
and binding obligation of the Trust, enforceable against the Trust in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies of
creditors and secured parties.
16. Representations of BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and shall
continue to be in, substantial compliance with all provisions of law, including
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), required in connection with the performance of its duties under this
Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Trust and BISYS' records, data, equipment, facilities and other property used in
the performance of its obligations hereunder are adequate and that it will make
such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
6
<PAGE> 7
17. Insurance.
BISYS shall notify the Trust should its insurance coverage with
respect to professional liability or errors and omissions coverage be canceled
or reduced. Such notification shall include the date of change and the reasons
therefor. BISYS shall notify the Trust of any material claims against it with
respect to services performed under this Agreement, whether or not they may be
covered by insurance, and shall notify the Trust from time to time as may be
appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
18. Information to be Furnished by the Trust and Funds.
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the
state in which such Declaration has been filed.
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments thereto.
2. Certified copies of resolutions of the Board of Trustees
covering the following matters:
A. Approval of this Agreement and authorization of a
specified officer of the Trust to execute and
deliver this Agreement and authorization for
specified officers of the Trust to instruct BISYS
hereunder; and
B. Authorization of BISYS to act as Transfer Agent
for the Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with specimen
signatures of those officers, who are authorized to instruct
BISYS in all matters.
(d) Two copies of the following (if such documents are employed by
the Trust):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
7
<PAGE> 8
(e) A certificate as to shares of beneficial interest of the Trust
authorized, issued, and outstanding as of the Effective Date
of BISYS' appointment as Transfer Agent (or as of the date on
which BISYS' services are commenced, whichever is the later
date) and as to receipt of full consideration by the Trust for
all shares outstanding, such statement to be certified by the
Treasurer of the Trust.
19. Information Furnished by BISYS.
BISYS has furnished to the Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' By-Laws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the following
matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement;
2. Authorization of BISYS to act as Transfer Agent for the
Trust.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with
the Commission pursuant to Rule 17Ad-13 under the Exchange
Act.
20. Amendments to Documents.
The Trust shall furnish BISYS written copies of any amendments to, or
changes in, any of the items referred to in Section 18 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Trust agrees
that no amendments will be made to the Prospectuses or Statement of Additional
Information of the Trust which might have the effect of changing the procedures
employed by BISYS in providing the services agreed to hereunder or which
amendment might affect the duties of BISYS hereunder unless the Trust first
obtains BISYS' approval of such amendments or changes.
21. Reliance on Amendments.
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Trust pursuant to Sections 18
and 20 of this Agreement and the Trust hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely
8
<PAGE> 9
on the above-mentioned amendments to and changes in the documents and other
items to be provided pursuant to Sections 18 and 20 hereof, BISYS shall be under
no duty to comply with or take any action as a result of any of such amendments
or changes unless the Trust first obtains BISYS' written consent to and approval
of such amendments or changes.
22. Compliance with Law.
Except for the obligations of BISYS set forth in Section 10 hereof,
the Trust assumes full responsibility for the preparation, contents, and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of the Trust's shares. The Trust
represents and warrants that no shares of the Trust will be offered to the
public until the Trust's registration statement under the 1933 Act and the 1940
Act has been declared or becomes effective.
23. Notices.
Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the party required to be served with such
notice at the following address: if to the Trust, to it at 248 East Capitol
Street, Jackson, Mississippi, Attn: Mike Allen, with a copy to Steven Howard,
Esq., Baker & McKenzie, 805 Third Avenue, New York, New York 10022; if to BISYS,
to it at 3435 Stelzer Road, Columbus, Ohio 43219, or at such other address as
such party may from time to time specify in writing to the other party pursuant
to this Section.
24. Headings.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
25. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
26. Governing Law.
This Agreement shall be governed by and provisions shall be construed
in accordance with the laws of the State of Ohio.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
PERFORMANCE FUNDS TRUST
By: /s/ JOHN J. PILEGGI
-----------------------------------
Title: President
--------------------------------
BISYS FUND SERVICES, INC.
By: /s/ STEVE MINTOS
-----------------------------------
Title: Executive Vice President
--------------------------------
10
<PAGE> 11
Dated: October 1, 1996
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
PERFORMANCE FUNDS TRUST
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10 under the Securities
Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. Shareholder Information Services
a. Make information available to shareholder servicing unit and other
remote access units regarding trade date, share price, current
holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
A-1
<PAGE> 12
3. Compliance Reporting
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in which
the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service forms
for corresponding Fund and shareholder income and capital gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
a. Provide reports for tracking rights of accumulation and purchases
made under a Letter of Intent.
b. Account for separation of shareholder investments from transaction
sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and marketing
expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load
Fund.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the Trust.
b. Issue customer statements on scheduled cycle, providing duplicate
second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
A-2
<PAGE> 13
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
PERFORMANCE FUNDS TRUST
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENT FEES
Effective as of the Conversion Date, the Transfer Agent shall receive an
account maintenance fee of $15.00 per year for each account which is in
existence at any time during the month for which payment is made, such fee to be
paid in equal monthly installments, plus out-of-pocket expenses. The Transfer
Agent shall be entitled to this account maintenance fee on all accounts
maintained in its records during the year, including those accounts which have a
zero balance during any portion of the year.
Additional Services:
Additional services such as IRA processing, development of interface
capabilities, servicing of 403(b) and 408(c) accounts, management of cash sweeps
between DDAs and mutual fund accounts and coordination of the printing and
distribution of prospectuses, annual reports and semi-annual reports are subject
to additional fees which will be quoted upon request. Programming costs or
database management fees for special reports or specialized processing will be
quoted upon request.
Out-of-pocket Expenses:
BISYS shall be entitled to be reimbursed for all reasonable out-of-pocket
expenses including, but not limited to, the expenses set forth in Section 3 of
the Transfer Agency Agreement to which this Schedule B is attached.
B-1
<PAGE> 14
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
PERFORMANCE FUNDS TRUST
AND
BISYS FUND SERVICES, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
C-1
<PAGE> 1
Exhibit 9(b)
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 1st day of October, 1996, between PERFORMANCE FUNDS
TRUST (the "Trust"), a Delaware business trust, and BISYS FUND SERVICES, INC.
("Fund Accountant"), a corporation organized under the laws of the State of
Delaware.
WHEREAS, the Trust desires that Fund Accountant perform certain fund
accounting services for each investment portfolio of the Trust, all as now or
hereafter may be established from time to time (individually referred to herein
as the "Fund" and collectively as the "Funds"); and
WHEREAS, Fund Accountant is willing to perform such services on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant; Conversion to Services.
The Trust hereby engages Fund Accountant to perform fund accounting
services as set forth in this Section 1 (collectively, the "Services"), and, in
connection therewith, the Trust agrees to convert to Fund Accountant's data
processing systems and software (the "BISYS System") as necessary in order to
receive the Services. The Trust shall cooperate with Fund Accountant to provide
Fund Accountant with all necessary information and assistance required to
successfully convert to the BISYS System. Fund Accountant shall provide the
Trust with a schedule relating to such conversion and the parties agree that the
conversion may progress in stages. The date upon which all Services shall have
been converted to the BISYS System shall be referred to herein as the
"Conversion Date." Fund Accountant hereby accepts such engagement and agrees to
perform the Services commencing, with respect to each individual Service, on the
date that the conversion of such Service to the BISYS System has been completed.
Fund Accountant shall determine in accordance with its normal acceptance
procedures when the applicable Service has been successfully converted.
(a) Maintenance of Books and Records. Fund Accountant will keep
and maintain the following books and records of each Fund
pursuant to Rule 31a-1 under the Investment Company Act of
1940 (the "Rule"):
(i) Journals containing an itemized daily record in detail
of all purchases and sales of securities, all receipts
and disbursements of cash and all other debits and
credits, as required by subsection (b)(1) of the Rule;
1
<PAGE> 2
(ii) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense
accounts, including interest accrued and interest
received, as required by subsection (b)(2)(I) of the
Rule;
(iii) Separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8)
of the Rule.
(b) Performance of Daily Accounting Services. In addition to the
maintenance of the books and records specified above, Fund
Accountant shall perform the following accounting services
daily for each Fund:
(i) Calculate the net asset value per share utilizing prices
obtained from the sources described in subsection
1(b)(ii) below;
(ii) Obtain security prices from independent pricing
services, or if such quotes are unavailable, then obtain
such prices from each Fund's investment adviser or its
designee, as approved by the Trust's Board of Trustees;
(iii) Verify and reconcile with the Fund's custodian all daily
trade activity;
(iv) Compute, as appropriate, each Fund's net income and
capital gains, dividend payables, dividend factors,
7-day yields, 7-day effective yields, 30-day yields, and
weighted average portfolio maturity;
(v) Review daily the net asset value calculation and
dividend factor (if any) for each Fund prior to release
to shareholders, check and confirm the net asset values
and dividend factors for reasonableness and deviations,
and distribute net asset values and yields to NASDAQ;
(vi) Report to the Trust the daily market pricing of
securities in any money market Funds, with the
comparison to the amortized cost basis;
(vii) Determine unrealized appreciation and depreciation on
securities held in variable net asset value Funds;
(viii)Amortize premiums and accrete discounts on securities
purchased at a price other than face value, if requested
by the Trust;
2
<PAGE> 3
(ix) Update fund accounting system to reflect rate changes,
as received from a Fund's investment adviser, on
variable interest rate instruments;
(x) Post Fund transactions to appropriate categories;
(xi) Accrue expenses of each Fund according to instructions
received from the Trust's Administrator;
(xii) Determine the outstanding receivables and payables for
all (1) security trades, (2) Fund share transactions and
(3) income and expense accounts;
(xiii)Provide accounting reports in connection with the
Trust's regular annual audit and other audits and
examinations by regulatory agencies; and
(xiv) Provide such periodic reports as the parties shall agree
upon, as set forth in a separate schedule.
(c) Special Reports and Services.
(i) Fund Accountant may provide additional special reports
upon the request of the Trust or a Fund's investment
adviser, which may result in an additional charge, the
amount of which shall be agreed upon between the
parties.
(ii) Fund Accountant may provide such other similar services
with respect to a Fund as may be reasonably requested by
the Trust, which may result in an additional charge, the
amount of which shall be agreed upon between the
parties.
(d) Additional Accounting Services. Fund Accountant shall also
perform the following additional accounting services for each
Fund:
(i) Provide monthly a download (and hard copy thereof) of
the financial statements described below, upon request
of the Trust. The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
3
<PAGE> 4
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and federal
excise tax returns;
(B) the Trust's semi-annual reports with the
Securities and Exchange Commission ("SEC") on Form
N-SAR;
(C) the Trust's annual, semi-annual and quarterly (if
any) shareholder reports;
(D) registration statements on Form N-1A and other
filings relating to the registration of Shares;
(E) the Administrator's monitoring of the Trust's
status as a regulated investment company under
Subchapter M of the Internal Revenue Code, as
amended;
(F) annual audit by the Trust's auditors; and
(G) examinations performed by the SEC.
2. Subcontracting.
Fund Accountant may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that Fund Accountant shall not be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that Fund Accountant shall be responsible, to the extent
provided in Section 6 hereof, for all acts of such subcontractor as if such acts
were its own.
3. Compensation.
Commencing on the Conversion Date, the Trust shall pay Fund
Accountant for the services to be provided by Fund Accountant under this
Agreement in accordance with, and in the manner set forth in, Schedule A hereto,
as such Schedule may be amended from time to time.
4. Reimbursement of Expenses.
In addition to paying Fund Accountant the fees described in Section
3 hereof, the Trust agrees to reimburse Fund Accountant for its out-of-pocket
expenses in providing services hereunder, including without limitation the
following:
4
<PAGE> 5
(a) All freight and other delivery and bonding charges incurred by Fund
Accountant in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by Fund Accountant in
communication with the Trust, the Trust's investment advisor or
custodian, dealers or others as required for Fund Accountant to
perform the services to be provided hereunder;
(c) The cost of obtaining security market quotes pursuant to Section
l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other materials;
(e) Any expenses Fund Accountant shall incur at the written direction of
an officer of the Trust thereunto duly authorized; and
(f) Any additional expenses reasonably incurred by Fund Accountant in
the performance of its duties and obligations under this Agreement.
5. Effective Date.
This Agreement shall become effective with respect to a Fund as of
the date first written above.
6. Term.
The initial term of this Agreement (the "Initial Term") shall be for
a period commencing on the date this Agreement is executed by both parties and
ending on the date that is one year after the Conversion Date. This Agreement
shall be renewed automatically for successive one-year terms unless written
notice not to renew is given by the non-renewing party to the other party at
least 60 days prior to the expiration of the then-current term; provided,
however, that after such termination for so long as Fund Accountant, with the
written consent of the Trust, in fact continues to perform any one or more of
the services contemplated by this Agreement or any schedule or exhibit hereto,
the provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect.
Compensation due Fund Accountant and unpaid by the Trust upon such termination
shall be immediately due and payable upon and notwithstanding such termination.
Fund Accountant shall be entitled to collect from the Trust, in addition to the
compensation described under Section 3 hereof, the amount of all of Fund
Accountant's costs for services in connection with Fund Accountant's activities
in effecting such termination, including without limitation, the delivery to the
Trust and/or its designees of the Trust's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination, in exchange
for payment of its costs, Fund Accountant will provide the Trust with reasonable
access to any Trust documents or records remaining in its possession.
5
<PAGE> 6
In the event of a material breach of this Agreement by either party,
the non-breaching party shall notify the breaching party in writing of such
breach and, upon receipt of such notice, the breaching party shall have 45 days
to remedy the breach. In the event the breach is not remedied within such time
period, the nonbreaching party may immediately terminate this Agreement.
If, during the Initial Term, for any reason other than (i)
nonrenewal or (ii) termination based upon a material breach of this Agreement,
Fund Accountant is replaced as Fund Accountant, or if a third party is added to
perform all or a part of the services provided by Fund Accountant under this
Agreement (excluding any sub-accountant appointed by Fund Accountant as provided
in Section 2 hereof), then the Trust shall make a one-time cash payment, as
liquidated damages, to Fund Accountant equal to the balance due Fund Accountant
for the remainder of the term of this Agreement, assuming for purposes of
calculation of the payment that (i) the asset level of the Trust on the date
Fund Accountant is replaced, or a third party is added, will remain constant for
the balance of the contract term and (ii) such payment shall be based upon the
actual fee being charged on such date (which may or may not be lower than the
contractual fee amount).
7. Standard of Care; Reliance on Records and Instructions;
Indemnification.
Fund Accountant shall use its best efforts to insure the accuracy of
all services performed under this Agreement, but shall not be liable to the
Trust for any action taken or omitted by Fund Accountant in the absence of bad
faith, willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties. A Fund agrees to indemnify and hold harmless Fund
Accountant, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Fund Accountant's actions
taken or nonactions with respect to the performance of services under this
Agreement with respect to such Fund or based, if applicable, upon reasonable
reliance on information, records, instructions or requests with respect to such
Fund given or made to Fund Accountant by a duly authorized representative of the
Trust; provided that this indemnification shall not apply to actions or
omissions of Fund Accountant in cases of its own bad faith, willful misfeasance,
negligence or from reckless disregard by it of its obligations and duties, and
further provided that prior to confessing any claim against it which may be the
subject of this indemnification, Fund Accountant shall give the Trust written
notice of and reasonable opportunity to defend against said claim in its own
name or in the name of Fund Accountant.
Fund Accountant agrees to indemnify and hold harmless the Trust, its
employees, agents, Trustees, officers and nominees from and against any and all
actions, suits and claims, whether groundless or otherwise, and from and against
any and all judgments, liabilities, losses, damages, costs, charges, reasonable
counsel fees and other expenses of every nature and character arising out of or
in any way relating to Fund Accountant's bad faith, willful misfeasance,
negligence or reckless disregard by it of its obligations and duties, with
respect to the performance of services under this Agreement; provided, that,
prior to confessing any claim against it which may be the
6
<PAGE> 7
subject of this indemnification, the Trust shall give Fund Accountant written
notice of and a reasonable opportunity to defend against said claim in its own
name or in the name of the Trust.
8. Record Retention and Confidentiality.
Fund Accountant shall keep and maintain on behalf of the Trust all
books and records which the Trust and Fund Accountant is, or may be, required to
keep and maintain pursuant to any applicable statutes, rules and regulations,
including without limitation Rules 31a-1 and 31a-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"), relating to the maintenance of books
and records in connection with the services to be provided hereunder. Fund
Accountant further agrees that all such books and records shall be the property
of the Trust and to make such books and records available for inspection by the
Trust or by the Securities and Exchange Commission at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders; except when requested to divulge
such information by duly-constituted authorities or court process.
9. Uncontrollable Events.
Fund Accountant assumes no responsibility hereunder, and shall not
be liable, for any damage, loss of data, delay or any other loss whatsoever
caused by events beyond its reasonable control.
10. Reports.
Fund Accountant will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by Fund
Accountant, or as subsequently agreed upon by the parties pursuant to an
amendment hereto.
11. Rights of Ownership.
All computer programs and procedures developed to perform services
required to be provided by Fund Accountant under this Agreement are the property
of Fund Accountant. All records and other data except such computer programs and
procedures are the exclusive property of the Trust and all such other records
and data will be furnished to the Trust in appropriate form as soon as
practicable after termination of this Agreement for any reason.
12. Return of Records.
Fund Accountant may at its option at any time, and shall promptly
upon the Trust's demand, turn over to the Trust and cease to retain Fund
Accountant's files, records and documents created and maintained by Fund
Accountant pursuant to this Agreement which are no longer needed
7
<PAGE> 8
by Fund Accountant in the performance of its services or for its legal
protection. If not so turned over to the Trust, such documents and records will
be retained by Fund Accountant for six years from the year of creation. At the
end of such six-year period, such records and documents will be turned over to
the Trust unless the Trust authorizes in writing the destruction of such records
and documents.
13. Representations of the Trust.
The Trust certifies to Fund Accountant that: (1) as of the close of
business on each Conversion Date, each Fund that is in existence as of the
Conversion Date has authorized unlimited shares, and (2) this Agreement has been
duly authorized by the Trust and, when executed and delivered by the Trust, will
constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
14. Representations of Fund Accountant.
Fund Accountant represents and warrants that: (1) the various
procedures and systems which Fund Accountant has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
the records, and other data of the Trust and Fund Accountant's records, data,
equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder, and (2) this Agreement has been duly authorized by Fund Accountant
and, when executed and delivered by Fund Accountant, will constitute a legal,
valid and binding obligation of Fund Accountant, enforceable against Fund
Accountant in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
15. Insurance.
Fund Accountant shall notify the Trust should any of its insurance
coverage be canceled or reduced. Such notification shall include the date of
change and the reasons therefor. Fund Accountant shall notify the Trust of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Trust from time to time as may be appropriate of the total outstanding claims
made by Fund Accountant under its insurance coverage.
16. Information to be Furnished by the Trust and Funds.
The Trust has furnished to Fund Accountant the following:
8
<PAGE> 9
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the
state in which such document has been filed.
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments thereto; and
(ii) Certified copies of resolutions of the Board of Trustees
covering the approval of this Agreement, authorization
of a specified officer of the Trust to execute and
deliver this Agreement and authorization for specified
officers of the Trust to instruct Fund Accountant
thereunder.
(c) A list of all the officers of the Trust, together with
specimen signatures of those officers who are authorized to
instruct Fund Accountant in all matters.
(d) Two copies of the Prospectuses and Statements of Additional
Information for each Fund.
17. Information Furnished by Fund Accountant.
(a) Fund Accountant has furnished to the Trust the following:
(i) Fund Accountant's Articles of Incorporation; and
(ii) Fund Accountant's Bylaws and any amendments thereto.
(b) Fund Accountant shall, upon request, furnish certified copies
of corporate actions covering the following matters:
(i) Approval of this Agreement, and authorization of a
specified officer of Fund Accountant to execute and
deliver this Agreement; and
(ii) Authorization of Fund Accountant to act as fund
accountant for the Trust and to provide accounting
services for the Trust.
18. Amendments to Documents.
The Trust shall furnish Fund Accountant written copies of any
amendments to, or changes in, any of the items referred to in Section 16 hereof
forthwith upon such amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses or Statements
of Additional Information of the Trust which might have the effect of changing
the procedures employed by Fund Accountant in providing the services agreed to
9
<PAGE> 10
hereunder or which amendment might affect the duties of Fund Accountant
hereunder unless the Trust first obtains Fund Accountant's approval of such
amendments or changes.
19. Compliance with Law.
Except for the obligations of Fund Accountant set forth in Section 8
hereof, the Trust assumes full responsibility for the preparation, contents and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction. Fund Accountant shall have no
obligation to take cognizance of any laws relating to the sale of the Trust's
Shares. The Trust represents and warrants that no Shares of the Trust will be
offered to the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
20. Notices.
Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the party required to be served with such
notice at the following address: if to the Company, to it at 248 East Capitol
Street, Jackson, Mississippi, Attn: Mike Allen, with a copy to Steven Howard,
Esq., Baker & McKenzie, 805 Third Avenue, New York, New York 10022; if to Fund
Accountant, to it at 3435 Stelzer Road, Columbus, Ohio 43219, or at such other
address as such party may from time to time specify in writing to the other
party pursuant to this Section.
21. Headings.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
22. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by the
specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
23. Governing Law.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
PERFORMANCE FUNDS TRUST
By: /s/ JOHN PILEGGI
-----------------------------------
Title: President
--------------------------------
BISYS FUND SERVICES, INC.
By: /s/ STEVE MINTOS
-----------------------------------
Title: Executive Vice President
--------------------------------
11
<PAGE> 12
Dated: October , 1996
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
PERFORMANCE FUNDS TRUST
AND
BISYS FUND SERVICES, INC..
FEES
Effective as of the Conversion Date, Fund Accountant shall be entitled to
receive a fee from each Fund in accordance with the following schedule:
A monthly fee of $2,500 per Fund plus out-of-pocket expenses, as
described in Section 4.
PERFORMANCE FUNDS TRUST BISYS FUND SERVICES, INC.
By: /s/ JOHN PILEGGI By: /s/ STEVE MINTOS
------------------------------- --------------------------------
A-1
<PAGE> 1
EXHIBIT 10
[BAKER & MCKENZIE LETTERHEAD]
September 24, 1997
Performance Funds Trust
3435 Stelzer Road
Columbus, OH 43219
Re: PERFORMANCE FUNDS TRUST
Registration Nos. 33-46488 and 811-6603
Dear Sir or Madam:
We hereby consent to the reference to our firm as Counsel in
Post-Effective Amendment No. 8 to Registration No. 33-46488.
Very truly yours,
BAKER & MCKENZIE
<PAGE> 1
Exhibit 11
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 8 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated July 18, 1997, relating to the financial
statements and financial highlights appearing in the May 31, 1997
Annual Report to Shareholders of Performance Funds Trust, which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the Prospectus
and under the heading "Experts," and "Financial Statements" in the Statement of
Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
September 24, 1997
<PAGE> 1
PERFORMANCE FUNDS TRUST
Exhibit 15a
March 25, 1997
Performance Funds Distributor, Inc.
125 West 55th Street
New York, NY 10019
Dear Sirs:
Pursuant to Section 8 of the Rule 12b-1 Distribution Plan and Agreement
dated September 11, 1992, between Performance Funds Trust (the "Trust") and
Performance Funds Distributor, Inc. (the "Agreement"), the following Amendment
is hereby effective immediately:
Performance Funds Trust is now located at
3435 Stelzer Road
Columbus, Ohio 43219; and
Performance Funds Distributor, Inc. is now located at
125 West 55th Street
New York, NY 10019
If the foregoing is acceptable and correctly sets forth the agreement
between the Trust and Performance Funds Distributor, Inc., please so indicate by
signing and returning this letter to the Company.
Very truly yours,
PERFORMANCE FUNDS TRUST
By: /s/ Richard B. Ille
----------------------------
Name: Richard Ille
Title: Vice President
PERFORMANCE FUNDS DISTRIBUTOR, INC.
By: /s/ Bruce Treff
----------------------------
Name: Bruce Treff
Title: Assistant Secretary
<PAGE> 2
PERFORMANCE FUNDS TRUST
AMENDMENT TO BY-LAWS
The undersigned, Assistant Secretary of Performance Funds Trust (the
"Fund") does hereby certify that pursuant to Article XII of the By-Laws of the
Fund, dated March 11, 1992, the following votes were duly adopted by a least a
majority of the Trustees of the Fund at a meeting duly called and held on March
25, 1997:
VOTED: That Article II, Section 2 of the By-Laws shall be amended to read as
follows:
Section 2. The President, Treasurer and Secretary shall be chosen by
the Trustees. Two or more offices may be held by a single person.
Subject to the provisions of Section 12 hereof, the President, the
Treasurer and the Secretary shall each hold office until their
successors are chosen and qualified and all other officers shall hold
office at the pleasure of the Trustees.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day
of March, 1997.
-----------------------------------
Bruce Treff
Assistant Secretary
<PAGE> 1
EXHIBIT 15b
THE SMALL CAP FUND
A Series of Performance Funds Trust
125 West 55th Street
New York, New York 10019
September 5, 1997
Performance Funds Distributor, Inc.
125 West 55th Street
New York, New York 10019
Rule 12b-1 Distribution Plan and Agreement Supplement
Dear Sirs or Madams:
This will confirm the agreement between Performance Funds Trust (the
"Trust") and Performance Funds Distributor Inc. ("PFD" or the "Distributor") as
follows:
The Small Cap Fund (the "Fund") is a series portfolio of the Trust which
has been organized as a business trust under the laws of the State of Delaware
and is an open-end management investment company. The Trust and the Distributor
have entered into a Rule 12b-1 Distribution Plan and Agreement, dated March 1,
1993 (as from time to time amended and supplemented, the "Master Agreement"),
pursuant to which the Distributor has agreed to pay broker-dealers and other
financial intermediaries for rendering certain distribution related services, as
more fully set forth therein. Certain capitalized terms used without definition
in this Supplement have the meaning specified in the Master Agreement.
The Trust agrees with the Sponsor as follows:
1. Adoption of Master Agreement. The Master Agreement is hereby adopted
for the Fund. The Fund shall be one of the "Funds" referred to in the Master
Agreement; and its shares shall be a "Series" of shares as referred to therein.
2. Payment of Fees. Fees for services rendered pursuant tot he Master
Agreement and this Supplement are paid in accordance with paragraph 3 of the
Master Agreement and at an annual rate not in excess of 0.35% of the average
daily value of the net assets of the Fund. Notwithstanding the foregoing, for
the first six months of operations, the Distributor hereby agrees to receive as
full compensation for all services rendered to the Fund a monthly fee based upon
the average daily value of the net assets of the Fund calculated at an annual
rate not in excess of 0.25%.
<PAGE> 2
If the foregoing correctly sets forth the agreement between the Trust
and the Distributor, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
THE SMALL CAP FUND, a Series of
Performance Funds Trust
By:
---------------------------
Title: Secretary
The foregoing Plan and
Agreement is hereby agreed
to as of the date hereof:
PERFORMANCE FUNDS DISTRIBUTOR, INC.
By:
-----------------------------------------
Title: President
<PAGE> 1
EXHIBIT 15c
SERVICES AGREEMENT
THIS AGREEMENT, dated as of August 1, 1997, by and between Performance
Funds Distributor, Inc. (the "Distributor"), having its principal place of
business at 125 W. 55th Street, New York, New York 10019, and BISYS FUND
SERVICES LIMITED PARTNERSHIP d/b/a BISYS FUND SERVICES ("BISYS") having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
W I T N E S S E T H:
WHEREAS, the Distributor is the principal underwriter of the shares of
Performance Funds Trust (the "Company"), a series investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), comprised
of various series (hereinafter referred to individually as a "Fund" and
collectively as the "Funds");
WHEREAS, the Distributor believes that an important market for each
Fund is comprised of the clients ("Planner Clients") of investment advisers,
broker-dealers, financial planners or similar entities ("Planners");
WHEREAS, the Company currently does not have a significant number of
Planner Clients as shareholders;
WHEREAS, the Distributor desires to retain BISYS to provide the
promotional services described herein; and
WHEREAS, the Distributor desires to compensate BISYS for such services
based upon Fund shares that are owned by Planner Clients introduced to the Funds
through the efforts of BISYS while this Agreement is in effect ("BISYS Planner
Clients").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Services.
a. Under the terms and conditions of this Agreement, BISYS,
acting directly or through an affiliate, shall engage in such marketing and
promotional activities ("Promotional Activities") as it deems appropriate for
purposes of generating sales of shares to Planner Clients upon the
recommendation of Planners. Such Promotional Activities shall include, but not
be limited to, (a) presentations to Planners, which may include the promotional
materials described in Section 3 of this Agreement, (b) participation at
conferences and seminars, and (c) the services described in Schedule A attached
hereto.
<PAGE> 2
b. For certain Fund shareholder accounts established for BISYS
Planner Clients, BISYS shall act as the broker-dealer of record and, in that
regard, shall perform such duties and assume such responsibilities as the
parties shall agree upon.
2. Fees.
a. The Distributor agrees to pay BISYS on the first business day
of each month the marketing fees ("Marketing Fees") and asset-based fees
("Asset-Based Fees") that are more particularly described in Schedule B attached
hereto. Such fees shall be based upon the average daily net asset value of all
Fund shares owned beneficially or of record by BISYS Planner Clients. For
purposes of determining the fees payable pursuant to the foregoing sentence, the
Distributor (i) acknowledges that BISYS may introduce the Distributor and/or the
Company's investment adviser to Planners either directly or indirectly through
third parties (the "Third Party Sources") including, by way of example, those
Third Party Sources set forth in Schedule C attached hereto and (ii) for
purposes of calculating the Marketing Fees and Asset-Based Fees that are payable
hereunder, the Distributor agrees that each person that purchases Fund shares
using the services of Third Party Sources through which Fund shares are offered
shall be deemed to be a BISYS Planner Client.
b. The parties hereto agree that the Marketing Fees described
herein shall be payable to BISYS for such period of time that this Agreement
remains in full force and effect. The parties further agree that the Asset-Based
Fees described herein shall be payable to BISYS for such period of time that
this Agreement remains in full force and effect and, in addition, in accordance
with the Schedule for the Payment of Asset-Based Fees Following Termination
contained in Schedule B hereto, notwithstanding the termination of this
Agreement; provided, however, that the obligation to pay Asset-Based Fees
hereunder shall cease in the event (i) the Distributor is terminated as
principal underwriter of the shares of the Company or otherwise ceases to act in
such capacity, or (ii) the Company's plan of distribution, adopted pursuant to
Rule 12b-1 under the 1940 Act, or any other plan for the financing of
shareholder servicing activities (individually, a "Plan"; collectively, the
"Plans") which finances such payment obligation is terminated for whatever
reason by the Company's Board of Directors/Trustees. In the event the Company's
Plan is terminated, the Distributor and BISYS agree to negotiate in good faith
with respect to whether and to what extent the Distributor will continue to make
such payments either from its own resources or in reliance upon financing that
is provided by a successor Plan.
c. BISYS agrees to provide the Distributor periodically with a
list of the Planners and Third Party Sources that have been introduced to the
Distributor and/or the Company's investment adviser.
2
<PAGE> 3
3. Review and Approval of Promotional Materials; Regulatory
Filings.
The parties hereto agree and acknowledge that the Distributor
shall have authority and control over the content and use of all advertisements,
sales literature or marketing materials (hereinafter referred to collectively as
"Promotional Materials"), including those Promotional Materials that are
produced by BISYS. All Promotional Materials that are produced by BISYS shall be
submitted to the Distributor for review and approval. BISYS shall not use any
Promotional Materials that it has produced without having received prior
approval from the Distributor. BISYS shall bear no responsibility for (i) filing
any Promotional Materials with regulatory bodies (including, but not limited to,
the Securities and Exchange Commission (the "SEC"), the National Association of
Securities Dealers, Inc. and state securities regulators) possessing regulatory
jurisdiction with respect to such Materials or (ii) obtaining approval from such
regulatory bodies for the use of such Materials. BISYS shall provide the
Distributor, three business days prior to use, with sufficient copies of all
final Promotional Materials for the Distributor's files and to allow the
Distributor to make all filings with any regulatory bodies (as described in the
preceding sentence) as required by federal, state or other laws or regulatory
requirements.
4. Representations and Warranties.
a. Representations and Warranties of the Distributor. The
Distributor represents and warrants that, at all times during the duration of
this Agreement, all activities of the Distributor, its officers, agents and
employees shall comply with all applicable laws, rules and regulations,
including, without limitation, the 1940 Act, all rules and regulations
promulgated by the Commission thereunder and all rules and regulations adopted
by any securities association registered under the Securities Exchange Act of
1934.
b. Representations and Warranties of BISYS. BISYS represents and
warrants that it has satisfied all state and federal regulatory requirements
applicable to the services it has undertaken to perform under this Agreement.
5. Duration and Termination.
a. Initial Term. This Agreement shall continue in effect, unless
earlier terminated by either party hereto as provided hereunder, until July 31,
1998 (the "Initial Term"). Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically for successive one-year
periods ("Rollover Periods").
b. Termination. This Agreement may be terminated without
penalty:
i) by provision of written notice of nonrenewal at
least sixty (60) days prior to the end of the Initial
Term or any Rollover Period, as the case may be;
ii) by mutual agreement of the parties;
3
<PAGE> 4
iii) in the event of a material breach that has not been cured
within thirty (30) days following written notice of such
breach from the non-breaching party; or
iv) by vote of a majority of the members of the Board of
Trustees of the Company who are not interested persons of
the Company and have no direct or indirect financial
interest in the operation of any Rule 12b-1 plan of
distribution or by vote of a majority of the outstanding
voting securities of such Company, on not more than 60
days written notice to BISYS.
6. Miscellaneous.
All notices and other communications made hereunder shall be in
writing and shall be deemed duly given when received by the party to whom such
notice has been directed at the respective addresses set forth herein or to such
other addresses as either party may designate by written notice to the other
party hereunder. The headings in this Agreement are for convenience of reference
only and shall not alter or otherwise affect the meaning of the provisions
herein. This Agreement embodies the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes any and all prior
agreements, arrangements and understandings relating to the subject matter
hereof. This Agreement cannot be changed or terminated orally and no waiver of
compliance with any provision, and no consent provided herein, shall be
effective unless evidenced by an instrument executed by the party to be charged.
This Agreement shall be governed by the internal laws of the State of Ohio,
without giving effect to conflict of laws principles. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors, but
this Agreement may not be assigned by either party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
PERFORMANCE FUNDS DISTRIBUTOR, INC.
By:
--------------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By:
--------------------------------
4
<PAGE> 5
SCHEDULE A
TO THE
SERVICES AGREEMENT BETWEEN
PERFORMANCE FUNDS DISTRIBUTOR, INC.
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
SERVICES
1. BISYS will provide a national wholesaling and internal wholesaling
distribution team.
2. Use by BISYS of its proprietary national database comprised of
approximately 3350 R.I.A.'s and 8000 Financial Planners
3. Dedicated 800 number support center/state of the art telephone
system/inbound/outbound.
4. Senior management contact and relationships with major mutual fund clearing
platforms.
5. Direct liaison with shareholder services, fund accounting, transfer agency,
and client services.
6. Monthly/quarterly national activity reports, i.e., sales, assets, channel
update, marketing, etc.
7. Institutional marketing programs, i.e., Platinum Collection, investment
advisor profiles, individual fund fact sheets, etc.
8. Portfolio manager national conference call facilitation.
9. Internet access/web.
10. Attendance and participation and national mutual fund conferences.
11. Ongoing market research and support.
A-1
<PAGE> 6
SCHEDULE B
TO THE
SERVICES AGREEMENT BETWEEN
PERFORMANCE FUNDS DISTRIBUTOR, INC.
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
FEES
MARKETING FEE SCHEDULE
Subject to the minimum fee amount described below, BISYS shall be
entitled to (i) an annual marketing fee of $60,000 until such time as $50
million in assets are raised through sales of Planner Client Shares; (ii) an
annual marketing fee of $45,000 after $50 million in assets have been raised
until such time as $100 million in assets have been raised; and (iii) an annual
marketing fee of $30,000 after $100 million in assets have been raised. At such
time as assets raised exceed $150 million, the parties shall renegotiate, in
good faith, the annual marketing fee payable hereunder. The foregoing fee
amounts will be prorated when a break point is reached during any particular
annual period. All annual marketing fee amounts shall be accrued monthly and
paid quarterly. Notwithstanding the foregoing fee schedule, BISYS shall be
entitled to receive a minimum marketing fee for the first year of the Services
Agreement in the amount of $60,000.
ASSET-BASED FEE SCHEDULE
<TABLE>
<CAPTION>
Annual Fee as a Percentage of the
Fund Assets Attributable Average Daily Net Asset Value of
to Planner Client Shares Planner Client Shares
------------------------ ---------------------------------
<S> <C>
First $50 million Twenty-five one-hundredths of one percent
(.25%) of such average daily net asset value
Next $50 million Twenty one-hundredths of one percent (.20%)
of such average daily net asset value
Next $50 million Fifteen one-hundredths of one percent (.15%)
of such average daily net asset value
All amounts in excess of $150 million Five one-hundredths of one percent (.05%) of
such average daily net asset value
</TABLE>
B-1
<PAGE> 7
SCHEDULE FOR THE
PAYMENT OF ASSET-BASED FEES
FOLLOWING TERMINATION
<TABLE>
<CAPTION>
Time Period Following Termination Asset-Based Fee That is Payable
--------------------------------- -------------------------------
<S> <C>
First Year 100% of the fee that is payable in accordance
with the Asset-Based Fee Schedule
Second Year 80% of the fee that is payable in accordance
with the Asset-Based Fee Schedule
Third Year and Beyond No Fee is Due
</TABLE>
B-2
<PAGE> 8
SCHEDULE C
TO THE
SERVICES AGREEMENT BETWEEN
----------------------------------------
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
THIRD PARTY SOURCES
-------------------
Schwab Institutional
Fidelity Investment Advisors Group
Trust Company of America
First Trust of Denver Datalynx System
Jack White Advisor Service
Waterhouse Securities
Resources Trust
Broker Dealer Sponsored Wrap Fee Programs
(Smith Barney, American Express, LPL, etc.)
C-1
<PAGE> 1
EXHIBIT 15d
COMPENSATION AGREEMENT
THIS AGREEMENT, dated as of August 1, 1997, by and between Trustmark
National Bank (the "Adviser"), having its principal place of business at 248
East Capitol Street, Jackson, Mississippi 39201-2582, and BISYS FUND SERVICES
LIMITED PARTNERSHIP d/b/a BISYS FUND SERVICES ("BISYS"), having its principal
place of business at 3435 Stelzer Road, Columbus, Ohio 43219. Capitalized terms
not defined herein are defined in the services agreement described below.
W I T N E S S E T H:
WHEREAS, BISYS has entered into a services agreement (the "Services
Agreement") with Performance Funds Distributor, Inc. (the "Distributor"), dated
as of the date first written above, pursuant to which BISYS shall be compensated
for the provision of certain promotional activities designed to generate sales
of shares of the series (hereinafter referred to individually as a "Fund" and
collectively as the "Funds") of Performance Funds Trust (the "Company");
WHEREAS, the Distributor is obligated to pay Marketing Fees to BISYS
under the Services Agreement for such period of time that the Services Agreement
remains in full force and effect;
WHEREAS, the Distributor is obligated to pay Asset-Based Fees to BISYS
under the Services Agreement for such period of time that the Services Agreement
remains in full force and effect and for a period of time following the
termination of the Services Agreement, provided, that such payment obligation
shall cease in the event that (i) the Distributor is terminated as principal
underwriter of the shares of the Company or otherwise ceases to act in such
capacity, or (ii) the Company's plan of distribution, adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, or any other plan for the
financing of shareholder servicing activities (collectively, the "Plans") which
finances such payment obligation is terminated for whatever reason by the
Company's Board of Directors/Trustees;
WHEREAS, the parties hereto agree and acknowledge that the Adviser
shall benefit from sales of Fund shares resulting from the promotional
activities of BISYS;
WHEREAS, BISYS has committed a substantial amount of resources to the
implementation of a marketing program to support such promotional activities;
and
WHEREAS, the Adviser desires to ensure that BISYS receives appropriate
compensation in consideration of such commitment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained herein, the parties hereto agree as follows:
<PAGE> 2
1. Payments to BISYS.
As consideration for the Promotional Activities described in
Section 1(a) of the Services Agreement, the Adviser agrees to pay to BISYS the
fees described in Schedule B of the Services Agreement in accordance with the
terms of such Services Agreement in the event that the Distributor fails for any
reason to pay such fees in accordance with the terms of such Services Agreement
(i) during any portion of the Initial Term of the Services Agreement, as defined
therein and (ii) following the Initial Term of the Service Agreement in
accordance with the Schedule for the Payment of Asset-Based Fees Following
Termination contained therein.
2. Duration and Termination.
This Agreement shall become effective as of the date first
written above. It shall continue in effect until such time as the Adviser's
payment obligations hereunder are fully satisfied.
3. Miscellaneous.
All notices and other communications made hereunder shall be
in writing and shall be deemed duly given when received by the party to whom
such notice has been directed at the respective addresses set forth herein or to
such other addresses as either party may designate by written notice to the
other party hereunder. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning of the
provisions herein. This Agreement cannot be changed or terminated orally and no
waiver of compliance with any provision, and no consent provided herein, shall
be effective unless evidenced by an instrument executed by the party to be
charged. This Agreement shall be governed by the internal laws of the State of
Ohio, without giving effect to conflict of laws principles. This Agreement shall
be binding upon and inure to the benefit of the parties and their successors,
but this Agreement may not be assigned by either party.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
TRUSTMARK NATIONAL BANK
By:
--------------------------------
Title:
-----------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
BY: BISYS FUND SERVICES, INC.,
GENERAL PARTNER
By:
--------------------------------
Title:
-----------------------------
2
<PAGE> 1
EXHIBIT 15(e)
PERFORMANCE FUNDS DISTRIBUTORS, INC.
DEALER AND SELLING GROUP AGREEMENT
Gentlemen:
We have entered into distribution agreements with the following open-end
management investment company: Performance Funds Trust (the "Funds"), under
which we are appointed exclusive agent for the sale of capital stock and shares
of beneficial interest ("Shares"). As such agent, we offer to sell to you as a
member of a Selling Group, Shares of the Funds on the terms set forth below. We
are acting as an underwriter within the meaning of Conduct Rule 2830 of the
National Association of Securities Dealers, Inc. ("NASD").
1. You are to offer and sell Shares of the Funds only at the public offering
price currently determined by each Fund in the manner described in its
Prospectus. This Agreement on your part runs to us and to the Fund and is for
the benefit of and enforceable by each.
2. You are hereby authorized (i) to place orders with us for Shares and (ii)
to tender Shares to us for redemption.
3. You have advised us that you are a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, and a member of the NASD. You agree
to abide by the Rules of Fair Practice of the NASD. This Agreement is in all
respects subject to Conduct Rule 2830 of the NASD Association of Securities
Dealers, Inc. which shall control any provisions to the contrary.
4. We shall not accept from you any conditional orders for the Shares. If
payment for the Shares purchased is not received within five days, the sale may
be canceled forthwith without any responsibility or liability on our part or on
the part of the Funds (in which case you will be responsible for any loss,
including loss of profit suffered by the Funds resulting from your failure to
make payment as aforesaid), or, at our option, we may sell the Shares ordered
back to the Funds (in which case we may hold you responsible for any loss,
including loss of profit suffered by us resulting from your failure to make
payment as aforesaid). Any order by you for the purchase of Shares of the Funds
through us shall be executed pursuant to the terms and conditions specified in
the Prospectus of each Fund for which an order is made unless rejected by us or
that Fund. In addition to the right to reject any order, each Fund has reserved
the right to withhold Shares from sale temporarily or permanently.
5. You will not offer or sell any of the Shares except under circumstances that
will result in compliance with the applicable Federal and state securities law
and in connection with sales and offers to sell Shares, you will furnish to each
person to whom any such sale or offer is made a copy of the applicable then
current Prospectus. We shall be under no liability to you except for lack of
good faith and for obligations expressly assumed by us herein. Nothing herein
contained, however, shall be deemed to be a condition, stipulation or provision
binding any persons acquiring any security to waive compliance with any
provisions of the Securities Act of 1933, or of the Rules and Regulations of the
Securities and Exchange Commission or to relieve the parties hereto from any
liability arising under the Securities Act of 1933.
<PAGE> 2
6. No person is authorized to make any representations concerning Shares of the
Funds except those contained in the then current Prospectus and printed
information issued by each Fund or by us as information supplemental to each
Prospectus. We shall supply prospectuses, reasonable quantities of supplemental
sales literature, sales bulletins, and additional information as issued. You
agree not to use other advertising or sales material relating to the Funds
unless approved in writing by us in advance of such use. Any printed information
furnished by us other than the then current Prospectus for each Fund, periodic
reports and proxy solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall have no
liability or responsibility to you in these respects unless expressly assumed in
connection therewith.
7. In accordance with the terms of the Rule 12b-1 Distribution Plan and
Agreement adopted on behalf of the Funds and as we shall from time to time agree
with regard to certain Funds, we will pay you a fee each month at an annual rate
which shall not exceed that specified in each Fund's current Prospectus based on
the daily share value of the preceding month's share balance of each Fund owned
by shareholders who purchased their shares through you.
8. You are to be allowed a discount from the public offering price of Shares
purchased by you through us in accordance with an applicable schedule of sales
charges as specified in each Fund's current Prospectus. The schedules of sales
charges will apply to single purchases, to purchases made under a Letter of
Intent and pursuant to Rights of Accumulation, each of which is described in the
Prospectus of each Fund.
9. You agree to respond to investor inquiries concerning the Fund to the best of
your ability and to contact all shareholders in the Funds to whom you have sold
Shares on a periodic basis to provide them with such information about the Funds
as we will reasonably provide to you.
10. You are obliged to date and time stamp all orders received by you and
promptly to transmit all orders to us in time to provide for processing at the
offering price next determined in accordance with each Fund's Prospectus. You
are not to withhold placing with us orders received from any customer for the
purchase of Shares so as to profit yourself as a result of such withholding. You
shall not purchase orders already received by you or for your bona fide
investment.
11. If any Share is repurchased by a Fund or is tendered thereto for redemption
within seven business days after confirmation by us of the original purchase
order from you for such security, you shall forthwith refund to us the full
concession allowed to you on the original sale.
12. You shall not, as principal, purchase any Shares of a Fund from a record
holder at price lower than the net asset value next determined by Shares of that
Fund. You shall, however, be permitted to sell any Shares of that Fund for the
account of a record owner to that Fund at the net asset value currently quoted
by or for those particular Shares, and may charge a fair service fee for
handling the transaction provided you disclose the fee to the record owner.
<PAGE> 3
13. In purchasing Shares of a Fund through us, you shall act only as Principal
for your own account. You shall purchase Shares of a Fund only through us,
except for repurchase of Shares incidental to redemption. In no transaction
(whether of purchase or sale) shall you have any authority to act as agent for,
partner of, or participant in a joint venture with us or with a Fund or any
other member of the selling group.
14. We act solely as agent for the Funds and are not responsible for qualifying
the Funds or their Shares for sale in any jurisdiction. We also are not
responsible for the issuance, form, validity, enforceability or value of Shares
of the Funds.
15. All communications to us should be sent to the address on the following
page. Any notice to you shall be duly given if mailed or telegraphed to you at
the address specified you.
16. Either party to this Agreement may cancel this Agreement by giving written
notice to the other. Such notice shall be deemed to have been given on the date
on which it was either delivered personally to the other party of any officer or
member thereof, or was mailed post-paid or delivered to a telegraph office for
transmission to the other party at his or its address. This Agreement may be
amended by us at any time upon notice to you and your placing of an order after
the effective date of any such amendment shall constitute your acceptance
thereof.
17. This Agreement should be executed in duplicate, each of which shall be
deemed to be an original. One of the duplicate originals should be returned to
us for our file. The Agreement shall be effective as of the date of acceptance
by you, but only upon receipt by us of such duplicate original. The Agreement
shall be in cancellation of and in substitution for any and all previous Dealer
Agreements, but shall not terminate, cancel or release any rights or liabilities
accrued thereunder. This Agreement shall be construed in accordance with the
laws of the State of New York.
Very truly yours,
PERFORMANCE FUNDS DISTRIBUTOR, INC.
Legal Address: Mailing Address:
125 West 55th Ave. 3435 Stelzer Road
New York, NY 10019 Columbus, OH 43219
Accepted:
_________________________
By: _____________________
Officer or Partner
_________________________
Print Name
Address:_________________
_________________________
Date:____________________
<PAGE> 1
EXHIBIT 16
PERFORMANCE EQUITY CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AGGREGATE TOTAL RETURN
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 06/01/92 TO 05/31/97 ):
( 2,237.85 /1,000) - 1 = 123.79%
1 YEAR ( 05/31/96 TO 05/31/97 ):
( 1,287.48 /1,000) - 1 = 28.75%
3 YEAR ( 05/31/94 TO 05/31/97 ):
( 1,902.42 /1,000) - 1 = 90.24%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 06/01/92 TO 05/31/97 ):
(1/(3 1825 /365))
(( 2,237.85 /1,000 -1) = 17.48%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/(1 365 /365))
(( 1,287.48 /1,000 -1) = 28.75%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/(3 1095 /365))
(( 1,902.42 /1,000 -1) = 23.91%
<PAGE> 2
PERFORMANCE EQUITY CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AMSOUTH EQUITY INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 03/20/97 TO 05/31/97 ):
( 1125.24 /1,000) - 1 = 12.52%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,105.61 /1,000) - 1 = 10.56%
MONTHLY: ( 05/01/97 TO 05/31/97 ):
( 1,014.61 /1,000) - 1 = 1.46%
<PAGE> 3
PERFORMANCE EQUITY CONSUMER
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
0
ACTUAL(WITH WAIVERS)
(a-b)
------------------ 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
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
d = The offering price (without CDSC) or the maximum redemption
price (with CDSC) per share on the last day of the period
MAXIMUM FEES (without waivers)
(a-b)
------------------ 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (without waivers)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption
price (with CDSC) per share on the last day of the period
ACTUAL
( 14,468.19 - 8,679.34 )
--------------------------------- 6]
30-Day S.E.C. Yield= 2 *{[( +1) -1} = 1.09%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending
April 30, 1997
FULL FEES (WITHOUT WAIVERS)
( 14,468.19 - 0.00 )
--------------------------------- 6]
= 2 *{[( +1) -1} = 2.74%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending
April 30, 1997
- --------------------------------------------------------------------------------
<PAGE> 4
PERFORMANCE EQUITY INSTITUTIONAL
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 06/01/92 TO 05/31/97 ):
( 1,974.37 /1,000) - 1 = 97.44%
YEAR TO DATE: ( 12/31/96 TO 05/31/97 ):
( 1,020.73 /1,000) - 1 = 2.07%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,012.64 /1,000) - 1 = 1.26%
MONTHLY: ( 04/30/97 TO 05/31/97 ):
( 1,004.29 /1,000) - 1 = 0.43%
1 YEAR ( 05/31/96 TO 05/31/97 ):
( 1,290.61 /1,000) - 1 = 29.06%
3 YEAR ( 05/31/94 TO 05/31/97 ):
( 1,916.52 /1,000) - 1 = 91.65%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 06/01/92 TO 05/31/97 ):
(1/( 1825 /365))
((1,974.37 /1,000 -1) = 14.57%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
((1,290.61 /1,000 -1) = 29.06%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000 -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
((1,916.52 /1,000 -1) = 24.21%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000 -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000 -1) = -100.00%
<PAGE> 5
PERFORMANCE EQUITY INSTITUTIONAL
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AMSOUTH EQUITY INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 03/20/97 TO 05/31/97 ):
( 1125.24 /1,000) - 1 = 12.52%
YEAR TO DATE: ( 03/20/97 TO 05/31/97 ):
( 1,125.24 /1,000) - 1 = 12.52%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,105.61 /1,000) - 1 = 10.56%
MONTHLY: ( 05/01/97 TO 05/31/97 ):
( 1,014.61 /1,000) - 1 = 1.46%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 01/31/76 TO 05/31/97 ):
(1/( 7760 /365))
(( /1,000 -1) = -100.00%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( /1,000 -1) = -100.00%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000 -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( /1,000 -1) = -100.00%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000 -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000 -1) = -100.00%
<PAGE> 6
PERFORMANCE EQUITY INSTITUTIONAL
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
- -------------------------------------------------------------------------------
0
ACTUAL(WITH WAIVERS)
(a-b)
-------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
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
d = The offering price (without CDSC) or the maximum redemption
price (with CDSC) per share on the last day of the period
MAXIMUM FEES (without waivers)
(a-b)
-------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (without waivers)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption
price (with CDSC) per share on the last day of the period
ACTUAL
( 14,468.19 - 8,679.34 )
------------------------------ 6]
30-Day S.E.C. Yield = 2 *{[( +1) -1} = 1.09%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending
April 30, 1997
FULL FEES (WITHOUT WAIVERS)
( 14,468.19 - 0.00 )
------------------------------ 6]
= 2 *{[( +1) -1} = 2.74%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending
April 30, 1997
- -----------------------------------------------------------------------------
<PAGE> 7
PERFORMANCE INTERMEDIATE INSTITUTITONAL
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 06/01/92 TO 05/31/97 ):
( 1,359.79 /1,000) - 1 = 35.98%
YEAR TO DATE: ( 12/31/96 TO 05/31/97 ):
( 1,020.73 /1,000) - 1 = 2.07%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,012.64 /1,000) - 1 = 1.26%
MONTHLY: ( 04/30/97 TO 05/31/97 ):
( 1,004.29 /1,000) - 1 = 0.43%
1 YEAR ( 05/31/96 TO 05/31/97 ):
( 1,071.99 /1,000) - 1 = 7.20%
3 YEAR ( 05/31/94 TO 05/31/97 ):
( 1,202.99 /1,000) - 1 = 20.30%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 06/01/92 TO 05/31/97 ):
(1/( 1825 /365))
((1,359.79 /1,000) -1) = 6.34%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
((1,071.99 /1,000) -1) = 7.20%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000) -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
((1,202.99 /1,000) -1) = 6.35%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000) -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000) -1) = -100.00%
<PAGE> 8
PERFORMANCE INTERMEDIATE INSTITUTITONAL
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AMSOUTH EQUITY INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 03/20/97 TO 05/31/97 ):
( 1125.24 /1,000) - 1 = 12.52%
YEAR TO DATE: ( 03/20/97 TO 05/31/97 ):
( 1,125.24 /1,000) - 1 = 12.52%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,105.61 /1,000) - 1 = 10.56%
MONTHLY: ( 05/01/97 TO 05/31/97 ):
( 1,014.61 /1,000) - 1 = 1.46%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 01/31/76 TO 05/31/97 ):
(1/( 7760 /365))
(( /1,000) -1) = -100.00%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( /1,000) -1) = -100.00%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000) -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( /1,000) -1) = -100.00%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000) -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000) -1) = -100.00%
================================================================================
<PAGE> 9
PERFORMANCE EQUITY CONSUMER
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
0
ACTUAL(WITH WAIVERS)
(a-b)
------------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
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
d = The offering price (without CDSC) or the maximum redemption
price (with CDSC) per share on the last day of the period
MAXIMUM FEES (without waivers)
(a-b)
------------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (without waivers)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption
price (with CDSC) per share on the last day of the period
ACTUAL
( 14,468.19 - 8,679.34 )
------------------------------ 6]
30-Day S.E.C. Yield = 2 *{[( +1) -1} = 1.09%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending
April 30, 1997
FULL FEES (WITHOUT WAIVERS)
( 14,468.19 - 0.00 )
--------------------------------- 6]
= 2 *{[( +1) -1} = 2.74%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending
April 30, 1997
<PAGE> 10
PERFORMANCE MONEY MARKET CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- --------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 09/30/93 TO 05/31/97 ):
( 1,185.77 /1,000) - 1 = 18.58%
YEAR TO DATE: ( 12/31/96 TO 05/31/97 ):
( 1,020.73 /1,000) - 1 = 2.07%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,012.64 /1,000) - 1 = 1.26%
MONTHLY: ( 04/30/97 TO 05/31/97 ):
( 1,004.29 /1,000) - 1 = 0.43%
1 YEAR ( 05/31/96 TO 05/31/97 ):
( 1,050.67 /1,000) - 1 = 5.07%
3 YEAR ( 05/31/94 TO 05/31/97 ):
( 1,162.02 /1,000) - 1 = 16.20%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -----------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE: PERFORMANCE MONEY MARKET CONSUMER
SINCE INCEPTION: ( 09/30/93 TO 05/31/97 ):
(1/( 1339 /365))
(( 1,185.77 /1,000 -1) = 4.75%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( 1,050.67 /1,000 -1) = 5.07%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000 -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( 1,162.02 /1,000 -1) = 5.13%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000 -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000 -1) = -100.00%
<PAGE> 11
PERFORMANCE MONEY MARKET CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AMSOUTH EQUITY INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
- ----------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 03/20/97 TO 05/31/97 ):
( 1125.24 /1,000) - 1 = 12.52%
YEAR TO DATE: ( 03/20/97 TO 05/31/97 ):
( 1,125.24 /1,000) - 1 = 12.52%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,105.61 /1,000) - 1 = 10.56%
MONTHLY: ( 05/01/97 TO 05/31/97 ):
( 1,014.61 /1,000) - 1 = 1.46%
<PAGE> 12
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- --------------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 01/31/76 TO 05/31/97 ):
(1/( 7760 /365))
(( /1,000 -1) = -100.00%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( /1,000 -1) = -100.00%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000 -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( /1,000 -1) = -100.00%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000 -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000 -1) = -100.00%
================================================================================
<PAGE> 13
PERFORMANCE MONEY MARKET CONSUMER
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
0
ACTUAL(WITH WAIVERS)
(a-b)
------------------ 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
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
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
MAXIMUM FEES (without waivers)
(a-b)
------------------ 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (without waivers)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
================================================================================
ACTUAL
( 14,468.19 - 8,679.34 )
--------------------------------- 6]
30-Day S.E.C. Yield= 2 *{[( +1) -1} = 1.09%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
FULL FEES (WITHOUT WAIVERS)
( 14,468.19 - 0.00 )
--------------------------------- 6]
= 2 *{[( +1) -1} = 2.74%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
- --------------------------------------------------------------------------------
<PAGE> 14
PERFORMANCE MID CAP CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 02/24/94 TO 05/31/97 ):
( 1,830.34 /1,000) - 1 = 83.03%
YEAR TO DATE: ( 12/31/96 TO 05/31/97 ):
( 1,020.73 /1,000) - 1 = 2.07%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,012.64 /1,000) - 1 = 1.26%
MONTHLY: ( 04/30/97 TO 05/31/97 ):
( 1,004.29 /1,000) - 1 = 0.43%
1 YEAR ( 05/31/96 TO 05/31/97 ):
( 1,223.30 /1,000) - 1 = 22.33%
3 YEAR ( 05/31/94 TO 05/31/97 ):
( 1,900.71 /1,000) - 1 = 90.07%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 02/24/94 TO 05/31/97 ):
(1/( 1192 /365))
(( 1,830.34 /1,000 -1) = 20.33%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( 1,223.30 /1,000 -1) = 22.33%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000 -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( 1,900.71 /1,000 -1) = 23.87%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000 -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000 -1) = -100.00%
<PAGE> 15
PERFORMANCE MONEY MARKET CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AMSOUTH EQUITY INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
- ------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 03/20/97 TO 05/31/97 ):
( 1125.24 /1,000) - 1 = 12.52%
YEAR TO DATE: ( 03/20/97 TO 05/31/97 ):
( 1,125.24 /1,000) - 1 = 12.52%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,105.61 /1,000) - 1 = 10.56%
MONTHLY: ( 05/01/97 TO 05/31/97 ):
( 1,014.61 /1,000) - 1 = 1.46%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- ------------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 01/31/76 TO 05/31/97 ):
(1/( 7760 /365))
(( /1,000 -1) = -100.00%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( /1,000 -1) = -100.00%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000 -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( /1,000 -1) = -100.00%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000 -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000 -1) = -100.00%
================================================================================
<PAGE> 16
PERFORMANCE MID CAP CONSUMER
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
0
ACTUAL(WITH WAIVERS)
(a-b)
----------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
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
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
MAXIMUM FEES (without waivers)
(a-b)
-------------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (without waivers)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
================================================================================
ACTUAL
( 14,468.19 - 8,679.34 )
--------------------------------- 6]
30-Day S.E.C. Yield = 2 *{[( +1) -1} = 1.09%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
FULL FEES (WITHOUT WAIVERS)
( 14,468.19 - 0.00 )
------------------------------- 6]
= 2 *{[( +1) -1} = 2.74%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
- --------------------------------------------------------------------------------
<PAGE> 17
PERFORMANCE MID CAP INSTITUTIONAL
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -----------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 02/24/94 TO 05/31/97 ):
( 1,843.88 /1,000) - 1 = 84.39%
YEAR TO DATE: ( 12/31/96 TO 05/31/97 ):
( 1,020.73 /1,000) - 1 = 2.07%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,012.64 /1,000) - 1 = 1.26%
MONTHLY: ( 04/30/97 TO 05/31/97 ):
( 1,004.29 /1,000) - 1 = 0.43%
1 YEAR ( 05/31/96 TO 05/31/97 ):
( 1,226.20 /1,000) - 1 = 22.62%
3 YEAR ( 05/31/94 TO 05/31/97 ):
( 1,914.00 /1,000) - 1 = 91.40%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -------------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 02/24/94 TO 05/31/97 ):
(1/( 1192 /365))
(( 1,843.88 /1,000) -1) = 20.61%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( 1,226.20 /1,000) -1) = 22.62%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000) -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( 1,914.00 /1,000) -1) = 24.16%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000) -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000) -1) = -100.00%
<PAGE> 18
PERFORMANCE MONEY MARKET CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AMSOUTH EQUITY INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
- -----------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 03/20/97 TO 05/31/97 ):
( 1125.24 /1,000) - 1 = 12.52%
YEAR TO DATE: ( 03/20/97 TO 05/31/97 ):
( 1,125.24 /1,000) - 1 = 12.52%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,105.61 /1,000) - 1 = 10.56%
MONTHLY: ( 05/01/97 TO 05/31/97 ):
( 1,014.61 /1,000) - 1 = 1.46%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -------------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 01/31/76 TO 05/31/97 ):
(1/( 7760 /365))
(( /1,000) -1) = -100.00%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( /1,000) -1) = -100.00%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000) -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( /1,000) -1) = -100.00%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000) -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000) -1) = -100.00%
================================================================================
<PAGE> 19
PERFORMANCE MID CAP INSTITUTIONAL
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
0
ACTUAL(WITH WAIVERS)
(a-b)
---------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
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
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
MAXIMUM FEES (without waivers)
(a-b)
----------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (without waivers)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
================================================================================
ACTUAL
( 14,468.19 - 8,679.34 )
--------------------------------- 6]
30-Day S.E.C. Yield= 2 *{[( +1) -1} = 1.09%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
FULL FEES (WITHOUT WAIVERS)
( 14,468.19 - 0.00 )
----------------------------- 6]
= 2 *{[( +1) -1} = 2.74%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
- -------------------------------------------------------------------------------
<PAGE> 20
PERFORMANCE MONEY MARKET INSTITUTIONAL
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -----------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 09/30/93 TO 05/31/97 ):
( 1,196.51 /1,000) - 1 = 19.65%
YEAR TO DATE: ( 12/31/96 TO 05/31/97 ):
( 1,020.73 /1,000) - 1 = 2.07%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,012.64 /1,000) - 1 = 1.26%
MONTHLY: ( 04/30/97 TO 05/31/97 ):
( 1,004.29 /1,000) - 1 = 0.43%
1 YEAR ( 05/31/96 TO 05/31/97 ):
( 1,053.39 /1,000) - 1 = 5.34%
3 YEAR ( 05/31/94 TO 05/31/97 ):
( 1,170.85 /1,000) - 1 = 17.09%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- ------------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE: PERFORMANCE MONEY MARKET INSTITUTIONAL
SINCE INCEPTION: ( 09/30/93 TO 05/31/97 ):
(1/( 1339 /365))
((1,196.51 /1,000) -1) = 5.01%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
((1,053.39 /1,000) -1) = 5.34%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000) -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
((1,170.85 /1,000) -1) = 5.40%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000) -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000) -1) = -100.00%
<PAGE> 21
PERFORMANCE MONEY MARKET CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AMSOUTH EQUITY INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
- ---------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 03/20/97 TO 05/31/97 ):
( 1125.24 /1,000) - 1 = 12.52%
YEAR TO DATE: ( 03/20/97 TO 05/31/97 ):
( 1,125.24 /1,000) - 1 = 12.52%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,105.61 /1,000) - 1 = 10.56%
MONTHLY: ( 05/01/97 TO 05/31/97 ):
( 1,014.61 /1,000) - 1 = 1.46%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -------------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 01/31/76 TO 05/31/97 ):
(1/( 7760 /365))
(( /1,000) -1) = -100.00%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( /1,000) -1) = -100.00%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000) -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( /1,000) -1) = -100.00%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000) -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000) -1) = -100.00%
===============================================================================
<PAGE> 22
PERFORMANCE MONEY MARKET INSTITUTIONAL
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
- -------------------------------------------------------------------------------
0
ACTUAL(WITH WAIVERS)
(a-b)
---------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
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
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
MAXIMUM FEES (without waivers)
(a-b)
---------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (without waivers)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
===============================================================================
ACTUAL
( 14,468.19 - 8,679.34 )
-------------------------------- 6]
30-Day S.E.C. Yield= 2 *{[( +1) -1} = 1.09%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
FULL FEES (WITHOUT WAIVERS)
( 14,468.19 - 0.00 )
-------------------------------- 6]
= 2 *{[( +1) -1} = 2.74%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
- --------------------------------------------------------------------------------
<PAGE> 23
PERFORMANCE SHORT TERM CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- ----------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 06/01/92 TO 05/31/97 ):
( 1,260.98 /1,000) - 1 = 26.10%
YEAR TO DATE: ( 12/31/96 TO 05/31/97 ):
( 1,020.73 /1,000) - 1 = 2.07%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,012.64 /1,000) - 1 = 1.26%
MONTHLY: ( 04/30/97 TO 05/31/97 ):
( 1,004.29 /1,000) - 1 = 0.43%
1 YEAR ( 05/31/96 TO 05/31/97 ):
( 1,054.38 /1,000) - 1 = 5.44%
3 YEAR ( 05/31/94 TO 05/31/97 ):
( 1,167.75 /1,000) - 1 = 16.78%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 06/01/92 TO 05/31/97 ):
(1/( 1825 /365))
(( 1,260.98 /1,000 -1) = 4.75%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( 1,054.38 /1,000 -1) = 5.44%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000 -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( 1,167.75 /1,000 -1) = 5.31%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000 -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000 -1) = -100.00%
<PAGE> 24
PERFORMANCE MONEY MARKET CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AMSOUTH EQUITY INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
- ---------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 03/20/97 TO 05/31/97 ):
( 1125.24 /1,000) - 1 = 12.52%
YEAR TO DATE: ( 03/20/97 TO 05/31/97 ):
( 1,125.24 /1,000) - 1 = 12.52%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,105.61 /1,000) - 1 = 10.56%
MONTHLY: ( 05/01/97 TO 05/31/97 ):
( 1,014.61 /1,000) - 1 = 1.46%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- ------------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 01/31/76 TO 05/31/97 ):
(1/( 7760 /365))
(( /1,000 -1) = -100.00%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( /1,000 -1) = -100.00%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000 -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( /1,000 -1) = -100.00%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000 -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000 -1) = -100.00%
================================================================================
<PAGE> 25
PERFORMANCE SHORT TERM CONSUMER
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
0
ACTUAL(WITH WAIVERS)
(a-b)
----------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
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
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
MAXIMUM FEES (without waivers)
(a-b)
----------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (without waivers)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
================================================================================
ACTUAL
( 14,468.19 - 8,679.34 )
--------------------------------- 6]
30-Day S.E.C. Yield= 2 *{[( +1) -1} = 1.09%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
FULL FEES (WITHOUT WAIVERS)
( 14,468.19 - 0.00 )
------------------------------ 6]
= 2 *{[( +1) -1} = 2.74%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
- -------------------------------------------------------------------------------
<PAGE> 26
PERFORMANCE SHORT TERM INSTITUTIONAL
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -----------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 06/01/92 TO 05/31/97 ):
( 1,274.36 /1,000) - 1 = 27.44%
YEAR TO DATE: ( 12/31/96 TO 05/31/97 ):
( 1,020.73 /1,000) - 1 = 2.07%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,012.64 /1,000) - 1 = 1.26%
MONTHLY: ( 04/30/97 TO 05/31/97 ):
( 1,274.36 /1,000) - 1 = 27.44%
1 YEAR ( 05/31/96 TO 05/31/97 ):
( 1,056.95 /1,000) - 1 = 5.70%
3 YEAR ( 05/31/94 TO 05/31/97 ):
( 1,176.47 /1,000) - 1 = 17.65%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -------------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE: PERFORMANCE SHORT TERM INSTITUTIONAL
SINCE INCEPTION: ( 06/01/92 TO 05/31/97 ):
(1/( 1825 /365))
((1,274.36 /1,000 -1) = 4.97%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
((1,056.95 /1,000 -1) = 5.70%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000 -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
((1,176.47 /1,000 -1) = 5.57%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000 -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000 -1) = -100.00%
<PAGE> 27
PERFORMANCE MONEY MARKET CONSUMER
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 05/31/97
AMSOUTH EQUITY INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
- ----------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 03/20/97 TO 05/31/97 ):
( 1125.24 /1,000) - 1 = 12.52%
YEAR TO DATE: ( 03/20/97 TO 05/31/97 ):
( 1,125.24 /1,000) - 1 = 12.52%
QUARTERLY: ( 02/28/97 TO 05/31/97 ):
( 1,105.61 /1,000) - 1 = 10.56%
MONTHLY: ( 05/01/97 TO 05/31/97 ):
( 1,014.61 /1,000) - 1 = 1.46%
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -------------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 01/31/76 TO 05/31/97 ):
(1/( 7760 /365))
(( /1,000 -1) = -100.00%
1 YEAR ( 05/31/96 TO 05/31/97 ):
(1/( 365 /365))
(( /1,000 -1) = -100.00%
2 YEAR ( 05/31/95 TO 05/31/97 ):
(1/( 730 /365))
(( /1,000 -1) = -100.00%
3 YEAR ( 05/31/94 TO 05/31/97 ):
(1/( 1095 /365))
(( /1,000 -1) = -100.00%
5 YEAR ( 05/31/92 TO 05/31/97 ):
(1/( 1825 /365))
(( /1,000 -1) = -100.00%
10 YEAR ( 05/31/87 TO 05/31/97 ):
(1/( 3650 /365))
(( /1,000 -1) = -100.00%
==============================================================================
<PAGE> 28
PERFORMANCE SHORT TERM INSTITUTIONAL
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
- ------------------------------------------------------------------------------
0
ACTUAL(WITH WAIVERS)
(a-b)
-------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
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
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
MAXIMUM FEES (without waivers)
(a-b)
-------------- 6]
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) -1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (without waivers)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
================================================================================
ACTUAL
( 14,468.19 - 8,679.34 )
----------------------------- 6]
30-Day S.E.C. Yield = 2 *{[( +1) -1} = 1.09%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
FULL FEES (WITHOUT WAIVERS)
( 14,468.19 - 0.00 )
---------------------------- 6]
= 2 *{[( +1) -1} = 2.74%
( 598,237.977 * 10.64 )
The performance was computed based on the thirty day period ending April 30,
1997
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 18(a)
POWER OF ATTORNEY
We, the undersigned Trustees of Performance Funds Trust (the "Funds"), an
open-ended, diversified, management investment company, organized as a Delaware
business trust, do hereby constitute and appoint Wally Grimm, Richard Ille,
Steven R. Howard and Scott MacLeod and each of them individually, our true and
lawful attorneys and agents to take any and all action and execute any and all
instruments which said attorneys and agents may deem necessary or advisable to
enable the Funds to comply with:
(i) The Securities Act of 1933, as amended, and any rules, regulations,
orders or other requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under such Securities Act of
1933, as amended, of shares of beneficial interest of the Funds to be offered
by the Funds;
(ii) the Investment Company Act of 1940, as amended, and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission thereunder, in connection with the registration of the Funds under
the Investment company Act of 1940, as amended; and
(iii) state securities laws and any rules, regulations, orders or other
requirements of state securities commissions, in connection with the
registration under state securities laws of the Funds and with the registration
under state securities laws of shares of beneficial interest of the Fund to be
offered by the Funds;
including specifically, but without limitation of the foregoing, power and
authority to sign the name of the Funds in its behalf and to affix its seal,
and to sign the name of such Trustee in his behalf as such Trustee to any
amendment or supplement (including post-effective amendments) to the
registration statement or statements filed with the Securities and Exchange
Commission under such Securities Act of 1933, as amended, and to execute any
instruments or documents filed or to be filed as part of or in connection with
such registration statement or statements, and to execute any instruments or
documents filed or to be filed as a part of or in connection with compliance
with state securities laws, including, but not limited to, all state filings
for any purpose, state filings in connection with corporate or trust
organization or amending corporate or trust documentation, filings for purposes
of amending corporate or trust documentation, filings for purposes of state tax
laws and filings in connection with blue sky regulations; and the undersigned
hereby ratifies and confirms all that said attorneys and agents shall do or
cause to be done by virtue hereof.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned place their hands as of the 25th
day of March, 1997.
/s/ CHARLES M. CARR
------------------------------
Charles M. Carr
/s/ JOHN WILLIAM HEAD
------------------------------
John William Head
/s/ JAMES H. JOHNSTON
------------------------------
James H. Johnston
/s/ JAMES T. MALLETTE
------------------------------
James T. Mallette
/s/ WALTER P. NEELY
------------------------------
Walter P. Neely
/s/ JOHN J. PILEGGI
------------------------------
John J. Pileggi
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 022
<NAME> INTERMEDIATE TERM GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 95,394,683
<INVESTMENTS-AT-VALUE> 94,782,127
<RECEIVABLES> 1,542,503
<ASSETS-OTHER> 24,848
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 96,349,478
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 642,121
<TOTAL-LIABILITIES> 642,121
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,854,275
<SHARES-COMMON-STOCK> 147,578<F1>
<SHARES-COMMON-PRIOR> 221,371<F1>
<ACCUMULATED-NII-CURRENT> 84,882
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 4,619,244
<ACCUM-APPREC-OR-DEPREC> (612,556)
<NET-ASSETS> 95,707,357
<DIVIDEND-INCOME> 37,485
<INTEREST-INCOME> 5,962,092
<OTHER-INCOME> 0
<EXPENSES-NET> 707,244
<NET-INVESTMENT-INCOME> 5,292,333
<REALIZED-GAINS-CURRENT> (114,007)
<APPREC-INCREASE-CURRENT> 1,010,690
<NET-CHANGE-FROM-OPS> 6,189,016
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 101,543<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 12,702<F1>
<NUMBER-OF-SHARES-REDEEMED> 95,285<F1>
<SHARES-REINVESTED> 8,790<F1>
<NET-CHANGE-IN-ASSETS> 15,856,539
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 440,376
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 751,282
<AVERAGE-NET-ASSETS> 1,823,011<F1>
<PER-SHARE-NAV-BEGIN> 9.82<F1>
<PER-SHARE-NII> .57<F1>
<PER-SHARE-GAIN-APPREC> .10<F1>
<PER-SHARE-DIVIDEND> .56<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.93<F1>
<EXPENSE-RATIO> 1.03<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>CONSUMER SERVICE CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 021
<NAME> SHORT TERM GOVERNMENT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 126,810,762
<INVESTMENTS-AT-VALUE> 126,744,949
<RECEIVABLES> 1,669,696
<ASSETS-OTHER> 9,447
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128,424,092
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 791,942
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 131,110,486
<SHARES-COMMON-STOCK> 123,550<F1>
<SHARES-COMMON-PRIOR> 151,519<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 27,487
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,385,036
<ACCUM-APPREC-OR-DEPREC> (65,813)
<NET-ASSETS> 127,632,150
<DIVIDEND-INCOME> 36,906
<INTEREST-INCOME> 7,380,026
<OTHER-INCOME> 0
<EXPENSES-NET> 785,752
<NET-INVESTMENT-INCOME> 6,631,180
<REALIZED-GAINS-CURRENT> (695,641)
<APPREC-INCREASE-CURRENT> 471,301
<NET-CHANGE-FROM-OPS> 6,406,840
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 67,062<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 41,252
<NUMBER-OF-SHARES-REDEEMED> 75,497<F1>
<SHARES-REINVESTED> 6,276<F1>
<NET-CHANGE-IN-ASSETS> 19,538,088
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 473,742
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 785,752
<AVERAGE-NET-ASSETS> 1,271,194<F1>
<PER-SHARE-NAV-BEGIN> 9.75<F1>
<PER-SHARE-NII> .49<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> .49<F1>
<PER-SHARE-DISTRIBUTIONS> .49<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.75<F1>
<EXPENSE-RATIO> .87<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>CONSUMER SERVICE SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 024
<NAME> MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 416,311,147
<INVESTMENTS-AT-VALUE> 416,311,147
<RECEIVABLES> 1,598,750
<ASSETS-OTHER> 16,672
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 417,926,569
<PAYABLE-FOR-SECURITIES> 2,983,900
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,983,855
<TOTAL-LIABILITIES> 4,967,755
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,129,622,000
<SHARES-COMMON-STOCK> 92,220,361<F1>
<SHARES-COMMON-PRIOR> 25,215,839<F1>
<ACCUMULATED-NII-CURRENT> 4,136
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,522
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 412,958,814
<DIVIDEND-INCOME> 61,270
<INTEREST-INCOME> 23,006,183
<OTHER-INCOME> 0
<EXPENSES-NET> 1,227,375
<NET-INVESTMENT-INCOME> 21,840,078
<REALIZED-GAINS-CURRENT> 10,495
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 21,850,573
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,063,174<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 200,861,148<F1>
<NUMBER-OF-SHARES-REDEEMED> 36,114,373<F1>
<SHARES-REINVESTED> 2,257,747<F1>
<NET-CHANGE-IN-ASSETS> 20,776,611
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,265,939
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,433,395
<AVERAGE-NET-ASSETS> 44,658,864<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .04<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> .04<F1>
<PER-SHARE-DISTRIBUTIONS> .04<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .38<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>CONSUMER SERVICE CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 014
<NAME> MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 416,311,147
<INVESTMENTS-AT-VALUE> 416,311,147
<RECEIVABLES> 1,598,750
<ASSETS-OTHER> 16,672
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 417,926,569
<PAYABLE-FOR-SECURITIES> 2,983,900
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,983,855
<TOTAL-LIABILITIES> 4,967,755
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,129,622,000
<SHARES-COMMON-STOCK> 320,732,095<F1>
<SHARES-COMMON-PRIOR> 366,966,364<F1>
<ACCUMULATED-NII-CURRENT> 4,136
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,522
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 412,958,814
<DIVIDEND-INCOME> 61,270
<INTEREST-INCOME> 23,006,183
<OTHER-INCOME> 0
<EXPENSES-NET> 1,227,375
<NET-INVESTMENT-INCOME> 21,840,078
<REALIZED-GAINS-CURRENT> 10,495
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 21,850,573
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18,776,904<F1>
<DISTRIBUTIONS-OF-GAINS> 13,881<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 673,527,201<F1>
<NUMBER-OF-SHARES-REDEEMED> 719,812,099<F1>
<SHARES-REINVESTED> 50,629<F1>
<NET-CHANGE-IN-ASSETS> 20,776,611
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,265,939
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,433,395
<AVERAGE-NET-ASSETS> 359,392,457<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .05<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> .05<F1>
<PER-SHARE-DISTRIBUTIONS> .05<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .25<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 011
<NAME> SHORT TERM GOVERNMENT FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 126,810,762
<INVESTMENTS-AT-VALUE> 126,744,949
<RECEIVABLES> 1,669,696
<ASSETS-OTHER> 9,447
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128,424,092
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 791,942
<TOTAL-LIABILITIES> 791,942
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 131,110,486
<SHARES-COMMON-STOCK> 12,970,314<F1>
<SHARES-COMMON-PRIOR> 10,935,518<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 27,487
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,385,036
<ACCUM-APPREC-OR-DEPREC> (65,813)
<NET-ASSETS> 127,632,150
<DIVIDEND-INCOME> 36,906
<INTEREST-INCOME> 7,380,026
<OTHER-INCOME> 0
<EXPENSES-NET> 785,752
<NET-INVESTMENT-INCOME> 6,631,180
<REALIZED-GAINS-CURRENT> (695,641)
<APPREC-INCREASE-CURRENT> 471,301
<NET-CHANGE-FROM-OPS> 6,406,840
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,564,119<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3,998,186<F1>
<NUMBER-OF-SHARES-REDEEMED> 2,452,500<F1>
<SHARES-REINVESTED> 489,110<F1>
<NET-CHANGE-IN-ASSETS> 19,538,088
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 27,168,810
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 473,742
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 785,752
<AVERAGE-NET-ASSETS> 117,012,146<F1>
<PER-SHARE-NAV-BEGIN> 9.75<F1>
<PER-SHARE-NII> .55<F1>
<PER-SHARE-GAIN-APPREC> .01<F1>
<PER-SHARE-DIVIDEND> .54<F1>
<PER-SHARE-DISTRIBUTIONS> .54<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.75<F1>
<EXPENSE-RATIO> .66<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 012
<NAME> INTERMEDIATE TERM GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 95394683
<INVESTMENTS-AT-VALUE> 94782127
<RECEIVABLES> 1542503
<ASSETS-OTHER> 24848
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 96349478
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 642121
<TOTAL-LIABILITIES> 642121
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100854275
<SHARES-COMMON-STOCK> 9488829<F1>
<SHARES-COMMON-PRIOR> 7910500<F1>
<ACCUMULATED-NII-CURRENT> 84882
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 4619244
<ACCUM-APPREC-OR-DEPREC> (612556)
<NET-ASSETS> 95707357
<DIVIDEND-INCOME> 37485
<INTEREST-INCOME> 5962092
<OTHER-INCOME> 0
<EXPENSES-NET> 707244
<NET-INVESTMENT-INCOME> 5292333
<REALIZED-GAINS-CURRENT> (114007)
<APPREC-INCREASE-CURRENT> 1010690
<NET-CHANGE-FROM-OPS> 6189016
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5059433<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3071378<F1>
<NUMBER-OF-SHARES-REDEEMED> 1826500<F1>
<SHARES-REINVESTED> 333451<F1>
<NET-CHANGE-IN-ASSETS> 15856538
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 440376
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 751282
<AVERAGE-NET-ASSETS> 80317898<F1>
<PER-SHARE-NAV-BEGIN> 9.82<F1>
<PER-SHARE-NII> .60<F1>
<PER-SHARE-GAIN-APPREC> .09<F1>
<PER-SHARE-DIVIDEND> .58<F1>
<PER-SHARE-DISTRIBUTIONS> .00<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.93<F1>
<EXPENSE-RATIO> .86<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>INSTITUTIONAL CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 015
<NAME> MID CAP GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 92,051,281
<INVESTMENTS-AT-VALUE> 131,147,889
<RECEIVABLES> 1,447,538
<ASSETS-OTHER> 16,956
<OTHER-ITEMS-ASSETS> 2,149
<TOTAL-ASSETS> 132,614,532
<PAYABLE-FOR-SECURITIES> 1,414,418
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 257,883
<TOTAL-LIABILITIES> 1,672,301
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 91,356,756
<SHARES-COMMON-STOCK> 7,481,108<F1>
<SHARES-COMMON-PRIOR> 5,744,117<F1>
<ACCUMULATED-NII-CURRENT> 6,768
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 482,099
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 39,096,608
<NET-ASSETS> 130,942,231
<DIVIDEND-INCOME> 1,089,802
<INTEREST-INCOME> 740,712
<OTHER-INCOME> 0
<EXPENSES-NET> 937,351
<NET-INVESTMENT-INCOME> 893,163
<REALIZED-GAINS-CURRENT> 1,922,390
<APPREC-INCREASE-CURRENT> 19,983,182
<NET-CHANGE-FROM-OPS> 22,798,735
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 870,028<F1>
<DISTRIBUTIONS-OF-GAINS> 2,164,608<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2,558,236<F1>
<NUMBER-OF-SHARES-REDEEMED> 997,066<F1>
<SHARES-REINVESTED> 175,821<F1>
<NET-CHANGE-IN-ASSETS> 48,800,753
<ACCUMULATED-NII-PRIOR> 1,487
<ACCUMULATED-GAINS-PRIOR> 774,486
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 762,354
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,073,733
<AVERAGE-NET-ASSETS> 98,904,349<F1>
<PER-SHARE-NAV-BEGIN> 14.05<F1>
<PER-SHARE-NII> .13<F1>
<PER-SHARE-GAIN-APPREC> 2.99<F1>
<PER-SHARE-DIVIDEND> .13<F1>
<PER-SHARE-DISTRIBUTIONS> .33<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 16.71<F1>
<EXPENSE-RATIO> .92<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 013
<NAME> EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 163,909,262
<INVESTMENTS-AT-VALUE> 253,061,580
<RECEIVABLES> 630,171
<ASSETS-OTHER> 4,864
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 253,696,615
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 711,824
<TOTAL-LIABILITIES> 711,824
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 162,685,620
<SHARES-COMMON-STOCK> 12,184,708<F1>
<SHARES-COMMON-PRIOR> 9,162,821<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (7,702)
<ACCUMULATED-NET-GAINS> 1,154,555
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 89,152,318
<NET-ASSETS> 252,984,791
<DIVIDEND-INCOME> 2,386,697
<INTEREST-INCOME> 1,978,692
<OTHER-INCOME> 0
<EXPENSES-NET> 1,567,065
<NET-INVESTMENT-INCOME> 2,798,324
<REALIZED-GAINS-CURRENT> 1,164,271
<APPREC-INCREASE-CURRENT> 48,227,378
<NET-CHANGE-FROM-OPS> 52,189,973
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,692,406<F1>
<DISTRIBUTIONS-OF-GAINS> 2,663,128<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 4,341,229<F1>
<NUMBER-OF-SHARES-REDEEMED> 1,568,739<F1>
<SHARES-REINVESTED> 249,397<F1>
<NET-CHANGE-IN-ASSETS> 103,009,609
<ACCUMULATED-NII-PRIOR> 60,315
<ACCUMULATED-GAINS-PRIOR> 2,855,007
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,154,404
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,738,369
<AVERAGE-NET-ASSETS> 180,331,055<F1>
<PER-SHARE-NAV-BEGIN> 15.29<F1>
<PER-SHARE-NII> .24<F1>
<PER-SHARE-GAIN-APPREC> 4.13<F1>
<PER-SHARE-DIVIDEND> .25<F1>
<PER-SHARE-DISTRIBUTIONS> .25<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 19.16<F1>
<EXPENSE-RATIO> .83<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 025
<NAME> MID CAP GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 92,051,281
<INVESTMENTS-AT-VALUE> 131,147,889
<RECEIVABLES> 1,447,538
<ASSETS-OTHER> 16,956
<OTHER-ITEMS-ASSETS> 2,149
<TOTAL-ASSETS> 132,614,532
<PAYABLE-FOR-SECURITIES> 1,414,418
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 257,883
<TOTAL-LIABILITIES> 1,672,301
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 91,356,756
<SHARES-COMMON-STOCK> 353,577<F1>
<SHARES-COMMON-PRIOR> 102,309<F1>
<ACCUMULATED-NII-CURRENT> 6,768
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 482,099
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 39,096,608
<NET-ASSETS> 130,942,231
<DIVIDEND-INCOME> 1,089,802
<INTEREST-INCOME> 740,712
<OTHER-INCOME> 0
<EXPENSES-NET> 937,351
<NET-INVESTMENT-INCOME> 893,163
<REALIZED-GAINS-CURRENT> 1,922,390
<APPREC-INCREASE-CURRENT> 19,983,182
<NET-CHANGE-FROM-OPS> 22,798,735
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,854<F1>
<DISTRIBUTIONS-OF-GAINS> 50,169<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 266,169<F1>
<NUMBER-OF-SHARES-REDEEMED> 19,298<F1>
<SHARES-REINVESTED> 4,397<F1>
<NET-CHANGE-IN-ASSETS> 48,800,753
<ACCUMULATED-NII-PRIOR> 1,487
<ACCUMULATED-GAINS-PRIOR> 774,486
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 762,354
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,073,733
<AVERAGE-NET-ASSETS> 2,665,684<F1>
<PER-SHARE-NAV-BEGIN> 14.05<F1>
<PER-SHARE-NII> .09<F1>
<PER-SHARE-GAIN-APPREC> 3.00<F1>
<PER-SHARE-DIVIDEND> .09<F1>
<PER-SHARE-DISTRIBUTIONS> .33<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 16.72<F1>
<EXPENSE-RATIO> 1.19<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>CONSUMER SERVICE CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 023
<NAME> EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 163909262
<INVESTMENTS-AT-VALUE> 253061580
<RECEIVABLES> 630171
<ASSETS-OTHER> 4864
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 253696615
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 711824
<TOTAL-LIABILITIES> 711824
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 162685620
<SHARES-COMMON-STOCK> 1019302<F1>
<SHARES-COMMON-PRIOR> 642787<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (7702)
<ACCUMULATED-NET-GAINS> 1154555
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 89152318
<NET-ASSETS> 252984791
<DIVIDEND-INCOME> 2386697
<INTEREST-INCOME> 1978692
<OTHER-INCOME> 0
<EXPENSES-NET> 1567065
<NET-INVESTMENT-INCOME> 2798324
<REALIZED-GAINS-CURRENT> 1164271
<APPREC-INCREASE-CURRENT> 48227378
<NET-CHANGE-FROM-OPS> 52189973
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 173421<F1>
<DISTRIBUTIONS-OF-GAINS> 201637<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 492606<F1>
<NUMBER-OF-SHARES-REDEEMED> 137774<F1>
<SHARES-REINVESTED> 21683<F1>
<NET-CHANGE-IN-ASSETS> 103009609
<ACCUMULATED-NII-PRIOR> 60315
<ACCUMULATED-GAINS-PRIOR> 2855007
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 154404
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1738369
<AVERAGE-NET-ASSETS> 13745762<F1>
<PER-SHARE-NAV-BEGIN> 15.29<F1>
<PER-SHARE-NII> .20<F1>
<PER-SHARE-GAIN-APPREC> 4.13<F1>
<PER-SHARE-DIVIDEND> .21<F1>
<PER-SHARE-DISTRIBUTIONS> .25<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 19.16<F1>
<EXPENSE-RATIO> 1.06<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>CONSUMER SERVICE CLASS
</FN>
</TABLE>
