<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1998
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. 11
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 15
(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
ELLEN STOUTAMIRE, ESQ.
BISYS FUND SERVICES
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
STEVEN R. HOWARD, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICA'S
NEW YORK, NEW YORK 10019
It is proposed that this filing will become effective:
X immediately upon filing pursuant to Rule 485(b)
on , 1998 pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
75 days after filing pursuant to Rule 485(a)
on , 1998 pursuant to Rule 485(a)
<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 EQUITY FUND
THE SMALL CAP EQUITY FUND
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS PROSPECTUS
<S> <C> <C>
PART A PROSPECTUS CAPTION
Item 1. Cover Page Cover Page
Item 2. Synopsis Description of Funds; Fund
Expenses
Item 3. Financial Highlights Financial Highlights
Item 4. General Description of Registrant 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
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 EQUITY FUND (FORMERLY, THE SMALL CAP FUND)
THE MID CAP EQUITY FUND (FORMERLY, THE MID CAP GROWTH FUND)
THE LARGE CAP 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 Class A and Class B 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 30, 1998 (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. The SAI is also available along with other
material on the SEC Internet website (http:/www.sec.gov)
------------------------
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 30, 1998
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses............................................... 3
Fee Table................................................... 3
Financial Highlights........................................ 5
Description of the Funds.................................... 16
The Investment Policies and Practices of the Funds.......... 19
Description of Securities and Investment Practices.......... 23
Investment Restrictions..................................... 34
Management of the Funds..................................... 35
Fund Share Valuation........................................ 38
Purchase of Fund Shares..................................... 38
Individual Retirement Accounts.............................. 40
Exchange Privileges......................................... 40
Redemption of Fund Shares................................... 41
Dividends, Distributions and Federal Income Tax............. 43
Other Information........................................... 45
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> 5
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, 1998 (except for The Money Market Fund and The
Intermediate Term Government Income Fund, the reduction or voluntary waiver of
advisory fees). Actual expenses in the future may be greater or less than those
shown. Shareholders in Class A and B shares of the Funds may be subject to Rule
12b-1 Plan distribution fees (annually up to 0.35% for Class A shares and 1.00%
for Class B shares 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 INTERMEDIATE
THE SHORT TERM TERM THE THE THE
MONEY GOVERNMENT GOVERNMENT SMALL CAP MID CAP LARGE CAP
MARKET INCOME INCOME EQUITY EQUITY EQUITY
FUND FUND FUND FUND FUND 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....................... none none none none none none
Other Expenses(after
waiver)(3)..................... 0.19% 0.24% 0.27% 0.45% 0.32% 0.31%
---- ---- ---- ---- ---- ----
Total Portfolio Operating
Expenses (after waiver)(4)..... 0.34% 0.64% 0.72% 1.45% 1.07% 0.91%
==== ==== ==== ==== ==== ====
</TABLE>
- ---------------
(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
Term Government Income Fund in contractual fee. Had this reduction not been
in effect, the ratio of investment advisory fees to net assets would have
been 0.30% for the Money Market Fund and 0.50% for the Intermediate Term
Government Income Fund.
(3) Reflects voluntary reduction of administration fee of 0.08% for the Money
Market Fund. Without such waiver, administration fees for the Money Market
Fund would total 0.15%.
(4) Absent voluntary fee waivers, "Total Operating Expenses" for the Money
Market Fund and the Intermediate Term Government Income Fund would have been
0.57% and 0.77%, respectively.
3
<PAGE> 6
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 INTERMEDIATE
THE SHORT TERM TERM THE THE THE
MONEY GOVERNMENT GOVERNMENT SMALL CAP MID CAP LARGE CAP
MARKET INCOME INCOME EQUITY EQUITY EQUITY
FUND FUND FUND FUND FUND FUND
------ ---------- ------------ --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 year................. $ 3 $ 7 $ 7 $ 15 $ 11 $ 9
3 years................ $11 $20 $23 $ 46 $ 34 $ 29
5 years................ $19 $36 $40 $ 79 $ 59 $ 50
10 years................ $42 $80 $89 $174 $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.
4
<PAGE> 7
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,
1998. The following financial highlights have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report on the
financial statements, including this data appears in the Funds' 1998 Annual
Report to Shareholders incorporated by reference into the Statement of
Additional Information. This financial data should be read in conjunction with
the related financial statements and notes thereto.
THE MONEY MARKET FUND
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
----------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994*
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.............. 0.05 0.05 0.05 0.05 0.02
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net investment income.............. (0.05) (0.05) (0.05) (0.05) (0.02)
-------- -------- -------- -------- --------
Net Asset Value, End of Period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return......................... 5.43% 5.34% 5.60% 5.27% 2.17%
Ratios to Average Net Assets/
Supplemental Data:
Net Assets, End of Period (000).... $349,024 $320,732 $366,966 $324,942 $139,157
Net investment income before
waivers/reimbursements.......... 5.07% 4.94% 5.12% 4.91% 2.77%**
Net investment income net of
waivers/reimbursements.......... 5.31% 5.20% 5.42% 5.27% 3.30%**
Expenses before waivers/
reimbursements.................. 0.57% 0.51% 0.54% 0.59% 0.68%**
Expenses net of waivers/
reimbursements.................. 0.33% 0.25% 0.24% 0.23% 0.15%**
</TABLE>
- ---------------
* Fund commenced operations on September 30, 1993
** Annualized
5
<PAGE> 8
THE SHORT TERM GOVERNMENT INCOME FUND
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
---------------------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994 1993*
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period..................... $ 9.75 $ 9.75 $ 9.84 $ 9.77 $ 10.10 $ 10.00
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income...... 0.54 0.55 0.54 0.53 0.40 0.44
Net realized and unrealized
gains/(loss) on
investments............. 0.10 (0.01 (0.09) 0.07 (0.25) 0.22
-------- -------- -------- -------- -------- --------
Total from investment
operations................. 0.64 0.54 0.45 0.60 0.15 0.66
-------- -------- -------- -------- -------- --------
Distributions to shareholders
from:
Net investment income...... (0.54) (0.54) (0.54) (0.53) (0.40) (0.44)
Net realized gain on
investments............. .-- .-- .-- .-- (0.05) (0.12)
In excess of net realized
gain on investments..... .-- .-- .-- .-- (0.03) .--
-------- -------- -------- -------- -------- --------
Total distributions to
shareholders............... (0.54) (0.54) (0.54) (0.53) (0.48) (0.56)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period..................... $ 9.85 $ 9.75 $ 9.75 $ 9.84 $ 9.77 $ 10.10
======== ======== ======== ======== ======== ========
Total Return................. 6.73% 5.70% 4.65% 6.37% 1.49% 6.74%
Ratios to Average Net
Assets/Supplemental Data:
Net Assets, End of Period
(000)................... $120,203 $126,428 $106,617 $104,730 $111,657 $138,822
Net investment income
before
waivers/reimbursements... 5.53% 5.63% 5.47% 5.40% 3.95% 4.27%
Net investment income net
of
waivers/reimbursements... 5.53% 5.63% 5.48% 5.43% 4.00% 4.32%
Expenses before waivers/
reimbursements.......... 0.64% 0.66% 0.72% 0.77% 0.74% 0.72%
Expenses net of waivers/
reimbursements.......... 0.64% 0.66% 0.71% 0.74% 0.69% 0.67%
Portfolio turnover rate.... 65.07% 85.21% 120.00% 267.65% 213.43% 216.52%
</TABLE>
- ---------------
* Fund commenced operations on June 1, 1992
6
<PAGE> 9
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
-------------------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994 1993*
-------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 9.93 $ 9.82 $ 10.11 $ 9.87 $ 10.56 $ 10.00
-------- ------- ------- -------- -------- --------
Income from Investment
Operations:
Net investment income....... 0.59 0.60 0.56 0.62 0.58 0.62
Net realized and unrealized
gains/(loss) on
investments.............. 0.42 0.09 (0.29) 0.25 (0.52) 0.61
-------- ------- ------- -------- -------- --------
Total from investment
operations.................. 1.01 0.69 0.27 0.87 0.06 1.23
-------- ------- ------- -------- -------- --------
Distributions to shareholders
from:
Net investment income....... (0.59) (0.58) (0.56) (0.62) (0.58) (0.62)
In excess of net investment
Income................... (0.01) .-- .-- .-- .--
Net realized gain on
investments.............. .-- .-- .-- .-- (0.11) (0.05)
In excess of net realized
gain on investments...... .-- .-- .-- (0.01) (0.06) .--
-------- ------- ------- -------- -------- --------
Total distributions to
shareholders................ (0.60) (0.58) (0.56) (0.63) (0.75) (0.67)
-------- ------- ------- -------- -------- --------
Net Asset Value, End of
Period...................... $ 10.34 $ 9.93 $ 9.82 $ 10.11 $ 9.87 $ 10.56
======== ======= ======= ======== ======== ========
Total Return.................. 10.42% 7.20% 2.66% 9.31% 0.34% 12.66%
Ratios to Average Net
Assets/Supplemental Data:
Net Assets, End of Period
(000).................... $118,743 $94,242 $77,677 $108,052 $158,420 $150,115
Net investment income before
waivers / reimbursements... 5.73% 6.43% 5.50% 6.33% 5.35% 5.85%
Net investment income net of
waivers/reimbursements... 5.78% 6.48% 5.55% 6.44% 5.50% 6.00%
Expenses before waivers/
Reimbursements........... 0.77% 0.91% 0.86% 0.82% 0.80% 0.82%
Expenses net of waivers/
reimbursements........... 0.72% 0.86% 0.81% 0.71% 0.65% 0.67%
Portfolio turnover rate..... 35.62% 46.23% 183.00% 339.95% 102.46% 54.43%
</TABLE>
- ---------------
* Fund commenced operations on June 1, 1992
7
<PAGE> 10
THE LARGE CAP EQUITY FUND
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
-------------------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994 1993*
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 19.16 $ 15.29 $ 12.51 $ 11.33 $ 11.21 $ 10.00
-------- -------- -------- -------- ------- -------
Income from Investment
Operations:
Net investment income....... 0.19 0.24 0.23 0.25 0.23 0.22
Net realized and unrealized
gains/(loss) on
investments.............. 6.00 4.13 3.29 1.42 0.12 1.21
-------- -------- -------- -------- ------- -------
Total from investment
operations.................. 6.19 4.37 3.52 1.67 0.35 1.43
-------- -------- -------- -------- ------- -------
Distributions to shareholders
from:
Net investment income....... (0.19) (0.25) (0.23) (0.24) (0.23) (0.22)
Net realized gain on
investments.............. (0.18) (0.25) (0.51) (0.25) .-- .--
-------- -------- -------- -------- ------- -------
Total distributions to
shareholders................ (0.37) (0.50) (0.74) (0.49) (0.23) (0.22)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of
Period...................... $ 24.98 $ 19.16 $ 15.29 $ 12.51 $ 11.33 $ 11.21
======== ======== ======== ======== ======= =======
Total Return.................. 32.53% 29.06% 28.73% 15.35% 3.10% 14.48%
Ratios to Average Net Assets/
Supplemental Data:
Net Assets, End of Period
(000).................... $259,585 $233,454 $140,144 $100,110 $93,983 $87,755
Net investment income before
waivers/reimbursements... 0.83% 1.34% 1.55% 2.02% 1.84% 2.00%
Net investment income net of
waivers/reimbursements... 0.83% 1.43% 1.65% 2.15% 1.99% 2.20%
Expenses before waivers/
reimbursements........... 0.91% 0.92% 0.91% 0.92% 0.98% 1.03%
Expenses net of waivers/
reimbursements........... 0.91% 0.83% 0.81% 0.79% 0.83% 0.83%
Portfolio turnover rate..... 4.78% 1.41% 6.00% 58.08% 27.11% 2.61%
</TABLE>
- ---------------
* Fund commenced operations on June 1, 1992
8
<PAGE> 11
THE MID CAP EQUITY FUND
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
-------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994*
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 16.71 $ 14.05 $ 11.11 $ 9.60 $ 10.00
-------- -------- ------- ------- -------
Income from Investment Operations:
Net investment income................. 0.08 0.13 0.13 0.13 0.03
Net realized and unrealized
gain/(loss) on investments......... 4.40 2.99 3.44 1.51 (0.40)
-------- -------- ------- ------- -------
Total from investment operations........ 4.48 3.12 3.57 1.64 (0.37)
-------- -------- ------- ------- -------
Distributions to shareholders from:
Net investment income................. (0.08) (0.13) (0.13) (0.13) (0.03)
Net realized gain on investments...... (1.00) (0.33) (0.50) .-- .--
-------- -------- ------- ------- -------
Total distribution to shareholders...... (1.08) (0.46) (0.63) (0.13) (0.03)
-------- -------- ------- ------- -------
Net Asset Value, End of Period.......... $ 20.11 $ 16.71 $ 14.05 $ 11.11 $ 9.60
======== ======== ======= ======= =======
Total Return............................ 27.15% 22.62% 33.06% 17.31% (3.66%)
Ratios to Average Net Assets/
Supplemental Data:
Net Assets, End of Period (000)....... $168,116 $125,035 $80,704 $48,068 $33,779
Net investment income before
waivers/reimbursements............. 0.41% 0.75% 0.90% 1.11% 0.60%**
Net investment income net of
waivers/reimbursements............. 0.41% 0.89% 1.06% 1.37% 1.60%**
Expenses before waivers/
reimbursements..................... 1.07% 1.06% 1.14% 1.22% 1.93%**
Expenses net of waivers/
reimbursements..................... 1.07% 0.92% 0.98% 0.96% 0.93%**
Portfolio turnover rate............... 20.48% 7.72% 28.00% 20.39% 5.88%
</TABLE>
- ---------------
* Fund commenced operations on February 24, 1994
** Annualized
9
<PAGE> 12
THE SMALL CAP EQUITY FUND
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
--------------------------
FOR THE PERIOD
ENDED MAY 31, 1998*
--------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 10.00
----------
Income from Investment Operations:
Net investment income/(loss).............................. (0.03)(a)
Net realized and unrealized gain/(loss) on investments.... (0.05)
----------
Total from investment operations............................ (0.08)
----------
Net Asset Value, End of Period.............................. $ 9.92
==========
Total Return................................................ (0.80%)
Ratios to Average Net Assets/
Supplemental Data:
Net Assets, End of Period (000)........................... $ 61,450
Ratio of net investment Income/(loss) to average net
assets................................................. (0.41%)**
Ratio of expenses to average net assets................... 1.45%**
Portfolio turnover rate................................... 12.28%
</TABLE>
- ---------------
* Fund commenced operations on October 1, 1997
** Annualized
(a) Calculated based on average shares during the period.
10
<PAGE> 13
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. 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 Institutional 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, May 31, 1997 and May 31, 1998.
<TABLE>
<CAPTION>
'Redemption Value
($10,000' Lehman
<S> <C> <C>
'Aug. 31,' 10322 10300
'Nov. 30,' 10326 10326
'Feb, 28,' 10606 10811
'May 31,' 10874 10682
'Aug. 31,' 10847 10874
'Nov. 30,' 10869 10936
'Feb. 28,' 10921 10981
'May 31,' 10432 10696
'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,' 12531 12851
'Feb. 28,' 12591 12946
'May 31,' 12744 13132
'Aug. 31,' 12980 13385
'Nov. 30,' 13199 13620
'Feb. 28,' 13420 13855
'May 31,' 13604 14050
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
---------------------------------------------------------
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Redemption Value ($10,000
investment) Since Inception....... $10,674 $10,832 $11,522 $12,057 $12,744 $13,604
Lehman Bros. 1-3 Yr. Govt. ......... 10,682 10,898 11,700 12,318 13,132 13,604
</TABLE>
Without fee waiver, performance would have been lower. Past performance does not
predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/98
- --------------------------------------------------------------------------
1 YEAR 5 YEAR SINCE INCEPTION (6/1/92)
- --------------------------------------------------------------------------
<S> <C> <C>
6.73% 4.97% 5.27%
- --------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
INTERMEDIATE TERM GOVERNMENT INCOME 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, May 31, 1997 and May 31, 1998.
<TABLE>
<CAPTION>
'Redemption Value
($10,000' Lehman
<S> <C> <C>
'Aug. 31,' 10543 10494
'Nov. 30,' 10466 10471
'Feb. 28,' 11146 11108
'May 31,' 11266 11226
'Aug. 31,' 11810 11819
'Nov. 30,' 11759 11774
'Feb. 28,' 11708 11742
'May 31,' 11304 11338
'Aug. 31,' 11465 11544
'Nov. 30,' 11187 11336
'Feb. 28,' 11695 11900
'May 31,' 12356 12655
'Aug. 31,' 12496 12820
'Nov. 30,' 12995 13409
'Feb. 29,' 12905 13401
'May 31,' 12686 13175
'Aug. 31,' 12792 13349
'Nov. 30,' 13521 14159
'Feb. 28,' 13407 14000
'May 31,' 13398 14216
'Aug. 31,' 13936 14661
'Nov. 30,' 14451 15210
'Feb. 28,' 14746 15555
'May 31,' 15017 15849
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
---------------------------------------------------------
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Redemption Value ($10,000
investment) Since Inception....... $11,266 $11,304 $12,356 $12,685 $13,598 $15,017
Lehman Bros. Govt./Corp. ........... 11,226 11,339 12,655 13,175 14,215 15,849
</TABLE>
Without fee waiver, performance would have been lower. Past performance does not
predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/98
- --------------------------------------------------------------------------
1 YEAR 5 YEAR SINCE INCEPTION (6/1/92)
- --------------------------------------------------------------------------
<S> <C> <C>
10.42% 5.92% 7.01%
- --------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
MID CAP EQUITY FUND
The investment performance of the Institutional Class of shares of the Mid
Cap Equity 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, 1997 and 1998.
<TABLE>
<CAPTION>
'Redemption Value
($10,000' Lehman
<S> <C> <C>
'May 31,' 9634 9610
'Aug. 31,' 10100 10096
'Nov. 30,' 9563 9585
'Feb. 28,' 10500 10264
'May 31,' 11301 10909
'Aug. 31,' 12676 12167
'Nov. 30,' 13180 12671
'Feb. 29,' 13849 13258
'May 31,' 15037 14014
'Aug. 31,' 14925 13612
'Nov. 30,' 16480 15050
'Feb. 28,' 17345 15504
'May 31,' 18439 16559
'Aug. 31,' 20772 18505
'Nov. 30,' 21556 18995
'Feb. 28,' 23193 20961
'May 31,' 23446 21302
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
----------------------------------------------
1994 1995 1996 1997 1998
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Redemption Value ($10,000 investment)
Since Inception............................. $9,610 $10,909 $14,014 $16,559 $23,446
S&P MidCap 400................................ 9,634 11,302 15,038 18,440 21,302
</TABLE>
Without fee waiver, performance would have been lower. Past performance does not
predict future results.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/98
- ---------------------------------------------------------
1 YEAR SINCE INCEPTION (2/24/94)
- ---------------------------------------------------------
<S> <C>
27.15% 22.13%
- ---------------------------------------------------------
</TABLE>
13
<PAGE> 16
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, May 31, 1997 and May 31, 1998.
<TABLE>
<CAPTION>
'Redemption Value
($10,000 Investment)
Since Inception' S&P 500
<S> <C> <C>
'Aug. 31,' 9979 10047
'Nov. 30,' 10685 10543
'Feb. 28,' 10997 10908
'May 31,' 11448 11159
'Aug. 31,' 12014 11569
'Nov. 30,' 12061 11605
'Feb. 28,' 12158 11875
'May 31,' 11803 11633
'Aug. 31,' 12293 12200
'Nov. 30,' 11835 11726
'Feb. 28,' 12535 12683
'May 31,' 13815 13978
'Aug. 31,' 14329 14813
'Nov. 30,' 15665 16057
'Feb. 29,' 16783 17060
'May 31,' 17527 17949
'Aug. 31,' 17388 17586
'Nov. 30,' 20284 20529
'Feb. 28,' 21123 21146
'May 31,' 22620 23234
'Aug. 31,' 24010 24736
'Nov. 30,' 25885 26387
'Feb. 28,' 28678 29096
'May 31,' 29976 30363
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
---------------------------------------------------------
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Redemption Value ($10,000
investment) Since Inception....... $11,448 $11,803 $13,615 $17,527 $22,620 $29,976
S&P 500............................. 11,159 11,633 13,978 17,949 23,234 30,363
</TABLE>
Without fee waiver, performance would have been lower. Past performance does not
predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/98
- --------------------------------------------------------------------------
1 YEAR 5 YEAR SINCE INCEPTION (6/1/92)
- --------------------------------------------------------------------------
<S> <C> <C>
32.53% 21.23% 20.09%
- --------------------------------------------------------------------------
</TABLE>
14
<PAGE> 17
SMALL CAP EQUITY FUND
The investment performance of the Institutional Class of the Small Cap
Equity Fund is compared to the performance of the Standard & Poor's SmallCap 600
Index in the following chart from October 1, 1997 (commencement of operations)
through May 31, 1998.
<TABLE>
<CAPTION>
'Redemption Value
($10,000 Investment)
Since Inception' S&P Small Cap 600
<S> <C> <C>
'Nov. 30,' 9200 10126
'Feb. 28,' 10030 11052
'May 31,' 9920 10930
</TABLE>
<TABLE>
<CAPTION>
NOV. 30, FEB. 28, MAY 31,
1997 1998 1998
-------- -------- -------
<S> <C> <C> <C>
Redemption Value ($10,000 investment) Since Inception....... $ 9,200 $10,020 $ 9,920
S&P SmallCap 600............................................ 10,126 11,052 10,930
</TABLE>
Without fee waiver, performance would have been lower. Past performance does not
predict future results.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/98
- ---------------------------------------------------------
1 YEAR SINCE INCEPTION (10/1/97)
- ---------------------------------------------------------
<S> <C>
n/a -0.80%
- ---------------------------------------------------------
</TABLE>
15
<PAGE> 18
DESCRIPTION OF THE FUNDS
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 Equity Fund, the Mid Cap Equity
Fund (the "Mid Cap Equity Fund") and the Large Cap Equity Fund (the Small Cap
Equity Fund, Mid Cap Equity 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 securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities") which results in a dollar
weighted average portfolio maturity of less than three years. The maximum
effective 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 U.S.
Government 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.
16
<PAGE> 19
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 Equity Fund
The investment objective of the Small Cap Equity 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 Equity Fund
The investment objective of the Mid Cap Equity 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 and futures contracts. 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
17
<PAGE> 20
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
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 Equity Fund and
the Mid Cap Equity Fund will, and the Large Cap Equity Fund may invest in, 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, investment grade convertible securities and futures transactions and
the Mid Cap Equity Fund and Small Cap Equity 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.
18
<PAGE> 21
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. 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 government income securities which results in a dollar weighted
average portfolio maturity of less than three years. The maximum effective
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 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
19
<PAGE> 22
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 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 Equity Fund. The investment objective of the Small Cap
Equity Fund is long-term capital appreciation. Under normal market conditions,
the Small Cap Equity 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, 1998 the Index contains 600 issues with market
capitalizations ranging from approximately $50 million to $3.3 billion. The
median market capitalization of the Index is approximately $514 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, have 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.
20
<PAGE> 23
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 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 Equity Fund. The investment objective of the Mid Cap Equity Fund
is to seek to achieve growth of capital by attempting to outperform the S&P
MidCap Index. The Mid Cap Equity 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 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
21
<PAGE> 24
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 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. 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 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.
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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.
Domestic and Foreign Bank Obligations (All Funds). These obligations
include but are not restricted to certificates of deposit, commercial paper,
Yankeedollar certificates of deposit, bankers' acceptances, Eurodollar
certificates of deposit and time deposits, promissory notes and medium-term
deposit notes. The Fund will not invest in any obligations of its affiliates, as
defined under the 1940 Act. The Funds limit their investments in United States
bank obligations to obligations of United States banks (including foreign
branches). The Funds limit their investments in foreign bank obligations to
United States dollar-denominated obligations of foreign banks (including United
States branches of foreign banks) which, in the opinion of the Adviser, are of
an investment quality comparable to obligations of United States banks which may
be purchased by the Funds.
Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Investments in fixed time deposits subject to withdrawal penalties
maturing from two days through seven days may not exceed 10% of the value of the
total assets of the Fund.
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions, such as exchange controls, may be adopted which might adversely
affect the payment of principal and interest on those obligations, that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks, or that the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not subject to examination by any United States
Government agency or instrumentality.
Investments in Eurodollar and Yankeedollar obligations involve additional
risks. Most notably, there generally is less publicly available information
about foreign companies; there may be less governmental regulation and
supervision; they may use different accounting and financial standards; and the
adoption of foreign governmental restrictions may adversely affect the payment
of principal and interest on foreign
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investments. In addition, not all foreign branches of United States banks are
supervised or examined by regulatory authorities as are United States banks, and
such branches may not be subject to reserve requirements.
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 one third of the value of the Fund's total assets.
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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 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
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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 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
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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 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. When purchasing CMO's or REMIC's, the Advisor will
use the actual maturity date, average life calculation and structure of the CMO
or REMIC to determine the effective maturity. To the extent a particular CMO or
REMIC is issued by an investment company, a
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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 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 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.
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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 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 (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
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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 (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.
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
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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 Equity 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 in
securities issued by other investment companies including shares of the Money
Market Fund. 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 in the aggregate 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. In order to avoid the imposition of additional fees as
a result of investments by the Trust's Funds in the Money Market Fund, the
Advisor and the Administrator will reduce that portion of their usual service
fees from each Fund by an amount equal to their service fee from the Money
Market Fund that are attributable to those Fund investments. The Advisor and the
Administrator will promptly forward such fees to the Trust's Funds.
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,
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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 Equity 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 and Large Cap Equity Fund will not
invest more than 5% of its respective net assets in small, unseasoned companies.
Short Sales (the Mid Cap Equity and the Small Cap Equity Funds). 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
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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 Equity Fund and Mid Cap Equity
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.
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
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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. Increased portfolio turnover may increase the
likelihood of additional capital gains for the Fund. The Small Cap Equity Fund,
Mid Cap Equity 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. The Money Market Fund may invest up to
25% of its total assets in the first tier securities of a single issuer for a
period of up to three business days after the acquisition thereof provided that
the Fund may not invest in the securities of more than one issuer in accordance
with this provision at any time. 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 Equity Funds may engage in
reverse repurchase agreements. The Funds may borrow from banks up to 33 1/3% of
the current value of their total assets and those borrowings may be secured by
the pledge of not more than 33 1/3% of the current value of such Fund's total
assets.
(2) make loans, and loans of portfolio securities in excess of 33 1/3% of
the value of such Fund's total assets 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.
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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.
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 Financial Services Group, has assets in excess of $1.6 billion
under management in addition to the Trust's Funds. 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. Kelly Collins is the Portfolio
Manager responsible for the day-to-day management of the Money Market Fund's
portfolio. Mr. Collins has been with Trustmark since 1991. Jonathan Rogers, CFA,
Vice President and Portfolio Manager at Trustmark National Bank since 1985, 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 is responsible for day-to-day management of the Small Cap Equity 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 12 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 Equity Fund. Charles H. Windham,
Jr., a Vice President of Trustmark since 1970, is responsible for the day-to-day
management of the
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Large Cap Equity Fund's portfolio. Zachariah Wasson, CFA, and Senior Vice
President of Trustmark, serves as Chief Investment Officer and has overall
supervisory responsibility. Mr. Wasson joined Trustmark in 1990 and has over 20
years of bank and investment experience.
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 Equity Fund, 1.00%; Mid Cap Equity 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 Ohio, Inc.
("BISYS") acts as the Administrator of the Funds. Performance Funds Distributor,
Inc. ("PFD"), an affiliate of BISYS, is the Distributor for the Trust and
distributes the Funds' shares and may be reimbursed for certain of its
distribution related expenses.
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. BISYS also serves as the
Funds' Transfer Agent and Fund Accountant.
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. Institutional Class 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
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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; 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. 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.
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YEAR 2000
Like other mutual funds, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by the Funds or their service providers and counterparties
do not properly process and calculate date-related information and data from and
after January 1, 2000. The Funds are in the process of assessing and formulating
responses to these potential problems with the Adviser and all other major
service providers and counter parties. There can be no assurance that the Funds'
actions will be sufficient to avoid any adverse impact.
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, the
Administrator and the Distributor, 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
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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.
Shares of the Institutional Class of the Funds are offered at net asset
value without a sales load. 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,
(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) other persons or organizations authorized by the Distributor.
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.
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 Plan, 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 $25.00
on either the fifth or twentieth day of each month into their established Fund
Account. No minimum initial investment applies
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when an account is established through the Automatic Investment Plan. Contact
the Funds for more information about the Automatic Investment Plan.
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
Shares of each Fund may be exchanged for shares of another Fund in the same
class only. 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 exchange 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."
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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 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 is 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 constant net 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
(unless a shareholder who has previously established wire transfer procedures
with the Trust's Transfer Agent has requested that proceeds be sent by wire
transfer), although each Fund may take up to seven days to make payment. Also,
if the New York Stock Exchange is closed (or when trading is restricted) for any
reason other than the customary weekend or holiday closing or if an emergency
condition as determined by the SEC merits such action, the Funds may suspend
redemptions or postpone payment dates.
Redemption Methods. To ensure acceptance of your redemption request, it is
important to follow the procedures described below. Although the Funds have no
present intention to do so, the Funds reserve the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communication, such as couriers. The Funds' services and their provisions may be
modified or terminated at any time by the Funds. If the Funds terminate any
particular service, they will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service
Organization. You may redeem your shares by contacting your broker or investment
adviser and instructing him to redeem your shares. He will then contact PFD and
place a redemption trade on your behalf. You will receive the next determined
net asset value per share after receipt of such request by your broker or
investment adviser. It will be the responsibility of such broker or investment
adviser to transmit your redemption request to the Fund in a timely manner. Such
broker or investment adviser may charge you a fee for this service.
By Mail. You may redeem your shares by sending a letter directly to
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
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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.
The above mentioned services "Telephone," "Wire" and "Checkwriting" are not
available for IRAs and trust clients of Trustmark.
Automatic 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
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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 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 Equity Fund, Mid Cap Equity 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 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.
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Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of 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 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.
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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 Class A and Class B shares. Institutional Class shares and
Class A and B shares are identical in all respects with the exception that the
Class A shares are subject to a front end sales charge and Class B shares may be
subject to a contingent deferred sales charge and Class A and B 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, Class A and B 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.
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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 Class A and Class B shares may experience a lower net return on their
investment than shareholders of the Institutional Class of shares because of
sales charges and 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 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.
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.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust,
P.O. Box 182484, Columbus, Ohio 43218-2484.
General and Account Information: (800) PERFORM (737-3676).
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APPENDIX
DESCRIPTION OF BOND RATINGS
Excerpts from Moody's description of its four highest bond ratings are
listed as follows:
X Aaa -- judged to be the best quality and they carry the smallest
degree of investment risk;
X 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;
X A -- possess many favorable investment attributes and are to be
considered as "upper medium grade obligations";
X 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:
X AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong;
X 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;
X 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;
X 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> 50
[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
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
[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 EQUITY FUND
THE MID CAP EQUITY FUND
THE LARGE CAP EQUITY FUND
INSTITUTIONAL CLASS
PROSPECTUS
[TRUSTMARK LOGO]
National Bank
Performance Funds'
Investment Adviser
SEPTEMBER 30, 1998
<PAGE> 51
CROSS REFERENCE SHEET
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE MONEY MARKET FUND
THE LARGE CAP EQUITY FUND
THE MID CAP EQUITY FUND
THE SMALL CAP EQUITY FUND
<TABLE>
<CAPTION>
CLASS A AND CLASS B PROSPECTUS
<S> <C> <C>
PART A PROSPECTUS CAPTION
Item 1. Cover page Cover Page
Item 2. Synopsis Class Shares; Fund Expenses
Item 3. Financial Highlights Financial Highlights
Item 4. General Description of Registrant 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> 52
[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 EQUITY FUND
THE MID CAP EQUITY FUND
THE LARGE CAP EQUITY FUND
CLASS A and CLASS B
PROSPECTUS
[TRUSTMARK LOGO]
National Bank
Performance Funds'
Investment Adviser
SEPTEMBER 30, 1998
<PAGE> 53
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses............................................... 3
Fee Table................................................... 3
Financial Highlights........................................ 6
Description of the Funds.................................... 17
The Investment Policies and Practices of the Funds.......... 19
Description of Securities and Investment Practices.......... 23
Investment Restrictions..................................... 33
Management of the Funds..................................... 34
Fund Share Valuation........................................ 38
Purchase of Fund Shares..................................... 38
Individual Retirement Accounts.............................. 42
Defined Contribution Plans.................................. 43
Exchange Privileges......................................... 43
Redemption of Fund Shares................................... 44
Dividends, Distributions and Federal Income Tax............. 47
Other Information........................................... 49
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.
<PAGE> 54
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 FUNDS ARE:
THE MONEY MARKET FUND
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE SMALL CAP EQUITY FUND (formerly, the Small Cap Fund)
THE MID CAP EQUITY FUND (formerly, the Mid Cap Growth Fund)
THE LARGE CAP EQUITY FUND
This Prospectus describes six investment funds (the "Funds") managed by
Trustmark National Bank. 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.
Each Fund offers and this Prospectus relates to Class A Shares (formerly
Consumer Service Class) and Class B Shares (with the exception of the Short Term
Government Income Fund which does not offer Class B shares). Certain investors
may qualify to invest in a Fund's "Institutional Class" which is offered in a
separate Prospectus. The different classes of shares represent investments in
the same portfolio of securities but are subject to different sales charges and
expenses. These alternatives permit investors to choose the most beneficial
method of purchasing shares given the amount of the purchase, the length of time
the investor expects to hold shares, and other circumstances. When you purchase
shares of the Funds be sure to specify the class of shares of the Fund(s) you
wish to purchase.
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 30, 1998 (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. The SAI is also available along with other
material on the SEC Internet website (http:/www.sec.gov).
------------------------
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 30, 1998
<PAGE> 55
CLASSES OF SHARES
The Funds offer investors a choice among classes of shares with different
sales charges and expenses. These alternatives permit choosing the most
beneficial method of purchasing shares given the amount of the purchase, the
length of time the investor expects to hold the shares, and other circumstances.
Class A Shares. Generally, an investor who purchases Class A shares pays a
sales charge at the time of purchase (except in the case of the Money Market
Fund which does not impose a sales charge). As a result, Class A shares are not
subject to any charges when they are redeemed (except for sales at net asset
value in excess of $1 million which may be subject to a contingent deferred
sales charge.) The initial sales charge may be reduced for certain purchases.
Class A shares are also subject to an annual Rule 12b-1 fee of up to 0.35% of
average daily net assets attributable to Class A shares. This fee is lower than
Class B and therefore Class A shares have lower expenses and pay higher
dividends.
Class B Shares. Class B shares are not sold with an initial sales charge,
but are subject to a contingent deferred sales charge of 5.00% if redeemed
within one year of purchase with declining charges for redemptions thereafter up
to 8 years of purchase. Class B shares are also subject to a higher annual Rule
12b-1 fee than Class A shares of 1.00% of the Fund's average daily net assets
attributable to Class B shares. However, after 8 years, Class B shares
automatically will be converted to Class A shares at no charge to the investor,
resulting in a lower Rule 12b-1 fee thereafter. Class B shares provide the
benefit of putting all dollars to work from the time of investment, but will
have a higher expense ratio and pay lower dividends than Class A shares due to
the higher Rule 12b-1 fee and any other class specific expenses.
In selecting which class of shares to purchase, you should consider, among
other things, (1) the length of time you expect to hold your investment, (2) the
amount of any applicable sales charge (whether imposed at the time of purchase
or redemption) and Rule 12b-1 fees, (3) whether you qualify for any reduction or
waiver of any applicable sales charge, (4) the various exchange privileges among
the different classes of shares and (5) the fact that Class B shares
automatically convert to Class A shares after 8 years.
2
<PAGE> 56
FUND EXPENSES
The following expense table lists the estimated costs and expenses that an
investor in the Class A and B shares 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, 1998 (except for The Money Market Fund and The
Intermediate Term Government Income Fund, the reduction or voluntary waiver of
advisory fees). Actual expenses in the future may be greater or less than those
shown. Shareholders in the Class A and B shares of the Funds may be subject to
sales charges and Rule 12b-1 Plan distribution fees (annually up to 0.35% and
1.00%, respectively, of the average net assets of a Fund).
FEE TABLE
<TABLE>
<CAPTION>
THE THE
THE SHORT TERM INTERMEDIATE
MONEY GOVERNMENT TERM GOVERNMENT
MARKET FUND INCOME FUND INCOME FUND
----------------- ----------- -----------------
CLASS A CLASS B CLASS A CLASS A CLASS B
------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on
Purchases (as a percentage
of offering price).......... none none 3.00% 5.25% none
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price)...................... none none none none none
Maximum Contingent Deferred
Sales Load (as a percentage
of redemption
proceeds)(1)(3)............. none 5.00% none none 5.00%
Redemption Fees(3)............ none none none none none
Exchange Fees................. none none none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Investment Advisory Fees
(after waivers)(2).......... 0.15% 0.15% 0.40% 0.45% 0.45%
12b-1 Fees(4)................. 0.25% 1.00% 0.25% 0.25% 1.00%
Other Expenses(5)............. 0.19% 0.19% 0.24% 0.27% 0.27%
---- ---- ---- ---- ----
Total Portfolio Operating
Expenses (after
waivers)(6)................. 0.59% 1.34% 0.89% 0.97% 1.72%
==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
THE THE THE
SMALL CAP MID CAP LARGE CAP
EQUITY FUND EQUITY FUND EQUITY FUND
----------------- ----------------- -----------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on
Purchases (as a percentage
of offering price).......... 5.25% none 5.25% none 5.25% none
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price)......................
Maximum Contingent Deferred
Sales Load (as a percentage
of redemption
proceeds)(1)(3)............. none 5.00% none 5.00% none 5.00%
Redemption Fees(3)............ 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)
Investment Advisory Fees
(after waivers)(2).......... 1.00% 1.00% 0.75% 0.75% 0.60% 0.60%
12b-1 Fees(4)................. 0.25% 1.00% 0.25% 1.00% 0.25% 1.00%
Other Expenses(5)............. 0.45% 0.45% 0.32% 0.32% 0.31% 0.31%
---- ---- ---- ---- ---- ----
Total Portfolio Operating
Expenses (after
waivers)(6)................. 1.70% 2.45% 1.32% 2.07% 1.16% 1.91%
==== ==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) If you purchase Class B shares, you do not pay an initial sales charge but
you may incur Contingent Deferred Sales Charge ("CDSC") if you redeem some
or all of your Class B shares before the end of the 6th year after which you
purchased such shares. The CDSC is 5%, 4%, 3%, 3%, 2% and 1% for redemptions
occurring in the years one through 6, respectively. No CDSC is charged after
the 6th year.
3
<PAGE> 57
(2) Reflects a voluntary reduction for the Money Market Fund and Intermediate
Term Government Income Fund in contractual fee. Had this reduction not been
in effect, the ratio of investment advisory fees to average net assets would
have been 0.30% and 0.50% for the Money Market Fund and the Intermediate
Term Government Income Fund, respectively.
(3) Under certain circumstances, purchases of Class A Shares not subject to an
initial sales charge will be subject to a redemption fee if redeemed within
12 months of the calendar month of purchase. For an additional discussion of
the Class A redemption fees, see this Prospectus under "Purchase of Fund
Shares."
(4) The Class A Shares and Class B Shares may be subject to Rule 12b-1 Plan
distribution fees (annual up to 0.35% and 1.00% respectively of the average
net assets of each class of each Fund) to which the Institutional Class is
not subject. Payment of distribution fees for Class A is currently not
expected to exceed 0.25%.
(5) Reflects voluntary reduction of administration fees of 0.08% for the Money
Market Fund. Without such waiver, administration fees for the Money Market
Fund would total 0.15%. 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.
(6) Absent the voluntary reductions in investment advisory fees, administration
fees and 12b-1 distribution fees, "Total Operating Expenses" as a percentage
of average daily net assets would be 0.92% for Class A Shares and 1.57% for
Class B Shares of the Money Market Fund; 0.99% for Class A Shares of the
Short Term Government Income Fund; 1.12% for Class A Shares and 1.77% for
Class B Shares of the Intermediate Term Government Income Fund; 1.80% for
Class A Shares of the Small Cap Equity Fund; 1.42% for Class A Shares of the
Mid Cap Equity Fund; and 1.26% for Class A Shares of 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.
4
<PAGE> 58
EXPENSE EXAMPLES:
Full Redemption. You would have paid the following expenses on a $1,000
investment, assuming a hypothetical 5% annual return and full redemption of your
shares at the end of each period shown below:
<TABLE>
<CAPTION>
3 5 10
1 YEAR YEARS YEARS YEARS
------ ----- ----- -----
<S> <C> <C> <C> <C>
MONEY MARKET FUND
Class A Shares............................................ 6 19 32 73
Class B Shares............................................ 64 75 99 169
SHORT TERM GOVERNMENT INCOME FUND
Class A Shares............................................ 39 58 78 136
INTERMEDIATE TERM GOVERNMENT INCOME FUND
Class A Shares............................................ 62 82 103 165
Class B Shares............................................ 67 84 113 174
SMALL CAP EQUITY FUND
Class A Shares............................................ 69 103 140 243
Class B Shares............................................ 75 106 151 251
MID CAP EQUITY FUND
Class A Shares............................................ 65 92 121 203
Class B Shares............................................ 71 95 131 212
LARGE CAP EQUITY FUND
Class A Shares............................................ 64 87 113 186
Class B Shares............................................ 69 90 123 195
</TABLE>
No Redemption. You would have paid the following expenses on a $1,000
investment, assuming a hypothetical 5% annual return and no redemption of your
shares at the end of each period shown below:
<TABLE>
<CAPTION>
3 5 10
1 YEAR YEARS YEARS YEARS
------ ----- ----- -----
<S> <C> <C> <C> <C>
MONEY MARKET FUND
Class A Shares............................................ n/a n/a n/a n/a
Class B Shares............................................ 14 45 79 173
SHORT TERM GOVERNMENT INCOME FUND
Class A Shares............................................ n/a n/a n/a n/a
INTERMEDIATE TERM GOVERNMENT INCOME FUND
Class A Shares............................................ n/a n/a n/a n/a
Class B Shares............................................ 17 54 93 203
SMALL CAP EQUITY FUND
Class A Shares............................................ n/a n/a n/a n/a
Class B Shares............................................ 25 76 131 279
MID CAP EQUITY FUND
Class A Shares............................................ n/a n/a n/a n/a
Class B Shares............................................ 21 65 111 240
LARGE CAP EQUITY FUND
Class A Shares............................................ n/a n/a n/a n/a
Class B Shares............................................ 19 60 103 223
</TABLE>
5
<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,
1998. The following financial highlights have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report on the
financial statements, including this data appears in the Funds' 1998 Annual
Report to Shareholders incorporated by reference into 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 throughout each period:
<TABLE>
<CAPTION>
THE MONEY MARKET FUND
--------------------------------------------------------------------
CLASS A SHARES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994*
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------ --------
Income from Investment
Operations:
Net investment income...... 0.05 0.04 0.05 0.05 0.02
------- ------- ------- ------ --------
Distributions to shareholders
from:
Net investment income...... (0.05) (0.04) (0.05) (0.05) (0.02)
------- ------- ------- ------ --------
Net Asset Value, End of
Period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ====== ========
Total Return................. 5.18% 5.07% 5.33% 5.02% 2.03%
Ratios to Average Net Assets/
Supplemental Data:
Net Assets, End of Period
(000)................... $73,794 $92,220 $25,216 $3,564 $ 797
Net investment income
before waivers/
reimbursements......... 4.82% 5.13% 4.87% 4.66% 2.52%**
Net investment income net
of waivers/
reimbursements......... 5.06% 5.23% 5.17% 5.02% 3.05%**
Expenses before waivers/
reimbursements.......... 0.82% 0.48% 0.79% 0.84% 0.93%**
Expenses net of waivers/
reimbursements.......... 0.58% 0.38% 0.49% 0.48% 0.40%**
</TABLE>
- ---------------
* Fund commenced operations on September 30, 1993
** Annualized
6
<PAGE> 60
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
THE SHORT TERM GOVERNMENT INCOME FUND
-----------------------------------------------------------------------------
CLASS A SHARES
-----------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994 1993*
---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period............... $ 9.75 $ 9.75 $ 9.84 $ 9.77 $10.10 $10.10
------ ------ ------ ------- ------ ------
Income from Investment
Operations:
Net investment income... 0.52 0.49 0.51 0.50 0.37 0.43
Net realized and
unrealized
gains/(loss) on
investments.......... 0.10 .-- (0.09) 0.07 (0.25) 0.22
------ ------ ------ ------- ------ ------
Total from investment
operations.............. 0.62 0.49 0.42 0.57 0.12 0.65
Distributions to
shareholders from:
Net investment income... (0.52) (0.49) (0.51) (0.50) (0.37) (0.43)
Net realized gain on
investments.......... .-- .-- .-- .-- (0.05) (0.12)
In excess of net
realized gain on
investments.......... .-- .-- .-- .-- (0.03) .--
------ ------ ------ ------- ------ ------
Total distributions to
shareholders............ (0.52) (0.49) (0.51) (0.50) (0.45) (0.55)
Net Asset Value, End of
Period.................. $ 9.85 $ 9.75 $ 9.75 $ 9.84 $ 9.77 $10.00
====== ====== ====== ======= ====== ======
Total Return.............. 6.48% 5.44% 4.38% 6.12% 1.23% 6.67%
Ratios to Average Net
Assets/Supplemental
Data:
Net Assets, End of
Period (000)......... $3,181 $1,205 $1,477 $ 739 654 $1,125
Net investment income
before waivers/
reimbursements....... 5.28% 5.01% 5.22% 5.15% 3.70% 4.19%
Net investment income
net of waivers/
reimbursements....... 5.28% 5.01% 5.23% 5.18% 3.75% 4.24%
Expenses before waivers/
reimbursements....... 0.89% 0.87% 0.96% 1.02% 0.99% 0.80%
Expenses net of waivers/
reimbursements....... 0.89% 0.87% 0.95% 0.99% 0.94% 0.75%
Portfolio turnover
rate................. 65.07% 85.21% 120.00% 267.65% 213.43% 216.43%
</TABLE>
- ---------------
* Fund commenced operations on June 1, 1992
7
<PAGE> 61
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
-----------------------------------------------------------------------------
CLASS A SHARES
-----------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994 1993*
---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period............... $ 9.93 $ 9.82 $10.11 $ 9.87 $10.56 $10.00
------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income... 0.57 0.57 0.54 0.60 0.55 0.62
Net realized and
unrealized
gains/(loss) on
investments.......... 0.42 0.10 (0.29) 0.25 (0.52) 0.61
------ ------ ------ ------ ------ ------
Total from investment
operations.............. 0.99 0.67 0.25 0.85 0.03 1.23
Distributions to
shareholders from:
Net investment income... (0.57) (0.56) (0.54) (0.60) (0.55) (0.62)
In excess of net
realized gain on
investments.......... (0.01) -- -- (0.01) (0.06) .--
------ ------ ------ ------ ------ ------
Net realized gain on
investments.......... -- -- -- -- (0.11) (0.05)
Total distributions to
shareholders............ (0.58) (0.56) (0.54) (0.61) (0.72) (0.67)
Net Asset Value, End of
Period.................. $10.34 $ 9.93 $ 9.82 $10.11 $ 9.87 $10.56
====== ====== ====== ====== ====== ======
Total Return.............. 10.15% 6.92% 2.40% 9.06% 0.08% 12.58%
Ratios to Average Net
Assets/Supplemental
Data:
Net Assets, End of
Period (000)......... $3,965 $1,465 $2,174 $3,225 $3,384 $1,952
Net investment income
before waivers/
reimbursements....... 5.48% 5.55% 5.25% 6.08% 5.10% 5.74%
Net investment income
net of waivers/
reimbursements....... 5.53% 5.60% 5.30% 6.19% 5.25% 5.89%
Expenses before waivers/
reimbursements....... 1.02% 1.08% 1.11% 1.07% 1.05% 0.93%
Expenses net of waivers/
reimbursements....... 0.97% 1.03% 1.06% 0.96% 0.90% 0.78%
Portfolio turnover
rate................. 35.62% 46.23% 183.00% 339.95% 102.46% 54.43%
</TABLE>
- ---------------
* Fund commenced operations on June 1, 1992
8
<PAGE> 62
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
THE LARGE CAP EQUITY FUND
-----------------------------------------------------------------------------
CLASS A SHARES
-----------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994 1993*
---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period............... $ 19.16 $ 15.29 $12.51 $11.33 $11.21 $10.00
------- ------- ------ ------ ------ ------
Income from Investment
Operations:
Net investment income... 0.13 0.20 0.19 0.22 0.20 0.21
Net realized and
unrealized
gains/(loss) on
investments.......... 5.99 4.13 3.29 1.42 0.12 1.21
------- ------- ------ ------ ------ ------
Total from investment
operations.............. 6.12 4.33 3.48 1.64 0.32 1.42
------- ------- ------ ------ ------ ------
Distributions to
shareholders from:
Net investment income... (0.13) (0.21) (0.19) (0.21) (0.20) (0.21)
Net realized gain on
investments.......... (0.18) (0.25) (0.51) (0.25) .-- .--
------- ------- ------ ------ ------ ------
Total distributions to
shareholders............ (0.31) (0.46) (0.70) (0.46) (0.20) (0.21)
Net Asset Value, End of
Period.................. $ 24.97 $ 19.16 $15.29 $12.51 $11.33 $11.21
======= ======= ====== ====== ====== ======
Total Return.............. 32.20% 28.75% 28.42% 15.10% 2.85% 14.37%
Ratios to Average Net
Assets/Supplemental
Data:
Net Assets, End of
Period (000)......... $41,474 $19,531 $9,831 $5,234 $5,287 $3,348
Net investment income
before waivers/
reimbursements....... 0.58% 1.10% 1.30% 1.77% 1.59% 1.89%
Net investment income
net of waivers/
reimbursements....... 0.58% 1.18% 1.40% 1.90% 1.74% 2.09%
Expenses before waivers/
reimbursements....... 1.16% 1.14% 1.16% 1.17% 1.23% 1.14%
Expenses net of waivers/
reimbursements....... 1.16% 1.06% 1.06% 1.04% 1.08% 0.94%
Portfolio turnover
rate................. 4.78% 1.41% 6.00% 58.08% 27.11% 2.61%
</TABLE>
- ---------------
* Fund commenced operations on June 1, 1992
9
<PAGE> 63
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
THE MID CAP EQUITY FUND
----------------------------------------------------------------
CLASS A SHARES
----------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994*
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 16.72 $14.05 $11.11 $ 9.60 $10.00
------- ------ ------ ------ ------
Income from Investment Operations:
Net investment income............. 0.03 0.09 0.10 0.11 0.03
Net realized and unrealized
gain/(loss) on investments..... 4.39 3.00 3.44 1.51 (0.40)
------- ------ ------ ------ ------
Total from investment operations.... 4.42 3.09 3.54 1.62 (0.37)
------- ------ ------ ------ ------
Distributions to shareholders from:
Net investment income............. (0.03) (0.09) (0.10) (0.11) (0.03)
In excess of net investment
income......................... (0.01) -- -- -- --
Net realized gain on
investments.................... (1.00) (0.33) (0.50) -- --
------- ------ ------ ------ ------
Total distribution to
shareholders...................... (1.04) (0.42) (0.60) (0.11) (0.03)
------- ------ ------ ------ ------
Net Asset Value, End of Period...... $ 20.10 $16.72 $14.05 $11.11 $ 9.60
======= ====== ====== ====== ======
Total Return........................ 26.82% 22.33% 32.76% 17.06% (3.70%)
Ratios to Average Net
Assets/Supplemental Data:
Net Assets, End of Period (000)... $19,298 $5,911 $1,437 $ 277 $ 35
Net investment income before
waivers/reimbursements......... 0.16% 0.54% 0.63% 0.86% 0.35%**
Net investment income net of
waivers/reimbursements......... 0.16% 0.65% 0.79% 1.12% 1.35%**
Expenses before waivers/
reimbursements................. 1.32% 1.30% 1.39% 1.47% 2.18%**
Expenses net of waivers/
reimbursements................. 1.32% 1.19% 1.23% 1.21% 1.18%**
Portfolio turnover rate........... 20.48% 7.72% 28.00% 20.39% 5.88%
</TABLE>
- ---------------
* Fund commenced operations on February 24, 1994
** Annualized
10
<PAGE> 64
For a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
THE SMALL CAP
EQUITY FUND
-------------------
CLASS A SHARES
-------------------
FOR THE PERIOD
ENDED MAY 31, 1998*
-------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $10.00
------
Income from Investment Operations:
Net investment income/(loss).............................. (0.04)(a)
------
Net realized and unrealized gain/(loss) on investments.... (0.05)
Total from investment operations............................ (0.09)
------
Net Asset Value, End of Period.............................. $ 9.91
======
Total Return................................................ (0.90%)
Ratios to Average Net Assets/Supplemental Data:
Net Assets, End of Period (000)........................... $3,704
Ratio of net investment Income/(loss) to average net
assets................................................. (0.66%)**
Ratio of expenses to average net assets................... 1.70%**
Portfolio turnover rate................................... 12.28%
</TABLE>
- ---------------
* Fund commenced operations on October 1, 1997
** Annualized
(a) Calculated based on average shares during the period.
11
<PAGE> 65
INDEX COMPARISON
The information set forth below compares the investment performance of a
hypothetical investment of $10,000 in each Fund's Class A 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 Class A Shares of the Short Term Fund
(excluding the effects of sales loads) 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, May 31, 1997 and May 31, 1998.
SHORT TERM GOVERNMENT INCOME FUND CHART
<TABLE>
<CAPTION>
Redemption Value
($100,000 Investment) Lehman Bros. 1-3 Yr.
Since Inception Govt.
<S> <C> <C>
Aug. 31, 1992 10322 10300
Nov. 30, 1992 10326 10224
Feb. 28, 1993 10605 10811
May 31, 1993 10667 10882
Aug. 31, 1993 10839 10874
Nov. 30, 1993 10868 10926
Feb. 28, 1994 10893 10981
May 31, 1994 10798 10896
Aug. 31, 1994 10930 11059
Nov. 30, 1994 10875 11011
Feb. 28, 1995 11131 11228
May 31, 1995 11457 11700
Aug. 31, 1995 11617 11880
Nov. 30, 1995 11830 12140
Feb. 29, 1996 11956 12288
May 31, 1996 11959 12318
Aug. 31, 1996 12001 12501
Nov. 30, 1996 12418 12851
Feb. 28, 1997 12488 12948
May 31, 1997 12910 13132
Aug. 31, 1997 12836 13385
Nov. 30, 1997 13046 13620
Feb. 28, 1998 13256 13855
May 31, 1998 13428 14050
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
---------------------------------------------------------
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Redemption Value
($10,000 investment)
Since Inception.................. $10,667 $10,798 $11,457 $11,959 $12,610 $13,428
Lehman Bros. 1-3 Yr. Govt.......... 10,682 10,898 11,700 12,318 13,132 13,604
</TABLE>
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/98
- --------------------------------------------------------------------------
1 YEAR 5 YEAR SINCE INCEPTION (6/1/92)
- --------------------------------------------------------------------------
<S> <C> <C>
6.48% 4.71% 5.04%
- --------------------------------------------------------------------------
</TABLE>
12
<PAGE> 66
INTERMEDIATE TERM GOVERNMENT INCOME FUND
The investment performance of the Class A Shares of the Intermediate Fund
(excluding the effects of sales loads) 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, May 31, 1997 and May 31, 1998.
INTERMEDIATE TERM GOVERNMENT INCOME FUND CHART
<TABLE>
<CAPTION>
Redemption Value
($100,000 Investment) Lehman Bros.
Since Inception Gov't/Corp
<S> <C> <C>
Aug. 31, 1992 10543 10499
Nov. 30, 1992 10456 10471
Feb. 28, 1993 11148 11108
May 31, 1993 11258 11226
Aug. 31, 1993 11794 11819
Nov. 30, 1993 11736 11774
Feb. 28, 1994 11678 11742
May 31, 1994 11269 11399
Aug. 31, 1994 11422 11544
Nov. 30, 1994 11147 11336
Feb. 28, 1995 11837 11900
May 31, 1995 12286 12655
Aug. 31, 1995 12419 12870
Nov. 30, 1995 12906 13409
Feb. 29, 1996 12866 13401
May 31, 1996 12652 13175
Aug. 31, 1996 12660 13349
Nov. 30, 1996 13394 14158
Feb. 28, 1997 13272 14048
May 31, 1997 13453 14215
Aug. 31, 1997 13777 14661
Nov. 30, 1997 14279 15210
Feb. 28, 1998 14549 15555
May 31, 1998 14821 15849
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
---------------------------------------------------------
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Redemption Value
($10,000 investment)
Since Inception.................. $11,258 $11,268 $12,286 $12,582 $13,453 $14,821
Lehman Bros. Govt./Corp............ 11,226 11,339 12,655 13,175 14,215 15,849
</TABLE>
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/98
- --------------------------------------------------------------------------
1 YEAR 5 YEAR SINCE INCEPTION (6/1/92)
- --------------------------------------------------------------------------
<S> <C> <C>
10.15% 5.65% 6.78%
- --------------------------------------------------------------------------
</TABLE>
13
<PAGE> 67
MID CAP EQUITY FUND
The investment performance of the Class A Shares of shares of the Mid Cap
Equity Fund (excluding the effects of sales loads) 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, 1997 and 1998.
MID CAP EQUITY FUND CHART
<TABLE>
<CAPTION>
Redemption Value
($10,000 Investment)
Since Inception S&P Mid Cap 400
<S> <C> <C>
May 31, 1994 9630 9610
Aug. 31, 1994 10090 10096
Nov. 30, 1994 9548 9565
Feb. 28, 1995 10478 10264
May 31, 1995 11270 10909
Aug. 31, 1995 12635 12167
Nov. 30, 1995 13129 12671
Feb. 29, 1996 13787 13258
May 31, 1996 14962 14014
Aug. 31, 1996 14842 13612
Nov. 30, 1996 16378 15050
Feb. 28, 1997 17228 15504
May 31, 1997 18303 16559
Aug. 31, 1997 20608 18505
Nov. 30, 1997 21374 18995
Feb. 28, 1998 22984 20961
May 31, 1998 23213 21302
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
----------------------------------------------
1994 1995 1996 1997 1998
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Redemption Value
($10,000 investment)
Since Inception............................ $9,630 $11,270 $14,962 $18,303 $23,213
S&P MidCap 400............................... 9,610 10,909 14,014 16,559 21,302
</TABLE>
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/98
- ---------------------------------------------------------
1 YEAR SINCE INCEPTION (2/24/94)
- ---------------------------------------------------------
<S> <C>
26.82% 21.84%
- ---------------------------------------------------------
</TABLE>
14
<PAGE> 68
LARGE CAP EQUITY FUND
The investment performance of the Class A Shares of the Large Cap Equity
Fund (excluding the effects of sales loads) 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, May 31, 1997 and May 31, 1998.
LARGE CAP EQUITY FUND CHART
<TABLE>
<CAPTION>
Redemption Value
($10,000 Investment)
Since Inception S&P 500
<S> <C> <C>
Aug. 31, 1992 9979 10044
Nov. 30, 1992 10695 10543
Feb. 28, 1993 10997 10908
May 31, 1993 11437 11159
Aug. 31, 1993 11996 11569
Nov. 30, 1993 12036 11605
Feb. 28, 1994 12123 11815
May 31, 1994 11763 11633
Aug. 31, 1994 12244 12200
Nov. 30, 1994 11582 11726
Feb. 28, 1995 12469 12663
May 31, 1995 13635 13974
Aug. 31, 1995 14236 14813
Nov. 30, 1995 15554 16057
Feb. 29, 1996 16664 17080
May 31, 1996 17382 17949
Aug. 31, 1996 17234 17588
Nov. 30, 1996 20092 20529
Feb. 28, 1997 20811 21546
May 31, 1997 23378 23234
Aug. 31, 1997 23740 24736
Nov. 30, 1997 25578 26387
Feb. 28, 1998 28321 29096
May 31, 1998 29586 30363
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
---------------------------------------------------------
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Redemption Value
($10,000 investment)
Since Inception.................. $11,437 $11,763 $13,535 $17,382 $22,378 $29,586
S&P 500............................ 11,159 11,633 13,978 17,949 23,234 30,363
</TABLE>
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/98
- --------------------------------------------------------------------------
1 YEAR 5 YEAR SINCE INCEPTION (6/1/92)
- --------------------------------------------------------------------------
<S> <C> <C>
32.20% 20.93% 19.83%
- --------------------------------------------------------------------------
</TABLE>
15
<PAGE> 69
SMALL CAP EQUITY FUND
The investment performance of the Class A Shares of the Small Cap Equity
Fund (excluding the effects of sales loads) is compared to the performance of
the Standard & Poor's SmallCap 600 Index in the following chart from October 1,
1997 (commencement of operations) through May 31, 1998.
SMALL CAP EQUITY FUND CHART
<TABLE>
<CAPTION>
Redemption Value
($10,000 Investment)
Since Inception S&P Small Cap 600
<S> <C> <C>
Nov. 30, 1997 9200 10126
Feb. 28, 1998 10020 11052
May 31, 1998 9910 10930
</TABLE>
<TABLE>
<CAPTION>
NOV. 30, FEB. 28, MAY 31,
1997 1998 1998
-------- -------- -------
<S> <C> <C> <C>
Redemption Value
($10,000 investment)
Since Inception........................................... $ 9,200 $10,020 $ 9,910
S&P SmallCap 600............................................ 10,126 11,052 10,930
</TABLE>
Without fee waiver, performance would have been lower. Past performance
does not predict future results.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF 5/31/98
- ---------------------------------------------------------
1 YEAR SINCE INCEPTION (10/1/97)
- ---------------------------------------------------------
<S> <C>
n/a -0.90%
- ---------------------------------------------------------
</TABLE>
16
<PAGE> 70
DESCRIPTION OF THE FUNDS
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 Equity Fund, the Mid Cap Equity
Fund and the Large Cap Equity Fund (the Small Cap Equity Fund, Mid Cap Equity
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 securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities ("U.S. Government Securities") which results in a dollar
weighted average portfolio maturity of less than three years. The maximum
effective 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 U.S.
Government 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.
17
<PAGE> 71
THE EQUITY FUNDS:
THE SMALL CAP EQUITY FUND
The investment objective of the Small Cap Equity 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 EQUITY FUND
The investment objective of the Mid Cap Equity 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 and futures contracts. 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.
18
<PAGE> 72
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 Equity Fund and
the Mid Cap Equity Fund will, and the Large Cap Equity Fund may invest in, 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, investment grade convertible securities and futures transactions and
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.
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
19
<PAGE> 73
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 government income securities which results in a dollar weighted
average portfolio maturity of less than three years. The maximum effective
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 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 Equity Fund. The investment objective of the Small Cap
Equity Fund is long-term capital appreciation. Under normal market conditions,
the Small Cap Equity 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
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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, 1998 the Index contains 600 issues with market
capitalizations ranging from approximately $50 million to $3.3 billion. The
median market capitalization of the Index is approximately $514 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, have 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 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.
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Mid Cap Equity Fund. The investment objective of the Mid Cap Equity Fund
is to seek to achieve growth of capital by attempting to outperform the S&P
MidCap Index. The Mid Cap Equity 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 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 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
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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. 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, 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 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.
Domestic and Foreign Bank Obligations (All Funds). These obligations
include but are not restricted to certificates of deposit, commercial paper,
Yankeedollar certificates of deposit, bankers' acceptances, Eurodollar
certificates of deposit and time deposits, promissory notes and medium-term
deposit notes. The Fund will not invest in any obligations of its affiliates, as
defined under the 1940 Act.
The Funds limit their investments in United States bank obligations to
obligations of United States banks (including foreign branches). The Funds limit
their investments in foreign bank obligations to United States
dollar-denominated obligations of foreign banks (including United States
branches of foreign banks) which, in the opinion of the Adviser, are of an
investment quality comparable to obligations of United States banks which may be
purchased by the Funds.
Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Investments in fixed time deposits subject to withdrawal penalties
maturing from two days through seven days may not exceed 10% of the value of the
total assets of the Fund.
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Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions, such as exchange controls, may be adopted which might adversely
affect the payment of principal and interest on those obligations, that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks, or that the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not subject to examination by any United States
Government agency or instrumentality.
Investments in Eurodollar and Yankeedollar obligations involve additional
risks. Most notably, there generally is less publicly available information
about foreign companies; there may be less governmental regulation and
supervision; they may use different accounting and financial standards; and the
adoption of foreign governmental restrictions may adversely affect the payment
of principal and interest on foreign investments. In addition, not all foreign
branches of United States banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements.
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
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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 one third of the value 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.
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
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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 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 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
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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. When purchasing CMO's or REMIC's, the Adviser will
use the actual maturity date, average life calculation and structure of the CMO
or REMIC to determine the effective maturity. 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.
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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 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 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
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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 (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.
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Put Options on Stock Index Futures Contracts (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.
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 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 a Fund.
In the event the underlying security does not
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sufficiently increase in value during the period when the warrant may be
exercised so as to provide an attractive investment for a Fund, 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 their total assets in warrants or
rights which are not listed on the New York or American Stock Exchanges.
The Small Cap Equity 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 in
securities issued by other investment companies including shares of the Money
Market Fund. 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 in the aggregate. 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. In order to avoid the imposition of additional fees as the
result of investments by the Trust's Funds in the Money Market Fund, the Advisor
and the Administrator will reduce that portion of their usual service fees from
each Fund by an amount equal to their service fees from the Money Market Fund
that are attributable to those Fund investments. The Advisor and the
Administrator will promptly forward such fees to the Trust's Funds.
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
Equity Fund's policy of investing at least 65% of its total assets in S&P
SmallCap 600 Index, the Mid Cap Equity 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
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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 Equity Fund and Large Cap Equity Fund
will not invest more than 5% of its respective net assets in small, unseasoned
companies.
Short Sales (the Mid Cap Equity and Small Cap Equity Funds). 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 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 (Equity Funds). 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
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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.
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. Increased portfolio turnover may increase the
likelihood of additional capital gains for the Fund. The Small Cap Equity Fund,
Mid Cap Equity 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. The Money Market Fund may invest up to
25 percent of its total assets in the first tier securities of a single issuer
for a period of up to three business days after the acquisition thereof provided
that the Fund may not invest in the securities of more than one issuer in
accordance with this provision at any time. 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 Equity Funds may engage in reverse repurchase
agreements. The Funds may borrow from banks up to
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33 1/3% of the current value of their total assets and those borrowings may be
secured by the pledge of not more than 33 1/3% of the current value of such
Fund's total assets.
(2) make loans, and loans of portfolio securities in excess of 33 1/3% of
the value of such Fund's total assets, 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.
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 Financial Services Group, has assets in excess of $1.6 billion
under management in addition to the Trust's Funds. 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. Kelly Collins is the Portfolio
Manager responsible for the day-to-day management of the Money Market Fund's
portfolio. Mr. Collins has been with Trustmark since 1991. Jonathan Rogers, CFA,
Vice President and Portfolio Manager at Trustmark National Bank since 1985, 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, is responsible for day-to-day management of the Small Cap Equity 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 12 years investment
experience joined Trustmark in 1991. Prior to joining Trustmark, Mr. Ralston was
employed by Third National Bank of
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Nashville. Mr. Ralston is also responsible for the day-to-day management of the
Mid Cap Equity 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, and Senior Vice President of Trustmark,
serves as Chief Investment Officer and has overall supervisory responsibility.
Mr. Wasson joined Trustmark in 1990 and has over 20 years of bank and investment
experience.
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 Equity Fund, 1.00%; Mid Cap Equity 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 Ohio, Inc.
("BISYS") acts as the Administrator of the Funds. Performance Funds Distributor,
Inc. ("PFD"), an affiliate of BISYS, is the Distributor for the Trust and
distributes the Funds' shares and may be reimbursed for certain of its
distribution related expenses.
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. BISYS also serves as the
Funds' Transfer Agent and Fund Accountant.
DISTRIBUTION PLAN AND EXPENSES
The Board of Trustees of the Trust has adopted a Distribution Plan and
related Shareholder Servicing Agreement (the "Plan") for the Class A and B
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
shareholders.
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.
Pursuant to the Plan of Distribution adopted by each Fund under Rule 12b-1
under the 1940 Act, each Fund pays the Distributor an annual fee of up to 0.35%
of average net assets attributable to that Fund's Class A shares and 1.00% of
average net asset of that Fund's Class B shares. While all of Class A's Rule
12b-1 fee constitutes a "distribution fee," only 0.75% of Class B's fees
constitute distribution fees.
The higher distribution fee attributable to Class B shares is designed to
permit an investor to purchase such shares through registered representatives of
the Distributor and other broker-dealers without the
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<PAGE> 89
assessment of an initial sales charge and at the same time to permit the
Distributor to compensate its registered representatives and other
broker-dealers in connection with the sale of such shares. The distribution fee
for all classes may be used by the Distributor for the purpose of financing any
activity which is primarily intended to result in the sale of shares of the
applicable Fund. For example, such distribution fee may be used by the
Distributor: (a) to compensate broker-dealers, including the Distributor and its
registered representatives, for their sale of Fund shares, including the
implementation of various incentive programs with respect to broker-dealers,
banks, and other financial institutions, and (b) to pay other advertising and
promotional expenses in connection with the distribution of Fund shares. These
advertising and promotional expenses include, by way of example but not by way
of limitation, costs of prospectuses for other than current shareholders;
preparation and distribution of sales literature; advertising of any type;
expenses of branch offices provided jointly by the Distributor and affiliated
companies; and compensation paid to and expenses incurred by officers, employees
or representatives of the Distributor or of other broker-dealers, banks, or
other financial institutions, including travel, entertainment, and telephone
expenses.
A portion of the Rule 12b-1 fee equal to 0.25% of the average net assets of
each Fund attributable to Class B shares constitutes a shareholder servicing fee
designed to compensate the Distributor for the provision of certain services to
shareholders. The services provided may include personal services provided to
shareholders, such as answering shareholder inquiries regarding the Funds and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may use the Rule 12b-1 fee to make
payments to qualifying broker-dealers and financial institutions that provide
such services.
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 shareholder servicing for Class A shareholders
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.
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<PAGE> 90
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; 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.
YEAR 2000
Like other mutual funds, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by the Funds or their service providers and counterparties
do not properly process and calculate date-related information and data from and
after January 1, 2000. The Funds are in the process of assessing and formulating
responses to these potential problems with
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<PAGE> 91
the Adviser and all other major service providers and counter parties. There can
be no assurance that the Funds' actions will be sufficient to avoid any adverse
impact.
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, the
Administrator and the Distributor 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 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 and Maximum 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. There will be a maximum purchase amount of
$250,000 for new purchases into Class B shares of any Fund. 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 Funds reserve the
right to reject purchase orders.
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<PAGE> 92
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.
To place an order, 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 Plan, 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 $25.00
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 Plan. Contact the Funds for more information
about the Automatic Investment Plan.
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.
The Funds offer investors a choice between multiple classes of shares which
offer differing sales charges and bear different expenses. These alternatives
permit an investor to choose the more beneficial method of purchasing shares
given the amount of the purchase, the length of time the investor expects to
hold the shares, and other circumstances. A broker-dealer may receive different
levels of compensation depending on which class of shares is sold. The
Distributor may also provide additional compensation to dealers in connection
with selling shares of the Funds or for their own company sponsored sales
programs. Additional compensation or assistance may be provided to dealers and
includes payment or reimbursement for educational, training and sales
conferences or programs for their employees. In some cases, this compensation
may only be available to dealers whose representatives have sold or are expected
to sell significant amounts of shares. The Distributor will make these payments
from its own resources and none of the aforementioned additional compensation is
paid by the applicable Fund or its shareholders.
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As of the date of this Prospectus, however, Class B shares are not yet
being offered in the Short-Term Government Income Fund. Investors purchasing
shares of the Money Market Fund may wish to purchase Class A shares, since such
shares are not subject to any initial sales charge or contingent deferred sales
charge. Shareholders investing directly in Class B shares of the Money Market
Fund will be requested to participate in the Automatic Exchange Plan. These
Class B Money Market Fund shareholders will be requested to set the time and
amount of their regular, automatic withdrawals in such a way that their Class B
shares will be exchanged out of the Money Market Fund within two years of
purchase and until the balance of the Class B shares available for transfer is
less than the requested Automatic Exchange amount. Such Class B shares may be
exchanged for Class B shares of any other Fund through the Automatic Exchange
Plan (see "Automatic Exchange Plan").
CLASS A SHARES
The public offering price of Class A shares (formerly Consumer Class) is
determined by adding a sales charge to the net asset value per share of the
shares next calculated after receipt of the purchase order (with the exception
of the Money Market Fund for which no sales charge is imposed). The sales
charges which vary with the size of the purchase, are shown in the following
table:
<TABLE>
<CAPTION>
SALES CHARGE
AS A
SALES CHARGE AS A PERCENTAGE OF
PERCENTAGE OF THE NET AMOUNT DEALER
AMOUNT OF SALE OFFERING PRICE INVESTED CONCESSION
------------------- ----------------- ------------- ----------
<S> <C> <C> <C> <C>
(All Funds except Money Market
Fund and Short Term Fund) $ 0-$50,000 5.25% 5.54% 0.25%
$ 50,001-$100,000 4.75% 4.98% 0.25%
$ 100,001-$250,000 3.75% 3.89% 0.25%
$ 250,001-$500,000 2.75% 2.82% 0.25%
$500,001-$1,000,000 1.75% 1.78% 0.25%
Over $ 1,000,000 0% 0% 0.25%
(Short Term Fund Only) $ 0-$50,000 3.00% 3.09% 0.25%
$ 50,001-$100,000 2.50% 2.56% 0.25%
$ 100,001-$250,000 2.00% 2.04% 0.25%
$ 250,001-$500,000 1.50% 1.52% 0.25%
$500,001-$1,000,000 1.00% 1.01% 0.25%
Over $ 1,000,000 0% 0% 0.25%
</TABLE>
Class A Shares of the Money Market Fund are offered at net asset value.
Rule 12b-1 Fees. For each Fund, Class A shares are subject to a Rule 12b-1
fee payable at an annual rate of up to 0.35% of the average daily net assets of
the Fund attributable to such shares. For additional information, see
"Management -- Distribution Plan and Expenses."
Deferred Sales Charges. Although there is no initial sales charge on
purchases of Class A shares of $1,000,000 or more, the Distributor pays
broker-dealers out of its own assets, a fee of up to 1% of the offering price of
such shares. If these shares are redeemed within 12 months, the redemption
proceeds will be reduced by 1.00%. For additional information, see
"Redemption -- Contingent Deferred Sales Charge."
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<PAGE> 94
SPECIAL PURCHASE PLANS
The Funds offer several special purchase plans, described in the
Prospectus, which allow reduction or elimination of the sales charge for Class A
shares under certain circumstances. Additional information regarding some of the
plans is as follows:
LETTER OF INTENT ("LOI")
You may reduce the initial sales charge rate that applies to your purchases
of Class A shares by meeting the terms of an LOI -- a non-binding commitment to
invest a certain amount within a thirteen-month period from your initial
purchase. The total amount of your intended purchases of Class A shares will
determine the reduced sales charge rate for Class A shares purchased during that
period.
The 13-month period is measured from the date the letter of intent is
approved by the Fund, or at the purchaser's option it may be made retroactive 90
days, in which case the Fund will make appropriate adjustments on purchases
during the 90-day period.
In computing the total amount purchased for purposes of determining the
applicable sales commission, the public offering price (at the time they were
purchased) of shares currently held in the Performance Funds having a sales
charge and purchased within the past 90 days may be used as a credit toward Fund
shares to be purchased under the Statement of Intention. Any such fund shares
purchased during the remainder of the 13-month period also may be included as
purchases made under the LOI.
The LOI includes a provision for payment of additional applicable sales
charges at the end of the period in the event the investor fails to purchase the
amount indicated. This is accomplished by holding in escrow the number of shares
represented by the sales charge discount. If the investor's purchases equal
those specified in the LOI, the escrow is released. If the purchases do not
equal those specified in the LOI, the shareholder may remit to the Distributor
an amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges that would have been paid on the
aggregate purchases if the total of such purchases had been made at a single
time. If the purchaser does not remit this sum to the Fund on a timely basis,
the Fund will redeem the escrowed shares. The LOI is not a binding obligation on
the part of the investor to purchase, or the Fund to sell, the full amount
indicated. Nevertheless, the LOI should be read carefully before it is signed.
CONCURRENT PURCHASES AND RIGHT OF ACCUMULATION
A Purchaser may qualify for a reduced sales charge by combining concurrent
purchases of Class A shares of one or more of the Funds (excluding the Money
Market Fund) or by combining a current purchase of Class A shares of a Fund with
prior purchases of Shares of any Fund except the Money Market Fund. The
applicable sales charge is based on the sum of (i) the Purchaser's current
purchase of Class A shares of any Fund (excluding the Money Market Fund) sold
with a sales charge plus (ii) the then current purchase of Class A shares of any
Fund sold with a sales charge plus (ii) the then current net asset value of all
Class A shares held by the Purchaser in any Fund (excluding the Money Market
Fund). To receive the applicable public offering price pursuant to the right of
accumulation, Shareholders must at the time of purchase provide the Transfer
Agent or the Distributor with sufficient information to permit confirmation of
qualification. Accumulation privileges may be amended or terminated without
notice at any time by the Distributor.
CLASS B SHARES -- (ALL FUNDS EXCEPT SHORT TERM GOVERNMENT INCOME FUND)
The public offering price of Class B Shares is the net asset value of the
applicable Fund's shares. Such shares are sold without an initial sales charge
so that the Fund receives the full amount of the investor's purchase. However, a
contingent deferred sales charge ("CDSC") will be imposed if the shares are
redeemed within six years of purchase. The Class B CDSC will not apply to
redemptions of shares purchased by the reinvestment of dividends or capital
gains distributions. The Class B CDSC will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original amount
invested. The CDSC is not imposed on the amount of any increase in your account
value over the initial amount invested. The Class B
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<PAGE> 95
CDSC is paid to the Distributor to reimburse expenses incurred in providing
distribution related services to the Fund in connection with the sale of Class B
shares.
When a Shareholder purchases Class B shares, the full purchase amount is
invested directly in the applicable Fund. Class B shares of each Fund are
subject to an ongoing distribution and Shareholder service fee at an annual rate
of 1.00% of such Fund's average daily net assets as provided in the Distribution
Plan (described below under "The Distributor"). This ongoing fee will cause
Class B shares to have a higher expense ratio and to pay lower dividends than
Class A shares. Class B shares convert automatically to Class A shares after
eight years, commencing from the end of the calendar month in which the purchase
order was accepted under the circumstances and subject to the qualifications
described in this Prospectus.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
shareholder service fees under the Distribution Plan are payable to the
Distributor to defray the expenses of advance brokerage commissions and expenses
related to providing distribution-related and shareholder services to the Fund
in connection with the sale of the Class B shares, such as the payment of
compensation to dealers and agents selling Class B shares. A dealer commission
of 4.00% of the original purchase price of the Class B shares of the Fund will
be paid to financial institutions and intermediaries. However, the Distributor
may, in its sole discretion, pay a higher dealer commission at its sole
discretion.
CLASS A SHARES SALES CHARGE WAIVERS
The following classes of investors may purchase Class A shares of the Funds
with no sales charge in the manner described below (which may be changed or
eliminated at any time by the Distributor):
(1) Existing Shareholders of a Fund with accounts open on or prior to
October 6, 1998 will incur no sales charges on additional purchases or exchanges
through December 31, 1998.
(2) Existing Shareholders of a Fund upon the reinvestment of dividend and
capital gain distributions;
(3) Officers, trustees, directors, advisory board members, employees and
retired employees of the Trustmark and its affiliates, the Distributor and its
affiliates, and employees of the Investment Advisor (and spouses, children and
parents of each of the foregoing);
(4) Investors for whom a Trustmark, a Trustmark correspondent bank, or
other financial institution acts in a fiduciary, advisory, custodial, agency, or
similar capacity;
(5) Fund shares purchased with the proceeds from a distribution from
Trustmark or an affiliate trust or agency account (this waiver applies only to
the initial purchase of a Fund subject to a sales load); and
(6) Investors who purchase Shares of a Fund through a payroll deduction
plan, a 401(k) plan, a 403(b) plan, or other defined contribution plans, which
by its terms permits purchases of Shares.
In addition, the Distributor may waive the sales charge for the purchase of
a Fund's shares with the proceeds from the recent redemption of shares of
another non-money market mutual fund that imposes a sales charge. The purchase
must be made within 60 days of the redemption, and the Distributor must be
notified in writing by the investor or by his or her financial institution at
the time the purchase is made. A copy of the investor's account statement
showing such redemption must accompany such notice. The Distributor may also
periodically waive the sales charge for all investors with respect to a Fund.
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.
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<PAGE> 96
DEFINED CONTRIBUTION PLANS
The Funds may be used as an investment through a 401(k) plan, a 403(b)
plan, or other defined contribution plans, which by its terms permits purchases
of Shares. These investors will not be subject to initial sales charges or CDSC
charges on purchases of Class A or Class B shares. No sales commissions shall be
paid to financial institutions and intermediaries on these purchases.
EXCHANGE PRIVILEGES
Shares of each Fund may be exchanged for shares of another Fund in the same
class only. Before engaging in an exchange transaction, a shareholder should
read carefully the portions of the applicable 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."
AUTOMATIC EXCHANGE PLAN (CLASS B SHARES ONLY)
The Automatic Exchange Plan enables Shareholders to make regular, automatic
withdrawals from Class B shares of a Fund and use those proceeds to benefit from
dollar-cost-averaging by automatically making purchases of shares of another
Fund. With shareholder authorization, the Trust's transfer agent will withdraw
the amount specified (subject to the applicable minimums) from the shareholder's
account and will automatically invest that amount in Class B shares of the Fund
designed by the Shareholder at the public offering price on the date of such
deduction. When the balance of the Fund you wish to transfer from becomes less
than the requested Automatic Exchange amount, Automatic Exchanges will be
discontinued. In order to participate in the Automatic Exchange Plan,
Shareholders must have a minimum initial purchase of $10,000 in their
Performance Fund accounts.
To participate in the Automatic Exchange Plan, Shareholders should complete
the appropriate section of the Account Registration Form, which can be acquired
by calling the Distributor. To change the Automatic Exchange Plan instructions
or to discontinue the feature, a Shareholder must send a written request to the
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Performance Funds Trust, P.O. Box 182484, Columbus, OH 43218-2484. The Automatic
Exchange Plan may be amended or terminated without notice at any time by the
Distributor.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any business
day. Shares will be redeemed without charge (except any contingent deferred
sales charge) at the net asset value next determined after a redemption request
in good order has been received 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 is 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 constant net 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
(unless a shareholder who has previously established wire transfer procedures
with the Trust's Transfer Agent has requested that proceeds be sent by wire
transfer), 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
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<PAGE> 98
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 (Class A shares only). 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.
Automatic 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. In certain cases, Class B shareholders
may redeem using the Automatic Withdrawal Plan without paying a CDSC as
described in "Redemption of Fund Shares--Class B Shares CDSC Waivers".
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
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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.
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
Class A Shares
Each Fund imposes a CDSC on Class A shares in certain circumstances. Under
the CDSC arrangement, for sales of shares of $1,000,000 or more (including right
of accumulation and LOI's (see "Purchase of Fund Shares")), the front-end sales
charge will not be imposed (although the Distributor intends to pay its
registered representatives and other dealers that sell Fund shares, out of its
own assets, a fee of up to 1% of the offering price of such sales except on
purchases exempt from the front end sales charge. However, if such shares are
redeemed within twelve months after their purchase date, the redemption proceeds
will be reduced by the 1.00% CDSC.
Class B Shares
If the Shareholder redeems Class B shares prior to the sixth anniversary of
purchase, the Shareholder will pay a Contingent Deferred Sales Charge at the
rates set forth below. The Contingent Deferred Sales Charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
Shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price. In addition, no charge is
assessed on Shares derived from reinvestment of dividends or capital gain
distributions.
To determine whether the Class B CDSC applies to a redemption, the Fund
redeems shares in the following order: (1) shares acquired by reinvestment of
the dividends and capital gains distribution; (2) shares held for over 6 years;
and (3) shares in the order they were purchased (shares held the longest are
redeemed first). The amount of the Class B CDSC will depend on the number of
years since the time you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
CLASS B
REDEMPTION DURING CDSC
----------------- -------
<S> <C>
1st year after purchase..................................... 5%
2nd year after purchase..................................... 4%
3rd year after purchase..................................... 3%
4th year after purchase..................................... 3%
5th year after purchase..................................... 2%
6th year after purchase..................................... 1%
7th year after purchase..................................... 0%
8th year after purchase..................................... 0%
</TABLE>
Following the eighth year after purchase, the Class B Shares automatically
convert to Class A shares. In the above table, a "year" is a 12-month period.
All purchases are considered to have been made on the first business day of the
month in which the purchase was made.
CLASS B SHARES CDSC WAIVERS
The CDSC does not apply to (1) redemption of shares when a Fund exercises
its right to liquidate accounts which are less than the minimum account size;
(2) death or disability, as defined in Section 72(m)(7) of the Code (if
satisfactory evidence is provided to the Fund); (3) minimum required
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<PAGE> 100
distributions from qualified retirement plans to Shareholders that have attained
the age of 70 1/2; (4) redemptions of up to 12% of the account value annually
using the Automatic Withdrawal Plan feature; and (5) investors who purchases
Shares of a Fund through a payroll deduction plan, a 401(k) plan, a 403(b) plan,
or other defined contribution plans, which by its terms permits purchases of
Shares.
In addition, the following circumstances are not deemed to result in a
"redemption" of Class B shares for purposes of the assessment of a Contingent
Deferred Sales Charge, which is therefore waived: (i) plans of reorganization of
the Fund, such as mergers, asset acquisitions, and exchange offers to which the
Fund is a party; or (ii) exchanges for Class B shares of other Funds of the
Trust as described under "Exchange Privilege".
As an illustration of CDSC calculations, assume that Shareholder X
purchases on Year 1/Day 1 100 shares at $10 per share. Assume further that, on
Year 2/Day 1, Shareholder X purchased an additional 100 shares at $12 per share.
Finally, assume that, on Year 3/Day 1, Shareholder X wishes to redeem shares
worth $1,300, and that the net asset value per share as of the close of business
on such day is $13. To effect Shareholder X's redemption request, 100 shares at
$13 per share (totaling $1,300) would be redeemed. The CDSC would be waived in
connection with the redemption of that number of shares equal in value (at the
time of redemption) to $220 (10% of $1,000 -- the purchase amount of the shares
purchased by Shareholder X on Year 1/Day 1 -- plus 10% of $1,200 -- the purchase
amount of the shares purchased by Shareholder X on Year 2/Day 1). In addition,
no CDSC would apply to the $400 in capital appreciation on Shareholder X's
shares ($2,600 Year 3 value minus $2,200 purchase cost of shares).
CONVERSION FEATURE
Class B shares include all Shares purchased pursuant to the Contingent
Deferred Sales Charge which have been outstanding for less than the period
ending eight years after the end of the month in which the shares were
purchased. At the end of this period, Class B shares will automatically convert
to Class A shares and will be subject to the lower distribution and Shareholder
service fees charged to Class A shares. Such conversion will be on the basis of
the relative net asset values of the two classes, without the imposition of any
sales charges, fee or other charge. The conversion is not a taxable event to a
Shareholder.
For purposes of conversion to Class A shares, shares received as dividends
or other distributions paid on Class B shares in a Shareholder's Fund account
will be considered to be held in a separate sub-account. Each time any Class B
shares in a Shareholder's Fund account (other than those in the sub-account)
convert to Class A shares, pro-rata portion of the Class B shares in the
sub-account will also convert to Class A shares.
If a Shareholder effects one or more exchanges among Class B Shares of the
Funds of the Trust during the eight-year period, the Trust will aggregate the
holding periods for the share of each Fund of the Trust for purposes of
calculating that eight-year period. Because the per share net asset value of the
Class A shares may be higher than that of the Class B shares at the time of
conversion, a Shareholder may receive fewer Class A shares than the number of
Class B Share converted, although the dollar value will be the same.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund has elected to qualify, 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). 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 Equity Fund, Mid Cap Equity Fund and Large Cap
Equity Fund monthly. The Government Income Funds will declare dividends of such
income daily and
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<PAGE> 101
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 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
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<PAGE> 102
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 Class A Shares are offered at net asset value with a front
end sales charge. Class B Shares are offered at net asset value and may be
subject to a Contingent Deferred sales charge. Class A and B Shares may be
subject to 12b-1 distribution fees. 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.
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<PAGE> 103
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 Class A and Class B 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 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 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.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust,
P.O. Box 182484, Columbus, Ohio 43218-2484.
General and Account Information: (800) PERFORM (737-3676).
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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
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[PERFORMANCE FUNDS LOGO]
Return completed form to: ACCOUNT
The Performance Funds APPLICATION
P.O. Box 182484 Class A and Class B Shares
Columbus, Ohio43218-2484
For assistance call: 1-800-PERFORM (737-3676)
1 ACCOUNT REGISTRATION AND INFORMATION (Do not use this form for an IRA or to
establish a retirement plan.)
Type of Registration (check one)
<TABLE>
<S> <C> <C> <C>
[ ] INDIVIDUAL [ ] TENANTS IN COMMON [ ] CORPORATION* [ ] CUSTODIAN FOR MINOR (UGMA)
[ ] JOINT TENANTS WITH RIGHT OF SURVIVORSHIP [ ] PARTNERSHIP* [ ] TRUST* [ ] OTHER (SPECIFY)*________________
</TABLE>
*Please attach a copy of the appropriate bylaws, resolutions or trust documents
establishing authority to open this account. If such agreements or resolutions
are not in existence, please contact the Fund at 1-800-737-3676 to request the
appropriate form.
<TABLE>
<S> <C>
- --------------------------------------------------------- -------------------------------------------------------------
INDIVIDUAL-(First Name/Initial/Last Name) Name of Custodian (only one)
Number
- --------------------------------------------------------- as custodian for___________________________ _______________
JOINT OWNER--if any (First Name/Initial/Last Name) Name of Minor (only one) Minor's State
of Residence
- -------------------------------------- -----------------
Social Security or Taxpayer ID Number Date of Birth --------------------------------- -------------------------
(Required by law) Minor's Social Security Number Minor's Date of Birth
- -------------------------------------- ----------------- Name of Organization__________________________________________
Social Security Number of Joint Owner Date of Birth
Name of Trustee_______________________________________________
----------------------------------- --------------------
Tax ID Number Date of Trust
Number and Street_______________________________________ Apt. #_____ City__________________________________ State_______ Zip______
Daytime Telephone Number (_____)____________________________________ Evening Phone Number (_____)_________________________________
CITIZENSHIP [ ] U.S. Citizen [ ] Non-Resident Alien (Attach a W-8 form. Dividends are subject to tax withholding.)
[ ] Resident Alien
EMPLOYMENT (REQUIRED BY NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.) [ ] Yes, I am an associated person of a NASD member.
Employer's Name (account owner)___________________________________________________ Occupation______________________________________
Employer's Address_______________________________________________ City_______________________________________ State_____ Zip_______
Employer's Name (joint owner)_____________________________________________________ Occupation______________________________________
Employer's Address_______________________________________________ City_______________________________________ State_____ Zip_______
===================================================================================================================================
</TABLE>
2 FUND SELECTION Indicate the Fund(s) and the Class of Shares in which you are
investing $1000 minimum initial investment per Fund; see prospectus for
exceptions. If no Class is selected you will automatically be invested in the
Class A Shares.
<TABLE>
<CAPTION>
<S> <C> <C>
CLASS A CLASS B
SHARES SHARES
- --------- --------- Select one of the following payment methods:
[ ] [ ] Money Market Fund* $___________ [ ] BY CHECK: Make check payable to The Performance Funds
[ ] N/A Short Term Government Income Fund $___________ [ ] BY WIRE: Complete this form and call 1-800-737-3676
[ ] [ ] Intermediate Term Government Income Fund $___________ for wire instructions and to place an order.
[ ] [ ] Large Cap Equity Fund $___________ Check box if establishing a letter of intent [ ] and
[ ] [ ] Mid Cap Equity Fund $___________ complete Section 11.
[ ] [ ] Small Cap Equity Fund $___________
[ ] [ ] Other $___________
TOTAL INVESTMENT $___________ *If purchasing Class B shares of the Money Market Fund,
please complete Section 7 as described in the prospectus
under "How to Purchase and Redeem Shares."
</TABLE>
================================================================================
<PAGE> 106
3 TELEPHONE REDEMPTION AND EXCHANGE (If left blank, you will automatically
receive telephone privileges.)
I elect the telephone privileges as described in the prospectus [ ] Yes [ ] No
================================================================================
4 DISTRIBUTION SELECTION (Your dividends and capital gains will be automatically
reinvested into your account unless you indicate otherwise.)
<TABLE>
<CAPTION>
DIVIDENDS CAPITAL GAINS
<S> <C>
[ ]reinvested [ ]reinvested
[ ]sent to me by check to the address indicated in Section 1. [ ]sent to me by check to the address indicated in Section 1.
[ ]automatically deposited to my bank account as indicated in [ ]automatically deposited to my bank account as indicated
Section 8. in Section 8.
</TABLE>
================================================================================
5 AUTOMATIC INVESTMENT PLAN (From your checking account. Attach a voided check
along with your initial purchase.)
The minimum initial purchase is reduced to $25 per fund when you use this
service. Subsequent minimum purchase is $25 for each fund.
<TABLE>
<CAPTION>
FUND NAME ACCOUNT NUMBER (OR NEW ACCOUNT) AMOUNT ($25 MIN.)
--------- ------------------------------- -----------------
<S> <C> <C>
$
- ------------------------------------------- --------------------------------------- -----------------------------------------
$
- ------------------------------------------- --------------------------------------- -----------------------------------------
$
- ------------------------------------------- --------------------------------------- -----------------------------------------
$
- ------------------------------------------- --------------------------------------- -----------------------------------------
</TABLE>
Please select how often you would like to have the amount(s) shown above
withdrawn from your Bank Account.
[ ] Once each month on the 5th
[ ] Once each month on the 20th
[ ] Twice each month on the 5th and the 20th
[ ] Once each quarter on the 5th beginning in _______ (Mar./June/Sept./Dec.)
(VOIDED CHECK MUST BE ATTACHED.)
** PLEASE COMPLETE SECTION 8
BY MAKING THE ABOVE SELECTION, I AUTHORIZE THE PERFORMANCE MUTUAL FUNDS'
TRANSFER AGENT AND BISYS FUND SERVICES, TO CHARGE THE AFOREMENTIONED ACCOUNT AND
INVEST THE MONIES INTO THE PERFORMANCE MUTUAL FUNDS LISTED ON THE ABOVE STATED
DATE(S). I will be responsible for assuring the monies are available in the bank
account I choose to have charged for these transactions. Please allow fifteen
business days after receipt to add, change or discontinue the Auto Invest Plan
feature. To add or change bank account information in Section 8, the request
must be in writing and accompanied by a signature guarantee.
================================================================================
6 AUTOMATIC WITHDRAWAL PLAN (From your Performance Funds account. Attach a
voided check along with your initial purchase.)
You must have a minimum account balance of $25,000. Please indicate the
Performance Fund(s) for the Auto Withdrawal.
<TABLE>
<CAPTION>
FUND NAME ACCOUNT NUMBER (or New Account) AMOUNT ($100 min./$100,000 max.)
--------- ------------------------------- --------------------------------
<S> <C> <C>
- ------------------------------------------- --------------------------------------- -----------------------------------------
- ------------------------------------------- --------------------------------------- -----------------------------------------
- ------------------------------------------- --------------------------------------- -----------------------------------------
</TABLE>
Please select how often you would like to have the amount(s) shown above
withdrawn from your Performance Fund(s).
[ ] Once each month on the 5th
[ ]Once each month on the 20th
[ ]Twice each month on the 5th and the 20th
[ ]Once each quarter on the 5th beginning in ________ (Mar./June/Sept./Dec.)
[ ]Check if proceeds should be mailed by check to the address of record in
Section 1.
[ ]Check if proceeds should be deposited to the bank account listed in
Section 8 on the Account Application.
(VOIDED CHECK MUST BE ATTACHED.)
BY MAKING THE ABOVE SELECTION, I AUTHORIZE THE PERFORMANCE FUNDS' TRANSFER AGENT
TO REDEEM SHARES FROM MY PERFORMANCE FUND(S) ACCOUNT ON THE STATED DATE(S). A
$1000 BALANCE IN THE SPECIFIED FUND MUST BE MAINTAINED FOR THE FEATURE TO BE
AVAILABLE. I ALSO UNDERSTAND THAT BY REDEEMING SHARES WITH A FLUCTUATING VALUE,
I MAY BE CREATING A TAXABLE EVENT. To change Auto Withdrawal amounts, dates, or
to discontinue the feature the request must be made in writing to BISYS Fund
Services. To add or change bank account information in Section 8, the request
must be in writing and accompanied by a signature guarantee. Please allow 15
business days after receipt to add, change or discontinue this feature. Class B
shareholders can use this feature to redeem up to 12% per year without incurring
a contingent deferred sales charge.
================================================================================
<PAGE> 107
7 AUTOMATIC EXCHANGE (Class B Shares only. From one Performance Fund to another
Performance Fund.)
You may make regular, automatic withdrawals from a Performance Fund to benefit
from dollar-cost-averaging by automatically making purchases into another
Performance Mutual Fund. You must have a minimum initial purchase of $10,000 or,
if you are adding this feature to an existing account you must have a minimum
balance of $10,000. The Auto Exchange feature is only available within the Class
B Shares.
Please select how often you would like to have the amount(s) shown below
withdrawn from your Performance Fund and invested into the selected Fund(s).
[ ] Once each month on the 20th
[ ] Once each quarter on the 20th beginning in (Mar./June/Sept./Dec.)
<TABLE>
<S> <C> <C> <C>
FROM: Fund Name___________________________ Account Number (or New)__________________ Amount ($50.00 min.)_____________________
TO: Fund Name___________________________ Account Number (or New)__________________ Amount ($50.00 min.)_____________________
TO: Fund Name___________________________ Account Number (or New)__________________ Amount ($50.00 min.)_____________________
</TABLE>
Shareholders investing in the Money Market Fund Class B shares are requested to
participate in the Auto Exchange feature so that most of the amount invested
will be moved from the Money Market Fund to the other selected Class B Share
Funds over a two year period. Please enter the calculated amounts above.
BY MAKING THE ABOVE SELECTION, I AUTHORIZE THE PERFORMANCE FUNDS' TRANSFER AGENT
TO REDEEM FROM THE AFOREMENTIONED PERFORMANCE FUND AND PURCHASE THE MONIES INTO
THE PERFORMANCE MUTUAL FUNDS CHOSEN ON THE ABOVE STATED DATE(S). Please allow
fifteen business days after written receipt of the request to add, change or
discontinue the Auto Exchange feature. Please complete an appropriate Letter of
Intent (if applicable).
================================================================================
8 Bank Address and Electronic Funds Transfer Information
<TABLE>
<CAPTION>
ATTACH A VOIDED CHECK FOR VERIFICATION. (Check as many boxes, as apply) YOUR ACCOUNT IS A:
<S> <C>
[ ] Check if telephone and written redemption proceeds are to be sent [ ] Checking Account
electronically as indicated below unless otherwise specified at the [ ] Savings Account
time of the request.
[ ] Check if cash dividends are to be sent electronically (complete Section 4).
[ ] Check if instructions apply to the Auto Invest Plan (complete Section 5).
[ ] Check if instructions apply to the Auto Withdrawal Plan (complete Section 6).
- --------------------------------------------------------------------------------------------------------------------
Name(s) on Bank Account
- --------------------------------------------------------------------------------------------------------------------
Bank Name Branch Office (if applicable) Bank Telephone Number
- --------------------------------------------------------------------------------------------------------------------
Bank ABA (Routing) Number (if unknown, call your bank) Bank Account Number
- --------------------------------------------------------------------------------------------------------------------
Bank Street Address (DO NOT use, P.O. Box) City State Zip
To add or change bank account information, the request must be in writing and accompanied by a signature guarantee.
</TABLE>
================================================================================
9 CHECKWRITING (Performance Money Market Fund Class A Shares only.) Please see
the current prospectus for details. ($100 minimum per check).
Please be sure to complete the following signature card section. Your monthly
statement will show your checks as redemptions.
[ ] Yes, I want checkwriting
CHECKWRITING SIGNATURE CARD
- --------------------------------------------------------------------------------
Name of registered owner(s) of shares (please print or type)
- --------------------------------------------------------------------------------
Signature Signature
TERMS AND CONDITIONS
The registered owner(s) whose signature(s) appear(s) above (the "Signatory,"
whether one or more), intending to be legally bound, hereby agrees with the
other registered owners and with the Fund and The Huntington National Bank, Ohio
(the "Bank") as follows::
1. REDEMPTION AUTHORIZATION: The Bank is appointed agent for the Signatory to
request redemption of shares of The Performance Money Market Fund (the
"Fund') registered in the name of the Signatory upon receipt of, and in the
amount of, items drawn in accordance with these Terms and Conditions by the
Signatory upon the Signatory's Fund account. The Bank is expressly
authorized to process items as redemption instructions hereunder without
requiring signature guarantee, and shall not be liable to the Fund, the
Signatory or any third party for any loss, liability or expense resulting
from the absence of any such guarantee. The Bank shall also not be liable to
the Fund, the Signatory or any third party for, and the Signatory
indemnifies and holds the Bank harmless from, and loss, liability or expense
arising from or related to any act of the Fund in redeeming or not redeeming
any shares or following or not following any instruction contained in an
item.
2. ITEM PROCESSING: Signatory agrees that the Bank's duties upon receipt of
items from the Signatory are only those of a collecting agent to present the
items to the Fund for payment through redemption of shares owned by the
Signatory. In addition, the Signatory agrees that:
(a) No item shall be issued or honored, or any redemption effected, in an
amount less than $100.
(b) No item shall be issued or honored, or any redemption effected, for any
amount not represented by fully paid shares or represented by shares
for which payment has not been made in full and any checks or other
instruments given in payment have not been finally paid and collected
through normal banking channels.
(c) Items shall be subject to any further limitations set forth in
Prospectus issued by the Fund including without limitation any
additions, amendments and supplements o these Terms and Conditions from
time to time in effect.
3. DUAL OWNERSHIP: If more than one person is indicated as a registered owner
of shares of the Fund, as by joint ownership, ownership in common, or
tenants by the entireties, then
(a) each registered owner must sign this signature card, (b) only one
registered owner need sign each item issued hereunder.
4. FORM OF ITEMS: The items shall be in a form provided or approved in advance
by the Fund or the Bank.
5. TERMINATION: Either the Bank or the Fund may at any time terminate the
special redemption privileges, related share redemption services and the
Bank's agency for the Signatory without prior notice by the Bank or the Fund
to the Signatory.
6. HEIRS AND ASSIGNS: The signatory may not assign its rights and duties
pursuant to these Terms and Conditions without the prior consent of the Fund
and bank. These Terms and Conditions shall bind the respective heirs,
executors, administrators and permitted assigns of the Signatory.
<PAGE> 108
10 SALES CHARGE WAIVERS (See current prospectus under "Sales Charge Waivers" for
qualified purchase types.)
Qualified Purchase Category and Explanation_____________________________________
================================================================================
11 LETTER OF INTENT (Class A Shares only.)
I understand that through accumulated investments I can reduce my sales charges
as outlined in the prospectus. I plan to invest over a 13-month period in shares
of one or more of the funds in the Performance Funds Trust (except the Money
Market Fund) an aggregate amount of at least:
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
If the amount indicated is not invested within 13 months, reduced sales charges
do not apply.
================================================================================
12 RIGHT OF ACCUMULATION (Class A Shares only. See the prospectus for
qualifications.)
[ ] I own shares of more than one fund in the Performance Funds Trust, which may
entitle me to a reduced sales charge. My shareholder account numbers are:
<TABLE>
<S> <C> <C>
Fund Name____________________________ Fund Name_____________________________ Fund Name_____________________________
Account #____________________________ Account #_____________________________ Account #_____________________________
</TABLE>
================================================================================
13 YOUR SIGNATURE (All registered shareholders must sign.)
I HAVE RECEIVED AND READ THE CURRENT PROSPECTUS OF THE FUND(S) SELECTED ON THIS
ACCOUNT APPLICATION FORM AND AGREE TO BE BOUND BY THEIR TERMS. I UNDERSTAND THAT
MUTUAL FUNDS SHARES ARE NOT OBLIGATIONS OF OR GUARANTEED BY TRUSTMARK NATIONAL
BANK OR ANY OF ITS SUBSIDIARIES OR ANY OTHER BANK, NOR ARE THEY INSURED BY THE
FDIC OR ANY OTHER GOVERNMENT AGENCY. I ALSO AUTHORIZE THE INSTRUCTIONS IN THIS
APPLICATION.
I CERTIFY, UNDER PENALTIES OF PERJURY:
(a) THAT THE SOCIAL SECURITY OR TAXPAYER IDENTIFICATION NUMBER(S) SHOWN IN
SECTION 1 IS CORRECT.
(b) UNLESS I HAVE CHECKED THE BOX BELOW, THAT (1) THE IRS HAS NEVER NOTIFIED
ME THAT I AM SUBJECT TO BACKUP WITHHOLDING OR (2) HAS NOTIFIED ME THAT I AM NO
LONGER SUBJECT TO SUCH BACKUP WITHHOLDING.
[ ] THE IRS HAS NOTIFIED ME THAT I AM SUBJECT TO BACKUP WITHHOLDING .
NON-RESIDENT ALIENS MAY BE SUBJECT TO A SEPARATE IRS WITHHOLDING OF 30%.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
THE SIGNATURE(S) BELOW CERTIFIES THAT I (WE) HAVE READ THE CUSTOMER AGREEMENT.
<TABLE>
<S> <C>
X X
- --------------------------------------------------------- --------------------------------------------------------
Signature of Account Owner Date Signature of Joint Owner (if any) Date
X
- ---------------------------------------------------------
Capacity of Signator
</TABLE>
================================================================================
Attach Voided Check Here.
------------------------------------------------------------------------------
John and Jane Doe
123 Main Street 000
Anywhere, U.S.A. 12345
________ 19__
PAY TO THE --------------
ORDER OF ___________________________________ $ | |
--------------
_____________________________________________________ DOLLARS
MEMO_______________ ____________________________
01010101010 1010 10 101010
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OFFICE USE ONLY
<S> <C> <C>
Dealer #_______________________________ Branch #_______________________________ Rep. #_______________________________
Wholesaler #___________________________ Fund Source____________________________ Lead Source__________________________
Referring Branch #_____________________ Referring Source_______________________ Campaign Code________________________
</TABLE>
<PAGE> 109
14 CLIENT AGREEMENT After reading this section, please sign in Section 13.
To: Performance Funds Distributor, Inc. (the "Distributor"), and BISYSFund
Services, Inc. (the "Transfer Agent") and Trustmark National Bank (the
"Investment Adviser").
I (We) have full right, power, authority and legal capacity; and am (are) of
legal age in my (our) state of residence to purchase shares of the investment
portfolios ("Funds") of the Performance Funds (the "Fund Company"). I (we)
affirm that I (we) have received and read the current prospectus(es) of the
Fund(s) selected and agree to be bound by its terms.
a. THE MEANING OF WORDS IN THIS AGREEMENT: The words "I," "me" and "my" refer to
the person(s) who signed this Agreement. The words "you" and "your" refer to the
Distributor and the Transfer Agent.
b. REPRESENTATIONS. I understand that you provide no investment, tax, or legal
advice, and I have relied on my independent judgment with respect to the
suitability or potential value of any security or order.
c. DEBIT AUTHORIZATION AND SETTLEMENT. If I authorize, and if the Transfer Agent
approves, the use of my bank account designated in Section 8 of this Account
Registration Form (the "designated account") as the settlement account in
connection with this account, I understand and agree that the Transfer Agent may
debit the designated account for payment of securities purchased by me either by
way of this Account Registration Form and order, by signing up for the Automatic
Investment Plan, or for subsequent purchases in any Funds as I may direct. If I
have instructed that a purchase be settled through a debit of my account,
Icertify that I have the power and authority to debit the account. I agree to
have sufficient collected funds available in the designated account to cover the
amounts due on purchase of securities at the time of placing my order. If Ihave
designated another method of payment, I agree to deliver sufficient collected
funds to cover the amount due by 9:00 a.m. (Eastern Time) on the settlement
date. I understand that if sufficient collected funds are not available, my
purchase will be rejected and I will be liable for any resulting loss.
If the Transfer Agent executes a transaction but fails to receive sufficient
payment for such shares, the Transfer Agent may, without prior notice, redeem
any Fund shares. I agree to reimburse the Fund company or BISYSFund Services,
Inc. on demand for any costs, losses or liabilities incurred by such party in
collection of the debit balance.
I understand and agree that the Transfer Agent may credit the designated account
with dividend distributions, Automatic Withdrawal Plan, and other distributions
that are payable to me (us) by the Fund Company.
I further understand that the Automatic Withdrawal Plan and the Automatic
Investment Plan may be terminated or modified at any time without notice.
d. FORCE MAJEURE. You shall not be liable for any loss or delay caused directly
or indirectly by war, natural disaster, government restrictions, exchange or
market rulings or other conditions beyond your control.
e. RECORDING CONVERSATIONS. I understand and agree that, for our mutual
protection, telephone conversations may be recorded without further notice.
f. APPLICABLE LAWS AND REGULATIONS. All transactions shall be subject to rules,
regulations, customs and usages of the exchange, market or clearinghouse where
executed, all applicable federal and state laws and regulations, and the
policies and procedures as determined by the Fund Company set forth in its then
current prospectus(es).
g. GOVERNING LAWS. The Agreement shall be governed by the laws of the State of
Ohio as applicable.
h. RELIANCE ON REPRESENTATIONS. I understand that you shall rely on the
information that I have set forth in this Agreement. I agree that all changes to
this information shall be promptly provided to the Transfer Agent in writing.
The Transfer Agent is entitled to rely on this information until I change it by
subsequent written notice.
i. DELIVERY AND RECEIPT. Any orders for transactions in the Funds under this
Agreement will NOT be effective until received and approved by the Distributor
and the Transfer Agent at their offices in Columbus, Ohio. The Distributor and
the Transfer Agent shall not be responsible for any losses or lost profit
opportunity I may experience due to any delays in the execution of purchase and
redemption orders as a result of delayed receipt of such orders.
j. INSTRUCTIONS. Neither the Distributor, the Transfer Agent, nor the Fund
Company shall be liable for any loss, damages, expense or cost arising out of
any telephone redemption effected in accordance with the Fund Company's
telephone redemption procedures, upon instructions reasonably believed to be
genuine. The Fund Company and its agents will employ procedures designed to
provide reasonable assurance that instructions by telephone are genuine. These
procedures include recording all phone conversations, sending confirmations to
shareholders within 72 hours of the telephone transaction, verification of
account name and account number or tax identification number and sending
redemption proceeds only to the address of record or to a previously authorized
bank account.
k. ARBITRATION. THIS PARAGRAPH CONTAINS WHAT IS SOMETIMES REFERRED TO AS A
PREDISPUTE ARBITRATION CLAUSE. IN THIS REGARD, I AM AWARE OF THE FOLLOWING:
(i) ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
(ii) THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO JURY TRIAL. (iii) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE
LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. (iv) THE ARBITRATORS' AWARD
IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S
RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS
STRICTLY LIMITED. (v) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY
OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY. (vi) ALL
AGREEMENTS SHALL INCLUDE A STATEMENT THAT "NO PERSON SHALL BRING A PUTATIVE OR
CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PREDISPUTE
ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE
CLASS ACTION; OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF
THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION
UNTIL:(i) THE CLASS CERTIFICATION IS DENIED, OR (ii) THE CLASS IS DECERTIFIED,
OR (iii) THE PERSON AGAINST WHOM THE ARBITRATION AGREEMENT WOULD BE ENFORCED IS
EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT
TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT
EXCEPT TO THE EXTENT STATED HEREIN." IT IS AGREED THAT ANY CONTROVERSY BETWEEN
ME AND THE FUND COMPANY AND/OR ANY OF ITS SERVICE PROVIDERS (INCLUDING THE
INVESTMENT ADVISER) ARISING OUT OF THIS AGREEMENT OR MY BUSINESS WITH YOU, SHALL
BE SETTLED BY ARBITRATION CONDUCTED IN ACCORDANCE WITH THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR THE AMERICAN ARBITRATION ASSOCIATION,
AS I MAY ELECT. FAILURE TO NOTIFY YOU OF SUCH ELECTION IN WRITING WITHIN FIVE
(5) DAYS AFTER RECEIPT FROM YOU OF A REQUEST FOR ARBITRATION SHALL BE DEEMED TO
BE AUTHORIZATION TO MAKE SUCH ELECTION ON MY BEHALF. JUDGMENT UPON THE AWARD OF
THE ARBITRATORS MAY BE ENTERED BY ANY COURT HAVING JURISDICTION.
l. INDEMNIFICATION. As additional consideration for the services of the
Distributor, the Transfer Agent and the Investment Adviser, with regard to this
Account, I agree to indemnify and hold each of them, the Fund Company, and their
officers, directors, employees and agents harmless from and against any and all
losses, liabilities, demands, claims, actions, expenses and attorney's fees
arising out of or in connection with this Agreement, which are not caused by
their negligence or willful misconduct. The provisions of this Section shall
survive termination of this Agreement; the provisions of this Section shall be
binding on my successors and assigns.
m. I understand that, if disbursements out of this account are to anyone other
than the applicant or the applicant's joint tenant, a signature guarantee will
be required.
n. With respect to Section 5, Section 6, and Section 7 Iunderstand that if the
5th or 20th should fall on a non-business day, the transaction will be effective
on the next business day.
o. I understand that mutual fund shares are not deposits of any bank, are not
insured by the FDIC, are not obligations of any bank or the U.S.. Government and
are not endorsed or guaranteed in any way by any bank.
<PAGE> 110
[PERFORMANCE FUNDS LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
ADMINISTRATOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
DISTRIBUTOR
Performance Funds Distributor, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
<PAGE> 111
PERFORMANCE FUNDS TRUST
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
UNDER THE SECURITIES ACT OF 1933
THE MONEY MARKET FUND
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS PROSPECTUS
<S> <C> <C>
PART A PROSPECTUS CAPTION
Item 1. Cover Page Cover Page
Item 2. Synopsis Description of Funds; Fund
Expenses
Item 3. Financial Highlights Financial Highlights
Item 4. General Description of Registrant 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 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;
Redemptions (Part B)
Item 9. Legal Proceedings Not Applicable
</TABLE>
<PAGE> 112
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 offers, by a
separate prospectus Class A and Class B 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 30,
1998, 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. The SAI is also available along with other
material on the SEC Internet website (http:/www.sec.gov).
------------------------
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 30, 1998
<PAGE> 113
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses............................................... 3
Fee Table................................................... 3
Financial Highlights........................................ 4
Description of the Fund..................................... 5
The Investment Policies and Practices of the Fund........... 5
Description of Securities and Investment Practices.......... 6
Investment Restrictions..................................... 11
Management of the Fund...................................... 12
Fund Share Valuation........................................ 15
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........................................... 21
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> 114
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, 1998
(except for the reduction or voluntary waiver of advisory fees). Actual expenses
in the future may be greater or less than those shown. Shareholders in Class A
and B shares of the Funds may be subject to Rule 12b-1 Plan distribution fees
(annually up to 0.35% for Class A shares and 1.00% for Class B shares 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>
<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.................................................. none
Other Expenses (after waiver)(3)............................ 0.19%
-----
Total Fund Operating Expenses (after waiver)(4)............. 0.34%
=====
</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 ratio of investment advisory fees to net assets would
have been 0.30%.
(3) Reflects a voluntary reduction of administration fee of 0.08%. Without such
waiver, administration fees for the Fund would total 0.15%.
(4) Absent voluntary waivers, "Total Operating Expenses" would have been 0.57%.
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.................................................... $11
5 years.................................................... $19
10 years.................................................... $42
</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> 115
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, 1998.
The financial highlights have been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report on the financial statements, including
this data, appears in the Fund's 1998 Annual Report to Shareholders incorporated
by reference into 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 throughout each period:
<TABLE>
<CAPTION>
THE MONEY MARKET FUND
--------------------------------------------------------
INSTITUTIONAL CLASS SHARES
--------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994*
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income.......... 0.05 0.05 0.05 0.05 0.02
-------- -------- -------- -------- --------
Distributions to shareholders
from:
Net investment income.......... (0.05) (0.05) (0.05) (0.05) (0.02)
-------- -------- -------- -------- --------
Net Asset Value, End of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return........... 5.43% 5.34% 5.60% 5.27% 2.17%
Ratios to Average Net Assets/
Supplemental Data:
Net Assets, End of Period
(000)....................... $349,024 $320,732 $366,966 $324,942 $139,157
Net investment income before
waivers/reimbursements...... 5.07% 4.94% 5.12% 4.91% 2.77%**
Net investment income net of
waivers/reimbursements...... 5.31% 5.20% 5.42% 5.27% 3.30%**
Expenses before waivers/
reimbursements.............. 0.57% 0.51% 0.54% 0.59% 0.68%**
Expenses net of waivers/
reimbursements.............. 0.33% 0.25% 0.24% 0.23% 0.15%**
</TABLE>
- ---------------
* Fund commenced operations on September 30, 1993
** Annualized
4
<PAGE> 116
DESCRIPTION OF THE FUND
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.
There is no guarantee that the Fund will achieve its investment objective.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND
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 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.
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 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 following describes in greater detail different types of securities and
investment practices used by the Fund.
5
<PAGE> 117
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities. The Fund 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.
Domestic and Foreign Bank Obligations. These obligations include but are
not restricted to certificates of deposit, commercial paper, Yankeedollar
certificates of deposit, bankers' acceptances, Eurodollar certificates of
deposit and time deposits, promissory notes and medium-term deposit notes. The
Fund will not invest in any obligations of its affiliates, as defined under the
1940 Act. The Fund limits its investments in United States bank obligations to
obligations of United States banks (including foreign branches). The Fund limits
its investments in foreign bank obligations to United States dollar-denominated
obligations of foreign banks (including United States branches of foreign banks)
which, in the opinion of the Adviser, are of an investment quality comparable to
obligations of United States banks which may be purchased by the Fund.
Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Investments in fixed time deposits subject to withdrawal penalties
maturing from two days through seven days may not exceed 10% of the value of the
total assets of the Fund.
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions, such as exchange controls, may be adopted which might adversely
affect the payment of principal and interest on those obligations, that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks, or that the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not subject to examination by any United States
Government agency or instrumentality.
Investments in Eurodollar and Yankeedollar obligations involve additional
risks. Most notably, there generally is less publicly available information
about foreign companies; there may be less governmental regulation and
supervision; they may use different accounting and financial standards; and the
adoption of foreign governmental restrictions may adversely affect the payment
of principal and interest on foreign
6
<PAGE> 118
investments. In addition, not all foreign branches of United States banks are
supervised or examined by regulatory authorities as are United States banks, and
such branches may not be subject to reserve requirements.
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.
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.
Loans of Portfolio Securities. To increase income, the Fund may lend its
securities to securities broker-dealers or financial institutions if (1) the
loan is collateralized in accordance with applicable regulatory requirements
including collateralization continuously at no less than 100% by marking to
market daily, (2) the loan is subject to termination by the Fund at any time,
(3) the Fund receives reasonable interest or fee payments on the loan, (4) the
Fund is able to exercise all voting rights with respect to the loaned securities
and (5) the loan will not cause the value of all loaned securities to exceed one
third of the value of the Fund's 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. 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
7
<PAGE> 119
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.
Mortgage-Related Securities. The Fund 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
8
<PAGE> 120
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 Fund 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 Fund 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 Fund 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 Fund 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. When purchasing CMO's or REMIC's, the Advisor will
use the actual maturity date, average life calculation and structure of the CMO
or REMIC to determine the effective maturity. To the extent a particular CMO or
REMIC is issued by an investment company, the Fund's ability to invest in such
CMOs or REMICs will be limited. The Fund 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 Fund's
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 the Fund purchases a
security at a premium, a prepayment rate that is
9
<PAGE> 121
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 the 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 Fund's
share value and yield are not guaranteed and there can be no assurance that the
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. 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 the Fund in calculating maturity for
purposes of its investment in asset-backed securities.
Illiquid Investments. It is the policy of the 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 10% of the value of the total net assets
of the 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 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
10
<PAGE> 122
determination the Adviser will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security. In
addition, the Adviser could consider the (1) frequency of trades and quotes, (2)
number of dealers and potential purchasers, (3) dealer undertakings to make a
market, and (4) the nature of the security and of marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities would be monitored
and, if as a result of changed conditions, it is determined that a Rule 144A
security is no longer liquid, the Fund's holdings of illiquid securities would
be reviewed to determine what, if any, steps are required to assure that the
Fund does not invest more than 10% of its assets in illiquid securities.
Investing in 144A securities could have the effect of increasing the amount of
the Fund's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
Investment Company Securities. The Fund may invest 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 a Fund investing more than 10% of the
value of its total assets in such securities in the aggregate. 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.
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 RESTRICTIONS
The Fund is a diversified fund. As such, it will not, with respect to 100%
of its total assets, 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. The Fund may
invest up to 25% of its total assets in the first tier securities of a single
issuer for a period of up to three business days after the acquisition thereof
provided that the Fund may not invest in the securities of more than one issuer
in accordance with this provision at any time. Also, the 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 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" of the 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
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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 Fund may not
(except where specified):
(1) borrow money or pledge or mortgage its assets, except that the
Fund may borrow from banks. The Fund may borrow from banks up to 33 1/3% of
the current value of its total assets and those borrowings may be secured
by the pledge of not more than 33 1/3% of the current value of the Fund's
total assets.
(2) make loans, and loans of portfolio securities in excess of 33 1/3%
of the value of the Fund's total assets except that the Fund may enter into
repurchase agreements with respect to its portfolio securities;
(3) invest more than 10% 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 the Fund which may be
changed only when permitted by law and approved by the holders of a majority of
the Fund's outstanding voting securities as described under "Other
Information -- Voting."
The 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 Fund 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 Financial Services Group, has assets in excess of $1.6 billion
under management in addition to the Trust's Funds. It was founded in 1890 and is
the second largest commercial bank headquartered in Mississippi. Trustmark has
been managing trust monies for over 40 years. Shares of the Fund are not
guaranteed by Trustmark, its parent or affiliates, nor are they insured by the
FDIC, the Federal Reserve Board or any other agency.
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For the advisory services it provides to the Fund, Trustmark is entitled to
receive monthly fees, based on average daily net assets, up to 0.30% annually
for the Fund.
Based upon the advice of its counsel, Trustmark believes that the
performance of investment advisory services for the Fund will not violate the
Glass-Steagall Act or other applicable banking laws or regulations. However,
future statutory or regulatory changes, as well as future judicial or
administrative decisions and interpretations of present and future statutes and
regulations, could prevent Trustmark from continuing to perform such services
for the Fund. If Trustmark were prohibited from acting as investment adviser to
the Fund, it is expected that the Board of Trustees would recommend to
shareholders approval of a new investment advisory agreement with another
qualified investment adviser selected by the Board or that the Board would
recommend other appropriate action.
The Distributor and Administrator. BISYS Fund Services Ohio, Inc.
("BISYS"), acts as the Administrator of the Fund. Performance Funds Distributor,
Inc., an affiliate of BISYS, acts as the Distributor of the Fund's shares and
may be reimbursed for certain of its distribution related expenses.
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. BISYS also serves as the
Fund's Transfer Agent and Fund Accountant.
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. 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
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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 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.
YEAR 2000
Like other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the Fund or its service providers and counterparties do
not properly process and calculate date-related information and data from and
after January 1, 2000. The Fund is in the process of assessing and formulating
responses to these potential problems with the
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Adviser and all other major service providers and counter parties. There can be
no assurance that the Fund's actions will be sufficient to avoid any adverse
impact.
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. The Trust maintains records of
each shareholder's holdings of Fund shares, and each shareholder receives a
statement of transactions, holdings and dividends. The Fund reserves the right
to waive or reduce the minimum initial investment amount with respect to certain
accounts. 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.
Shares of the Institutional Class of the Fund are offered at net asset
value without a sales load. 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,
(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) other persons or organizations authorized by the Distributor.
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.
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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.
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 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 redemption proceeds will not be available
until payment of the purchase has been collected, which may take up to fifteen
days.
By Automatic Investment. Investors may participate in the Automatic
Investment Plan, 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 $25.00
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 Plan. Contact the Fund for more information
about the Automatic Investment Plan.
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
Shares of the Fund may be exchanged for shares of another Fund in the same
class only. 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
$100. The Trust may terminate or amend the terms of the exchange privilege at
any time upon 60 days' written notice to shareholders.
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A new account opened by exchange must be established with the same name(s),
address and social security number or TIN as the existing account. All exchanges
will be made based on the net asset value next determined following receipt of
the request by a Fund in good order, plus any applicable sales tax. 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 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 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 by the Fund. If shares are
redeemed through a broker-dealer or investment adviser, such redemption is
complete upon receipt by the broker-dealer or investment adviser of the
shareholder's redemption request. See "Fund Share Valuation." A redemption is 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, 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
(unless a shareholder who has previously established wire transfer procedures
with the Trust's Transfer Agent had requested that proceeds be sent by wire
transfer), 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
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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, 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 Fund toll free at
1-800-737-3676. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number or TIN
and account registration, (ii) the Fund name from which you are redeeming
shares, and (iii) the amount to be redeemed. The Fund employs reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Fund fails to employ such reasonable procedures, 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 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 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 Fund by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Your instructions should include: (i) your account number, social security
number or TIN and account registration, (ii) the Fund name from which you are
redeeming shares, and (iii) the amount to be redeemed. Wire redemptions are
available to the shareholder
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unless otherwise indicated by checking the box on the Purchase Application.
Please attach a copy of a void check of account where proceeds are to be wired.
Your bank may charge you a fee for receiving a wire payment on your behalf.
Check Writing. A check redemption ($100 minimum, no maximum) feature is
available. Checks are free and may be obtained from the Fund. It is not possible
to use a check to close out your account since additional shares accrue daily.
The above mentioned services "Telephone," "Wire" and "Check Writing" are
not available for IRAs and trust clients of Trustmark.
Automatic 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
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capital gains over net long-term capital losses). The Fund will declare
distributions of such income daily and pay those dividends monthly. The Fund
intends to distribute, at least annually, substantially all net capital gains
(the excess of net long-term capital gains over net short-term capital losses).
In determining amounts of capital gains to be distributed, any capital loss
carryovers from prior years will be applied against capital gains.
Shareholders may elect to receive distributions in additional Fund shares
based on the net asset value at the close of business on the payment date of the
distribution or receive such distributions in cash. If no election is made,
distributions will be automatically reinvested in additional shares of the Fund.
Dividends declared in, and attributable to, the preceding month will be paid
within five business days after the end of each month.
Shares purchased will begin earning dividends on the day the purchase order
is executed and shares redeemed will earn dividends through the previous day.
Net investment income for a Saturday, Sunday or a holiday will be declared as a
dividend on the previous business day.
Investors who redeem all or a portion of Fund shares prior to a dividend
payment date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of investment income (regardless of whether derived from
dividends, interest or short-term capital gains) will be taxable to shareholders
as ordinary income. Distributions of net long-term capital gains designated by
the Fund as capital gain dividends will be taxable as long-term capital gains,
regardless of how long a shareholder has held his Fund shares. Distributions are
taxable in the same manner whether received in additional shares or in cash.
A distribution will be treated as paid on December 31 of the calendar year
if it is declared by the Fund during October, November, or December of that year
to shareholders of record in such a month and paid by the Fund during January of
the following calendar year. Such distributions will be taxable to shareholders
in the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares.
The dividends paid by the Fund are not expected to qualify for the
dividend-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders 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.
20
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OTHER INFORMATION
CAPITALIZATION
Performance Funds Trust was organized as a Delaware business trust on March
11, 1992, and consists of multiple separately managed portfolios or series. The
Board of Trustees may establish additional series in the future. The
capitalization of the Trust consists solely of an unlimited number of shares of
beneficial interest with a par value of $0.001 each. When issued, shares of the
Fund are fully paid and non-assessable.
This Prospectus relates to the Institutional Class of the Fund's shares.
The Fund also offers Class A and Class B shares. Institutional Class shares and
Class A and B shares are identical in all respects with the exception that the
Class A shares are subject to a front end sales charge and Class B shares may be
subject to a contingent deferred sales charge. Class A and B shares may also be
subject to Rule 12b-1 fees to which the Institutional Class shares are not
subject. Purchases may be made through an authorized broker or financial
institution, including the Fund, by mail or by wire. Call 1-800-737-3676, or
contact your sales representative, broker-dealer or bank to obtain more
information about the Fund's classes of shares.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of each series of the Trust and requires that
notice of the disclaimer be given in each contract or obligation entered into or
executed by the Trust or the Trustees. The risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations and should be
considered remote and is limited to the amount of the shareholder's investment
in the Fund.
VOTING
Shareholders have the right to vote in the election of Trustees when
elections are required by law and on any and all matters on which, by law or
under the provisions of the Declaration of Trust, they may be entitled to vote.
The Trust is not required to hold regular annual meetings of the Fund's
shareholders and does not intend to do so. The Fund may vote separately on items
which affect only the Fund and each class within the Fund may vote separately on
matters which affect only that class. For example, only Class A and Class B
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 the Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of the Fund.
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<PAGE> 133
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and/or total return in
advertisements or reports to shareholders or prospective investors. The methods
used to calculate the yield and total return of the Fund are mandated by the
SEC.
Quotations of "yield" for the Fund will be based on the income received by
a hypothetical investment (less a pro rata share of Fund expenses) over a
particular seven-day period, which is then "annualized" (i.e., assuming that the
seven-day yield would be received for 52 weeks, stated in terms of an annual
percentage return on the investment).
"Effective yield" for the Fund is calculated in a manner similar to that
used to calculate yield, but includes the compounding effect of earnings on
reinvested dividends. Quotations of yield and effective yield reflect only the
Fund's performance during the particular seven-day period on which the
calculations are based. Yield and effective yield for the Fund will vary based
on changes in market conditions, the level of interest rates and the level of
the Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), reflect the deduction of a proportional share of Fund expenses (on an
annual basis), and assume that all dividends and distributions are reinvested
when paid.
Performance information for the Fund may be compared to various 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.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Performance Funds Trust,
P.O. Box 182484, Columbus, Ohio, 43218-2484.
General and Account Information: (800) PERFORM (737-3676).
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<PAGE> 134
APPENDIX
DESCRIPTION OF BOND RATINGS
Excerpts from Moody's description of its four highest bond ratings are
listed as follows:
X Aaa -- judged to be the best quality and they carry the smallest
degree of investment risk;
X 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;
X A -- possess many favorable investment attributes and are to be
considered as "upper medium grade obligations";
X 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:
X AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong;
X 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;
X 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;
X 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> 135
[PERFORMANCE FUNDS LOGO]
INVESTMENT ADVISER
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
ADMINISTRATOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
DISTRIBUTOR
Performance Funds Distributor, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
Trustmark National Bank
248 East Capitol Street
Jackson, Mississippi 39201
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers 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 30, 1998
<PAGE> 136
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
PART B 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 Income Tax (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> 137
PERFORMANCE FUNDS TRUST
TELEPHONE: 1-800 PERFORM (737-3676)
STATEMENT OF ADDITIONAL INFORMATION - SEPTEMBER 30, 1998
THE MONEY MARKET FUND
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE SMALL CAP EQUITY FUND (formerly the Small Cap Fund)
THE MID CAP EQUITY FUND (formerly the Mid Cap Growth Fund)
THE LARGE CAP 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 the Class A (formerly Consumer Class) Shares,
Class B Shares and the "Institutional Shares" of each 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 EQUITY FUND,
THE MID CAP EQUITY FUND AND THE LARGE CAP EQUITY FUND (each, a "Fund" and
collectively, the "Funds"). The investment objectives of each Fund are described
in the Prospectus. See "The Investment Policies of the Funds."
This SAI is not a prospectus and should be read in conjunction with the
Funds' Prospectus, dated September 30, 1998. 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> 138
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
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
</TABLE>
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<PAGE> 139
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 a security if, as a result, more than 25% of the value of
its total assets would be invested in securities of one or more issuers
conducting their principal business activities in the same industry (except for
the Money Market Fund, which will not be limited in its investments in
obligations issued by the domestic banking industry), provided that this
limitation shall not apply to obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities;
(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 or section 4(2) 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;
(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. In order to avoid the
imposition of additional fees as the result of investments by the Trust's Funds
in affiliated Funds the Adviser and Administrator will reduce that portion of
their usual service fees from each Fund by an amount equal to their service fees
from the lesser of acquiring or acquired Funds that are attributable to those
Fund investments;
(7) make loans or lend its portfolio securities if, as a result, the
aggregate of such loans exceeds 33 1/3% of the value of a Fund's total assets;
(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 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
(except for the Small Cap Equity or Mid Cap Equity Funds make short sales of
securities; or
(10) issue senior securities or otherwise borrow, except that each Fund
may borrow from banks up to 33 1/3% of the current value of its total assets and
these borrowings may be secured by the pledge of up to 33 1/3% of the current
value of its total assets; 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
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<PAGE> 140
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).
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 provided however, the Money
Market Fund may invest up to 25% of its total assets in the first tier
securities of a single issuer for a period of up to three business days after
the acquisition thereof.
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 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 33 1/3% 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
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<PAGE> 141
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.
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.
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<PAGE> 142
The principal reason for writing put and call options is to attempt to
realize, through the receipt of premiums, a greater current return than would be
realized on the underlying securities alone. In return for the premium received
for a call option, the Government Income Funds forego the opportunity for profit
from a price increase in the underlying security above the exercise price so
long as the option remains open, but retains the risk of loss should the price
of the security decline. In return for the premium received for a put option,
the Government Income Funds assume the risk that the price of the underlying
security will decline below the exercise price, in which case the put would be
exercised and the Fund would suffer a loss. The Government Income Funds may
purchase put options in an effort to protect the value of a security it owns
against a possible decline in market value.
Writing of options involves the risk that there will be no market in
which to effect a closing transaction. An exchange-traded option may be closed
out only on an exchange that provides a secondary market for an option of the
same series. OTC options are not generally terminable at the option of the
writer and may be closed out only by negotiation with the holder. There is also
no assurance that a liquid secondary market on an exchange will exist. In
addition, because OTC options are issued in privately negotiated transactions
exempt from registration under the Securities Act of 1933, there is no assurance
that the Government Income Funds will succeed in negotiating a closing out of a
particular OTC option at any particular time. If a Government Income Fund, as
covered call option writer, is unable to effect a closing purchase transaction
in the secondary market or otherwise, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise.
The staff of the SEC has taken the position that purchased options not
traded on registered domestic securities exchanges and the assets used as cover
for written options not traded on such exchanges are generally illiquid
securities. However, the staff has also opined that, to the extent a mutual fund
sells an OTC option to a primary dealer that it considers creditworthy and
contracts with such primary dealer to establish a formula price at which the
fund would have the absolute right to repurchase the option, the fund would only
be required to treat as illiquid the portion of the assets used to cover such
option equal to the formula price minus the amount by which the option is
in-the-money. Pending resolution of the issue, the Government Income Funds will
treat such options and, except to the extent permitted through the procedure
described in the preceding sentence, assets as subject to each such Fund's
limitation on investments in securities that are not readily marketable.
Index Futures Contracts (Equity 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
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<PAGE> 143
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.
Options on Index Futures(Equity Funds). 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 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
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(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 Equity Fund, Mid Cap 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 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 sellers
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% (10% for the Money Market Fund) 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 Equity Fund, Mid Cap Equity Fund and Large Cap
Fund, respectively.
Variable and Floating Rate Demand and Master Demand Notes. 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
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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.
American Depository Receipts. The Small Cap Equity, Mid Cap Equity and
Large Cap Equity 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 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
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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 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
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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
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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 liquid if determined to be liquid by the
Adviser pursuant to procedures adopted by the Board.
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 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 Equity and Mid Cap
Equity 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.
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Mid Cap Common Stocks. Investing by the Mid Cap Equity 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 Equity, Mid Cap
Equity and Large Cap Equity 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 Equity, Mid Cap Equity and Large
Cap Equity 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, 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 Equity, Large
Cap Equity and Mid Cap Equity 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.
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Corporate Reorganizations. The Small Cap Equity, Large Cap Equity and
Mid Cap Equity 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 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 Equity and Small Cap Equity 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
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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.
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.
Zero Coupon Securities. 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.
15
<PAGE> 152
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 39, Trustee - 230 Park Avenue, New York, New York 10169.
Senior Managing Director, Furman Selz LLC.
Charles M. Carr, age 64, 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 72, 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 51, 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 38, 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 52, 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.
Walter B. Grimm*, Age 53, Trustee and President of the Trust, Senior Vice
President & Client Services Executive, BISYS Fund Services since June, 1992.
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.
As required by law, for as long as the Trust has a Distribution Plan,
the selection and nomination of trustees who are not "interested persons" of the
Trust will be made by such disinterested trustees. See "Rule 12b-1 Distribution
Plan" in this SAI.
Trustees of the Trust who are not affiliated with the Distributor or
the Adviser receive from the Trust an annual fee of $5,000 and a fee for each
Board of Trustees and Board committee meeting attended of $1,000. Trustees who
are affiliated with the Distributor or the Adviser do not receive compensation
from the Trust but all trustees are reimbursed for all out-of-pocket expenses
relating to attendance at meetings.
The following table sets forth total compensation paid to Trustees for
the fiscal year ended May 31, 1998. 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, 1998 in excess of $60,000.
16
<PAGE> 153
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT ESTIMATED COMPENSATION
AGGREGATE BENEFITS ANNUAL FROM
COMPENSATION ACCRUED AS BENEFITS REGISTRANT
FROM THE PART OF FUND UPON AND FUND
NAME OF PERSON, POSITION REGISTRANT EXPENSES RETIREMENT COMPLEX
- ------------------------ ---------- -------- ---------- -------
<S> <C> <C> <C>
John J. Pileggi, Trustee $10,330 0 N/A $10,330
James H. Johnston, III, M.D., $13,752 0 N/A $13,752
Trustee
James T. Mallette, $12,130 0 N/A $12,130
Trustee
Walter P. Neely, Ph.D., $13,030 0 N/A $13,030
CFA, Trustee
Charles M. Carr, Trustee $14,472 0 N/A $14,472
John William Head, Trustee $12,361 0 N/A $12,361
</TABLE>
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 Equity Fund, 1.00%; the Mid Cap Equity Fund, 0.75%; the
Large Cap Equity Fund, 0.60%.
For the fiscal years ended May 31, 1996, May 31, 1997 and May 31, 1998,
Trustmark was entitled to and waived advisory fees as listed below:
17
<PAGE> 154
<TABLE>
<CAPTION>
TRUSTMARK ENTITLED TRUSTMARK WAIVED
------------------ ----------------
1996 1997 1998 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
The Money Market Fund $1,151,421 $1,265,939 $1,358,311 $ 782,328 $ 826,237 $679,155
The Short Term Government Income
Fund 449,285 473,742 490,543 6,868 -- --
The Intermediate Term
Government Income Fund 396,037 440,376 572,600 38,724 44,038 57,262
The Mid Cap Equity Fund 468,219 762,354 1,240,502 94,055 136,382 --
The Large Cap Equity Fund 750,188 1,154,404 1,671,113 125,235 171,304 --
The Small Cap Equity Fund
(commenced operations on 10/1/97) 330,599 --
</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.
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 Ohio, Inc. ("BISYS"). 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% Fund. Prior to November
11, 1996, Furman Selz LLC ("Furman Selz") was Administrator to the Funds.
For the fiscal year ended May 31, 1998, BISYS earned fees totaling
$670,195, $180,995, $168,816, $410,694, $243,636 and $48,141 for the Money
Market Fund, the Short Term Fund, the Intermediate Fund, the Large Cap Equity
Fund, the Mid Cap Equity and the Small Cap Equity Funds, respectively. BISYS
waived fees totaling $403,393 for the Money Market Fund.
For the year ended May 31, 1997, Furman Selz and BISYS were entitled to
and waived administrative service 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 Fund 58,242 -- 73,871 --
Large Cap Equity Fund 109,656 -- 178,945 --
Mid Cap Equity 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 Fund, the Mid Cap Equity Fund
and the respectively, pursuant to each Fund's Administration Agreement with
Furman Selz.
18
<PAGE> 155
RULE 12b-1 DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Class A and B Shares of the Funds have adopted Distribution Plans (the
"Distribution Plans") which permits the Funds to pay certain expenses associated
with the distribution of its shares. Such expenses may not exceed, on an annual
basis, 0.35% of the Fund's Class A average daily net assets, and 1.00% of the
Fund's Class B average daily net assets. 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, 1998, the Class A Shares (formerly,
the Consumer Service Class) of the Money Market Fund, the Short Term Fund, the
Intermediate Fund, the Large Cap Equity Fund, the Mid Cap Equity Fund and the
Small Cap Equity Fund paid $288,789, $4,034, $5,186, $73,719, $30,841 and
$2,469, respectively, pursuant to each Fund's Distribution Plan. Of the Class A
Distribution Plan expenses paid in fiscal year 1998, almost entirely all of the
expenses were used for broker/dealer compensation. No Class B Distribution Plan
expenses were paid in fiscal year 1998 since there were no Class B Shares
outstanding.
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.
19
<PAGE> 156
Based on the seven day period ended May 31, 1998, the seven day yield
of the Class A Shares and Institutional Class Shares of the Money Market was
5.11%% and 5.22%, 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:
n
P (1+T) = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of the maximum sales charge and a
proportional share of Fund expenses (net of certain reimbursed expenses) on an
annual basis, and will assume that all dividends and distributions are
reinvested when paid.
As indicated in the Prospectus, the Funds may advertise certain yield
information.
Yield for the Government Income Funds will be calculated based on a
30-day (or one month) period, computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
a-b
YIELD = -----------------------------
2[(cd+1) to the 6th power -1]
(where a = hypothetical dividends and interest earned during the 30-day period;
b = expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the net asset value per share on the last day of the
period. The net investment income of each of such Funds includes actual interest
income, plus or minus amortized purchase discount (which may include original
issue discount) or premium, less accrued expenses. Realized and unrealized gains
and losses on portfolio securities are not included in such Funds' net
investment income for this purpose. For purposes of sales literature, such
Funds' yield also may be calculated on the basis of the net asset value per
share rather than the public offering price, provided that the yield data
derived pursuant to the calculation described above also are presented.
Based on the thirty day period ended May 31, 1998 ("30-day base
period") the 30 day yield for the Class A Shares and the Institutional Class of
the Short Term Fund was 5.22% and 5.49%, respectively, and the 30 day yield for
the Class A Shares and the Institutional Class of the Intermediate Fund was
5.51% and 5.78%, respectively.
20
<PAGE> 157
The average annual total return information for Class A Shares for the
periods indicated below is as follows:
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND TOTAL RETURN
<S> <C>
One year ended May 31, 1998 6.48%
3-year 5.43%
Inception (6/1/92) to May 31, 1998 5.04%
INTERMEDIATE TERM GOVERNMENT INCOME FUND
One year ended May 31, 1998 10.15%
3-year 6.45%
Inception (6/1/92) to May 31, 1997 6.78%
LARGE CAP EQUITY FUND
One year ended May 31, 1998 32.20%
3-year 29.78%
Inception (6/1/92) to May 31, 1998 19.83%
MID CAP EQUITY FUND
One year ended May 31, 1998 26.82%
3-year 27.23%
Inception (6/1/92) to May 31, 1998 21.84%
SMALL CAP EQUITY FUND
One year ended May 31, 1998 n/a
3-year n/a
Inception (10/1/97) to May 31, 1998 -0.90%
</TABLE>
The average annual total return information for the Institutional Class
for the periods indicated below is as follows:
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND TOTAL RETURN
<S> <C>
One year ended May 31, 1998 6.73%
3-year 5.69%
Inception (6/1/92) to May 31, 1998 5.27%
INTERMEDIATE TERM GOVERNMENT INCOME FUND
One year ended May 31, 1998 10.42%
3-year 6.72%
Inception (6/1/92) to May 31, 1998 7.01%
LARGE CAP EQUITY FUND
One year ended May 31, 1998 32.53%
3-year 30.10%
Inception (6/1/92) to May 31, 1998 20.09%
MID CAP EQUITY FUND
One year ended May 31, 1998 27.15%
3-year 27.54%
Inception (6/1/92) to May 31, 1998 22.13%
SMALL CAP EQUITY FUND
One year ended May 31, 1998 n/a
3-year n/a
Inception (10/1/97) to May 31, 1998 -0.80%
</TABLE>
21
<PAGE> 158
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.
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.
HOW TO BUY SHARES
The Prospectus contains a general description of how investors may buy
shares of the fund and states whether the funds offer more than one class of
shares. This SAI contains additional information which may be of interest to
investors. Class A shares are generally sold with a sales charge payable at the
time of purchase (with the exception of the Money Market Fund which charges no
sales charge). The prospectus contains a table of applicable sales charges.
Certain purchases of Class A shares may be exempt from a sales charge. Class B
shares may be subject to a contingent deferred sales charge (CDSC) payable upon
redemption within a specified period after purchase. The prospectus contains a
table of applicable CDSCs. Class B shares will automatically convert into Class
A shares at the end of the month eight years after the purchase date.
Institutional Shares which are not subject to sales charges or a
22
<PAGE> 159
CDSC are available only to certain investors. See the Institutional Class
prospectus for more information.
Sales Without Sales Charge or Contingent Deferred Sales Charges. The
Funds may sell shares without a sales charge or CDSC pursuant to several
different Special Purchase Plans.
Letter of Intent. The Funds may waive the sales charge on Class A
Shares pursuant to a signed Letter of Intent. The Letter of Intent ("LOI") will
be made at the public offering price applicable at the time of such purchase to
a single transaction of the total dollar amount indicated in the LOI. A LOI may
include purchase of shares made not more than 90 days prior to the date that an
investor signs the LOI; however, the 13-month period during which the LOI is in
effect will begin on the date of the earliest purchase to be included. A LOI is
not a binding obligation upon the investor to purchase the full amount
indicated. If the investor desires to redeem shares before the full amount has
been purchased, the shares will be released from escrow only if the investor
pays the sales charge that, without regard to the LOI, would apply to the total
investment made to date. LOI forms may be obtained from Performance Funds Trust
or from investment dealers. Interested investors should read the LOI carefully.
Concurrent Purchases and Right of Accumulation. A Purchaser may qualify
for a reduced sales charge by combining concurrent purchases of Class A shares
of one or more of the Funds (excluding the Money Market Fund) or by combining a
current purchase of Class A shares of a Fund with prior purchases of Shares of
any Fund except the Money Market Fund. The applicable sales charge is based on
the sum of (i) the Purchaser's current purchase of Class A shares of any Fund
(excluding the Money Market Fund) sold with a sales charge plus (ii) the then
current purchase of Class A shares of any Fund sold with a sales charge plus
(ii) the then current net asset value of all Class A shares held by the
Purchaser in any Fund (excluding the Money Market Fund). To receive the
applicable public offering price pursuant to the right of accumulation,
Shareholders must at the time of purchase provide the Transfer Agent or the
Distributor with sufficient information to permit confirmation of qualification.
Accumulation privileges may be amended or terminated without notice at any time
by the Distributor.
Class A Shares Sales Charge Waivers. The following classes of investors
may purchase Class A shares of the Funds with no sales charge in the manner
described below (which may be changed or eliminated at any time by the
Distributor):
(1) Existing Shareholders of a Fund with accounts open on or prior to
September 29, 1998 will incur no sales charges on additional purchases or
exchanges through December 31, 1998.
(2) Existing Shareholders of a Fund upon the reinvestment of dividend
and capital gain distributions;
(3) Officers, trustees, directors, advisory board members, employees
and retired employees of the Trustmark and its affiliates, the Distributor and
its affiliates, and employees of the Investment Advisor (and spouses, children
and parents of each of the foregoing);
(4) Investors for whom a Trustmark, Trustmark correspondent bank or
other financial institution acts in a fiduciary, advisory, custodial, agency, or
similar capacity;
(5) Fund shares purchased with the proceeds from a distribution from
Trustmark or an affiliate trust or agency account (this waiver applies only to
the initial purchase of a Fund subject to a sales load); and
(6) Investors who purchase Shares of a Fund through a payroll deduction
plan, a 401(k) plan, a 403(b) plan, or other defined contribution plans, which
by its terms permits purchases of Shares.
23
<PAGE> 160
In addition, the Distributor may waive the sales charge for the
purchase of a Fund's shares with the proceeds from the recent redemption of
shares of another non-money market mutual fund that imposes a sales charge. The
purchase must be made within 60 days of the redemption, and the Distributor must
be notified in writing by the investor or by his or her financial institution at
the time the purchase is made. A copy of the investor's account statement
showing such redemption must accompany such notice. The Distributor may also
periodically waive the sales charge for all investors with respect to a Fund.
Class B Shares CDSC Waivers. The CDSC does not apply to (1) redemption
of shares when a Fund exercises its right to liquidate accounts which are less
than the minimum account size; (2) death or disability, as defined in Section
72(m)(7) of the Code (if satisfactory evidence is provided to the Fund); (3)
minimum required distributions from qualified retirement plans to Shareholders
that have attained the age of 70-1/2; (4) redemptions of up to 12% of the
account value annually using the Automatic Withdrawal Plan feature; and (5)
investors who purchases Shares of a Fund through a payroll deduction plan, a
401(k) plan, a 403(b) plan, or other defined contribution plans, which by its
terms permits purchases of Shares.
In addition, the following circumstances are not deemed to result in a
"redemption" of Class B shares for purposes of the assessment of a Contingent
Deferred Sales Charge, which is therefore waived: (i) plans of reorganization of
the Fund, such as mergers, asset acquisitions, and exchange offers to which the
Fund is a party; or (ii) exchanges for Class B shares of other Funds of the
Trust as described under "Exchange Privilege" in the Prospectus.
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.
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
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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.
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.
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<PAGE> 162
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 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. Under the Investment Company Act of
1940, persons affiliated with the Adviser, the Fund or BISYS Fund Services may
act as a broker for the Fund. In order for such persons to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration received
by such persons must be reasonable and fair compared to the commissions, fees or
other remunerations paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on an exchange
during a comparable period of time. This standard would allow the affiliate to
receive no more than the remuneration which would be expected to be received by
an unaffiliated broker in a commensurate arms-length transaction. The Trustees
of the Trust regularly review the commissions paid by the Fund to affiliated
brokers.
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.
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 year ended May 31, 1998 the Money Market Fund and the
Short Term Fund did not pay any brokerage commissions. During the same period,
the Small Cap Equity Fund, the Mid Cap Equity Fund and the Large Cap Equity Fund
paid $138,937, $153,152.37 and $79,058.56, respectively, in brokerage
commissions. For the fiscal years ended 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 Equity Fund paid
$115,918 and $152,907 and the Large Cap Fund paid $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
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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, 1998, the portfolio turnover rates for the Short Term Fund, the Small Cap
Equity Fund were 65.07%, 35.62%, 4.78%, 20.48% and 12.28%, respectively. For the
fiscal year ended May 31, 1997, the portfolio turnover rates for the Short Term
Fund, the Intermediate Fund, the Mid Cap Equity Fund and the Large Cap Fund were
86%, 46%, 8% and 1%, 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; 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. The Fund will not be subject to federal income tax on its
net investment income and net capital gains which are distributed to its
shareholders, provided that it distributes to its stockholders at least 90% of
its net investment income and tax-exempt income earned in each year. If the Fund
does not meet all of these Code 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.
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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 Equity Funds will qualify for the dividends-received
deduction available to corporations. The Small Cap, Mid Cap and Large Cap Equity
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 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.
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.
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
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state and local taxes. Special tax treatment, including a penalty on certain
pre-retirement distributions, is accorded to accounts maintained as IRAs.
Shareholders should consult their own tax advisers as to the Federal, state and
local tax consequences of ownership of shares of the Funds in their particular
circumstances.
Foreign Shareholders. Under the Code, distributions of net investment
income by the Fund to a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation, or foreign partnership (a
"foreign shareholder") will be subject to U.S. withholding tax (at a rate of 30%
or a lower treaty rate). Withholding will not apply if a dividend paid by the
Fund to a foreign shareholder is "effectively connected" with a U.S. trade or
business, in which case the reporting and withholding requirements applicable to
U.S. citizens or domestic corporations will apply. Distributions of net
long-term capital gains are not subject to tax withholding, but in the case of a
foreign shareholder who is a nonresident alien individual, such distributions
ordinarily will be subject to U.S. income tax at a rate of 30% if the individual
is physically present in the U.S. for more than 182 days during the taxable
year.
SHARES OF BENEFICIAL INTEREST
The Funds currently offer their shares in multiple classes, each with
different sales arrangements and bearing different expenses. Under the Funds'
Articles of Incorporation, the Boards of Trustees are authorized to create new
portfolios or classes without the approval of the shareholders of the applicable
Fund. Each share will have a pro rata interest in the assets of the Fund
portfolios to which the shares of that series relates, and will have no interest
in the assets of any other Fund portfolio. In the event of liquidation, each
share of a Fund would have the same rights to dividends and assets as every
other share of that Fund, except that, in the case of a series with more than
one class of shares, such distributions will be adjusted to appropriately
reflect any charges and expenses borne by each individual class. Each Fund's
Board of Trustees is also authorized to create new classes without shareholder
approval. 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.
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<PAGE> 166
The Trust may dispense with annual meetings of shareholders in any year
in which it is not required to elect trustees under the 1940 Act. However, the
Trust undertakes to hold a special meeting of its shareholders if the purpose of
voting on the question of removal of a director or trustees is requested in
writing by the holders of at least 10% of the Trust's outstanding voting
securities, and to assist in communicating with other shareholders as required
by Section 16(c) of the 1940 Act.
Each share of a Fund represents an equal proportional interest in that
Fund with each other share and is entitled to such dividends and distributions
out of the income earned on the assets belonging to that Fund as are declared in
the discretion of the Trustees. In the event of the liquidation or dissolution
of the Trust, shareholders of a Fund are entitled to receive the assets
attributable to that Fund that are available for distribution, and a
distribution of any general assets not attributable to a particular Fund that
are available for distribution in such manner and on such basis as the Trustees
in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Trust.
As of September 18, 1998, the following were five percent or greater
shareholders of the Funds:
SHORT TERM FUND
INSTITUTIONAL CLASS
Harman & Co. 27.49%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
Harman & Co. 69.73%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
CLASS A SHARES
Donaldson Lufkin Jenrette 9.89%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 8.31%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Corelink Financial Inc. 39.21%
P.O. 4054
Concord, CA 94524
CLASS B SHARES
None.
INTERMEDIATE FUND
INSTITUTIONAL CLASS
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<PAGE> 167
Harman & Co. 28.46%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
Harman & Co. 68.31%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
CLASS A SHARES
Corelink Financial Inc. 57.55%
P.O. Box 4054
Concord, CA 94524
CLASS B SHARES
None.
MID CAP EQUITY FUND
INSTITUTIONAL CLASS
Harman & Co. 20.26%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
Harman & Co. 74.19%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
CLASS A SHARES
Corelink Financial Inc. 25.89%
P.O. Box 4054
Concord, CA 94524
CLASS B SHARES
None.
LARGE CAP EQUITY FUND
INSTITUTIONAL CLASS
Harman & Co. 15.38%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
Harman & Co. 57.24%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
First American Trust Company 10.75%
Managed Omnibus Reinvest
421 North Main Street
Santa Ana, CA 92701-4617
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<PAGE> 168
First American Trust Company 10.91%
Managed Omnibus Reinvest
421 North Main Street
Santa Ana, CA 92701-4617
CLASS A SHARES
Corelink Financial Inc. 15.17%
P.O. Box 4054
Concord, CA 94524
CLASS B SHARES
None.
SMALL CAP EQUITY FUND
INSTITUTIONAL CLASS
Harman & Co. 12.02%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
Harman & Co. 83.44%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
CLASS A SHARES
Donaldson Lufkin Jenrette 8.33%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 8.84%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Corelink Financial Inc. 52.19%
P.O. 4054
Concord, CA 94524
CLASS B SHARES
None.
MONEY MARKET FUND
INSTITUTIONAL CLASS
Harman & Co. 98.71%
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
CLASS A SHARES
W.G. Yates & Sons Construction Co. 5.47%
Attn Marvin Blanks
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<PAGE> 169
P.O. Box 456
Philadelphia, MS 39350-0456
St. Dominic Jackson Memorial Hospital 17.37%
Attn. Frank Quiriconi
969 Lakeland Drive
Jackson, MS 39216-4602
CLASS B SHARES
None.
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, 1998, the Money Market Fund, the
Short Term Fund, the Intermediate Fund, the Large Cap Equity Fund, the Mid Cap
Equity Fund and the Small Cap Equity Fund paid $181,734, $49,055, $45,809,
$111,408, $65,593 and $13,224, 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 Equity Fund and the Large
Cap Fund paid $168,792, $47,702, $35,230, $40,659 and $76,961, respectively, to
the Custodian.
For the fiscal year ended May 31, 1996, the Money Market Fund, the
Short Term Fund, the Intermediate Fund, the Mid Cap Equity Fund and the Large
Cap Fund paid $153,662, $44,947, $31,761, $24,944 and $49,996, respectively, to
the Custodian.
EXPERTS
PricewaterhouseCoopers LLP serves as the independent accountants for
the Trust. PricewaterhouseCoopers LLP provides audit services, tax return
preparation and assistance and consultation in connection with certain SEC
filings. PricewaterhouseCoopers 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, 1998 and for the
period then ended including the Report of PricewaterhouseCoopers LLP,
independent accountants, as contained in the Annual Report to Shareholders are
incorporated by reference.
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<PAGE> 170
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.
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.
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<PAGE> 171
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 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.
<PAGE> 172
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 EQUITY FUND
THE SMALL CAP EQUITY 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, 1998 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 EQUITY FUND
THE SMALL CAP EQUITY FUND
(b) Exhibits:
(1) Trust Instrument. (1)
(2) (a) Bylaws of Registrant. (1)
(2) (b) Amendment to Bylaws. (8)
(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. (7)
(c) Form of Investment Advisory Contract Supplement for The Small
Cap Fund. (7)
(d) Form of Amendment to Administration Agreement between
Registrant and BISYS Fund Services Ohio, Inc.--filed herewith
(6) Form of Revised Distribution Agreement between Registrant and
Performance Funds Distributor, Inc. (7)
(6) (b) Form of Amendment to Distribution Agreement between Registrant
and Performance Funds Distributor, Inc.--filed herewith
(7) None.
(8) Custodian Agreement between Registrant and Trustmark National Bank.(2)
(9) (a) Transfer Agency Agreement between Registrant and BISYS Fund
Services, Inc. (7)
<PAGE> 173
(b) Fund Accounting Agreement between Registrant and BISYS Fund
Services, Inc. (7)
(c) Form of Amendment to Transfer Agency Agreement between
Registrant and BISYS Fund Services Ohio, Inc.--filed herewith
(d) Form of Amendment to Fund Accounting Agreement between
Registrant and BISYS Fund Services Ohio, Inc.--filed herewith
(10) Consent of Counsel -- filed herewith
(11) Consent of Independent Accountants--filed herewith
(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. (7)
(15) (b) Supplement to the Rule 2b-1 Distribution Plan and Agreement
between The Small Cap Fund and Performance Funds
Distributor, Inc. (7)
(c) Revised Plan of Distribution Pursuant to Rule 12b-1 for Class
A Shares--filed herewith
(15) (d) Revised Plan of Distribution Pursuant to Rule 12b-1 for Class
B Shares--filed herewith
(15) (e) Form of Services Agreement between Performance Funds
Distributor, Inc. and BISYS FUND SERVICES LIMITED PARTNERSHIP
d/b/a BISYS Fund Services. (7)
(15) (f) Form of Compensation Agreement between Trustmark National Bank
and BISYS FUND SERVICES LIMITED PARTNERSHIP d/b/a BISYS Fund
Services. (7)
(15) (g) Form of Dealer and Selling Group Agreement with Performance
Funds Trust. (7)
(15) (h) Form of Service Organization Agreement--Class A Shares--filed
herewith.
(15) (i) Form of Service Organization Agreement--Class B Shares--filed
herewith.
(15) (j) Form of Service Organization Agreement--Institutional Class
Shares--filed herewith.
(15) (k) Form of Revised Dealer and Selling Group Agreement--filed
herewith.
(16) Schedule for Computation of Performance Quotations. (8)
(17) Financial Data Scheduled--filed herewith
(18) Amended and Restated Rule 18f-3 Plan to incorporate Class A and B
Shares--filed herewith
(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.
2
<PAGE> 174
(5) Filed with Post-Effective Amendment No. 4 on September 30, 1994.
(6) Filed with Post-Effective Amendment No. 6 on September 27, 1996.
(7) Filed with Post-Effective Amendment No. 8 on September 26, 1997.
(8) Filed with Post-Effective Amendment No. 9 on March 31, 1998.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AT SEPTEMBER 18, 1997.
Short-Term Government Income Fund (Institutional)..................... 40
Short-Term Government Income Fund (Class A)........................... 5
Intermediate Term Government Fixed Income Fund (Institutional)........ 60
Intermediate Term Government Fixed Income Fund (Class A).............. 19
The Large Cap Equity Fund (Class A)................................... 304
The Large Cap Equity Fund (Institutional)............................. 160
Money Market Fund (Class A)........................................... 874
Money Market Fund (Institutional)..................................... 98
Mid Cap Equity Fund (Class A)......................................... 58
Mid Cap Equity Fund (Institutional)................................... 18
Small Cap Equity Fund (Class A)....................................... 4
Small Cap Equity Fund (Institutional)................................. 0
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.
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.
3
<PAGE> 175
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, 1998, Trustmark
had assets of approximately $5.8 billion and capital of approximately $614
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
Counsel/Secretary
Mark J. Rybarczyk None Senior Vice President
Dennis Sheehan None Senior Vice President
Sean Kelly None Vice President
Dale Smith None Vice President
</TABLE>
4
<PAGE> 176
<TABLE>
<S> <C> <C>
Michael Burns None Vice President
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.
* All addresses are 3435 Stelzer Road, Columbus, Ohio 43219.
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.
* All addresses are 3435 Stelzer Road, Columbus, Ohio 43219.
5
<PAGE> 177
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 10 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 30, 1998.
PERFORMANCE FUNDS TRUST (REGISTRANT)
By: /s/ WALTER B. GRIMM
Walter B. Grimm, President
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ JOHN J. PILEGGI Trustee September 30, 1998
John J. Pileggi
JAMES H. JOHNSTON, III* Trustee September 30, 1998
James H. Johnston, III
JAMES T. MALLETTE* Trustee September 30, 1998
James T. Mallette
WALTER P. NEELY* Trustee September 30, 1998
Walter P. Neely
CHARLES M. CARR** Trustee September 30, 1998
Charles M. Carr
JOHN WILLIAM HEAD** Trustee September 30, 1998
John William Head
/s/ WALTER B. GRIMM President September 30, 1998
Walter B. Grimm
</TABLE>
*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.
6
<PAGE> 1
Exhibit 5(d)
AMENDMENT TO
ADMINISTRATION AGREEMENT
This Amendment is made as of October 1, 1998, between Performance Funds
Trust (the "Trust"), BISYS Fund Services Limited Partnership d/b/a BISYS Fund
Services and BISYS Fund Services, Ohio, Inc. The parties hereby amend the
Administration Agreement (the "Agreement") between the Trust and BISYS Fund
Services Limited Partnership d/b/a BISYS Fund Services, dated as of October 1,
1996, as set forth below.
WHEREAS, the parties hereto wish to substitute BISYS Fund Services
Ohio, Inc. for BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
as the Administrator under the Agreement;
WHEREAS, the parties hereto wish to modify the portion of Schedule A to
the Agreement entitled "Portfolios";
WHEREAS, the parties hereto wish to modify the portion of Schedule A to
the Agreement entitled "Fees"; and
WHEREAS, the parties hereto wish to modify the portion of Schedule A to
the Agreement entitled "Term".
NOW THEREFORE, in consideration of the foregoing and the mutual
premises and covenants herein set forth, the parties agree as follows:
1. Capitalized terms not otherwise defined herein shall have the same
meaning as in the Agreement.
2. BISYS Fund Services Ohio, Inc. (the "Administrator") shall replace
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
as the Administrator under the Agreement.
3. Schedule A to the Agreement shall be amended by replacing the
second sentence of the section entitled "Portfolios" with the
following:
<PAGE> 2
The current Portfolios of the Trust are set forth below:
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; and
The Small Cap Fund.
4. Schedule A to the Agreement shall be amended by replacing the
first paragraph of the section entitled "Fees" with the following:
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.
5. Schedule A to the Agreement shall be amended by replacing the
section entitled "Term" with the following:
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 September 30, 2003.
Thereafter, 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
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 and
costs provided in Schedule A and Articles 3 and 4 hereof, the
amount of all of the Administrator's costs for services in
connection with the Administrator's activities in effecting
such termination,
2
<PAGE> 3
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.
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.
In the event that the Administrator or its direct or indirect
parent, directly or indirectly merges with, or sells
substantially all of its assets to, another entity (a "Change
of Control"), the Trust shall have an option to terminate this
Agreement, subject to the liquidated damages provisions set
forth below, upon the provision of 60 days written notice to
the Administrator. Such option shall expire on the 60th day
following the effective date of the Change of Control.
If, for any reason, other than (i) non-renewal or (ii)
termination based upon a material breach of this Agreement,
the Administrator is replaced by the Trust as the
Administrator, or if a third party is added by the Trust to
perform all or a part of the services provided by the
Administrator under this Agreement (excluding any
sub-administrator appointed by the Administrator as provided
in Article 2 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 the remainder
of the term of this Agreement, assuming for purposes of
calculation of the payment that 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 contract
term.
In the event the Trust is merged into another legal entity in
part or in whole pursuant to any form of business
reorganization or is liquidated in part or in whole prior to
the expiration of the then-current term of this Agreement, the
parties acknowledge and agree that (i) the liquidated damages
provision set forth above shall be applicable in those
instances in which the Administrator is not retained to
provide administration services and (ii) for purposes of
calculating the payment amount representing liquidated
damages, the appropriate asset level of the Trust shall be the
greater of: (i) the asset level
3
<PAGE> 4
calculated for the Trust at the time the Trust's Board of
Directors receives notification of an intention on the part of
Fund management to effect such a business reorganization or
liquidation; (ii) the asset level calculated for the Trust at
the time the Trust's Board of Directors formally approves such
a business reorganization or liquidation; or (iii) the asset
level calculated for the Trust on the day prior to the first
day during which assets are transferred by the Trust pursuant
to the plan of reorganization or liquidation. The one-time
cash payment referenced above shall be due and payable on the
day prior to the first day during which assets are transferred
pursuant to the plan of reorganization or liquidation.
The parties further acknowledge and agree that, in the event
the Administrator ceases to be retained, as set forth above,
(i) a determination of actual damages incurred by the
Administrator would be extremely difficult, and (ii) the
liquidated damages provision contained herein is intended to
adequately compensate the Administrator damages incurred and
is not intended to constitute any form of penalty.
6. This Amendment may be executed in one or more counterparts, each
of which will be deemed an original, but all of which together
shall constitute one and the same instrument.
7. Except as specifically set forth herein, all other provisions of
the Agreement shall remain in full force and effect.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
PERFORMANCE FUNDS TRUST
By: __________________________________
Title:________________________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: __________________________________
Title:________________________________
BISYS FUND SERVICES OHIO, INC.
By: __________________________________
Title:________________________________
5
<PAGE> 1
Exhibit 6(b)
AMENDMENT TO
DISTRIBUTION AGREEMENT
This Amendment is made as of October 1, 1998, between Performance Funds
Trust, (the "Trust") and Performance Funds Distributor, Inc. (the
"Distributor"). The parties hereby amend the Distribution Agreement (the
"Agreement") between the Trust and the Distributor, dated as of October 1, 1996,
as set forth below.
WHEREAS, the parties hereto wish to modify Section 6 of the Agreement
entitled "Term, Duration and Termination" by extending the initial term set
forth therein.
NOW THEREFORE, in consideration of the foregoing and the mutual premises
and covenants herein set forth, the parties agree as follows:
1. Capitalized terms not otherwise defined herein shall have the same
meaning as in the Agreement.
2. Section 6 of the Agreement shall be amended by replacing the first
sentence of such Section with the following:
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
September 30, 2003.
3. This Amendment may be executed in one or more counterparts, each of
which will be deemed an original, but all of which together shall
constitute one and the same instrument.
4. Except as specifically set forth herein, all other provisions of the
Agreement shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
PERFORMANCE FUNDS TRUST
By:
----------------------------
Title:
-------------------------
PERFORMANCE FUNDS
DISTRIBUTOR, INC.
By:
----------------------------
Title:
-------------------------
2
<PAGE> 1
Exhibit 9(c)
AMENDMENT TO
TRANSFER AGENCY AGREEMENT
This Amendment is made as of October 1, 1998, between Performance Funds
Trust, (the "Trust"), BISYS Fund Services, Inc. and BISYS Fund Services Ohio,
Inc. The parties hereby amend the Transfer Agency Agreement (the "Agreement")
between the Trust and BISYS Fund Services, Inc., dated as of October 1, 1996, as
set forth below.
WHEREAS, the parties hereto wish to substitute BISYS Fund Services
Ohio, Inc. for BISYS Fund Services, Inc. as the Transfer Agent under the
Agreement;
WHEREAS, the parties hereto wish to modify Section 5 of the Agreement
entitled "Term," and
WHEREAS, the parties wish to modify the fee schedule set forth in
Schedule B to the Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual
premises and covenants herein set forth, the parties agree as follows:
1. Capitalized terms not otherwise defined herein shall have the same
meaning as in the Agreement.
2. BISYS Fund Services Ohio, Inc. ("BISYS") shall replace BISYS
Fund Services, Inc. as the transfer agent under the Agreement.
3. Section 5 of the Agreement shall be amended by replacing the first
sentence of such section with the following:
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 September 30, 2003.
4. Schedule B to the Agreement shall be amended by replacing the
first paragraph with the following:
Effective as of October 1, 1998, BISYS 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. BISYS 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
<PAGE> 2
balance during any portion of the year. In addition
to the above-referenced account maintenance fee,
BISYS shall be entitled to receive an annual fee of
$7,000 per each class per Fund.
5. This Amendment may be executed in one or more counterparts, each
of which will be deemed an original, but all of which together
shall constitute one and the same instrument.
6. Except as specifically set forth herein, all other provisions of
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
PERFORMANCE FUNDS TRUST
By: __________________________________
Title:________________________________
BISYS FUND SERVICES, INC.
By: __________________________________
Title:________________________________
BISYS FUND SERVICES OHIO, INC.
By: __________________________________
Title:________________________________
2
<PAGE> 1
Exhibit 9(d)
AMENDMENT TO
FUND ACCOUNTING AGREEMENT
This Amendment is made as of October 1, 1998, between Performance Funds
Trust, (the "Trust"), BISYS Fund Services, Inc. and BISYS Fund Services Ohio,
Inc. The parties hereby amend the Fund Accounting Agreement (the "Agreement")
between the Trust and BISYS Fund Services, Inc, dated as of October 1, 1996, as
set forth below.
WHEREAS, the parties hereto wish to substitute BISYS Fund Services
Ohio, Inc. for BISYS Fund Services, Inc. as the Fund Accountant under the
Agreement;
WHEREAS, the parties hereto wish to modify Section 6 of the Agreement
entitled "Term"; and
WHEREAS, the parties hereto wish to modify the portion of Schedule A to
the Agreement entitled "Fees".
NOW THEREFORE, in consideration of the foregoing and the mutual
premises and covenants herein set forth, the parties agree as follows:
1. Capitalized terms not otherwise defined herein shall have the same
meaning as in the Agreement.
2. BISYS Fund Services Ohio, Inc. (the "Fund Accountant") shall
replace BISYS Fund Services, Inc. as the Fund Accountant under the
Agreement.
3. Section 6 of the Agreement shall be amended by replacing the first
sentence of such section with the following:
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 September 30, 2003.
4. Schedule A to the Agreement shall be amended by replacing it with
the following:
Effective as of October 1, 1998, Fund Accountant shall be entitled
to receive a fee from each Fund in accordance with the following
schedule:
An annual fee of $30,000 per Fund for the class of shares in
existence as of the date set forth above, plus an additional
annual fee of $5,000 per Fund for each additional class. In
addition to such annual fees, Fund Accountant shall be
entitled to receive out-of-pocket expenses, as described in
Section 4.
<PAGE> 2
5. This Amendment may be executed in one or more counterparts, each
of which will be deemed an original, but all of which together
shall constitute one and the same instrument.
6. Except as specifically set forth herein, all other provisions of
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
PERFORMANCE FUNDS TRUST
By: __________________________________
Title:________________________________
BISYS FUND SERVICES, INC.
By: __________________________________
Title:________________________________
BISYS FUND SERVICES OHIO, INC.
By: __________________________________
Title:________________________________
2
<PAGE> 1
Exhibit 10
September 30, 1998
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: PERFORMANCE FUNDS TRUST (File Nos. 33-46488 and 811-6603)
---------------------------------------------------------
Dear Sir/Madam:
As counsel to Performance Funds Trust (the "Trust"), we have reviewed
Post-Effective Amendment No. 11 to the Trust's Registration Statement on Form
N-1A (the "Amendment"). The Amendment is being filed pursuant to Rule 485 of
the 1933 Act and it is proposed that it will become effective immediately upon
filing pursuant to paragraph (b).
Based upon our review, we advise you that the Amendment does not
include disclosure which we believe would render it ineligible to become
effective under paragraph (b) of Rule 485.
It is our opinion that the securities being registered will when sold,
be legally issued, fully paid and non-assessable and we hereby consent to the
reference to our firm as Counsel in Post-Effective Amendment No. 11 to
Registration No. 33-46488.
Sincerely,
/s/ Paul, Weiss, Rifkind, Wharton
& Garrison
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
<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. 11 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated July 17, 1998, relating to the financial
statements and financial highlights appearing in the May 31, 1998 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 Prospectuses and under
the headings, "Experts" and "Financial Statements" in such Statement of
Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
September 30, 1998
<PAGE> 1
Exhibit 15(c)
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(Class A Shares)
Plan of Distribution adopted as of the 23 day of June, 1998 by
Performance Funds Trust a Delaware business trust (the "Trust"), on behalf of
the Class A shares of its separately designated series (the "Funds").
WITNESSETH
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company; and
WHEREAS, each Fund is a separately designated investment series of the
Trust with its own investment objective, policies and purposes offering three
separate classes of shares of common stock, par value $.001 per share, of the
Trust (the "Shares").; and
WHEREAS, the Trust has entered into a Distribution Agreement with
Performance Funds Distributor, Inc. Pursuant to which the Distributor acts as
the exclusive distributor and representative of the Trust in the offer and sale
of the Shares to the public; and
WHEREAS, the Corporation desires to adopt this Distribution Plan
(the"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class A shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class A
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Funds hereby adopts this Plan
on the following terms:
1. DISTRIBUTION ACTIVITIES. The Funds shall pay the Distributor a
distribution fee under the Plan at the end of each month at the annual rate of
up to 0.35% of average daily net assets attributable to Class A shares of the
Funds to compensate the Distributor and broker-dealers for providing sales and
promotional activities and services. Such activities will relate to the sale,
promotion and marketing of the Class A shares. Such expenditures may consist of
sales
<PAGE> 2
commissions to financial consultants for selling A shares, compensation,
sales incentives and payments to sales and marketing personnel, and the payment
of expenses incurred in its sales and promotional activities, including
advertising expenditures related to the Class A shares and the costs of
preparing and distributing promotional materials with respect to such Class A
shares. Payment of the distribution fee described in this Section 1 shall be
subject to any limitations set forth in applicable regulations of the National
Association of Securities Dealers, Inc. Nothing herein shall prohibit the
Distributor from collecting distribution fees in any given year, as provided
hereunder, in excess of expenditures made in such year for sales and promotional
activities with respect to the Funds.
2. PAYMENTS TO OTHER PARTIES. The Funds hereby authorize the
Distributor to enter into agreements with broker-dealers to provide compensation
to such broker-dealers for activities and services of the type referred to in
Section 1 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee for distribution fee to such broker-dealers as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the broker-dealers shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
3. RELATED AGREEMENTS. All agreements with any person relating to
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the 12b-1 Trustees or, by vote
of a majority of the outstanding voting securities (as defined in the Act) of
Class A shares of the Fund, on not more than 60 days' written notice to any
other party to the agreement; and
(b) that such agreement shall terminate automatically in the
event of its assignment.
4. QUARTERLY REPORTS. The Treasurer of the Trust shall provide to the
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class A shares of the
Funds and any related agreement and the purposes for which such expenditures
were made.
5. TERM AND TERMINATION. (a) This Plan shall become effective as of the
date hereof, and , unless terminated as herein provided, shall continue from
year to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of both the (i) Trustees of the Trust and
(ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a
majority of the 12b-1 Trustees or by vote of a majority of the outstanding
voting securities (as defined in the Act) of Class A shares of the Funds.
<PAGE> 3
6. AMENDMENTS. This Plan may not be amended to increase materially the
maximum expenditures permitted by Section 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Funds, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
7. RECORDKEEPING. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
9. DEFINITION OF CERTAIN TERMS. For purposes of this Plan, the terms
"assignment", "interested person", "majority of the outstanding voting
securities", and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
10. SEPARATE SERIES. Pursuant to the provisions of the Articles of
Incorporation each Fund is a separate series of the Trust, and all debts,
liabilities and expenses of Class A shares of the Funds shall be enforceable
only against the assets of Class A shares of each Fund and not against the
assets of any other fund or class of shares or of the Trust as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of
the day and year first written above.
PERFORMANCE FUNDS TRUST
By:
---------------------------
Title:
Accepted By:
PERFORMANCE FUNDS DISTRIBUTOR,INC.
By:
----------------------------------
Title:
<PAGE> 1
Exhibit 15(d)
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(Class B Shares)
Plan of Distribution adopted as of the 23 day of June, 1998 by
Performance Funds Trust a Delaware business trust (the "Trust"), on behalf of
the Class B shares of its separately designated series (the "Funds").
WITNESSETH
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company; and
WHEREAS, each Fund is a separately designated investment series of the
Trust with its own investment objective, policies and purposes offering three
separate classes of shares of common stock, par value $.001 per share, of the
Trust (the "Shares").; and
WHEREAS, the Trust has entered into a Distribution Agreement with
Performance Funds Distributor, Inc. pursuant to which the Distributor acts as
the exclusive distributor and representative of the Trust in the offer and sale
of the Shares to the public; and
WHEREAS, the Corporation desires to adopt this Distribution Plan
(the"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class B shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class B
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Funds hereby adopts this Plan
on the following terms:
1. DISTRIBUTION ACTIVITIES. The Fund shall pay the Distributor a
distribution fee under the Plan at the end of each month at the annual rate of
1.00% of average daily net assets attributable to Class B shares of the Fund,
0.75% of which will constitute distribution fees. This fee would include
compensation to the Distributor and other broker dealers for providing sales and
promotional activities and services. Such activities and service will relate to
the sale,
<PAGE> 2
promotion and marketing of the Class B shares. Such expenditures may consist of
sales commissions to financial consultants for selling Class B shares,
compensation, sales incentives and payments to sales and marketing personnel,
and the payment of expenses incurred in its sales and promotional activities,
including advertising expenditures related to the Class B shares of the Fund and
the costs of preparing and distributing promotional materials with respect to
such Class B shares. Payment of the distribution fee described in this Section 1
shall be subject to any limitations set forth in applicable regulations of the
National Association of Securities Dealers, Inc. Nothing herein shall prohibit
the Distributor from collecting distribution fees in any given year, as provided
hereunder, in excess of expenditures made in such year for sales and promotional
activities with respect to the Funds. A portion of the Rule 12b-1 fee equal to
0.25% of the average net assets of each Fund attributable to Class B shares
constitutes a shareholder servicing fee designed to compensate the Distributor
for the provision of certain services to shareholders. The services provided
shall include shareholder administrative support services including (i)
answering customer inquiries; (ii) providing necessary personnel and facilities
to establish and maintain shareholder accounts and records; (iii) assisting in
aggregating and processing purchases of Fund shares; (iv) arranging for wiring
of funds; (v) furnishing (either separately or on an integrated basis with other
reports sent to a shareholder by a Servicing Agent monthly and year-end
statement and confirmation of purchases and; (vi) transmitting on behalf of a
fund, proxy statements, prospectuses and other communications.
2. PAYMENTS TO OTHER PARTIES. The Funds hereby authorize the
Distributor to enter into agreements with broker-dealers to provide compensation
to such broker-dealers for activities and services of the type referred to in
Section 1 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee for distribution fee to such broker dealers as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the broker-dealers shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. RELATED AGREEMENTS. All agreements with any person relating to
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the 12b-1 Trustees or, by vote
of a majority of the outstanding voting securities (as defined in the Act) of
Class B shares of the Fund, on not more than 60 days' written notice to any
other party to the agreement; and
(b) that such agreement shall terminate automatically in the
event of its assignment.
5. QUARTERLY REPORTS. The Treasurer of the Trust shall provide to the
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class B shares of the
Funds and any related agreement and the purposes for which such expenditures
were made.
<PAGE> 3
6. TERM AND TERMINATION. (a) This Plan shall become effective as of the
date hereof, and , unless terminated as herein provided, shall continue from
year to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of both the (I) Trustees of the Trust and
(ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a
majority of the 12b-1 Trustees or by vote of a majority of the outstanding
voting securities (as defined in the Act) of Class B shares of the Funds.
7. AMENDMENTS. This Plan may not be amended to increase materially the
maximum expenditures permitted by Section 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. RECORDKEEPING. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
9. DEFINITION OF CERTAIN TERMS. For purposes of this Plan, the terms
"assignment", "interested person", "majority of the outstanding voting
securities", and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
10. SEPARATE SERIES. Pursuant to the provisions of the Articles of
Incorporation each Fund is a separate series of the Trust, and all debts,
liabilities and expenses of Class B shares of the Funds shall be enforceable
only against the assets of Class B shares of each Fund and not against the
assets of any other fund or class of shares or of the Trust as a whole.
<PAGE> 4
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of
the day and year first written above.
PERFORMANCE FUNDS TRUST
By:
---------------------------
Title:
Accepted By:
PERFORMANCE FUNDS DISTRIBUTOR,INC.
By:
---------------------------------
Title:
<PAGE> 1
Exhibit 15(h)
PERFORMANCE FUNDS TRUST
SERVICE ORGANIZATION AGREEMENT
CLASS A SHARES
SERVICE ORGANIZATION AGREEMENT, dated as of ________________,
by and between Performance Funds Trust (the "Trust"), a Delaware business trust,
on behalf of 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 and The Large Cap Equity Fund and , (the "Financial Institution"), as a
shareholder servicing agent hereunder (the "Agent") relating to transactions in
Class A shares of capital stock, $.001 par value (the "Shares"), of any of the
existing investment portfolios offered by the Trust (the "Funds"). In the event
that the Trust establishes one or more portfolios other than the Funds with
respect to which it decides to retain the Financial Institution hereunder, the
Trust shall promptly notify the Financial Institution in writing. If the
Financial Institution is willing to render such services, it shall notify the
Trust in writing whereupon such portfolio shall become a Fund hereunder.
The Trust and the Financial Institution hereby agree as
follows:
1. APPOINTMENT. The Financial Institution, as Agent, hereby
agrees to perform certain services for its customers (the "Customers") as
hereinafter set forth. The Agent's appointment hereunder is non-exclusive, and
the parties recognize and agree that, from time to time, the Trust may enter
into other shareholder servicing agreements, in writing, with other financial
institutions.
2. SERVICES TO BE PERFORMED. The Agent, as agent for its
Customers, shall be responsible for performing shareholder administrative
support services, which will include the following: (i) answering customer
inquiries regarding account status and history, the manner in which purchases,
exchanges and redemptions of shares of the Funds may be effected and certain
other matters pertaining to the Funds; (ii) assisting shareholders in
designating and changing dividend options, account designations and addresses;
(iii) providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; (iv) assisting in aggregating and processing
purchase, exchange and redemption transactions; (v) placing net purchase and
redemption orders with the Trust's distributor; (vi) arranging for wiring of
funds; (vii) transmitting and receiving funds in connection with customer orders
to purchase or redeem shares; (viii) processing dividend payments; (ix)
verifying and guaranteeing shareholder signatures in connection with redemption
orders and transfers and changes in shareholder-designated accounts, as
necessary; (x) providing periodic statements showing a customer's account
balance and, to the extent practicable, integrating such information with other
customer transactions otherwise effected through or
<PAGE> 2
with the Shareholder Servicing Agent; (xi) furnishing (either separately or on
an integrated basis with other reports sent to a shareholder by a Shareholder
Servicing Agent) monthly and year-end statement and confirmations of purchases,
exchanges and redemptions; (xii) transmitting on behalf of the Trust, proxy
statements, annual reports, updating prospectuses and other communications from
the Trust to the shareholders of the Funds; (xiii) receiving, tabulating and
transmitting to the Trust proxies executed by shareholders with respect to
meetings of shareholders of the Funds; (xiv) providing sub-transfer agency
services; (xv) providing sub-custodian services; (xvi) providing sub-accounting
services; (xvii) providing fiduciary services (excluding investment management)
and (xviii) providing asset allocation services.
The Agent shall provide all personnel and facilities
necessary in order for it to perform the functions described in this paragraph
with respect to its Customers.
3. FEES.
3.1. FEES FROM THE TRUST. In consideration for the services
described in Section 2 hereof and the incurring of expenses in connection
therewith, the Agent shall receive a fee (which may vary depending upon the
services provided), computed daily and payable monthly, at the annual rate of up
to 0.35% of the average daily net asset value of Shares of each Fund for which
the Agent from time to time performs services under this Agreement on behalf of
Customers: provided that no more than 0.25% of such fee may be paid to such
Agent in "services fees" within the meaning of the NASD Rules. Fees with respect
to Customers' Shares in any one Fund will be paid exclusively from the assets of
that class of shares of the Fund in which such Customer's assets are invested.
For purposes of determining the fees payable to the Agent hereunder, the value
of the Trust's net assets shall be computed in the manner specified in the
Trust's then-current prospectus and statement of additional information (the
"Prospectus") for computation of the net asset value of the Trust's Shares.
3.2. FEES FROM CUSTOMERS. It is agreed that the Financial
Institution may impose certain conditions on Customers, in addition to or
different from those imposed by the Trust, such as requiring a minimum initial
investment or imposing limitations on the amounts of transactions. It is also
understood that the Financial Institution may directly credit or charge fees to
Customers in connection with an investment in the Funds. The Financial
Institution shall credit or bill Customers directly for such credits or fees. In
the event the Financial Institution charges Customers such fees, it shall make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to Customers both of any direct fees charged to the
Customer and of the fees received or to be received by it from the Trust
pursuant to Section 3.1 of this Agreement. It is understood however, that in no
event shall the Financial Institution have recourse or access as Agent or
otherwise to the account of any shareholder of the Trust except to the extent
expressly authorized by law or by such shareholder, or to any assets of the
Trust, for payment of any direct fees referred to in this Section 3.2.
2
<PAGE> 3
4. APPROVAL OF MATERIALS TO BE CIRCULATED. Advance copies or
proofs of all materials which are to be generally circulated or disseminated by
the Agent to Customers or prospective Customers which identify or describe the
Trust shall be provided to the Trust at least 10 days prior to such circulation
or dissemination (unless the Trust consents in writing to a shorter period), and
such materials shall not be circulated or disseminated or further circulated or
disseminated at any time after the Trust shall have given written notice to the
Agent of any objection thereto.
Nothing in this Section 4 shall be construed to make the Trust liable
for the use of any information about the Trust which is disseminated by the
Agent.
5. COMPLIANCE WITH LAWS, ETC. The Agent shall comply with all
applicable federal and state laws and regulations in the performance of its
duties under this Agreement, including securities laws.
6. LIMITATION OF AGENT'S LIABILITY. In consideration of the
Agent's undertaking to render the services described in this Agreement, the
Trust agrees that the Agent shall not be liable under this Agreement for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of this Agreement, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Agent against any
liability to the Trust or its shareholders to which the Agent would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Agent's duties under this Agreement or by reason of the
Agent's reckless disregard of its obligations and duties hereunder.
7. INDEMNIFICATION. The Trust agrees to indemnify and hold
harmless the Agent from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, and any state and
foreign securities and blue sky laws, all as or to be amended from time to time)
and expenses, including attorneys' fees and disbursements arising directly or
indirectly from (i) any misstatements or omissions in the Trust's Prospectus, or
(ii) any action or thing which the Agent takes or does or omits to take or do
reasonably believed by the Agent to be at the request or direction or in
reliance on the advice or instructions, whether oral or written, of the Trust
provided, that the Agent shall not be indemnified against any liability to the
Trust or to its shareholders (or any expenses incident to such liability)
arising out of the Agent's own willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations and duties hereunder. In order that the
indemnification provision contained in this paragraph shall apply, it is
understood that if in any case the Trust may be asked to indemnify or save the
Agent harmless, the Trust shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further understood that
the Agent
3
<PAGE> 4
will use all reasonable care to identify and notify the Trust promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Trust. The Trust
shall have the option to defend the Agent against any claim which may be the
subject of this indemnification and, in the event that the Trust so elects, it
will so notify the Agent and thereupon the Trust shall take over complete
defense for the claim, and the Agent shall in such situation incur no further
legal or other expenses for which it shall seek indemnification under this
paragraph. The Agent shall in no case confess any claim or make any compromise
or settlement in any case in which the Trust will be asked to indemnify the
Agent, except with the Trust's prior written consent.
8. LIMITATION OF SHAREHOLDER LIABILITY, ETC. The Agent hereby
agrees that obligations assumed by the Trust pursuant to this Agreement shall be
limited in all cases to the Trust and its assets and that the Agent shall not
seek satisfaction of any such obligation from the shareholders or any
shareholder of the Trust. It is further agreed that the Agent shall not seek
satisfaction of any such obligations from the Board of Trustees or any
individual Trustee of the Trust.
9. NOTICES. All notices or other communications hereunder to
either party shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to the Trust, at the
address of the Trust, or (b) if to the Agent, at ___________________________,
Attention:_________ ________________________________.
10. FURTHER ASSURANCES. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
11. TERMINATION. This Agreement will continue in effect until
two years from the date hereof and thereafter for successive annual periods,
provided that such continuance is specifically approved at least annually (a) by
the Trust's Board of Trustees and (b) by the vote, cast in person at a meeting
called for the purpose, of a majority of the Trust's trustees who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such party. This Agreement may be terminated at any time, without the
payment of any penalty, by a vote of a majority of the Trust's outstanding
voting securities (as defined in the 1940 Act) or by a vote of a majority of the
Trust's entire Board of Trustees on 60 days' written notice to the Agent or by
the Agent on (60) days' written notice to the Trust. Notice of termination of
the Shareholder Servicing Plan by the Board of Trustees, pursuant to which this
Agreement has been entered, shall constitute a notice of termination of this
Agreement.
12. CHANGES; AMENDMENTS. This Agreement may be changed or
amended only by written instrument signed by both parties.
13. REPORTS. The Agent will provide the Trust or its designees
such information as the Trust or its designees may reasonably request
(including, without
4
<PAGE> 5
limitation, periodic certifications confirming the provision to Customers of the
services described herein), and will otherwise cooperate with the Trust and its
designees (including, without limitation, any auditors designated by the Trust),
in connection with the preparation of reports to its Board of Trustees
concerning this Agreement and the monies paid or payable under this Agreement,
as well as any other reports or filings that may be required by law.
14. SUBCONTRACTING BY AGENT. The Agent may subcontract for the
performance of the Agent's obligations hereunder with any one or more persons,
including but not limited to any one or more persons which is an affiliate of
the Agent; PROVIDED, HOWEVER, that the Agent shall be as fully responsible to
the Trust for the acts and omissions of any subcontractor as it would be for its
own acts or omissions. The Agent shall notify the Trust of any such arrangements
no later than the next meeting of the Trust's Board of Trustees following the
entry by the Agent into such arrangements. Notwithstanding this paragraph or
paragraph 11 of this Agreement, the Trust reserves the right to terminate this
Agreement immediately or upon such notice as the Trust, in its sole discretion,
determines to give, and without payment of any penalty, if the Trust notifies
the Agent that any subcontractor of the Agent is unacceptable to the Trust for
any reason and the Agent does not terminate its arrangements with such
subcontractor as promptly as reasonably practicable.
15. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New York.
16. MISCELLANEOUS. The captions in this Agreement are included
for convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement has been executed on behalf of the Trust by the undersigned not
individually, but in the capacity indicated.
PERFORMANCE FUNDS TRUST
By:
------------------------------------
Title:
[FINANCIAL INSTITUTION]
- ----------------------------------
By:
-------------------------------
Title:
5
<PAGE> 1
Exhibit 15(i)
PERFORMANCE FUNDS TRUST
SERVICE ORGANIZATION AGREEMENT
CLASS B SHARES
SERVICE ORGANIZATION AGREEMENT, dated as of ________________,
by and between Performance Funds Trust (the "Trust"), a Delaware business trust,
on behalf of The Money Market Fund, The Intermediate Term Government Income
Fund, The Small Cap Fund, The Mid Cap Growth Fund and The Large Cap Equity Fund
and
, (the "Financial Institution"), as a shareholder servicing agent hereunder
(the "Agent") relating to transactions in Class B shares of capital stock, $.001
par value (the "Shares"), of any of the existing investment portfolios offered
by the Trust (the "Funds"). In the event that the Trust establishes one or more
portfolios other than the Funds with respect to which it decides to retain the
Financial Institution hereunder, the Trust shall promptly notify the Financial
Institution in writing. If the Financial Institution is willing to render such
services, it shall notify the Trust in writing whereupon such portfolio shall
become a Fund hereunder.
The Trust and the Financial Institution hereby agree as
follows:
1. APPOINTMENT. The Financial Institution, as Agent, hereby
agrees to perform certain services for its customers (the "Customers") as
hereinafter set forth. The Agent's appointment hereunder is non-exclusive, and
the parties recognize and agree that, from time to time, the Trust may enter
into other shareholder servicing agreements, in writing, with other financial
institutions.
2. SERVICES TO BE PERFORMED. The Agent, as agent for its
Customers, shall be responsible for performing shareholder administrative
support services, which will include the following: (i) providing sub-transfer
agency services; (xv) providing sub-custodian services; (xvi) providing
sub-accounting services; (xvii) providing fiduciary services (excluding
investment management) and (xviii) providing asset allocation services.
The Agent shall provide all personnel and facilities necessary in order
for it to perform the functions described in this paragraph with respect to its
Customers.
3. FEES.
3.1. FEES FROM THE TRUST. In consideration for the services
described in Section 2 hereof and the incurring of expenses in connection
therewith, the Agent shall receive a fee (which may vary depending upon the
services provided), computed daily and payable monthly, at the annual rate of up
to 0.35% of the average daily net asset value of Shares of each Fund for which
the Agent from time to time performs services under this
1
<PAGE> 2
Agreement on behalf of Customers. Fees with respect to Customers' Shares in any
one Fund will be paid exclusively from the assets of that class of shares of the
Fund in which such Customer's assets are invested. For purposes of determining
the fees payable to the Agent hereunder, the value of the Trust's net assets
shall be computed in the manner specified in the Trust's then-current prospectus
and statement of additional information (the "Prospectus") for computation of
the net asset value of the Trust's Shares.
3.2. FEES FROM CUSTOMERS. It is agreed that the Financial
Institution may impose certain conditions on Customers, in addition to or
different from those imposed by the Trust, such as requiring a minimum initial
investment or imposing limitations on the amounts of transactions. It is also
understood that the Financial Institution may directly credit or charge fees to
Customers in connection with an investment in the Funds. The Financial
Institution shall credit or bill Customers directly for such credits or fees. In
the event the Financial Institution charges Customers such fees, it shall make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to Customers both of any direct fees charged to the
Customer and of the fees received or to be received by it from the Trust
pursuant to Section 3.1 of this Agreement. It is understood however, that in no
event shall the Financial Institution have recourse or access as Agent or
otherwise to the account of any shareholder of the Trust except to the extent
expressly authorized by law or by such shareholder, or to any assets of the
Trust, for payment of any direct fees referred to in this Section 3.2.
4. APPROVAL OF MATERIALS TO BE CIRCULATED. Advance copies or
proofs of all materials which are to be generally circulated or disseminated by
the Agent to Customers or prospective Customers which identify or describe the
Trust shall be provided to the Trust at least 10 days prior to such circulation
or dissemination (unless the Trust consents in writing to a shorter period), and
such materials shall not be circulated or disseminated or further circulated or
disseminated at any time after the Trust shall have given written notice to the
Agent of any objection thereto.
Nothing in this Section 4 shall be construed to make the Trust liable
for the use of any information about the Trust which is disseminated by the
Agent.
5. COMPLIANCE WITH LAWS, ETC. The Agent shall comply with all
applicable federal and state laws and regulations in the performance of its
duties under this Agreement, including securities laws.
6. LIMITATION OF AGENT'S LIABILITY. In consideration of the
Agent's undertaking to render the services described in this Agreement, the
Trust agrees that the Agent shall not be liable under this Agreement for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of this Agreement, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Agent against any
liability to the Trust or its shareholders to which the Agent would
2
<PAGE> 3
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Agent's duties under this Agreement or by
reason of the Agent's reckless disregard of its obligations and duties
hereunder.
7. INDEMNIFICATION. The Trust agrees to indemnify and hold
harmless the Agent from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, and any state and
foreign securities and blue sky laws, all as or to be amended from time to time)
and expenses, including attorneys' fees and disbursements arising directly or
indirectly from (i) any misstatements or omissions in the Trust's Prospectus, or
(ii) any action or thing which the Agent takes or does or omits to take or do
reasonably believed by the Agent to be at the request or direction or in
reliance on the advice or instructions, whether oral or written, of the Trust
provided, that the Agent shall not be indemnified against any liability to the
Trust or to its shareholders (or any expenses incident to such liability)
arising out of the Agent's own willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations and duties hereunder. In order that the
indemnification provision contained in this paragraph shall apply, it is
understood that if in any case the Trust may be asked to indemnify or save the
Agent harmless, the Trust shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further understood that
the Agent will use all reasonable care to identify and notify the Trust promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Trust. The Trust
shall have the option to defend the Agent against any claim which may be the
subject of this indemnification and, in the event that the Trust so elects, it
will so notify the Agent and thereupon the Trust shall take over complete
defense for the claim, and the Agent shall in such situation incur no further
legal or other expenses for which it shall seek indemnification under this
paragraph. The Agent shall in no case confess any claim or make any compromise
or settlement in any case in which the Trust will be asked to indemnify the
Agent, except with the Trust's prior written consent.
8. LIMITATION OF SHAREHOLDER LIABILITY, ETC. The Agent hereby
agrees that obligations assumed by the Trust pursuant to this Agreement shall be
limited in all cases to the Trust and its assets and that the Agent shall not
seek satisfaction of any such obligation from the shareholders or any
shareholder of the Trust. It is further agreed that the Agent shall not seek
satisfaction of any such obligations from the Board of Trustees or any
individual Trustee of the Trust.
9. NOTICES. All notices or other communications hereunder to
either party shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to the Trust, at the
address of the Trust, or (b) if to the Agent, at _________________________,
Attention: ________________ _________________________.
3
<PAGE> 4
10. FURTHER ASSURANCES. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
11. TERMINATION. This Agreement will continue in effect until
two years from the date hereof and thereafter for successive annual periods,
provided that such continuance is specifically approved at least annually (a) by
the Trust's Board of Trustees and (b) by the vote, cast in person at a meeting
called for the purpose, of a majority of the Trust's trustees who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such party. This Agreement may be terminated at any time, without the
payment of any penalty, by a vote of a majority of the Trust's outstanding
voting securities (as defined in the 1940 Act) or by a vote of a majority of the
Trust's entire Board of Trustees on 60 days' written notice to the Agent or by
the Agent on (60) days' written notice to the Trust. Notice of termination of
the Shareholder Servicing Plan by the Board of Trustees, pursuant to which this
Agreement has been entered, shall constitute a notice of termination of this
Agreement.
12. CHANGES; AMENDMENTS. This Agreement may be changed or
amended only by written instrument signed by both parties.
13. REPORTS. The Agent will provide the Trust or its designees
such information as the Trust or its designees may reasonably request
(including, without limitation, periodic certifications confirming the provision
to Customers of the services described herein), and will otherwise cooperate
with the Trust and its designees (including, without limitation, any auditors
designated by the Trust), in connection with the preparation of reports to its
Board of Trustees concerning this Agreement and the monies paid or payable under
this Agreement, as well as any other reports or filings that may be required by
law.
14. SUBCONTRACTING BY AGENT. The Agent may subcontract for the
performance of the Agent's obligations hereunder with any one or more persons,
including but not limited to any one or more persons which is an affiliate of
the Agent; PROVIDED, HOWEVER, that the Agent shall be as fully responsible to
the Trust for the acts and omissions of any subcontractor as it would be for its
own acts or omissions. The Agent shall notify the Trust of any such arrangements
no later than the next meeting of the Trust's Board of Trustees following the
entry by the Agent into such arrangements. Notwithstanding this paragraph or
paragraph 11 of this Agreement, the Trust reserves the right to terminate this
Agreement immediately or upon such notice as the Trust, in its sole discretion,
determines to give, and without payment of any penalty, if the Trust notifies
the Agent that any subcontractor of the Agent is unacceptable to the Trust for
any reason and the Agent does not terminate its arrangements with such
subcontractor as promptly as reasonably practicable.
15. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New York.
4
<PAGE> 5
16. MISCELLANEOUS. The captions in this Agreement are included
for convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement has been executed on behalf of the Trust by the undersigned not
individually, but in the capacity indicated.
PERFORMANCE FUNDS TRUST
By:
-----------------------
Title:
[FINANCIAL INSTITUTION]
- ------------------------------------
By:
---------------------------------
Title:
5
<PAGE> 1
eXHIBIT 15(j)
PERFORMANCE FUNDS TRUST
SERVICE ORGANIZATION AGREEMENT
INSTITUTIONAL CLASS
SERVICE ORGANIZATION AGREEMENT, dated as of ________________,
by and between Performance Funds Trust (the "Trust"), a Delaware business trust,
on behalf of 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 and The Large Cap Equity Fund and , (the "Financial Institution"), as a
shareholder servicing agent hereunder (the "Agent") relating to transactions in
Institutional Class shares of capital stock, $.001 par value (the "Shares"), of
any of the existing investment portfolios offered by the Trust (the "Funds"). In
the event that the Trust establishes one or more portfolios other than the Funds
with respect to which it decides to retain the Financial Institution hereunder,
the Trust shall promptly notify the Financial Institution in writing. If the
Financial Institution is willing to render such services, it shall notify the
Trust in writing whereupon such portfolio shall become a Fund hereunder.
The Trust and the Financial Institution hereby agree as
follows:
1. APPOINTMENT. The Financial Institution, as Agent, hereby
agrees to perform certain services for its customers (the "Customers") as
hereinafter set forth. The Agent's appointment hereunder is non-exclusive, and
the parties recognize and agree that, from time to time, the Trust may enter
into other shareholder servicing agreements, in writing, with other financial
institutions.
2. SERVICES TO BE PERFORMED. The Agent, as agent for its
Customers, shall be responsible for performing shareholder administrative
support services, which will include the following: (i) answering customer
inquiries regarding account status and history, the manner in which purchases,
exchanges and redemptions of shares of the Funds may be effected and certain
other matters pertaining to the Funds; (ii) assisting shareholders in
designating and changing dividend options, account designations and addresses;
(iii) providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; (iv) assisting in aggregating and processing
purchase, exchange and redemption transactions; (v) placing net purchase and
redemption orders with the Trust's distributor; (vi) arranging for wiring of
funds; (vii) transmitting and receiving funds in connection with customer orders
to purchase or redeem shares; (viii) processing dividend payments; (ix)
verifying and guaranteeing shareholder signatures in connection with redemption
orders and transfers and changes in shareholder-designated accounts, as
necessary; (x) providing periodic statements showing a customer's account
balance and, to the extent practicable, integrating such information with other
customer transactions otherwise effected through or
1
<PAGE> 2
with the Shareholder Servicing Agent; (xi) furnishing (either separately or on
an integrated basis with other reports sent to a shareholder by a Shareholder
Servicing Agent) monthly and year-end statement and confirmations of purchases,
exchanges and redemptions; (xii) transmitting on behalf of the Trust, proxy
statements, annual reports, updating prospectuses and other communications from
the Trust to the shareholders of the Funds; (xiii) receiving, tabulating and
transmitting to the Trust proxies executed by shareholders with respect to
meetings of shareholders of the Funds; (xiv) providing sub-transfer agency
services; (xv) providing sub-custodian services; (xvi) providing sub-accounting
services; (xvii) providing fiduciary services (excluding investment management)
and (xviii) providing asset allocation services.
The Agent shall provide all personnel and facilities
necessary in order for it to perform the functions described in this paragraph
with respect to its Customers.
3. FEES.
3.1. FEES FROM THE TRUST. In consideration for the services
described in Section 2 hereof and the incurring of expenses in connection
therewith, the Agent shall receive a fee (which may vary depending upon the
services provided), computed daily and payable monthly, at the annual rate of up
to 0.35% of the average daily net asset value of Shares of each Fund for which
the Agent from time to time performs services under this Agreement on behalf of
Customers: provided that no more than 0.25% of such fee may be paid to such
Agent in "services fees" within the meaning of the NASD Rules. Fees with respect
to Customers' Shares in any one Fund will be paid exclusively from the assets of
that class of shares of the Fund in which such Customer's assets are invested.
For purposes of determining the fees payable to the Agent hereunder, the value
of the Trust's net assets shall be computed in the manner specified in the
Trust's then-current prospectus and statement of additional information (the
"Prospectus") for computation of the net asset value of the Trust's Shares.
3.2. FEES FROM CUSTOMERS. It is agreed that the Financial
Institution may impose certain conditions on Customers, in addition to or
different from those imposed by the Trust, such as requiring a minimum initial
investment or imposing limitations on the amounts of transactions. It is also
understood that the Financial Institution may directly credit or charge fees to
Customers in connection with an investment in the Funds. The Financial
Institution shall credit or bill Customers directly for such credits or fees. In
the event the Financial Institution charges Customers such fees, it shall make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to Customers both of any direct fees charged to the
Customer and of the fees received or to be received by it from the Trust
pursuant to Section 3.1 of this Agreement. It is understood however, that in no
event shall the Financial Institution have recourse or access as Agent or
otherwise to the account of any shareholder of the Trust except to the extent
expressly authorized by law or by such shareholder, or to any assets of the
Trust, for payment of any direct fees referred to in this Section 3.2.
2
<PAGE> 3
4. APPROVAL OF MATERIALS TO BE CIRCULATED. Advance copies or
proofs of all materials which are to be generally circulated or disseminated by
the Agent to Customers or prospective Customers which identify or describe the
Trust shall be provided to the Trust at least 10 days prior to such circulation
or dissemination (unless the Trust consents in writing to a shorter period), and
such materials shall not be circulated or disseminated or further circulated or
disseminated at any time after the Trust shall have given written notice to the
Agent of any objection thereto.
Nothing in this Section 4 shall be construed to make the Trust liable
for the use of any information about the Trust which is disseminated by the
Agent.
5. COMPLIANCE WITH LAWS, ETC. The Agent shall comply with all
applicable federal and state laws and regulations in the performance of its
duties under this Agreement, including securities laws.
6. LIMITATION OF AGENT'S LIABILITY. In consideration of the
Agent's undertaking to render the services described in this Agreement, the
Trust agrees that the Agent shall not be liable under this Agreement for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of this Agreement, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Agent against any
liability to the Trust or its shareholders to which the Agent would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Agent's duties under this Agreement or by reason of the
Agent's reckless disregard of its obligations and duties hereunder.
7. INDEMNIFICATION. The Trust agrees to indemnify and hold
harmless the Agent from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, and any state and
foreign securities and blue sky laws, all as or to be amended from time to time)
and expenses, including attorneys' fees and disbursements arising directly or
indirectly from (i) any misstatements or omissions in the Trust's Prospectus, or
(ii) any action or thing which the Agent takes or does or omits to take or do
reasonably believed by the Agent to be at the request or direction or in
reliance on the advice or instructions, whether oral or written, of the Trust
provided, that the Agent shall not be indemnified against any liability to the
Trust or to its shareholders (or any expenses incident to such liability)
arising out of the Agent's own willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations and duties hereunder. In order that the
indemnification provision contained in this paragraph shall apply, it is
understood that if in any case the Trust may be asked to indemnify or save the
Agent harmless, the Trust shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further understood that
the Agent
3
<PAGE> 4
will use all reasonable care to identify and notify the Trust promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Trust. The Trust
shall have the option to defend the Agent against any claim which may be the
subject of this indemnification and, in the event that the Trust so elects, it
will so notify the Agent and thereupon the Trust shall take over complete
defense for the claim, and the Agent shall in such situation incur no further
legal or other expenses for which it shall seek indemnification under this
paragraph. The Agent shall in no case confess any claim or make any compromise
or settlement in any case in which the Trust will be asked to indemnify the
Agent, except with the Trust's prior written consent.
8. LIMITATION OF SHAREHOLDER LIABILITY, ETC. The Agent hereby
agrees that obligations assumed by the Trust pursuant to this Agreement shall be
limited in all cases to the Trust and its assets and that the Agent shall not
seek satisfaction of any such obligation from the shareholders or any
shareholder of the Trust. It is further agreed that the Agent shall not seek
satisfaction of any such obligations from the Board of Trustees or any
individual Trustee of the Trust.
9. NOTICES. All notices or other communications hereunder to
either party shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to the Trust, at the
address of the Trust, or (b) if to the Agent, at ,, Attention:
10. Further Assurances. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
11. Termination. This Agreement will continue in effect until
two years from the date hereof and thereafter for successive annual periods,
provided that such continuance is specifically approved at least annually (a) by
the Trust's Board of Trustees and (b) by the vote, cast in person at a meeting
called for the purpose, of a majority of the Trust's trustees who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such party. This Agreement may be terminated at any time, without the
payment of any penalty, by a vote of a majority of the Trust's outstanding
voting securities (as defined in the 1940 Act) or by a vote of a majority of the
Trust's entire Board of Trustees on 60 days' written notice to the Agent or by
the Agent on (60) days' written notice to the Trust. Notice of termination of
the Shareholder Servicing Plan by the Board of Trustees, pursuant to which this
Agreement has been entered, shall constitute a notice of termination of this
Agreement.
12. Changes; Amendments. This Agreement may be changed or
amended only by written instrument signed by both parties.
13. Reports. The Agent will provide the Trust or its designees
such information as the Trust or its designees may reasonably request
(including, without limitation, periodic certifications confirming the provision
to Customers of the services
4
<PAGE> 5
described herein), and will otherwise cooperate with the Trust and its designees
(including, without limitation, any auditors designated by the Trust), in
connection with the preparation of reports to its Board of Trustees concerning
this Agreement and the monies paid or payable under this Agreement, as well as
any other reports or filings that may be required by law.
14. SUBCONTRACTING BY AGENT. The Agent may subcontract for the
performance of the Agent's obligations hereunder with any one or more persons,
including but not limited to any one or more persons which is an affiliate of
the Agent; PROVIDED, HOWEVER, that the Agent shall be as fully responsible to
the Trust for the acts and omissions of any subcontractor as it would be for its
own acts or omissions. The Agent shall notify the Trust of any such arrangements
no later than the next meeting of the Trust's Board of Trustees following the
entry by the Agent into such arrangements. Notwithstanding this paragraph or
paragraph 11 of this Agreement, the Trust reserves the right to terminate this
Agreement immediately or upon such notice as the Trust, in its sole discretion,
determines to give, and without payment of any penalty, if the Trust notifies
the Agent that any subcontractor of the Agent is unacceptable to the Trust for
any reason and the Agent does not terminate its arrangements with such
subcontractor as promptly as reasonably practicable.
15. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New York.
16. MISCELLANEOUS. The captions in this Agreement are included
for convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement has been executed on behalf of the Trust by the undersigned not
individually, but in the capacity indicated.
PERFORMANCE FUNDS TRUST
By:
-------------------------------------
Title:
[Financial Institution]
- -----------------------------
By:
- -----------------------------
Title:
5
<PAGE> 1
Exhibit 15(k)
PERFORMANCE FUNDS DISTRIBUTOR, 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 cancelled 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 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.
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
<PAGE> 3
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 time 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:
---------------------------
- ----------------------------
Date:
By: -------------------------
-------------------------
Officer or Partner
- ----------------------------
Print Name
Address:
--------------------
- ----------------------------
Date:
-----------------------
<PAGE> 1
Exhibit 18
AMENDED AND RESTATED
PERFORMANCE FUNDS TRUST
Rule 18f-3 Plan
Rule 18f-3
- ----------
Pursuant to Rule 18f-3 (" Rule 18f-3") of the Investment Company Act of
1940, as amended (the "Act"), Performance Funds Trust (the "Trust"), a
registered open-end investment company whose shares are registered on Form N-1A,
consisting of the Money Market Fund, The Short Term Government Income Fund, The
Intermediate Term Government Income Fund, The Mid Cap Growth Fund, The Large Cap
Equity Fund and The Small Cap Fund, and any future fund or series created by the
Trust (collectively, the "Funds"), hereby adopts this plan setting forth the
separate arrangements and expense allocations of each class of shares. Any
material amendment to this plan is subject to prior approval of the Board of
Trustees, including a majority of the disinterested Trustees.
Authorized Classes
- ------------------
CLASS A SHARES - (Formerly Consumer Class)
Class A shares of all funds except the Money Market and Short Term
Government Income Fund are sold subject to an initial sales charge as follows:
4.75% $ 0 - $100,000
3.75% $100,001 - $250,000
2.75% $250,001 - $500,000
1.75% $500,001 - $1,000,000
0% Over $1,000,000
Class A shares of the Short Term Government Income Fund are sold subject
to an initial sales charge as follows:
2.50% $ 0 - $100,000
2.00% $100,001 - $250,000
1.50% $250,001 - $500,000
1.00% $500,001 - $1,000,000
0% Over $1,000,000
Class A shares of the Money Market Fund will charge no initial sales
charge.
Class A shares are subject to a distribution fee under the Rule 12b-1 Plan
payable at a maximum annual rate of up to 0.35% of the average daily net assets
of that Class. Class A Shares are also subject to fees of up to 0.35% (subject
to NASD rules) pursuant to a Servicing Organization
<PAGE> 2
Agreement.
CLASS B SHARES
Class B Shares are not subject to an initial sales charge but all Funds
except the Short Term Government Income Fund are subject to a contingent
deferred sales charge which will be imposed on redemptions as follows:
5% in year 1
4% in year 2
3% in year 3
3% in year 4
2% in year 5
1% in year 6
0% in year 7
0% in year 8
Class B Shares automatically convert to Class A shares on the first
business day of the month following the eighth anniversary of the issuance of
such Class B shares. Class B shares are also subject to a distribution fee
pursuant to Rule 12b-1 payable at the annual rate of up to 1.00% (0.75% of which
are distribution fees and 0.25% for servicing fees) the average daily net assets
of the class. Class B Shares are also subject to fees of up to 0.30% (subject to
NASD rules) pursuant to a Servicing Organization Agreement.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available to investors who do not desire
enhanced shareholder servicing. Institutional Shares are offered and sold
without an initial sales charge or a deferred sales charge and do not impose
12b-1 Fees, Service Organization Fees or Shareholder Servicing Fees.
Class Voting Rights and Obligations and Class Expenses
- ------------------------------------------------------
The Classes of shares issued by any Fund will be identical in all
respects except for Class designation, allocation of certain expenses directly
related to the distribution or service arrangement, or both, for a Class, and
voting rights--each Class votes separately with respect to issues affecting only
that Class. Shares of all Classes will represent interests in the same
investment fund; therefore each Class is subject to the same investment
objectives, policies and limitations.
Each Class of shares shall bear expenses, not including advisory or
custodial fees or other expenses related to the management of the Fund's assets,
that are directly attributable to the kind or degree of services rendered to
that Class ("Class Expenses"). Class Expenses, including the management fee or
the fee of other service providers, may be waived or reimbursed by the
- 2 -
<PAGE> 3
Funds' investment adviser, underwriter or any other provider of services to the
Funds with respect to each Class of a Fund on a Class by Class basis.
Exchanges and Conversion Privileges
- -----------------------------------
Shareholders who have held all or part of their shares in a Fund
for at least seven days may exchange shares of one Fund for shares of any of the
other portfolios of the Trust which are available for sale in their state. A
shareholder who has paid a sales load in connection with the purchase of shares
of any of the Funds will be subject only to that portion of the sales load of
the Fund into which the shareholder is exchanging which exceeds the sales load
originally paid by the shareholder. Class B Shares will convert automatically to
Class A shares on the first business day of the month following the eighth
anniversary of the issuance of such Class B Shares. Class B Shares will be
converted at the net asset value of Class A Shares, without the imposition of
any sales load, fee or charge.
- 3 -
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<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 011
<NAME> SHORT TERM GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 122,302,362
<INVESTMENTS-AT-VALUE> 122,789,093
<RECEIVABLES> 1,239,366
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 124,028,459
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 644,870
<TOTAL-LIABILITIES> 644,870
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125,559,834
<SHARES-COMMON-STOCK> 12,206,355<F1>
<SHARES-COMMON-PRIOR> 12,970,314<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 25,116
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,677,860
<ACCUM-APPREC-OR-DEPREC> 486,731
<NET-ASSETS> 123,383,589
<DIVIDEND-INCOME> 73,885
<INTEREST-INCOME> 7,490,797
<OTHER-INCOME> 0
<EXPENSES-NET> 788,770
<NET-INVESTMENT-INCOME> 6,775,912
<REALIZED-GAINS-CURRENT> 709,547
<APPREC-INCREASE-CURRENT> 552,544
<NET-CHANGE-FROM-OPS> 8,038,003
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,690,972<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1,887,533<F1>
<NUMBER-OF-SHARES-REDEEMED> 3,155,517<F1>
<SHARES-REINVESTED> 504,025<F1>
<NET-CHANGE-IN-ASSETS> (4,248,561)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 27,487
<OVERDIST-NET-GAINS-PRIOR> 3,385,036
<GROSS-ADVISORY-FEES> 490,543
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 788,770
<AVERAGE-NET-ASSETS> 121,022,486<F1>
<PER-SHARE-NAV-BEGIN> 9.75<F1>
<PER-SHARE-NII> .54<F1>
<PER-SHARE-GAIN-APPREC> .10<F1>
<PER-SHARE-DIVIDEND> .54<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.85<F1>
<EXPENSE-RATIO> .64<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> SHORT TERM GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 122,302,362
<INVESTMENTS-AT-VALUE> 122,789,093
<RECEIVABLES> 1,239,366
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 124,028,459
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 644,870
<TOTAL-LIABILITIES> 644,870
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125,559,834
<SHARES-COMMON-STOCK> 322,942<F1>
<SHARES-COMMON-PRIOR> 123,550<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 25,116
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,677,860
<ACCUM-APPREC-OR-DEPREC> 486,731
<NET-ASSETS> 123,383,589
<DIVIDEND-INCOME> 73,885
<INTEREST-INCOME> 7,490,797
<OTHER-INCOME> 0
<EXPENSES-NET> 788,770
<NET-INVESTMENT-INCOME> 6,775,912
<REALIZED-GAINS-CURRENT> 709,547
<APPREC-INCREASE-CURRENT> 552,544
<NET-CHANGE-FROM-OPS> 8,038,003
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 84,940<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 280,309<F1>
<NUMBER-OF-SHARES-REDEEMED> 86,727<F1>
<SHARES-REINVESTED> 5,810<F1>
<NET-CHANGE-IN-ASSETS> (4,248,561)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 27,487
<OVERDIST-NET-GAINS-PRIOR> 3,385,036
<GROSS-ADVISORY-FEES> 490,543
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 788,770
<AVERAGE-NET-ASSETS> 1,613,402<F1>
<PER-SHARE-NAV-BEGIN> 9.75<F1>
<PER-SHARE-NII> .52<F1>
<PER-SHARE-GAIN-APPREC> .10<F1>
<PER-SHARE-DIVIDEND> .52<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.85<F1>
<EXPENSE-RATIO> .89<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> 021
<NAME> INTERMEDIATE TERM GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 117,553,702
<INVESTMENTS-AT-VALUE> 121,399,020
<RECEIVABLES> 1,977,411
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,376,431
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 667,947
<TOTAL-LIABILITIES> 667,947
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 123,385,514
<SHARES-COMMON-STOCK> 11,478,978<F1>
<SHARES-COMMON-PRIOR> 9,488,829<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 46,474
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 4,495,874
<ACCUM-APPREC-OR-DEPREC> 3,865,318
<NET-ASSETS> 122,708,484
<DIVIDEND-INCOME> 59,117
<INTEREST-INCOME> 7,391,468
<OTHER-INCOME> 0
<EXPENSES-NET> 832,302
<NET-INVESTMENT-INCOME> 6,618,283
<REALIZED-GAINS-CURRENT> 123,368
<APPREC-INCREASE-CURRENT> 4,447,874
<NET-CHANGE-FROM-OPS> 11,219,525
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,663,066<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3,787,107<F1>
<NUMBER-OF-SHARES-REDEEMED> 2,259,944<F1>
<SHARES-REINVESTED> 462,986<F1>
<NET-CHANGE-IN-ASSETS> 27,001,127
<ACCUMULATED-NII-PRIOR> 84,882
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 4,619,244
<GROSS-ADVISORY-FEES> 572,600
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 889,564
<AVERAGE-NET-ASSETS> 112,445,961<F1>
<PER-SHARE-NAV-BEGIN> 9.93<F1>
<PER-SHARE-NII> .59<F1>
<PER-SHARE-GAIN-APPREC> .42<F1>
<PER-SHARE-DIVIDEND> .60<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.34<F1>
<EXPENSE-RATIO> 0.72<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> 022
<NAME> INTERMEDIATE TERM GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 117,533,702
<INVESTMENTS-AT-VALUE> 121,399,020
<RECEIVABLES> 1,977,411
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,376,431
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 667,947
<TOTAL-LIABILITIES> 667,947
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 123,385,514
<SHARES-COMMON-STOCK> 383,601<F1>
<SHARES-COMMON-PRIOR> 145,578<F1>
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<EXPENSES-NET> 832,302
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<DISTRIBUTIONS-OF-INCOME> 116,573<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
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<NUMBER-OF-SHARES-REDEEMED> 94,109<F1>
<SHARES-REINVESTED> 7,586<F1>
<NET-CHANGE-IN-ASSETS> 27,001,127
<ACCUMULATED-NII-PRIOR> 84,882
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 4,619,244
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 889,564
<AVERAGE-NET-ASSETS> 2,074,308<F1>
<PER-SHARE-NAV-BEGIN> 9.93<F1>
<PER-SHARE-NII> .57<F1>
<PER-SHARE-GAIN-APPREC> .42<F1>
<PER-SHARE-DIVIDEND> .58<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.34<F1>
<EXPENSE-RATIO> 0.97<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> 031
<NAME> LARGE CAP EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 151,223,826
<INVESTMENTS-AT-VALUE> 301,085,474
<RECEIVABLES> 606,929
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 301,692,403
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 632,728
<TOTAL-LIABILITIES> 632,728
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 138,266,951
<SHARES-COMMON-STOCK> 10,393,041<F1>
<SHARES-COMMON-PRIOR> 12,184,708<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 30,415
<ACCUMULATED-NET-GAINS> 12,961,491
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 149,861,648
<NET-ASSETS> 301,059,675
<DIVIDEND-INCOME> 4,731,416
<INTEREST-INCOME> 112,237
<OTHER-INCOME> 0
<EXPENSES-NET> 2,610,821
<NET-INVESTMENT-INCOME> 2,232,832
<REALIZED-GAINS-CURRENT> 13,921,927
<APPREC-INCREASE-CURRENT> 60,709,330
<NET-CHANGE-FROM-OPS> 76,864,089
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,081,682<F1>
<DISTRIBUTIONS-OF-GAINS> 1,889,861<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1,712,431<F1>
<NUMBER-OF-SHARES-REDEEMED> 3,646,925<F1>
<SHARES-REINVESTED> 142,827<F1>
<NET-CHANGE-IN-ASSETS> 48,074,884
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,154,555
<OVERDISTRIB-NII-PRIOR> 7,702
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,671,113
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,610,821
<AVERAGE-NET-ASSETS> 249,030,538<F1>
<PER-SHARE-NAV-BEGIN> 19.16<F1>
<PER-SHARE-NII> .19<F1>
<PER-SHARE-GAIN-APPREC> 6.00<F1>
<PER-SHARE-DIVIDEND> .19<F1>
<PER-SHARE-DISTRIBUTIONS> .18<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 24.98<F1>
<EXPENSE-RATIO> .91<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> 032
<NAME> LARGE CAP EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 151,223,826
<INVESTMENTS-AT-VALUE> 301,085,474
<RECEIVABLES> 606,929
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 301,692,403
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 632,728
<TOTAL-LIABILITIES> 632,728
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 138,266,951
<SHARES-COMMON-STOCK> 1,660,726<F1>
<SHARES-COMMON-PRIOR> 1,019,302<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 30,415
<ACCUMULATED-NET-GAINS> 12,961,491
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 149,861,648
<NET-ASSETS> 301,059,675
<DIVIDEND-INCOME> 4,731,416
<INTEREST-INCOME> 112,237
<OTHER-INCOME> 0
<EXPENSES-NET> 2,610,821
<NET-INVESTMENT-INCOME> 2,232,832
<REALIZED-GAINS-CURRENT> 13,921,927
<APPREC-INCREASE-CURRENT> 60,709,330
<NET-CHANGE-FROM-OPS> 76,864,089
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 173,864<F1>
<DISTRIBUTIONS-OF-GAINS> 225,130<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 827,432<F1>
<NUMBER-OF-SHARES-REDEEMED> 203,755<F1>
<SHARES-REINVESTED> 17,747<F1>
<NET-CHANGE-IN-ASSETS> 48,074,884
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,154,555
<OVERDISTRIB-NII-PRIOR> 7,702
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,671,113
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,610,821
<AVERAGE-NET-ASSETS> 29,487,592<F1>
<PER-SHARE-NAV-BEGIN> 19.16<F1>
<PER-SHARE-NII> .13<F1>
<PER-SHARE-GAIN-APPREC> 5.99<F1>
<PER-SHARE-DIVIDEND> .13<F1>
<PER-SHARE-DISTRIBUTIONS> .18<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 24.97<F1>
<EXPENSE-RATIO> 1.16<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> 041
<NAME> MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 423,650,646
<INVESTMENTS-AT-VALUE> 423,650,646
<RECEIVABLES> 1,201,493
<ASSETS-OTHER> 18,185
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 424,870,324
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,052,157
<TOTAL-LIABILITIES> 2,052,157
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 422,829,307
<SHARES-COMMON-STOCK> 349,023,170<F1>
<SHARES-COMMON-PRIOR> 320,732,095<F1>
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<FN>
<F1>INSTITUTIONAL CLASS
</FN>
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<CIK> 0000885093
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<NUMBER> 042
<NAME> MONEY MARKET FUND
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<FN>
<F1>CONSUMER SERVICE CLASS
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<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 051
<NAME> MID CAP GROWTH FUND
<S> <C>
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<FN>
<F1>INSTITUTIONAL CLASS
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</TABLE>
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<ARTICLE> 6
<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 052
<NAME> MID CAP GROWTH FUND
<S> <C>
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<FN>
<F1>CONSUMER SERVICE CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
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<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 061
<NAME> SMALL CAP FUND
<S> <C>
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<FN>
<F1>INSTITUTIONAL SHARES
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</TABLE>
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<CIK> 0000885093
<NAME> PERFORMANCE FUNDS TRUST
<SERIES>
<NUMBER> 062
<NAME> SMALL CAP FUND
<S> <C>
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<FN>
<F1>CONSUMER SERVICE SHARES
</FN>
</TABLE>
