<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1999
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. 12
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 16
(CHECK APPROPRIATE BOX OR BOXES)
PERFORMANCE FUNDS TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 737-3676
GEORGE STEVENS, 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 AMERICAS
NEW YORK, NEW YORK 10019
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
IMMEDIATELY UPON FILING PURSUANT TO RULE 485(b)
ON , 1999 PURSUANT TO RULE 485(b)
X 60 DAYS AFTER FILING PURSUANT TO RULE 485(a)
75 DAYS AFTER FILING PURSUANT TO RULE 485(a)
ON , 1999 PURSUANT TO RULE 485(a)
<PAGE> 2
PERFORMANCE FUNDS TRUST
INSTITUTIONAL CLASS SHARES
================================================================================
----------
PROSPECTUS
----------
SEPTEMBER __, 1999
MONEY MARKET FUND
-----------------
THE MONEY MARKET FUND
BOND FUNDS
----------
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
EQUITY FUNDS
------------
THE SMALL CAP EQUITY FUND
THE MID CAP EQUITY FUND
THE LARGE CAP EQUITY FUND
- ------------------
QUESTIONS?
CALL 1-800-PERFORM
OR YOUR INVESTMENT
REPRESENTATIVE.
- ------------------
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
<PAGE> 3
TABLE OF CONTENTS
================================================================================
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES EACH FUND'S
INVESTMENTS, RISKS, PAST PERFORMANCE, AND FEES.
3 OVERVIEW
MONEY MARKET FUND
5 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES AND PERFORMANCE INFORMATION
7 PRINCIPAL RISKS
9 FEES AND EXPENSES
================================================================================
BOND FUNDS
11 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
PERFORMANCE
15 PRINCIPAL RISKS
17 FEES AND EXPENSES
================================================================================
EQUITY FUNDS
19 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
PERFORMANCE
25 PRINCIPAL RISKS
27 FEES AND EXPENSES
================================================================================
ADDITIONAL INFORMATION
29 INVESTING FOR DEFENSIVE PURPOSES
29 YEAR 2000 AND THE PERFORMANCE FUNDS
================================================================================
FUND MANAGEMENT
31 INVESTMENT ADVISER
32 PORTFOLIO MANAGERS
32 DISTRIBUTOR AND ADMINISTRATOR
================================================================================
SHAREHOLDER INFORMATION
33 PRICING OF FUND SHARES
34 PURCHASING AND ADDING TO YOUR SHARES
38 SELLING YOUR SHARES
40 GENERAL POLICIES ON SELLING SHARES
42 EXCHANGING YOUR SHARES
43 SERVICE ORGANIZATIONS
43 DIVIDENDS, DISTRIBUTIONS AND TAXES
================================================================================
FINANCIAL HIGHLIGHTS
44
================================================================================
BACK COVER
45 WHERE TO LEARN MORE ABOUT THE FUNDS
2
<PAGE> 4
RISK/RETURN SUMMARY AND FUND EXPENSES
OVERVIEW
This prospectus describes the following funds offered by Performance Funds Trust
(the "Funds").
MONEY MARKET FUND RISK/RETURN PROFILE OF MUTUAL FUNDS
- --------------------------------------------------------------
[CHART APPEARS HERE]
The Money Market Fund
BOND FUNDS
- ----------
The Short Term Government Income Fund
The Intermediate Term Government Income Fund
EQUITY FUNDS
- ------------
The Small Cap Equity Fund
The Mid Cap Equity Fund
The Large Cap Equity Fund
On the following pages, you will find important information about each Fund,
including:
o the investment objective
o principal investment strategy
o performance information
o fees and expenses, and
o principal risks associated with each Fund
The Funds are managed by Trustmark National Bank ("Trustmark" or the "Adviser").
3
<PAGE> 5
<TABLE>
<CAPTION>
PRINCIPAL RISKS OF THE FUNDS
- -----------------------------------------------------------------------------------------------------------------------------
MARKET SELECTION FOREIGN INTEREST CREDIT PREPAYMENT
RISK RISK INVESTMENT RATE RISK RISK RISK
RISK
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THE MONEY MARKET FUND X X X X
- -----------------------------------------------------------------------------------------------------------------------------
THE SHORT TERM GOVERNMENT INCOME FUND X X X X X
- -----------------------------------------------------------------------------------------------------------------------------
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND X X X X X
- -----------------------------------------------------------------------------------------------------------------------------
THE SMALL CAP EQUITY FUND X X X
- -----------------------------------------------------------------------------------------------------------------------------
THE MID CAP EQUITY FUND X X X
- -----------------------------------------------------------------------------------------------------------------------------
THE LARGE CAP EQUITY FUND X X X
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
A complete description of these and other risks can be found in the sections
"Equity Funds - Principal Risks," "Bond Funds - Principal Risks" and "Money
Market Fund - Principal Risks."
4
<PAGE> 6
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
THE MONEY MARKET FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE As high a level of current income
as is consistent with preservation
of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests in a broad range
of high quality, short-term, money
instruments which have remaining
maturities not to exceed 397 days.
The Fund is required to maintain a
portfolio maturity of 90 days or
less.
The Fund's investments may include
any investments permitted under
federal rules governing money
market funds, including: U.S.
Government securities, bank
obligations, commercial paper,
corporate debt securities,
variable rate demand notes and
repurchase agreements and other
high quality short-term
securities. Generally, securities
in which the Fund may invest will
not earn as high a yield as
securities with longer maturities
or of lower quality.
The Adviser selects only those
U.S. dollar-denominated debt
instruments that meet the high
quality and credit risk standards
established by the Board of
Trustees and consistent with
Federal requirements applicable to
money market funds. In accordance
with such requirements, the Fund
will purchase securities that are
rated within the top two rating
categories by at least two
nationally recognized statistical
rating organizations ("NRSROs")
or, if only one NRSRO has rated
the security, by that NRSRO, or if
not rated, the securities are
deemed of comparable quality
pursuant to standards adopted by
the Board of Trustees. The Fund's
investments in securities with the
second-highest rating (or deemed
of comparable quality) may not
exceed 5% of its total assets, and
all the Fund's commercial paper
investments must be in the highest
rating category (or deemed of
comparable quality).
5
<PAGE> 7
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
THE MONEY MARKET FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an
indication of the risks of an investment
in the Fund by showing its
performance from year to year.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS FOR
INSTITUTIONAL CLASS SHARES
(Both the chart and the table assume
reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1994 4.19%
1995 5.85%
1996 5.33%
1997 5.43%
1998 5.31%
</TABLE>
Best quarter: 3rd Qtr 1995 1.42%
Worst quarter: 3rd Qtr 1993 1.16%
Past performance does not indicate how the Fund
will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS SHARES 9/30/93 5.31% 5.22% 5.12%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the period January 1, 1999 through June 30, 1999 the aggregate
(non-annualized) total returns of the Fund was 2.33%.
As of May 31, 1999 the 7-day current yield of the Fund's Institutional shares
was 4.68%. For current yield information on the Fund, call 1-800-PERFORM. The
Money Market Fund's yield appears in the Wall Street Journal each Thursday.
6
<PAGE> 8
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
PRINCIPAL RISKS
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Investing in the Money Market Fund
involves risks common to any
investment in securities. By itself,
no Fund constitutes a balanced
investment program.
An investment in the Money Market Fund
is not a bank deposit of Trustmark
National Bank or any other bank and is
not insured or guaranteed by the
Federal Deposit Insurance Corporation
or any other government agency.
The Money Market Fund expects to
maintain a net asset value of $1.00
per share, but there is no assurance
that they will be able to do so on a
continuous basis.
There can be no assurance that the
investment objective of the Money
Market Fund will be achieved.
SELECTION RISK
Like all investment funds, the Money
Market Fund is subject to the chance
that poor security selection will
cause the Fund to underperform other
funds with similar objectives.
INTEREST RATE RISK
Interest rate risk is the chance that
the value of the instruments held by
the Fund will decline due to rising
interest rates. When interest rates
rise, the price of most debt
instruments goes down. When interest
rates go down, prices go up. The price
of a debt instrument is also affected
by its maturity. Debt instruments with
shorter maturities, such as those
permitted for money market funds tend
to be less sensitive to changes in
interest rates than instruments with
longer maturities.
CREDIT RISK
Credit risk is the chance that the
issuer of a debt instrument will fail
to repay interest and principal in a
timely manner or may be unable to
fulfill an obligation to repurchase
securities from the Fund, reducing the
Fund's return. Credit risk is
minimized by the Fund's policy of
adequate diversification among issuers
and industries and minimum credit risk
requirements for money market funds
under applicable law.
INCOME RISK
Income risk is the chance that falling
interest rates will cause the Fund's
income to decline. Income risk is
generally higher for short-term debt
instruments.
7
<PAGE> 9
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
PRINCIPAL RISKS, CONTINUED
- --------------------------------------------------------------------------------
ADDITIONAL PRINCIPAL PREPAYMENT RISK
INVESTMENT RISKS The Fund's investments in
mortgage-related securities are
subject to the risk that the principal
amount of the underlying mortgage may
be repaid prior to the security's
maturity date. Such repayments are
common when interest rates decline.
When such a repayment occurs, no
additional interest will be paid on
the investment. Prepayment exposes the
Fund to a lower return upon subsequent
reinvestment of the principal.
A full discussion of all permissible
investments can be found in the
Statement of Additional Information
("SAI").
WHO MAY WANT TO INVEST? Consider investing in the Money Market
Fund if you:
o ARE SEEKING PRESERVATION OF
CAPITAL
o HAVE A LOW RISK TOLERANCE
o ARE WILLING TO ACCEPT LOWER
POTENTIAL RETURNS IN EXCHANGE
FOR A HIGHER DEGREE OF SAFETY
o ARE INVESTING SHORT-TERM
RESERVES
The Money Market Fund will not be
appropriate for anyone:
o SEEKING HIGH TOTAL RETURNS
o PURSUING A LONG-TERM GOAL OR
INVESTING FOR RETIREMENT
8
<PAGE> 10
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
FEES AND EXPENSES
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
FEE TABLE
<TABLE>
<CAPTION>
The Money Market
Fund
INSTITUTIONAL CLASS SHARES
--------------------------------------------------------------------
<S> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge (Load)
Imposed on Purchases None
ANNUAL FUND OPERATING EXPENSES
(EXPENSE THAT ARE DEDUCTED FROM FUND
ASSETS)
Management fees(1) 0.30%
(12b-1) fees None
Service Organization fees(1) 0.35%
Other expenses 0.29%
TOTAL ANNUAL FUND
OPERATING EXPENSES 0.94%
FEE WAIVER(1) 0.45%
NET ANNUAL FUND
OPERATING EXPENSES 0.49%
</TABLE>
- --------
(1) The Fund's Adviser and Distributor have contractually agreed to waive a
portion of the advisory fees and service organization fees at least until
May 31, 2000. As a result, Management fees would be 0.20% and service
organization fees would be 0.0%. You will be notified if the waiver is
discontinued after that date.
9
<PAGE> 11
EXAMPLE: THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES:
o $10,000 INVESTMENT
o 5% ANNUAL RETURN
o REDEMPTION AT THE END OF EACH PERIOD
o NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION OF
THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2000.
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
<TABLE>
<CAPTION>
MONEY MARKET FUND
Institutional Class
Shares
---------------------------------------------------------------
<S> <C>
One Year After Purchase $ 50
Three Years After Purchase $ 256
Five Years After Purchase $ 480
Ten Years After Purchase $1136
</TABLE>
10
<PAGE> 12
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
THE SHORT TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE As high a level of current income
as is consistent with limiting the
risk of potential loss.
PRINCIPAL INVESTMENT The Fund normally invests at least
STRATEGIES 65% of its total assets in
securities issued or guaranteed by
the U.S. Government, its agencies
and instrumentalities ("U.S.
Government Securities"). Under
normal market conditions, the Fund
will maintain a dollar weighted
average portfolio of less than
three years with a maximum
effective maturity of
approximately five years for any
individual security. The Fund
focuses on maximizing income
consistent with prudent investment
risk within this maturity range
and credit and risk tolerances
established for the Fund. The Fund
typically seeks to increase its
total return by shortening the
average maturity of its portfolio
securities when it expects
interest rates to increase and
lengthening the average maturity
to take advantage of expected
interest rate declines.
The Fund may also invest a portion
of its assets in domestic and
foreign bank obligations,
commercial paper, investment grade
corporate debt securities,
investment grade mortgage and
asset-backed securities and other
debt securities, including money
market securities which are of
comparable quality in the
Adviser's opinion and interest
rate futures contracts. The
Adviser will sell securities based
upon the Fund's current strategic
outlook.
11
<PAGE> 13
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
THE SHORT TERM GOVERNMENT INCOME FUND, CONTINUED
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an indication
of the risks of an investment in the Fund by
showing its performance from year to year and
as compared to a broad-based securities index.
The Lehman Brothers 1-3 Year Government Index
in the table below, is an unmanaged index
comprised of U.S. Treasury issues, debt of U.S.
Government agencies and corporate debt
guaranteed by the U.S. Government.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR INSTITUTIONAL CLASS SHARES
(Both the chart and the table assume
reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1993 4.78%
1994 0.15%
1995 9.79%
1996 4.17%
1997 6.29%
1998 6.28%
</TABLE>
Best quarter: 3rd Qtr 1992 3.01%
Worst quarter: 1st Qtr 1994 -0.44%
Past performance does not indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS SHARES 6/1/92 6.28% 5.29% 5.38%
- --------------------------------------------------------------------------------------------------------------------------
LEHMAN BROTHERS 1-3 YEAR
GOVERNMENT INDEX 6/1/92 6.97% 5.96% 5.99%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was .85% versus ____% for the Lehman
Brothers 1-3 Year Government Index.
12
<PAGE> 14
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES A high level of current income.
Total return, with certain
parameters, is a secondary
consideration.
PRINCIPAL INVESTMENT The Fund normally invests at least
STRATEGIES 65% of its total assets in U.S.
Government Securities. The Fund
will normally have a dollar
weighted average portfolio
maturity of 3-10 years.
While maturity and credit quality
are the most important investment
factors, the Fund also considers
the following when making
investment decisions:
o current yield and yield to
maturity
o potential for capital gain
The Fund may also invest a portion
of its assets in domestic and
foreign bank obligations,
commercial paper, investment grade
corporate debt securities,
investment grade mortgage and
asset-backed securities and other
debt securities, including money
market securities which are of
comparable quality in the
Adviser's opinion and interest
rate futures contracts. There are
no restrictions on the maturity of
any individual investments of the
Fund. The Adviser will sell
securities based upon the Fund's
current strategic outlook.
13
<PAGE> 15
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND, CONTINUED
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an
indication of the risks of an investment
in the Fund by showing its
performance from year to year and as
compared to a broad-based securities
index. The Lehman Brothers
Government/Corporate Index in the
table below, is an unmanaged index
comprised of U.S. Treasury issues,
debt of U.S. Government agencies
and corporate debt guaranteed by the
U.S. Government.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR INSTITUTIONAL CLASS SHARES
(Both the chart and the table assume
reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1994 -4.72%
1995 17.06%
1996 1.37%
1997 9.24%
1998 8.56%
</TABLE>
Best quarter: 3rd Qtr 1998 4. 78%
Worst quarter: 1st Qtr 1994 -3.25%
Past performance does not indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS SHARES 6/1/92 8.58% 6.05% 7.25%
- --------------------------------------------------------------------------------------------------------------------------
LEHMAN BROTHERS
GOVERNMENT/CORPORATE INDEX 6/1/92 9.47% 7.30% 8.22%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was -3.46% versus ____% for the Lehman
Brothers Government/Corporate Index.
14
<PAGE> 16
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
PRINCIPAL RISKS
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Investing in the Bond Funds involves
risks common to any investment in
securities. By itself, no Fund
constitutes a balanced investment
program. An investment in a Bond Fund
is not a bank deposit and is not
insured or guaranteed by the Federal
Deposit Insurance Corporation or any
other government agency.
The Bond Funds will invest primarily
in fixed income securities, which
present a lesser potential for capital
appreciation than equity securities.
There is no guarantee that the Funds
will meet their goals. When you sell
your shares in the Funds, they may be
worth more or less than you paid for
them. It is possible to lose money by
investing in the Funds.
INTEREST RATE RISK
All bonds fluctuate in value as
interest rates fluctuate. Generally,
as interest rates rise, the value of a
Fund's bond investments, and of its
shares, will decline. If interest
rates decline, the Fund's bond
investments (and its share price) will
increase in value. In general, the
shorter the maturity of a bond, the
lower the risk of price fluctuation
and the lower the return.
CREDIT RISK
To the extent the Bond Funds invest in
non-U.S. government debt securities,
they are subject to greater credit
risk. Bonds are subject to the risk
that the issuer may not make timely
payments of principal and interest, or
may default. This risk increases the
lower the credit rating of an
instrument or its issuer. Each Fund
can acquire bonds that carry
investment grade credit ratings, which
are bonds rated by a Rating Agency in
the four highest rating categories.
Obligations rated in the fourth
highest rating category are considered
to have speculative characteristics.
If an issuer of fixed income
securities defaults on its obligations
to pay interest and repay principal,
or a bond's credit rating is
downgraded, a Fund could lose money.
15
<PAGE> 17
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
PRINCIPAL RISKS, CONTINUED
- --------------------------------------------------------------------------------
Two other principal risks of fixed
income (bond) investing are market
risk and selection risk. Market risk
means that the bond market in general
has ups and downs, which may affect
the performance of any individual
fixed income security. Selection risk
means that the particular bonds that
are selected for a Fund may
underperform the market or other funds
with similar objectives.
ADDITIONAL PRINCIPAL PREPAYMENT RISK
INVESTMENT RISKS A Fund's investments in mortgage-
related securities are subject to the
risk that the principal amount of the
underlying mortgage may be repaid
prior to the bond's maturity date.
Such repayments are common when
interest rates decline. When such a
repayment occurs, no additional
interest will be paid on the
investment. Prepayment exposes a Fund
to potentially lower return upon
subsequent reinvestment of the
principal.
CALL RISK
Call risk is the chance that during
periods of falling interest rates, a
bond issuer will "call" - or repay - a
high-yielding bond before its maturity
date. Forced to reinvest the
unanticipated proceeds at lower
interest rates, the Fund would
experience a decline in income and the
potential for taxable capital gains.
Call risk is generally high for
longer-term bonds.
A full discussion of all permissible
investments can be found in the SAI.
WHO MAY WANT TO INVEST? Consider investing in a Bond Fund if
you are:
o SEEKING TO ADD A MONTHLY INCOME
COMPONENT TO YOUR PORTFOLIO
o SEEKING HIGHER POTENTIAL RETURNS
THAN THOSE PROVIDED BY MONEY
MARKET FUNDS
o WILLING TO ACCEPT THE RISKS OF
PRICE AND DIVIDEND FLUCTUATIONS
The Bond Funds will not be appropriate
for anyone:
o SEEKING SAFETY OF PRINCIPAL
16
<PAGE> 18
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
FEES AND EXPENSES
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Bond Funds.
FEE TABLE
<TABLE>
<CAPTION>
THE SHORT TERM THE INTERMEDIATE TERM
GOVERNMENT INCOME FUND GOVERNMENT INCOME FUND
Institutional Class Shares Institutional Class Shares
---------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge (Load)
Imposed on Purchases None None
Maximum Deferred Sales
Charge (Load) None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSE THAT ARE DEDUCTED FROM
FUND ASSETS)
Management fees 0.40% 0.50%
Distribution (12b-1) fees None None
Service Organization fees(1) 0.35% 0.35%
Other expenses 0.29% 0.34%
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.04% 1.19%
FEE WAIVER(1) 0.35% 0.35%
NET ANNUAL FUND
OPERATING EXPENSES 0.69% 0.84%
</TABLE>
- --------
(1) The Fund's Distributor has contractually agreed to waive the service
organization fees at least until May 31, 2000. As a result, service
organization fees would be 0.0%. You will be notified if the waiver is
discontinued after that date.
17
<PAGE> 19
EXAMPLE: THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE BOND FUNDS WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE
ASSUMES:
o $10,000 INVESTMENT
o 5% ANNUAL RETURN
o REDEMPTION AT THE END OF EACH PERIOD
o NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION OF
THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2000
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
<TABLE>
<CAPTION>
THE SHORT TERM THE INTERMEDIATE TERM
GOVERNMENT INCOME FUND GOVERNMENT INCOME FUND
Institutional Class Shares Institutional Class Shares
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
One Year After Purchase $ 70 $ 86
Three Years After Purchase $ 297 $ 344
Five Years After Purchase $ 543 $ 624
Ten Years After Purchase $1258 $1434
</TABLE>
18
<PAGE> 20
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE SMALL CAP EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT The Fund normally invests at least 65%
STRATEGIES of its total assets in a broadly
diversified portfolio of common stocks
of small capitalized companies
representing the major economic sectors
comprising the Standard and Poor's
SmallCap 600 Index at the time of
purchase. The Fund's Adviser selects
stocks that it believes have attractive
valuation, are undergoing positive
change and are fundamentally strong. As
of June 30, 1999, the companies in the
S&P 600 SmallCap Index had a market
capitalization of up to approximately
$____ billion. 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 SmallCap 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.
The Adviser will consider selling
securities if the issuer's market
capitalization increases to the point
that it is no longer included in the S&P
600 SmallCap Index.
The Fund may also invest, under normal
conditions, up to 35% of its total
assets in equity securities and
equivalents of larger capitalization
companies, preferred stock, foreign
securities/ American Depository Receipts
("ADRs"), investment grade debt
securities, convertible securities,
warrants, money market instruments and
stock or index options and futures
contracts.
The Fund may invest temporarily for
defensive purposes up to 100% of its
assets in non-equity securities, money
market instruments and in the equity
securities of larger capitalized
companies.
19
<PAGE> 21
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE SMALL CAP EQUITY FUND, CONTINUED
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an
indication of the risks of an investment
in the Fund by showing its
performance from year to year and as
compared to a broad-based securities
index. The Standard and Poor's Small
Cap 600 Index in the table below is an
unmanaged index of 600 selected
common stocks, most of which are
listed on the New York Stock Exchange.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR INSTITUTIONAL CLASS SHARES
(Both the chart and the table assume
reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1998 -3.62%
</TABLE>
Best quarter: 4th Qtr 1998 15.06%
Worst quarter: 3rd Qtr 1998 -21.82%
Past performance does not indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS SHARES 10/1/97 -3.62% N/A -8.86%
- ---------------------------------------------------------------------------------------------------------------------
S&P SMALL CAP 600 INDEX 10/1/97 -1.31% N/A -15.49%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was -2.04% versus ____% for the S&P
Small Cap 600 Index.
20
<PAGE> 22
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE MID CAP EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE Growth of capital by attempting to
outperform the S&P MidCap Index.
PRINCIPAL INVESTMENT STRATEGIES The Fund normally invests at least
65% of its total assets in common
stocks of mid-sized companies
(those with market capitalizations
ranging from $200 million to $5.2
billion at the time of purchase)
including common stocks listed on
the S&P MidCap Index. The Fund's
Adviser selects stocks that have
attractive valuation, the
potential for future earnings
growth and in the Adviser's
opinion, are likely to outperform
the S&P MidCap Index. 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.
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. The Adviser will
consider selling those securities
which no longer meet the Fund's
criteria for market
capitalization.
The Fund may also invest, under
normal market conditions, up to
35% of its total assets, in
preferred stock, warrants, foreign
securities/ADRs, equity securities
of larger capitalized companies,
investment grade debt securities,
convertible securities, money
market instruments and stock or
index options and futures
contracts.
The Fund may invest temporarily
for defensive purposes up to 100%
of its total assets in non-equity
securities, money market
instruments and in the equity
securities of larger capitalized
companies.
21
<PAGE> 23
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE MID CAP EQUITY FUND, CONTINUED
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an
indication of the risks of an investment
in the Fund by showing its
performance from year to year and as
compared to a broad-based securities
index. The Standard and Poor's
MidCap Index in the table below is an
unmanaged index of 400 selected
common stocks of mid sized
companies.
PERFORMANCE BAR CHART AND
TABLE YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR INSTITUTIONAL CLASS SHARES
(Both the chart and the table
assume reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1995 35.98%
1996 26.98%
1997 31.76%
1998 5.66%
</TABLE>
Best quarter: 4th Qtr 1998 19.46%
Worst quarter: 3rd Qtr 1998 -15.44%
Past performance does not indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS SHARES 2/24/94 5.66% N/A 19.09%
- -------------------------------------------------------------------------------------------------------------------------
S&P MIDCAP INDEX 2/24/94 19.12% N/A 24.44%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was 4.51% versus ____% for the S&P
MidCap Index.
22
<PAGE> 24
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE LARGE CAP EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES Long-term capital appreciation.
Income generation is a secondary
consideration.
PRINCIPAL INVESTMENT STRATEGIES The Fund normally invests at least
65% of its 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's Adviser focuses on
stocks that it believes are
undervalued in terms of price or
other financial measurements. In
particular, 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.
The Fund may also 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
securities' market value. Although
the Fund anticipates it will
invest primarily in companies
found in the S&P 500(R)Index, it
may also invest in smaller
capitalization companies. The
Adviser will consider selling
securities which no longer meet
the Fund's criteria for investing.
The Fund may also invest, under
normal market conditions, up to
35% of its total assets in foreign
securities/ADRs, preferred stock,
investment grade debt securities,
warrants, convertible securities,
money market instruments and stock
futures contracts.
The Fund may invest temporarily
for defensive purposes up to 100%
of its total assets in debt
securities rated A or better by a
Rating Agency, bank obligations
and money market instruments.
23
<PAGE> 25
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE LARGE CAP EQUITY FUND, CONTINUED
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an indication
of the risks of an investment in the Fund by
showing its performance from year to year and as
compared to a broad-based securities
index. The S&P 500(R) Index, in the
table below, is an unmanaged index of
common stocks representative of the
large company sector of the equity
market.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR INSTITUTIONAL CLASS SHARES
(Both the chart and the table assume
reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1993 12.01%
1994 -3.77%
1995 36.02%
1996 23.79%
1997 32.99%
1998 28.78%
</TABLE>
Best quarter: 4th Qtr 1998 20.61%
Worst quarter: 3rd Qtr 1998 -10.46%
Past performance does not indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS SHARES 6/1/92 28.78% 22.65% 20.36%
- -------------------------------------------------------------------------------------------------------------------------
S&P 500(R)INDEX 6/1/92 28.58% 24.06% 20.70%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was 10.03% versus ____% for the S&P
500(R) Index.
24
<PAGE> 26
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
PRINCIPAL RISKS
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Investing in the Equity Funds involves
risks common to any investment in
securities. By itself, no Fund
constitutes a balanced investment
program.
An investment in an Equity Fund is not
a bank deposit and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency.
The Equity Funds will invest
principally in common stocks, which
have historically presented greater
potential for capital appreciation
than fixed income securities, but do
not provide the same protection of
capital or assurance of income. There
is no guarantee that the Funds will
meet their goals. When you sell your
shares in the Funds, they may be worth
more or less than you paid for them.
It is possible to lose money by
investing in the Funds.
Two principal risks of equity
investing are market risk and
selection risk. Market risk means that
the stock market in general has ups
and downs, which may affect the
performance of any individual stock.
Selection risk means that the
particular stocks that are selected
for a Fund may underperform the market
or other funds with similar
objectives.
CAPITALIZATION RISK
While stocks of smaller companies can
provide greater growth potential and
potentially higher returns, they carry
higher risks than those of larger
companies. They may trade infrequently
or in lower volumes, making it
difficult for a Fund to sell its
shares at the price it wants. Smaller
companies may be more sensitive to
changes in the economy overall.
Historically, small company stocks
have been more volatile than those of
larger companies. As a result, the
Small Cap Equity Fund's net asset
value may be subject to rapid and
substantial changes. The Mid Cap
Equity Fund is also subject to the
same risk.
25
<PAGE> 27
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
PRINCIPAL RISKS, CONTINUED
- --------------------------------------------------------------------------------
ADDITIONAL PRINCIPAL FOREIGN INVESTMENT RISK
INVESTMENT RISKS Overseas investing carries potential
risks not associated with domestic
investments. Such risks include, but
are not limited to: (1) currency
exchange rate fluctuations, including
adverse effects due to the euro
conversion (2) political and financial
instability, (3) less liquidity and
greater volatility of foreign
investments, (4) lack of uniform
accounting, auditing and financial
reporting standards, (5) less
government regulation and supervision
of foreign stock exchanges, brokers
and listed companies, (6) increased
price volatility, (7) delays in
transaction settlement in some foreign
markets, and (8) adverse impact of the
euro conversion on the business or
financial condition of companies in
which the Fund is invested.
A full discussion of all permissible
investments can be found in the SAI.
WHO MAY WANT TO INVEST? Consider investing in an Equity Fund
if you are:
O PURSUING A LONG-TERM GOAL SUCH AS
RETIREMENT
O SEEKING TO ADD A GROWTH COMPONENT
TO YOUR PORTFOLIO
O WILLING TO ACCEPT HIGHER RISKS OF
INVESTING IN THE STOCK MARKET IN
EXCHANGE FOR POTENTIALLY HIGHER
LONG-TERM RETURNS
The Equity Funds will not be
appropriate for anyone:
O SEEKING MONTHLY INCOME
O PURSUING A SHORT-TERM GOAL OR
INVESTING EMERGENCY RESERVES
O SEEKING SAFETY OF PRINCIPAL
26
<PAGE> 28
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
FEES AND EXPENSES
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Class shares of the Equity Funds.
<TABLE>
<CAPTION>
FEE TABLE
THE SMALL CAP THE MID CAP THE LARGE CAP
EQUITY FUND EQUITY FUND EQUITY FUND
Institutional Institutional Institutional
Class Shares Class Shares Class Shares
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge (Load)
Imposed on Purchases None None None
Maximum Deferred Sales
Charge (Load) None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
Management fees 1.00%(1) 0.75% 0.60%
Distribution [and/or Service] None None None
(12b-1) fees
Service Organization fees(1) 0.35% 0.35% 0.35I%
Other expenses 0.40% 0.34% 0.30%
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.75% 1.44% 1.55%
FEE WAIVER(1) 0.55% 0.35% 0.65%
NET ANNUAL FUND
OPERATING EXPENSES 1.20% 1.09% 0.90%
</TABLE>
- --------
(1) The Fund's Adviser and Distributor have contractually agreed to waive a
portion of the advisory fee for the Small Cap Equity Fund and the service
organization fee for the Equity Funds at least until May 31, 2000. As a
result, Management fees would be 0.80% and service organization fees for
the Equity Funds would be 0.0%. You will be notified if the waiver is
discontinued after that date.
27
<PAGE> 29
EXAMPLE: THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUNDS WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES:
o $10,000 INVESTMENT
o 5% ANNUAL RETURN
o REDEMPTION AT THE END OF EACH PERIOD
o NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION OF
THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2000
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
<TABLE>
<CAPTION>
SMALL CAP MID CAP LARGE CAP
EQUITY FUND EQUITY FUND EQUITY FUND
Institutional Institutional Institutional
Class Shares Class Shares Class Shares
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Year After Purchase $ 122 $ 111 $ 92
Three Years After Purchase $ 500 $ 422 $ 363
Five Years After Purchase $ 906 $ 758 $ 657
Ten Years After Purchase $2065 $1720 $1503
</TABLE>
28
<PAGE> 30
ADDITIONAL INFORMATION
INVESTING FOR When the Adviser determines that market
DEFENSIVE PURPOSES conditions are appropriate, each of the
Equity and Bond Funds may, for temporary
defensive purposes, hold investments that
are not part of its main investment
strategy to try to avoid losses during
unfavorable market conditions. These
investments may include uninvested cash.
Each of the Funds may invest up to 100% of
its total assets in money market
instruments including short-term U.S.
Government Securities, bank obligations
and commercial paper. If a Fund is
investing defensively, it will not be
pursuing its investment objective.
PORTFOLIO TURNOVER The portfolio turnover rate for each Fund
is included in the Financial Highlights
section of this Prospectus. The Funds are
actively managed and, in some cases in
response to market conditions, a Fund's
portfolio turnover may exceed 100%. A
higher rate of portfolio turnover
increases brokerage and other expenses,
which must be borne by the Fund and its
shareholders and may adversely affect the
Fund's performance. High portfolio
turnover also may result in the
realization of substantial net short-term
capital gains, which are taxable when
distributed to shareholders.
YEAR 2000 AND THE Like other funds and business
PERFORMANCE FUNDS organizations around the world, the Funds
could be adversely affected if the
computer systems used by the Adviser and
the Funds' other service providers do not
properly process dates beyond December 31,
1999. In addition, year 2000 issues may
adversely affect companies in which the
Funds invest where, for example, such
companies incur substantial costs to
address year 2000 issues or suffer losses
caused by the failure to do so in an
adequate or timely manner.
The Funds have been assured that the
Adviser and other service providers have
developed and are implementing clearly
defined and documented plans intended to
minimize risks to services critical to the
Funds' operations associated with year
2000 issues. Internal efforts include a
commitment to dedicate adequate staff and
funding to identify and remedy year 2000
issues, and specific actions such as
inventorying software systems, determining
inventory items that may not function
properly after December 31, 1999,
reprogramming or replacing such systems,
and retesting for year 2000 readiness. The
Adviser and the Funds' service providers
are likewise seeking assurances from their
respective vendors and suppliers that such
entities are addressing any year 2000
issues, and each provider intends to
engage, where appropriate, in private
and/or industry interface testing of
systems for year 2000 readiness.
In the event that any systems upon which
the Funds are dependent are not year 2000
ready by December 31, 1999, administrative
errors and account maintenance failures
would likely occur.
While the ultimate costs or consequences
of incomplete or untimely resolution of
year 2000 issues by the Adviser or the
Funds' service providers cannot be
accurately assessed at this time, the
Funds currently have no reason to believe
that the year 2000 plans of the Adviser
and the Funds' service providers will not
be completed by
29
<PAGE> 31
December 31, 1999, or that the anticipated
costs associated with full implementation
of their plans will have a material
adverse impact on either their business
operations or financial conditions or
those of the Funds. The Funds and the
Adviser will continue to closely monitor
developments relating to this issue,
including development by the Adviser and
the Funds' service providers of
contingency plans for providing back-up
computer services in the event of a
systems failure or the inability of any
provider to achieve year 2000 readiness.
Separately, the Adviser will monitor
potential investment risk related to year
2000 issues.
30
<PAGE> 32
FUND MANAGEMENT
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Trustmark National Bank, 248 East Capital 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 review, 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.
For these advisory services, the Funds paid fees as follows during the fiscal
year ended May 31, 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
As a percentage of
average daily net
assets as of 5/31/99
- ------------------------------------------------------------------------------------------------------------
<S> <C>
The Money Market Fund 0.15%*
- ------------------------------------------------------------------------------------------------------------
The Short Term Government Income Fund 0.40%
- ------------------------------------------------------------------------------------------------------------
The Intermediate Term Government Income Fund 0.45%*
- ------------------------------------------------------------------------------------------------------------
The Small Cap Equity Fund 1.00%
- ------------------------------------------------------------------------------------------------------------
The Mid Cap Equity Fund 0.75%
- ------------------------------------------------------------------------------------------------------------
The Large Cap Equity Fund 0.60%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*Trustmark National Bank waived a portion of its contractual fees for these
Funds for the most recent fiscal year. Contractual fees (without waivers) are
0.30% for the Money Market Fund and 0.50% for the Intermediate Term Government
Income Fund.
31
<PAGE> 33
FUND MANAGEMENT
PERFORMANCE PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
Trustmark has an investment management staff of highly trained professionals who
manage the assets of each Performance 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
Government Income Fund's portfolio.
Robert H. Spaulding is responsible for the day-to-day management of the
Intermediate Term Government Income 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 the
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.
Douglas H. Ralston, CFA, is responsible for the day-to-day management of the Mid
Cap Equity Fund. He is also responsible for the day-to-day- management of the
Small Cap Equity Fund with Douglas P. Muenzenmay acting as Associate Manager.
Mr. Ralston serves as Vice President and Trust Officer with over 12 years'
investment experience. Mr. Ralston joined Trustmark in 1991. Prior to joining
Trustmark, Mr. Ralston was employed by Third National Bank of Nashville.
Charles 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.
DISTRIBUTOR AND ADMINISTRATOR
- --------------------------------------------------------------------------------
BISYS Fund Services ("BISYS") provides management and administrative services to
the Funds, including providing office space, equipment and clerical personnel to
the Funds and supervising custodial, auditing, valuation, bookkeeping and legal
services. BISYS Fund Services, Inc., an affiliate of BISYS, acts as the fund
accountant, transfer agent and dividend paying agent of the Funds. BISYS and
BISYS Fund Services, Inc. are each located at 3435 Stelzer Road, Columbus, Ohio
43219.
Performance Funds Distributor, Inc. 3435 Stelzer Road, Columbus, Ohio 43219 acts
as the Funds' distributor. The Distributor is an affiliate of BISYS and was
formed specifically to distribute the Funds.
32
<PAGE> 34
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
- --------------------------------------------------------------------------------
HOW NAV IS CALCULATED MONEY MARKET FUND
The NAV is calculated by The Money Market Fund's net asset
adding the total value of the value, or NAV, is expected to be
Fund's investments and constant at $1.00 per share,
other assets, subtracting its although its value is not
liabilities and then dividing guaranteed. The NAV is determined at
that figure by the number of 12 noon Eastern time on days the New
outstanding shares of the York Stock Exchange is open. The
Fund: Money Market Fund values its
securities at their amortized cost.
The amortized cost method involves
NAV= valuing a portfolio security
initially at its cost on the date of
the purchase and thereafter assuming
TOTAL ASSETS - LIABILITIES a constant amortization to maturity
- -------------------------- of the difference between the
NUMBER OF SHARES principal amount due at maturity and
OUTSTANDING initial cost.
OTHER FUNDS
The per share NAV for each non-Money
You can find most Funds' Market Fund is determined and its
NAV daily in the Wall Street shares are priced at the close of
Journal and in other regular trading on the New York
newspapers. Stock Exchange, normally at 4:00
p.m. Eastern time, on days the
Exchange is open.
Your order for purchase, sale or
exchange of shares is priced at the
next NAV calculated after your order
is received in good order by the
Fund on any day that both the New
York Stock Exchange and the Funds'
custodian are open for business. For
example: If you properly place a
purchase order to buy shares of the
Intermediate Term Government Income
Fund, it must be received by 4:00
p.m. Eastern time in order to
receive the NAV calculated at 4:00
p.m. If your order is received after
4:00 p.m. Eastern time, you will
receive the NAV calculated on the
next day at 4:00 p.m. Eastern time.
The non-Money Market Funds'
securities, other than short-term
debt obligations, are generally
valued at current market prices
unless market quotations are not
available, in which case securities
will be valued by a method that the
Board of Trustees believes
accurately reflects fair value. Debt
obligations with remaining
maturities of 60 days or less are
valued at amortized cost or based on
their acquisition cost.
33
<PAGE> 35
SHAREHOLDER INFORMATION
PURCHASING AND SELLING YOUR INVESTMENT SHARES
- --------------------------------------------------------------------------------
PURCHASING AND ADDING TO YOUR SHARES
You may purchase shares Institutional Class shares of the Funds
of the Funds through the are offered at net asset value without a
Performance Funds sales load. Purchases of Institutional
Distributor or through Class shares may only be made by one of
banks, brokers and other the following types of "Institutional
investment Investors": (1) trusts, or investment
representatives, which management and other fiduciary accounts
may charge additional managed or administered by Trustmark or
fees and may require its affiliates or correspondents pursuant
higher minimum to a written agreement, (2) employees of
investments or impose Trustmark (and family members), the
other limitations on buying Distributor, Administrator, and affiliates
and selling shares. If you and correspondents, (3) or Trustees of the
purchase shares through Trust (and family members) or Directors of
an investment Trustmark (and family members), (4) any
representative, that party persons purchasing shares with the
is responsible for proceeds of a distribution from a trust,
transmitting orders by investment management and other fiduciary
close of business and account managed or administered by
may have an earlier cut- Trustmark or its affiliates or
off time for purchase and correspondents, pursuant to a written
sale requests. Consult agreement and (5) other persons or
your investment organizations authorized by the
representative or Distributor. The Trust and the Distributor
institution for specific reserve the right to waive or reduce the
information. minimum initial investment amount with
respect to certain accounts. 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.
All purchases must be in U.S. dollars. A
fee will be charged for any checks that do
not clear. Third-party checks are not
accepted.
The Distributor may reject a purchase
order if it considers it in the best
interest of the Fund and its shareholders.
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.
- --------------------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
Each Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
- --------------------------------------------------------------------------------
34
<PAGE> 36
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
BY MAIL
If purchasing through your financial advisor or brokerage account, simply tell
your advisor or broker that you wish to purchase shares of the Funds and he or
she will take care of the necessary documentation. For all other purchases,
follow the instructions below.
All investments made by regular mail or express delivery, whether initial or
subsequent, should be sent:
BY REGULAR MAIL: BY EXPRESS MAIL:
Performance Funds Trust Performance Funds Trust
P.O. Box 182484 3435 Stelzer Road
Columbus, OH 43218-2484 Columbus, OH 43219
For Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "Performance Funds Trust"
and include the name of the appropriate Fund(s) on the check.
3. Mail or deliver application and payment to address above.
For Subsequent Investment:
1. Use the investment slip attached to your account statement. Or, if
unavailable, provide the following information:
o Fund name
o Share class
o Amount invested
o Account name and account number
2. Make check, bank draft or money order payable to "Performance Funds Trust"
and include your account number on the check.
3. Mail or deliver investment slip and payment to the address above.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be a
U. S. Bank. Your bank or broker may charge for this service.
Establish the electronic purchase option on your account application or call
1-800-737-3676. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-737-3676 to arrange a transfer from your bank account.
35
<PAGE> 37
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial
institutions to send funds to each
other, almost instantaneously. With
an electronic purchase or sale, the
transaction is made through the
Automated Clearing House (ACH) and
may take up to eight days to clear.
There is generally no fee for ACH
transactions.
------------------------------------
BY WIRE TRANSFER
Call 1-800-737-3676 to obtain a new account number and instructions for sending
your application, and for instructing your bank to wire transfer your
investment.
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
- --------------------------------------------------------------------------------
You can add to your account by using the convenient options described below. The
Fund reserves the right to change or eliminate these privileges at any time with
60 days notice.
- --------------------------------------------------------------------------------
36
<PAGE> 38
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM PAYROLL DIRECT DEPOSIT
You can make automatic investments in the You may set up a payroll
Funds from your bank account. Automatic direct deposit arrangement
investments can be as little as $25; no investment through your employer or
is required to establish an automatic investment retirement benefit source.
account. You may make periodic
investments of at least $20
To invest regularly from your bank account: per pay period.
o Complete the Automatic Investment Plan
portion on your Account Application. To invest regularly from
Make sure you note: your paycheck or
o Your bank name, address and account government check:
number Call 1-800-737-3676 for an
o The amount you wish to invest enrollment form.
automatically (minimum $25) ---------------------------
o How often you want to invest (every
month or 4 times a year)
o Attach a voided personal check.
- --------------------------------------------------------------------------------
Dividends and Distributions
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Capital gains are distributed at least annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE OWNED
YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION DATE, SOME
OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A DISTRIBUTION.
- --------------------------------------------------------------------------------
37
<PAGE> 39
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
- --------------------------------------------------------------------------------
You may sell your shares at WITHDRAWING MONEY FROM YOUR FUND
any time. Your sales price INVESTMENT
will be the next NAV after As a mutual fund shareholder, you are
your sell order is received technically selling shares when you
in good order by the Fund, request a withdrawal in cash. This is
its transfer agent, or your also known as redeeming shares or a
investment representative. redemption of shares.
Normally you will receive --------------------------------------
your proceeds within a
week after your request is
received. See section on INSTRUCTIONS FOR SELLING SHARES
"General Policies on Selling If selling your shares through your
Shares" below. financial adviser or broker, ask him
or her for redemption procedures. Your
adviser and/or broker may have
transaction minimums and/or
transaction times which will affect
your redemption. For all other sales
transactions, follow the instructions
below.
By telephone 1. Call 1-800-737-3676 with
(unless you have declined telephone instructions as to how you wish to
sales privileges) receive your funds (mail, wire,
electronic transfer). (See "General
Policies on Selling Shares--Verifying
Telephone Redemptions" below)
- --------------------------------------------------------------------------------
By mail 1. Call 1-800-737-3676 to request
(See "General Policies on Selling redemption forms or write a letter of
Shares - Redemptions in Writing instruction indicating:
Required") o your Fund and account number
o amount you wish to redeem
o address where your check should be
sent
o account owner signature
2. Mail to:
Performance Funds Trust
P.O. Box 182484
Columbus, OH 43218-2484
- --------------------------------------------------------------------------------
By overnight service See "By mail" instruction 1 above.
(See "General Policies on Selling 2. Send to
Shares--Redemptions Performance Funds Trust
in Writing Required" below) c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
38
<PAGE> 40
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
Wire transfer Call 1-800-737-3676 to request a wire
You must indicate this transfer.
option on your
application. If you call by 4 p.m. Eastern time,
your payment will normally be wired to
your bank on the next business day.
Note: Your financial institution
may also charge a separate fee.
- --------------------------------------------------------------------------------
Electronic Redemptions Call 1-800-737-3676 to request an
electronic redemption.
Your bank must participate in If you call by 4 p.m. Eastern time,
the Automated Clearing House the NAV of your shares will normally
(ACH) and must be a U.S. bank. be determined on the same day and the
proceeds credited within 8 days.
Your bank may charge
for this service.
AUTOMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The minimum periodic withdrawal is $100. To
activate this feature:
o Make sure you've checked the appropriate box on the Account Application. Or
call 1-800-737-3676.
o Include a voided personal check.
o Your account must have a value of $25,000 or more to start withdrawals.
REDEMPTION BY CHECK WRITING
You may write checks in amounts of $100 or more on your account in the Money
Market Fund. To obtain checks, complete the signature card section of the
Account Application or contact the Fund to obtain a signature card. Dividends
and distributions will continue to be paid up to the day the check is presented
for payment. You may not close your Money Market Fund account by writing a
check.
39
<PAGE> 41
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee, which include each of
the following.
o Redemptions over $25,000
o Your account registration or the name(s) in your account has changed
within the last 15 days
o The check is not being mailed to the address on your account
o The check is not being made payable to the owner of the account
o The redemption proceeds are being transferred to another Fund account
with a different registration.
A signature guarantee can be obtained from a financial institution, such as
a bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock
Exchange Medallion Signature Program) or SEMP (Stock Exchanges Medallion
Program). Members are subject to dollar limitations which must be
considered when requesting their guarantee. The Transfer Agent may reject
any signature guarantee if it believes the transaction would otherwise be
improper.
VERIFYING TELEPHONE REDEMPTIONS
The Funds make every effort to insure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders. If appropriate precautions have not been taken, the
Transfer Agent may be liable for losses due to unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, your redemption proceeds
will not be mailed until the Transfer Agent is satisfied that the check has
cleared (which may require up to 15 business days). You can avoid this delay by
purchasing shares with a certified check or federal funds wire.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders. If you experience difficulty making a telephone
redemption during periods of drastic economic or market change, you can send the
Funds your request by regular mail or express mail.
REDEMPTION IN KIND
Each Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind" for amounts redeemed by a shareholder, in any
90-day period, in excess of $250,000 or 1% of Fund net assets, whichever is
less. If the Fund deems it advisable for the benefit of all shareholders,
redemption in kind will consist of securities equal in market value to your
shares. When you convert these securities to cash, you will pay brokerage
charges.
40
<PAGE> 42
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
CLOSING OF SMALL ACCOUNTS
If your account falls (not as a result of market action) below $500 ($250 for
IRAs), the Fund may ask you to increase your balance. If it is still below $500
($250 for IRAs) after 30 days, the Fund may close your account and send you the
proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that remain
uncashed for six months will be canceled and the money reinvested in the
appropriate Fund.
41
<PAGE> 43
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
- --------------------------------------------------------------------------------
You can exchange your INSTRUCTIONS FOR EXCHANGING SHARES
shares in one Fund for Exchanges may be made by sending a
shares of the same class of written request to Performance
another Performance Fund, Funds Trust, P.O. Box 182484,
usually without paying Columbus OH 43218-2484, or by
additional sales charges calling 1-800-737-3676. Please
(see "Notes on exchanges" provide the following information:
below). No transaction fees o Your name and telephone number
are charged for exchanges. o The exact name on your account
and account number
You must meet the o Taxpayer identification number
minimum investment (usually your Social Security
requirements for the Fund number)
into which you are o Dollar value or number of
exchanging. Exchanges shares to be exchanged
from one Fund to another o The name of the Fund from
are taxable. which the exchange is to be
made
o The name of the Fund into
which the exchange is being
made.
See "Selling your Shares" for
important information about
telephone transactions.
-----------------------------------
NOTES ON EXCHANGES
The registration and tax
identification numbers of the two
accounts must be identical.
The Exchange Privilege (including
automatic exchanges) may be changed
or eliminated at any time upon a
60-day notice to shareholders.
Be sure to read carefully the
Prospectus of any Fund into which
you wish to exchange shares.
42
<PAGE> 44
SHAREHOLDER INFORMATION
SERVICE ORGANIZATIONS
- --------------------------------------------------------------------------------
Various banks, trust companies, broker-dealers (other than the Distributor) and
other financial organizations ("Service Organization(s)") may provide certain
administrative services for its customers who invest in the Funds through
accounts maintained at that Service Organization. The Funds, under servicing
agreements with the Service Organization, will pay the Service Organization an
annual rate up to .35% of the Fund's average daily net assets for these
services, which include:
o receiving and processing shareholder orders
o performing the accounting for customers' sub-accounts
o maintaining retirement plan accounts
o answering questions and handling correspondence for customer accounts
o acting as the sole shareholder of record for customer accounts
o issuing shareholder reports and transaction confirmations
o performing daily "sweep" functions
Investors who purchase, sell or exchange shares of the Funds through a customer
account maintained at a Service Organization may be charged extra for other
services which are not specified in the servicing agreement with the Fund but
are covered under separate fee schedules provided by the Service Organization to
their customers. Customers with accounts at Service Organizations should consult
their Service Organization for information concerning their sub-accounts. The
Adviser or Administrator also may pay Service Organizations for rendering
services to customers' sub-accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Any income a Fund receives is paid out, less expenses, in the form of dividends
to its shareholders. Income dividends on each Equity Fund are declared and paid
monthly. Dividends on all other Funds are declared daily and paid monthly.
Capital gains for all Funds are distributed at least annually.
An exchange of shares is considered a sale, and any related gains may be subject
to applicable taxes.
Taxes on capital gains distributions paid by the Funds will vary with the length
of time the Fund has held the security - not how long you have invested in the
Fund.
Some dividends may be taxable in the year in which they are declared, even if
they are paid or appear on your account statement the following year. Dividends
and distributions are treated in the same manner for federal income tax purposes
whether you receive them in cash or in additional shares.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements.
There is a penalty on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
43
<PAGE> 45
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE FUNDS'
FINANCIAL PERFORMANCE FOR THE PAST 5 YEARS [OR, IF SHORTER, THE PERIOD OF THE
FUNDS' OPERATIONS]. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE
FUND SHARE. THE TOTAL RETURNS IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR
WOULD HAVE EARNED [OR LOST] ON AN INVESTMENT IN THE FUND (ASSUMING REINVESTMENT
OF ALL DIVIDENDS AND DISTRIBUTIONS). THIS INFORMATION HAS BEEN AUDITED BY
PRICEWATERHOUSECOOPERS, LLP, WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL
STATEMENTS, ARE INCLUDED IN ANNUAL REPORT, WHICH IS AVAILABLE UPON REQUEST.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
MONEY MARKET FUND FINANCIAL HIGHLIGHTS
BOND FUNDS FINANCIAL HIGHLIGHTS
EQUITY FUNDS FINANCIAL HIGHLIGHTS
44
<PAGE> 46
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including each Fund's operations and investment
policies. It is incorporated by reference and is legally considered a part of
this prospectus.
- --------------------------------------------------------------------------------
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING A BROKER OR BANK THAT SELLS
THE FUND. OR CONTACT THE FUND AT:
PERFORMANCE FUNDS TRUST
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-PERFORM
- --------------------------------------------------------------------------------
You can review the Funds' reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
45
<PAGE> 47
PERFORMANCE FUNDS TRUST
CLASS A AND CLASS B SHARES
----------
PROSPECTUS
----------
SEPTEMBER __, 1999
MONEY MARKET FUND
-----------------
THE MONEY MARKET FUND
BOND FUNDS
----------
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
EQUITY FUNDS
------------
THE SMALL CAP EQUITY FUND
THE MID CAP EQUITY FUND
THE LARGE CAP EQUITY FUND
- ---------------------------
QUESTIONS?
CALL 1-800-PERFORM
OR YOUR INVESTMENT
REPRESENTATIVE.
- ---------------------------
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 48
TABLE OF CONTENTS
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES EACH FUND'S
INVESTMENTS, RISKS, PAST PERFORMANCE, AND FEES.
3 OVERVIEW
MONEY MARKET FUND
5 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES AND PERFORMANCE INFORMATION
7 PRINCIPAL RISKS
9 FEES AND EXPENSES
BOND FUNDS
11 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES AND PERFORMANCE
16 PRINCIPAL RISKS
17 FEES AND EXPENSES
EQUITY FUNDS
24 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES AND PERFORMANCE
27 PRINCIPAL RISKS
29 FEES AND EXPENSES
ADDITIONAL INFORMATION
30 INVESTING FOR DEFENSIVE PURPOSES
30 YEAR 2000 AND THE CENTURA FUNDS
FUND MANAGEMENT
31 INVESTMENT ADVISER
32 PORTFOLIO MANAGERS
SHAREHOLDER INFORMATION
33 PRICING OF FUND SHARES
34 PURCHASING AND ADDING TO YOUR SHARES
40 SELLING YOUR SHARES
41 GENERAL POLICIES ON SELLING SHARES
42 DISTRIBUTION ARRANGEMENTS/SALES CHARGES
43 DISTRIBUTION AND SERVICE (12B-1) FEES
53 EXCHANGING YOUR SHARES
47 SERVICE ORGANIZATIONS
54 DIVIDENDS, DISTRIBUTIONS AND TAXES
FINANCIAL HIGHLIGHTS
55
BACK COVER
56 WHERE TO LEARN MORE ABOUT THE FUNDS
2
<PAGE> 49
RISK/RETURN SUMMARY AND FUND EXPENSES
OVERVIEW
This prospectus describes the following funds offered by Performance Funds Trust
(the "Funds").
MONEY MARKET FUND RISK/RETURN PROFILE OF MUTUAL FUNDS
- ---------------------------------------------------------------
[CHART APPEARS HERE]
The Money Market Fund
BOND FUNDS
- ----------
The Short Term Government Income Fund
The Intermediate Term Government Income Fund
EQUITY FUNDS
- ------------
The Small Cap Equity Fund
The Mid Cap Equity Fund
The Large Cap Equity Fund
On the following pages, you will find important information about each Fund,
including:
o the investment objective
o principal investment strategy
o performance information
o fees and expenses, and
o principal risks associated with each Fund
The Funds are managed by Trustmark National Bank ("Trustmark" or the "Adviser").
3
<PAGE> 50
PRINCIPAL RISKS OF THE FUNDS
<TABLE>
<CAPTION>
- --------------------------------------------- ------------ ------------- ------------- ------------ --------- ---------------
MARKET SELECTION FOREIGN INTEREST CREDIT PREPAYMENT
RISK RISK INVESTMENT RATE RISK RISK RISK
RISK
- --------------------------------------------- ------------ ------------- ------------- ------------ --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
THE MONEY MARKET FUND X X X X
- --------------------------------------------- ------------ ------------- ------------- ------------ --------- ---------------
THE SHORT TERM GOVERNMENT INCOME FUND X X X X X
- --------------------------------------------- ------------ ------------- ------------- ------------ --------- ---------------
THE INTERMEDIATE TERM GOVERNMENT
INCOME FUND X X X X X
- --------------------------------------------- ------------ ------------- ------------- ------------ --------- ---------------
THE SMALL CAP EQUITY FUND X X X
- --------------------------------------------- ------------ ------------- ------------- ------------ --------- ---------------
THE MID CAP EQUITY FUND X X X
- --------------------------------------------- ------------ ------------- ------------- ------------ --------- ---------------
THE LARGE CAP EQUITY FUND X X X
- --------------------------------------------- ------------ ------------- ------------- ------------ --------- ---------------
</TABLE>
A complete description of these and other risks can be found in the sections
"Equity Funds - Principal Risks," "Bond Funds - Principal Risks" and "Money
Market Fund - Principal Risks."
4
<PAGE> 51
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
THE MONEY MARKET FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE As high a level of current income as is
consistent with preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests in a broad range of high
quality, short-term, money instruments which
have remaining maturities not to exceed 397
days. The Fund is required to maintain a
portfolio maturity of 90 days or less.
The Fund's investments may include any
investments permitted under federal rules
governing money market funds, including:
U.S. Government Securities, bank
obligations, commercial paper, corporate
debt securities, variable rate demand notes
and repurchase agreements and other high
quality short-term securities. Generally,
securities in which the Fund may invest will
not earn as high a yield as securities with
longer maturities or of lower quality.
The Adviser selects only those U.S.
dollar-denominated debt instruments that
meet the high quality and credit risk
standards established by the Board of
Trustees and consistent with Federal
requirements applicable to money market
funds. In accordance with such requirements,
the Fund will purchase securities that are
rated within the top two rating categories
by at least two nationally recognized
statistical rating organizations ("NRSROs")
or, if only one NRSRO has rated the
security, by that NRSRO, or if not rated,
the securities are deemed of comparable
quality pursuant to standards adopted by the
Board of Trustees. The Fund's investments in
securities with the second-highest rating
(or deemed of comparable quality) may not
exceed 5% of its total assets, and all the
Fund's commercial paper investments must be
in the highest rating category (or deemed of
comparable quality).
5
<PAGE> 52
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
THE MONEY MARKET FUND
- -------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an indication
of the risks of an investment in the Fund by
showing its performance from year to year.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASS A SHARES
(Both the chart and the table assume reinvestment of dividends and
distributions.)
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/98
FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1994 3.93%
1995 5.58%
1996 5.07%
1997 5.16%
1998 5.05%
</TABLE>
Past performance does not indicate how the Fund will perform in the future.
Best quarter: 3rd Qtr 1995 1.36%
Worst quarter: 1st Qtr 1994 0.71%
The returns for Class B shares will differ from the Class A returns shown in the
bar chart because of differences in expenses of each class. The table assumes
that Class B shareholders redeem all their fund shares at the end of the period
indicated.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES 9/30/93 5.05% 4.96% 4.86%
- --------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
(with applicable Contingent
Deferred Sales Charge) 9/30/93 4.76% 4.90% 4.81%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
1 For the period January 1, 1999 through June 30, 1999 the aggregate
(non-annualized) total returns of the Fund's Class A Shares was 2.21%.
As of May 31, 1999 the 7-day current yields of the Fund's Class A and B shares
were 4.43% and 3.43%, respectively. For current yield information on the Fund,
call 1-800-PERFORM. The Money Market Fund's yield appears in the Wall Street
Journal each Thursday.
The table above reflects the impact of any contingent deferred sales charges
that apply to Class B shares of the Money Market Fund.
- ------------------------
1 Both the chart and the table assume reinvestment of dividends and
distributions
6
<PAGE> 53
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
PRINCIPAL RISKS
- -------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS - Investing in the Money Market Fund involves
risks common to any investment in
securities. By itself, no Fund constitutes a
balanced investment program.
An investment in the Money Market Fund is
not a bank deposit of Trustmark National
Bank or any other bank and is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
The Money Market Fund expects to maintain a
net asset value of $1.00 per share, but
there is no assurance that they will be able
to do so on a continuous basis.
There can be no assurance that the
investment objective of the Money Market
Fund will be achieved.
SELECTION RISK
--------------
Like all investment funds, the Money Market
Fund is subject to the chance that poor
security selection will cause the Fund to
underperform other funds with similar
objectives.
INTEREST RATE RISK
------------------
Interest rate risk is the chance that the
value of the instruments held by the Fund
will decline due to rising interest rates.
When interest rates rise, the price of most
debt instruments goes down. When interest
rates go down, prices go up. The price of a
debt instrument is also affected by its
maturity. Debt instruments with shorter
maturities, such as those permitted for
money market funds tend to be less sensitive
to changes in interest rates than
instruments with longer maturities.
CREDIT RISK
-----------
Credit risk is the chance that the issuer of
a debt instrument will fail to repay
interest and principal in a timely manner or
may be unable to fulfill an obligation to
repurchase securities from the Fund,
reducing the Fund's return. Credit risk is
minimized by the Fund's policy of adequate
diversification among issuers and industries
and minimum credit risk requirements for
money market funds under applicable law.
INCOME RISK
-----------
Income risk is the chance that falling
interest rates will cause the Fund's income
to decline. Income risk is generally higher
for short-term debt instruments.
7
<PAGE> 54
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
PRINCIPAL RISKS, CONTINUED
- -------------------------------------------------------------------------------
ADDITIONAL PRINCIPAL PREPAYMENT RISK
INVESTMENT RISKS ---------------
The Fund's investments in
mortgage-related securities are
subject to the risk that the principal
amount of the underlying mortgage may
be repaid prior to the security's
maturity date. Such repayments are
common when interest rates decline.
When such a repayment occurs, no
additional interest will be paid on
the investment. Prepayment exposes the
Fund to a lower return upon subsequent
reinvestment of the principal.
A full discussion of all permissible
investments can be found in the
Statement of Additional Information
("SAI").
WHO MAY WANT TO INVEST? Consider investing in the Money Market
Fund if you:
o ARE SEEKING PRESERVATION OF
CAPITAL
o HAVE A LOW RISK TOLERANCE
o ARE WILLING TO ACCEPT LOWER
POTENTIAL RETURNS IN EXCHANGE FOR
A HIGHER DEGREE OF SAFETY
o ARE INVESTING SHORT-TERM RESERVES
The Money Market Fund will not be
appropriate for anyone:
o SEEKING HIGH TOTAL RETURNS
o PURSUING A LONG-TERM GOAL OR
INVESTING FOR RETIREMENT
8
<PAGE> 55
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
FEES AND EXPENSES
- -------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
FEE TABLE
The Money Market
Fund
A SHARES B SHARES
--------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR 0.00% 0.00%
INVESTMENT)
Maximum Sales Charge (Load) 0.00% 0.00%
Imposed on Purchases
ANNUAL FUND OPERATING EXPENSES
(EXPENSE THAT ARE DEDUCTED FROM
FUND ASSETS)
Management fees(1) 0.30% 0.30%
Distribution [and/or Service] 0.35%(1) 1.00%
(12b-1) fees
Service Organization Fees(1) 0.35% 0.35%
Other expenses 0.29% 0.29%
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.29% 1.94%
FEE WAIVER(1)
0.55% 0.45%
NET ANNUAL FUND
OPERATING EXPENSES 0.74% 1.49%
- -------------------------------
1 The Fund's Adviser and Distributor have contractually agreed to waive a
portion of the advisory fee, service organization fees and 12b-1 fees at least
until May 31, 2000. As a result, Management fees would be 0.20%, service
organization fees would be 0.0%, and 12b-1 fees would be 0.25%. You will be
notified if the waiver is discontinued after that date.
9
<PAGE> 56
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes:
O $10,000 investment
o 5% annual return
o redemption at the end of each period
o no changes in the fund's operating expenses, except for the expiration of
the current contractual fee waivers on May 31, 2000.
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
<TABLE>
<CAPTION>
MONEY MARKET FUND
B Shares
A Shares B Shares (Without CDSC)
-------------------------------- ------------- -------- --------------
<S> <C> <C> <C>
One Year After Purchase $ 76 $ 652 $ 152
Three Years After Purchase $ 258 $ 867 $ 567
Five Years After Purchase $ 457 $1,213 $1,013
Ten Years After Purchase $1,032 $2,271 $2,271
</TABLE>
10
<PAGE> 57
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
THE SHORT TERM GOVERNMENT INCOME FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE As high a level of current income as is
consistent with limiting the risk of
potential loss.
PRINCIPAL INVESTMENT The Fund normally invests at least 65% of
STRATEGIES its total assets in securities issued or
guaranteed by the U.S. Government, its
agencies and instrumentalities ("U.S.
Government Securities"). Under normal market
conditions, the Fund will maintain a dollar
weighted average portfolio of less than
three years with a maximum effective
maturity of approximately five years for any
individual security. The Fund focuses on
maximizing income consistent with prudent
investment risk within this maturity range
and credit and risk tolerances established
for the Fund. The Fund typically seeks to
increase its total return by shortening the
average maturity of its portfolio securities
when it expects interest rates to increase
and lengthening the average maturity to take
advantage of expected interest rate
declines.
The Fund may also invest a portion of its
assets in domestic and foreign bank
obligations, commercial paper, investment
grade corporate debt securities, investment
grade mortgage and asset-backed securities
and other debt securities, including money
market securities which are of comparable
quality in the Adviser's opinion and
interest rate futures contracts. The Adviser
will sell securities based upon the Fund's
current strategic outlook.
11
<PAGE> 58
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
- -------------------------------------------------------------------------------
THE SHORT TERM GOVERNMENT INCOME FUND, CONTINUED
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and as compared to a
broad-based securities index. The Lehman Brothers 1-3 Year Government Index in
the table below, is an unmanaged index comprised of U.S. Treasury issues, debt
of U.S. Government agencies and corporate debt guaranteed by the U.S.
Government.
PERFORMANCE BAR CHART AND TABLE YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASS
A SHARES
(Both the chart and the table assume reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1993 4.55%
1994 -0.10%
1995 9.51%
1996 3.91%
1997 6.03%
1998 6.01%
</TABLE>
The returns for Class B Shares will be lower than the Class A Shares' returns
shown in the bar chart because expenses of the classes differ.
Best quarter: 3rd Qtr 1992 3.01%
Worst quarter: 1st Qtr 1994 -0.50%
Past performance does not indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
-------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES
(with maximum 3% sales charge) 6/1/92 2.88% 4.39% 4.67%
- -----------------------------------------------------------------------------------------------------------------------
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT
INDEX 6/1/92 6.97% 5.96% 5.99%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was 0.72% versus ____% for the Lehman
Brothers 1-3 Year Government Index.
12
<PAGE> 59
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES A high level of current income. Total
return, with certain parameters, is a
secondary consideration.
PRINCIPAL INVESTMENT The Fund normally invests at least 65% of
STRATEGIES its total assets in U.S. Government
Securities. The Fund will normally have a
dollar weighted average portfolio maturity
of 3-10 years.
While maturity and credit quality are the
most important investment factors, the Fund
also considers the following when making
investment decisions:
o current yield and yield to maturity
o potential for capital gain
The Fund may also invest a portion of its
assets in domestic and foreign bank
obligations, commercial paper, investment
grade corporate debt securities, investment
grade mortgage and asset-backed securities
and other debt securities, including money
market securities which are of comparable
quality in the Adviser's opinion and
interest rate futures contracts. There are
no restrictions on the maturity of any
individual investments of the Fund. The
Adviser will sell securities based upon the
Fund's current strategic outlook.
13
<PAGE> 60
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND, CONTINUED
- -------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and as compared to a
broad-based securities index. The Lehman Brothers Government/Corporate Index in
the table below, is an unmanaged index comprised of U.S. Treasury issues, debt
of U.S. Government agencies and corporate debt guaranteed by the U.S.
Government.
PERFORMANCE BAR CHART AND TABLE YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASS
A SHARES
(Both the chart and the table assume reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1993 10.54%
1994 -4.95%
1995 16.77%
1996 1.12%
1997 8.97%
1998 8.22%
</TABLE>
Best quarter: 2nd Qtr 1995 5.94%
Worst quarter: 1st Qtr 1994 -3.31%
Past performance does not indicate how the Fund will perform in the future.
The returns for Class B Shares will be lower than the Class A Shares' returns
shown in the bar chart because expenses of the classes differ.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
-------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES
(with maximum 5.25% sales charge) 6/1/92 2.54% 4.62% 6.13%
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
(with applicable CDSC) 6/1/92 3.01% 5.40% 6.96%
- ------------------------------------------------------------------------------------------------------------------------------
LEHMAN BROTHERS
GOVERNMENT/CORPORATE INDEX 6/1/92 9.47% 7.30% 8.22%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was -3.49% versus ____% for the Lehman
Brothers Government/Corporate Index.
14
<PAGE> 61
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
PRINCIPAL RISKS
- -------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS - Investing in the Bond Funds involves risks
ALL BOND FUNDS common to any investment in securities. By
itself, no Fund constitutes a balanced
investment program. An investment in a Bond
Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency.
The Bond Funds will invest primarily in
fixed income securities, which present a
lesser potential for capital appreciation
than equity securities. There is no
guarantee that the Funds will meet their
goals. When you sell your shares in the
Funds, they may be worth more or less than
you paid for them. It is possible to lose
money by investing in the Funds.
INTEREST RATE RISK
------------------
All bonds fluctuate in value as interest
rates fluctuate. Generally, as interest
rates rise, the value of a Fund's bond
investments, and of its shares, will
decline. If interest rates decline, the
Fund's bond investments (and its share
price) will increase in value. In general,
the shorter the maturity of a bond, the
lower the risk of price fluctuation and the
lower the return.
CREDIT RISK
-----------
To the extent the Bond Funds invest in
non-U.S. government debt securities, they
are subject to greater credit risk. Bonds
are subject to the risk that the issuer may
not make timely payments of principal and
interest, or may default. This risk
increases the lower the credit rating of an
instrument or its issuer. Each Fund can
acquire bonds that carry investment grade
credit ratings, which are bonds rated by a
Rating Agency in the four highest rating
categories. Obligations rated in the fourth
highest rating category are considered to
have speculative characteristics.
If an issuer of fixed income securities
defaults on its obligations to pay interest
and repay principal, or a bond's credit
rating is downgraded, a Fund could lose
money.
15
<PAGE> 62
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
PRINCIPAL RISKS, CONTINUED
- -------------------------------------------------------------------------------
Two other principal risks of fixed income
(bond) investing are market risk and
selection risk. Market risk means that the
bond market in general has ups and downs,
which may affect the performance of any
individual fixed income security. Selection
risk means that the particular bonds that
are selected for a Fund may underperform the
market or other funds with similar
objectives.
ADDITIONAL PRINCIPAL PREPAYMENT RISK
INVESTMENT RISKS ---------------
A Fund's investments in mortgage-related
securities are subject to the risk that the
principal amount of the underlying mortgage
may be repaid prior to the bond's maturity
date. Such repayments are common when
interest rates decline. When such a
repayment occurs, no additional interest
will be paid on the investment. Prepayment
exposes a Fund to potentially lower return
upon subsequent reinvestment of the
principal.
CALL RISK
---------
Call risk is the chance that during periods
of falling interest rates, a bond issuer
will "call" - or repay - a high-yielding
bond before its maturity date. Forced to
reinvest the unanticipated proceeds lower
interest rates, the Fund would experience a
decline in income and the potential for
taxable capital gains. Call risk is
generally high for longer-term bonds.
A full discussion of all permissible
investments can be found in the SAI.
WHO MAY WANT TO INVEST? Consider investing in a Bond Fund if you
are:
o SEEKING TO ADD A MONTHLY INCOME COMPONENT
TO YOUR PORTFOLIO
o SEEKING HIGHER POTENTIAL RETURNS THAN
THOSE PROVIDED BY MONEY MARKET FUNDS
o WILLING TO ACCEPT THE RISKS OF PRICE AND
DIVIDEND FLUCTUATIONS
The Bond Funds will not be appropriate for
anyone:
o SEEKING SAFETY OF PRINCIPAL
16
<PAGE> 63
RISK/RETURN SUMMARY AND FUND EXPENSES - BOND FUNDS
FEES AND EXPENSES
- -------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Bond Funds.
<TABLE>
<CAPTION>
FEE TABLE
---------
The Short Term The Intermediate Term
Government Income Fund Government Income Fund
A SHARES A SHARES B SHARES
- ------------------------------------ ------------------------ ------------ -------------
<S> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge (Load) 3.00% 5.25% 0.00%
Imposed on Purchases(1)
Maximum Deferred Sales 0.00% 0.00% 5.00%
Charge (Load)(2)
ANNUAL FUND OPERATING EXPENSES
(EXPENSE THAT ARE DEDUCTED FROM
FUND ASSETS)
Management fees 0.40% 0.50% 0.50%
Distribution (12b-1) fees 0.35%(3) 0.35%(3) 1.00%
Service Organization fees(3) 0.35% 0.35% 0.35%
Other expenses 0.29% 0.34% 0.34%
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.39% 1.54% 2.19%
FEE WAIVER 0.45% 0.45%(3) 0.35%
NET ANNUAL FUND
OPERATING EXPENSES 1.04%(3) 1.09%(3) 1.84%
</TABLE>
- -------------------------------------
1 Lower sales charges are available depending upon the amount invested. For
investments of more than $1 million, no sales charges apply; however, a
contingent deferred sales charge ("CDSC") is applicable to redemptions
within 12 months of purchase. See "Distribution Arrangements."
2 A CDSC on Class B shares declines over five years starting with year one
and ending in year seven from: 5%,4%, 3%, 3%, 2%, 1%, 1%.
3 The Fund's Distributor has contractually agreed to waive a portion of the
service organization fees and 12b-1 fees at least until May 31, 2000. As a
result, the 12b-1 fees would be 0.25% and service organization fees would
be 0.00%. You will be notified if this waiver is discontinued after that
date.
17
<PAGE> 64
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes:
o $10,000 investment
o 5% annual return
o redemption at the end of each period
o no changes in the Fund's operating expenses, except for the expiration of
the current contractual fee waivers on May 31, 2000
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
<TABLE>
<CAPTION>
THE SHORT TERM GOVERNMENT THE INTERMEDIATE TERM GOVERNMENT
INCOME FUND INCOME FUND
B Shares
A Shares A Shares B Shares without CDSC
- ------------------------- --------------------------- ------------ ---------- ---------------
<S> <C> <C> <C> <C>
One Year
After Purchase $ 393 $ 630 $ 687 $ 187
Three Years
After Purchase $ 664 $ 925 $ 953 $ 653
Five Years
After Purchase $ 958 $1,243 $1,349 $1,149
Ten Years
After Purchase $1,802 $2,154 $2,534 $2,534
</TABLE>
18
<PAGE> 65
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE SMALL CAP EQUITY FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE Long-term capital appreciation.
PRINCIPAL INVESTMENT The Fund normally invests at least 65% of
STRATEGIES its total assets in a broadly diversified
portfolio of common stocks of small
capitalized companies representing the major
economic sectors comprising the Standard and
Poor's SmallCap 600 Index at the time of
purchase. The Fund's Adviser selects stocks
that it believes have attractive valuation,
are undergoing positive change and are
fundamentally strong. As of June 30, 1999,
the companies in the S&P 600 SmallCap Index
had a market capitalization of up to
approximately $____ billion. 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
SmallCap 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.
The Adviser will consider selling securities
if the issuer's market capitalization
increases to the point that it is no longer
included in the S&P 600 SmallCap Index.
The Fund may also invest, under normal
conditions, up to 35% of its total assets in
equity securities and equivalents of larger
capitalization companies, preferred stock,
foreign securities/American Depository
Receipts ("ADRs"), investment grade debt
securities, convertible securities,
warrants, money market instruments and stock
or index options and futures contracts.
The Fund may invest temporarily for
defensive purposes up to 100% of its total
assets in non-equity securities, money
market instruments and in the equity
securities of larger capitalized companies.
19
<PAGE> 66
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE SMALL CAP EQUITY FUND, CONTINUED
- -------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance of its first full year of operation and as
compared to a broad-based securities index. The Standard and Poor's SmallCap 600
Index in the table below is an unmanaged index of 600 selected common stocks,
most of which are listed on the New York Stock Exchange.
PERFORMANCE BAR CHART AND TABLE YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASS
A SHARES
(Both the chart and the table assume reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1998 -3.94%
</TABLE>
Best quarter: 4th Qtr 1998 14.97%
Worst quarter: 3rd Qtr 1998 -21.86%
Past performance does not indicate how the Fund will perform in the future.
The returns for Class B Shares will be lower than the Class A Shares' returns
shown in the bar chart because expenses of the classes differ.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
-------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES
(with maximum 5.25% sales charge) 10/1/97 -8.96% N/A -12.92%
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
(with applicable CDSC) 10/1/97 -8.80% N/A -12.08%
- -----------------------------------------------------------------------------------------------------------------------------
S&P SMALLCAP 600 INDEX 10/1/91 -1.31% N/A 15.49%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was -2.16% versus ____% for the S&P
SmallCap 600 Index.
20
<PAGE> 67
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE MID-CAP EQUITY FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE Growth of capital by attempting to
outperform the S&P MidCap Index.
PRINCIPAL INVESTMENT STRATEGIES The Fund normally invests at least 65% of
its total assets in common stocks of
mid-sized companies (those with market
capitalizations ranging from $200 million to
$5.2 billion at the time of purchase)
including common stocks listed on the S&P
MidCap Index. The Fund's Adviser selects
stocks that have attractive valuation, the
potential for future earnings growth and in
the Adviser's opinion, are likely to
outperform the S&P MidCap Index. 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.
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. The
Adviser will consider selling those
securities which no longer meet the Fund's
criteria for market capitalization.
The Fund may also invest, under normal
market conditions, up to 35% of its total
assets, in preferred stock, warrants,
foreign securities/ADRs, equity securities
of larger capitalized companies, investment
grade debt securities, convertible
securities, money market instruments and
stock or index options and futures
contracts.
The Fund may invest temporarily for
defensive purposes up to 100% of its total
assets in non-equity securities, money
market instruments and in the equity
securities of larger capitalized companies.
21
<PAGE> 68
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE MID CAP EQUITY FUND, CONTINUED
- -------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and as compared to a
broad-based securities index. The S&P MidCap Index in the table below is an
unmanaged index of 400 selected common stocks of mid sized companies.
PERFORMANCE BAR CHART AND TABLE YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASS
A SHARES
(Both the chart and the table assume reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1995 38.66%
1996 26.69%
1997 31.45%
1998 5.40%
</TABLE>
Best quarter: 4th Qtr 1998 19.42%
Worst quarter: 3rd Qtr 1998 -15.51%
Past performance does not indicate how the Fund will perform in the future.
The returns for Class B Shares will be lower than the Class A Shares' returns
shown in the bar chart because expenses of the classes differ.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Since Inception
-------------- --------- ---------------
<S> <C> <C> <C>
CLASS A SHARES
(with maximum 5.25% sales charge) 2/24/94 -0.12% 17.51%
- ----------------------------------------------------------------------------------------------------------
CLASS B SHARES
(with applicable CDSC) 2/24/94 0.21% 18.54%
- ----------------------------------------------------------------------------------------------------------
S&P MID CAP INDEX 2/24/94 19.12% 18.44%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was 4.36% versus ____% for the S&P
MidCap Index.
22
<PAGE> 69
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE LARGE CAP EQUITY FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES Long-term capital appreciation. Income
generation is a secondary consideration.
PRINCIPAL INVESTMENT STRATEGIES The Fund normally invests at least 65% of
its 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's Adviser focuses
on stocks that it believes are undervalued
in terms of price or other financial
measurements. In particular, 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. The Fund
may also 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
securities' market value. Although the Fund
anticipates it will invest primarily in
companies found in the S&P 500(R)Index, it
may also invest in smaller capitalization
companies. The Adviser will consider selling
securities which no longer meet the Fund's
criteria for investing.
The Fund may also invest, under normal
market conditions, up to 35% of its total
assets in foreign securities/ADRs, preferred
stock, investment grade debt securities,
warrants, convertible securities, money
market instruments and stock futures
contracts.
The Fund may invest temporarily for
defensive purposes up to 100% of its total
assets in debt securities rated A or better
by a Rating Agency, bank obligations and
money market instruments.
23
<PAGE> 70
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
THE LARGE CAP EQUITY FUND, CONTINUED
- -------------------------------------------------------------------------------
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and as compared to a
broad-based securities index. The S&P 500(R) Index, in the table below, is an
unmanaged index of common stocks representative of the large company sector of
the equity market.
PERFORMANCE BAR CHART AND TABLE YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASS
A SHARES
(Both the chart and the table assume reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
(PERCENTAGE
CHANGE)
<S> <C>
1993 11.75%
1994 -4.01%
1995 35.68%
1996 23.49%
1997 32.67%
1998 28.45%
</TABLE>
Best quarter: 4th Qtr 1998 20.56%
Worst quarter: 3rd Qtr 1998 -10.53%
Past performance does not indicate how the Fund will perform in the future.
The returns for Class B Shares will be lower than the Class A Shares' returns
shown in the bar chart because expenses of the classes differ.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
-------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES
(with maximum 5.25% sales charge) 6/1/92 21.70% 21.04% 19.11%
- ----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
(with applicable CDSC) 6/1/92 23.28% 22.13% 20.06%
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500(R) INDEX 6/1/92 28.58% 24.06% 20.70%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
**For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was 9.89% versus ____% for the S&P
500(R) Index.
24
<PAGE> 71
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
PRINCIPAL RISKS
- -------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS - Investing in the Equity Funds involves risks
ALL EQUITY FUNDS common to any investment in securities. By
itself, no Fund constitutes a balanced
investment program.
An investment in an Equity Fund is not a
bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
The Equity Funds will invest principally in
common stocks, which have historically
presented greater potential for capital
appreciation than fixed income securities,
but do not provide the same protection of
capital or assurance of income. There is no
guarantee that the Funds will meet their
goals. When you sell your shares in the
Funds, they may be worth more or less than
you paid for them. It is possible to lose
money by investing in the Funds.
Two principal risks of equity investing are
market risk and selection risk. Market risk
means that the stock market in general has
ups and downs, which may affect the
performance of any individual stock.
Selection risk means that the particular
stocks that are selected for a Fund may
underperform the market or other funds with
similar objectives.
ADDITIONAL PRINCIPAL CAPITALIZATION RISK
INVESTMENT RISKS While stocks of smaller companies can
provide greater growth potential and
potentially higher returns, they carry
higher risks than those of larger companies.
They may trade infrequently or in lower
volumes, making it difficult for a Fund to
sell its shares at the price it wants.
Smaller companies may be more sensitive to
changes in the economy overall.
Historically, small company stocks have been
more volatile than those of larger
companies. As a result, the Small Cap Equity
Fund's net asset value may be subject to
rapid and substantial changes. The Mid Cap
Equity Fund is also subject to the same
risk.
25
<PAGE> 72
RISK/RETURN SUMMARY AND FUND EXPENSES
PRINCIPAL RISKS, CONTINUED
- -------------------------------------------------------------------------------
FOREIGN INVESTMENT RISK
-----------------------
Overseas investing carries potential risks
not associated with domestic investments.
Such risks include, but are not limited to:
(1) currency exchange rate fluctuations,
including adverse effects due to the euro
conversion (2) political and financial
instability, (3) less liquidity and greater
volatility of foreign investments, (4) lack
of uniform accounting, auditing and
financial reporting standards, (5) less
government regulation and supervision of
foreign stock exchanges, brokers and listed
companies, (6) increased price volatility,
(7) delays in transaction settlement in some
foreign markets, and (8) adverse impact of
the euro conversion on the business or
financial condition of companies in which
the Fund is invested.
A full discussion of all permissible
investments can be found in the SAI.
WHO MAY WANT TO INVEST? Consider investing in an Equity Fund if you
are:
o PURSUING A LONG-TERM GOAL SUCH AS
RETIREMENT
o SEEKING TO ADD A GROWTH COMPONENT TO
YOUR PORTFOLIO
o WILLING TO ACCEPT HIGHER RISKS OF
INVESTING IN THE STOCK MARKET IN
EXCHANGE FOR POTENTIALLY HIGHER
LONG-TERM RETURNS
The Equity Funds will not be appropriate for
anyone:
o SEEKING MONTHLY INCOME
o PURSUING A SHORT-TERM GOAL OR
INVESTING EMERGENCY RESERVES
o SEEKING SAFETY OF PRINCIPAL
26
<PAGE> 73
RISK/RETURN SUMMARY AND FUND EXPENSES - EQUITY FUNDS
FEES AND EXPENSES
- -------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Equity Funds.
<TABLE>
<CAPTION>
FEE TABLE
---------
The Small Cap The Mid Cap The Large Cap
Equity Fund Equity Fund Equity Fund
A SHARES B SHARES A SHARES B SHARES A SHARES B SHARES
------------ ------------ ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge (Load) 5.25% 0.00% 5.25% 0.00% 5.25% 0.00%
Imposed on Purchases(1)
Maximum Deferred Sales 0.00% 5.00% 0.00% 5.00% 0.00% 5.00%
Charge (Load)(2)
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
Management fees 1.00%(3) 1.00% 0.75% 0.75% 0.60% 0.60%
Distribution [and/or Service] 0.35%(3) 1.00% 0.35%(3) 1.00% 0.35%(3) 1.00%
(12b-1) fees
Service Organization Fees (3) 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Other expenses 0.40% 0.40% 0.34% 0.34% 0.30% 0.30%
TOTAL ANNUAL FUND
OPERATING EXPENSES 2.10% 2.75% 1.79% 2.44% 1.60% 2.25%
FEE WAIVER 0.65%(3) 0.55% 0.45%(3) 0.35% 0.45%(3) 0.35%
NET ANNUAL FUND
OPERATING EXPENSES 1.45% 2.20% 1.34% 2.09% 1.15% 1.90%
</TABLE>
- ------------------------------
1 Lower sales charges are available depending upon the amount invested. For
investments of more than $1 million, no sales charges apply; however, a
contingent deferred sales charge ("CDSC") is applicable to redemptions
within 12 months of purchase. See "Distribution Arrangements."
2 A CDSC on Class B shares declines over five years starting with year one
and ending in year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
3 The Fund's Adviser and Distributor have contractually agreed to waive a
portion of the advisory fee of the Small Cap Equity Fund and for the Equity
Funds, the service organization fees and the 12b-1 fees at least until May
31, 2000. As a result, the Small Cap Equity Fund's Management Fees would be
0.80%. For the Equity Funds, service organization fees would be 0.0% and
the 12b-1 fees would be 0.25%. You will be notified if the waivers are
discontinued after that date.
27
<PAGE> 74
EXAMPLE: THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUNDS WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES:
o $10,000 INVESTMENT
o 5% ANNUAL RETURN
o REDEMPTION AT THE END OF EACH PERIOD
o NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION
OF THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2000
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
<TABLE>
<CAPTION>
SMALL CAP MID CAP LARGE CAP
EQUITY FUND EQUITY FUND EQUITY FUND
B Shares B Shares B Shares
without without without
A Shares B Shares CDSC A Shares B Shares CDSC A Shares B Shares CDSC
- ------------------------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One Year
After Purchase $ 665 $ 723 $ 223 $ 654 $ 712 $ 212 $ 636 $ 693 $ 193
Three Years
After Purchase $1,071 $1,104 $ 804 $ 999 $1,064 $ 729 $ 943 $ 971 $ 671
Five Years
After Purchase $1,507 $1,169 $1,419 $1,368 $1,512 $1,276 $1,273 $1,380 $1,180
Ten Years
After Purchase $2,740 $3,112 $3,112 $2,418 $2,826 $2,791 $2,218 $2,596 $2,596
</TABLE>
28
<PAGE> 75
ADDITIONAL INFORMATION
INVESTING FOR DEFENSIVE PURPOSES When the Adviser determines that market
conditions are appropriate, each of the
Equity and Bond Funds may, for temporary
defensive purposes, hold investments that
are not part of its main investment strategy
to try to avoid losses during unfavorable
market conditions. These investments may
include uninvested cash. Each of the Funds
may invest up to 100% of its total assets in
money market instruments including
short-term U.S. Government Securities, bank
obligations and commercial paper. If a Fund
is investing defensively, it will not be
pursuing its investment objective.
PORTFOLIO TURNOVER The portfolio turnover rate for each Fund is
included in the Financial Highlights section
of this Prospectus. The Funds are actively
managed and, in some cases in response to
market conditions, a Fund's portfolio
turnover may exceed 100%. A higher rate of
portfolio turnover increases brokerage and
other expenses, which must be borne by the
Fund and its shareholders and may adversely
affect the Fund's performance. High
portfolio turnover also may result in the
realization of substantial net short-term
capital gains, which are taxable when
distributed to shareholders.
YEAR 2000 AND THE Like other funds and business organizations
PERFORMANCE FUNDS around the world, the Funds could be
adversely affected if the computer systems
used by the Adviser and the Funds' other
service providers do not properly process
dates beyond December 31, 1999. In addition,
year 2000 issues may adversely affect
companies in which the Funds invest where,
for example, such companies incur
substantial costs to address year 2000
issues or suffer losses caused by the
failure to do so in an adequate or timely
manner.
The Funds have been assured that the Adviser
and other service providers have developed
and are implementing clearly defined and
documented plans intended to minimize risks
to services critical to the Funds'
operations associated with year 2000 issues.
Internal efforts include a commitment to
dedicate adequate staff and funding to
identify and remedy year 2000 issues, and
specific actions such as inventorying
software systems, determining inventory
items that may not function properly after
December 31, 1999, reprogramming or
replacing such systems, and retesting for
year 2000 readiness. The Adviser and the
Funds' service providers are likewise
seeking assurances from their respective
vendors and suppliers that such entities are
addressing any year 2000 issues, and each
provider intends to engage, where
appropriate, in private and/or industry
interface testing of systems for year 2000
readiness.
In the event that any systems upon which the
Funds are dependent are not year 2000 ready
by December 31, 1999, administrative errors
and account maintenance failures would
likely occur.
While the ultimate costs or consequences of
incomplete or untimely resolution of year
2000 issues by the Adviser or the Funds'
service providers cannot be accurately
assessed at this time, the Funds currently
have no reason to believe that the year 2000
plans of the Adviser and the Funds' service
providers will not be completed by
29
<PAGE> 76
December 31, 1999, or that the anticipated
costs associated with full implementation of
their plans will have a material adverse
impact on either their business operations
or financial conditions or those of the
Funds. The Funds and the Adviser will
continue to closely monitor developments
relating to this issue, including
development by the Adviser and the Funds'
service providers of contingency plans for
providing back-up computer services in the
event of a systems failure or the inability
of any provider to achieve year 2000
readiness. Separately, the Adviser will
monitor potential investment risk related to
year 2000 issues.
FUND MANAGEMENT
INVESTMENT ADVISER
- -------------------------------------------------------------------------------
Trustmark National Bank, 248 East Capital 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 review, 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.
For these advisory services, the Funds paid fees as follows during the fiscal
year ended May 31, 1999:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------- ------------------------
As a percentage of
average net assets
as of 5/31/99
- ----------------------------------------------------------------------------------- ------------------------
<S> <C>
The Money Market Fund 0.15%*
- ----------------------------------------------------------------------------------- ------------------------
The Short Term Government Income Fund 0.40%
- ----------------------------------------------------------------------------------- ------------------------
The Intermediate Term Government Income Fund 0.45%*
- ----------------------------------------------------------------------------------- ------------------------
The Small Cap Equity Fund 1.00%
- ----------------------------------------------------------------------------------- ------------------------
The Mid Cap Equity Fund 0.75%
- ----------------------------------------------------------------------------------- ------------------------
The Large Cap Equity Fund 0.60%
- ----------------------------------------------------------------------------------- ------------------------
</TABLE>
*Trustmark National Bank waived a portion of its contractual fees for these
Funds for the most recent fiscal year. Contractual fees (without waivers) are
0.30% for the Money Market Fund and 0.50% for the Intermediate Term Government
Income Fund.
30
<PAGE> 77
FUND MANAGEMENT
PERFORMANCE PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
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
Government Income Fund's portfolio.
Robert H. Spaulding is responsible for the day-to-day management of the
Intermediate Term Government Income 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 the
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.
Douglas H. Ralston, CFA, is responsible for the day-to-day management of the Mid
Cap Equity Fund. He is also responsible for the day-to-day management of the
Small Cap Equity Fund with Douglas P. Muenzenmay acting as Associate Manager.
Mr. Ralston serves as Vice President and Trust Officer with over 12 years'
investment experience. Mr. Ralston joined Trustmark in 1991. Prior to joining
Trustmark, Mr. Ralston was employed by Third National Bank of Nashville.
Charles 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.
Zach 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.
DISTRIBUTOR AND ADMINISTRATOR
- -------------------------------------------------------------------------------
BISYS Fund Services ("BISYS") provides management and administrative services to
the Funds, including providing office space, equipment and clerical personnel to
the Funds and supervising custodial, auditing, valuation, bookkeeping and legal
services. BISYS Fund Services, Inc., an affiliate of BISYS, acts as the fund
accountant, transfer agent and dividend paying agent of the Funds. BISYS and
BISYS Fund Services, Inc. are each located at 3435 Stelzer Road, Columbus, Ohio
43219.
Performance Funds Distributor, Inc. 3435 Stelzer Road, Columbus, Ohio 43219 acts
as the Funds' distributor. The Distributor is an affiliate of BISYS and was
formed specifically to distribute the Funds.
31
<PAGE> 78
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
- -------------------------------------------------------------------------------
HOW NAV IS CALCULATED
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
TOTAL ASSETS - LIABILITIES
--------------------------
Number of Shares
Outstanding
1. NAV is calculated separately for Class A and the Class B shares.
2. You can find most Funds' NAV daily in the Wall Street Journal and in other
newspapers.
MONEY MARKET FUND
The Money Market Fund's net asset value, or NAV, is expected to be constant at
$1.00 per share, although its value is not guaranteed. The NAV is determined at
12 noon Eastern time on days the New York Stock Exchange is open. The Money
Market Fund values its securities at their amortized cost. The amortized cost
method involves valuing a portfolio security initially at its cost on the date
of the purchase and thereafter assuming a constant amortization to maturity of
the difference between the principal amount due at maturity and initial cost.
OTHER FUNDS
The per share NAV for each non-Money Market Fund is determined and its shares
are priced at the close of regular trading on the New York Stock Exchange,
normally at 4:00 p.m. Eastern time, on days the Exchange is open.
Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is received in good order by the Fund on any day
that both the New York Stock Exchange and the Funds' custodian are open for
business. For example: If you properly place a purchase order to buy shares of
the Intermediate Term Government Income Fund, it must be received by 4:00 p.m.
Eastern time in order to receive the NAV calculated at 4:00 p.m. If your order
is received after 4:00 p.m. Eastern time, you will receive the NAV calculated on
the next day at 4:00 p.m. Eastern time.
The non-Money Market Funds' securities, other than short-term debt obligations,
are generally valued at current market prices unless market quotations are not
available, in which case securities will be valued by a method that the Board of
Trustees believes accurately reflects fair value. Debt obligations with
remaining maturities of 60 days or less are valued at amortized cost or based on
their acquisition cost.
32
<PAGE> 79
SHAREHOLDER INFORMATION
PURCHASING AND SELLING YOUR INVESTMENT SHARES
- -------------------------------------------------------------------------------
You may purchase shares of the Funds through the Performance Funds Distributor
or through banks, brokers and other investment representatives, which may charge
additional fees and may require higher minimum investments or impose other
limitations on buying and selling shares. If you purchase shares through an
investment representative, that party is responsible for transmitting orders by
close of business and may have an earlier cut-off time for purchase and sale
requests. Consult your investment representative or institution for specific
information.
PURCHASING AND ADDING TO YOUR SHARES
<TABLE>
<CAPTION>
ACCOUNT TYPE MINIMUM MINIMUM SUBSEQUENT
INITIAL INVESTMENT
CLASS A OR B INVESTMENT
<S> <C> <C>
Regular $ 100
(non-retirement) $ 1,000
- --------------------------------------------------------------
Retirement (IRA) $ 250 $ 50
- --------------------------------------------------------------
Automatic
Investment Plan $ 25 $ 25
- --------------------------------------------------------------
</TABLE>
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted.
A Fund may waive its minimum purchase requirement and the Distributor may reject
a purchase order if it considers it in the best interest of the Fund and its
shareholders
- -------------------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
Each Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
- -------------------------------------------------------------------------------
33
<PAGE> 80
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
- -------------------------------------------------------------------------------
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
BY MAIL
If purchasing through your financial advisor or brokerage account, simply tell
your advisor or broker that you wish to purchase shares of the Funds and he or
she will take care of the necessary documentation. For all other purchases,
follow the instructions below.
All investments made by regular mail or express delivery, whether initial or
subsequent, should be sent:
BY REGULAR MAIL: BY EXPRESS MAIL:
Performance Funds Trust Performance Funds Trust
P.O. Box 182484 3435 Stelzer Road
Columbus, OH 43218-2484 Columbus, OH 43219
For Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "Performance Funds Trust"
and include the name of the appropriate Fund(s) on the check.
3. Mail or deliver application and payment to address above.
For Subsequent Investment:
1. Use the investment slip attached to your account statement. Or, if
unavailable, provide the following information:
o Fund name
o Share class
o Amount invested
o Account name and account number
2. Make check, bank draft or money order payable to "Performance Funds Trust"
and include your account number on the check.
3. Mail or deliver investment slip and payment to the address above.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be a
U. S. Bank. Your bank or broker may charge for this service.
Establish the electronic purchase option on your account application or call
1-800-737-3676. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-737-3676 to arrange a transfer from your bank account.
34
<PAGE> 81
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
- -------------------------------------------------------------------------------
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial institutions to send
funds to each other, almost instantaneously. With an
electronic purchase or sale, the transaction is made
through the Automated Clearing House (ACH) and may
take up to eight days to clear. There is generally no
fee for ACH transactions.
-----------------------------------------------------
BY WIRE TRANSFER
Call 1-800-737-3676 to obtain a new account number and instructions for sending
your application, and for instructing your bank to wire transfer your
investment.
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
- -------------------------------------------------------------------------------
You can add to your account by using the convenient options described below. The
Fund reserves the right to change or eliminate these privileges at any time with
60 days notice.
- -------------------------------------------------------------------------------
35
<PAGE> 82
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
- -------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM
You can make automatic investments in the Funds from your bank account.
Automatic investments can be as little as $25; no investment is required to
establish an automatic investment account.
To invest regularly from your bank account:
o Complete the Automatic Investment Plan portion on your
Account Application.
Make sure you note:
o Your bank name, address and account number
o The amount you wish to invest automatically (minimum $25)
o How often you want to invest (every month or 4 times a year)
o Attach a voided personal check.
PAYROLL DIRECT DEPOSIT
You may set up a payroll direct deposit arrangement through your employer or
retirement benefit source. You may make periodic investments of at least $20 per
pay period.
To invest regularly from your paycheck or government check: Call 1-800-737-3676
for an enrollment form.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Dividends and Distributions
- ---------------------------
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends are higher for Class A shares than for Class B shares, because Class A
shares have lower distribution expenses. Capital gains are distributed at least
annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE OWNED
YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION DATE, SOME
OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A DISTRIBUTION.
- -------------------------------------------------------------------------------
36
<PAGE> 83
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
- -------------------------------------------------------------------------------
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received in good order by the Fund, its transfer agent,
or your investment representative. Normally you will receive your proceeds
within a week after your request is received. See section on "General Policies
on Selling Shares" below.
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares or a
redemption of shares.
- --------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B shares, you will be charged a fee for any shares that have
not been held for a sufficient length of time. These fees will be deducted from
the money paid to you. See the section on "Distribution Arrangements/Sales
Charges" below for details.
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR SELLING SHARES
If selling your shares through your financial adviser or broker, ask him or her
for redemption procedures. Your adviser and/or broker may have transaction
minimums and/or transaction times which will affect your redemption. For all
other sales transactions, follow the instructions below.
By telephone (unless you have declined telephone sales privileges)
1. Call 1-800-737-3676 with instructions as to how you wish to
receive your funds (mail, wire, electronic transfer). (See "General
Policies on Selling Shares--Verifying Telephone Redemptions" below)
By mail
(See "General Policies on Selling Shares - Redemptions in Writing Required"
below)
1. Call 1-800-737-3676 to request redemption forms or write a letter
of instruction indicating:
o your Fund and account number
o amount you wish to redeem
o address where your check should be sent
o account owner signature
2. Mail to:
Performance Funds Trust
P.O. Box 182484
Columbus, OH 43218-2484
- --------------------------------------------------------------------------------
By overnight service
(See "General Policies on Selling Shares--Redemptions in Writing Required"
below)
See "By mail" instruction 1 above.
2. Send to
Performance Funds Trust
c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
37
<PAGE> 84
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
- -------------------------------------------------------------------------------
Wire transfer Call 1-800-737-3676 to request a wire
You must indicate this transfer.
option on
your application. If you call by 4 p.m. Eastern time, your
payment will normally be wired to your
bank on the next business day.
Note: Your financial
institution may also
charge a separate fee.
- -------------------------------------------------------------------------------
Electronic Redemptions Call 1-800-737-3676 to request an
electronic redemption.
Your bank must participate in If you call by 4 p.m. Eastern time, the
the Automated Clearing House NAV of your shares will normally be
(ACH) and must be a U.S. bank. determined on the same day and the
proceeds credited within 8 days.
Your bank may charge
for this service.
AUTOMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The minimum periodic withdrawal is $100. To
activate this feature:
o Make sure you've checked the appropriate box on the Account Application.
Or call 1-800-737-3676.
o Include a voided personal check.
o Your account must have a value of $25,000 or more to start withdrawals.
Class B shareholders are exempt from the CDSC imposed on redemptions involved in
the Automatic Withdrawal Plan.
REDEMPTION BY CHECK WRITING (A SHARES ONLY) - THE MONEY MARKET FUND
You may write checks in amounts of $100 or more on your account in the Money
Market Fund. To obtain checks, complete the signature card section of the
Account Application or contact the Fund to obtain a signature card. Dividends
and distributions will continue to be paid up to the day the check is presented
for payment. You may not close your Money Market Fund account by writing a
check.
38
<PAGE> 85
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
- -------------------------------------------------------------------------------
GENERAL POLICIES ON SELLING SHARES
- ----------------------------------
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee, which include each of
the following.
o Redemptions over $25,000
o Your account registration or the name(s) in your account has changed
within the last 15 days
o The check is not being mailed to the address on your account
o The check is not being made payable to the owner of the account
o The redemption proceeds are being transferred to another Fund account
with a different registration.
A signature guarantee can be obtained from a financial institution,
such as a bank, broker-dealer, or credit union, or from members of the
STAMP (Securities Transfer Agents Medallion Program), MSP (New York
Stock Exchange Medallion Signature Program) or SEMP (Stock Exchanges
Medallion Program). Members are subject to dollar limitations which
must be considered when requesting their guarantee. The Transfer Agent
may reject any signature guarantee if it believes the transaction would
otherwise be improper.
VERIFYING TELEPHONE REDEMPTIONS
The Funds make every effort to insure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders. If appropriate precautions have not been taken, the
Transfer Agent may be liable for losses due to unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, your redemption proceeds
will not be mailed until the Transfer Agent is satisfied that the check has
cleared (which may require up to 15 business days). You can avoid this delay by
purchasing shares with a certified check or federal funds wire.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders. If you experience difficulty making a telephone
redemption during periods of drastic economic or market change, you can send the
Funds your request by regular mail or express mail.
REDEMPTION IN KIND
Each Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind" for amounts redeemed by a shareholder, in any
90-day period, in excess of $250,000 or 1% of Fund net assets, whichever is
less. If the Fund deems it advisable for the benefit of all shareholders,
redemption in kind will consist of securities equal in market value to your
shares. When you convert these securities to cash, you will pay brokerage
charges.
39
<PAGE> 86
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
- -------------------------------------------------------------------------------
CLOSING OF SMALL ACCOUNTS
If your account falls (not as a result of market action) below $500, ($250 for
IRAs) the Fund may ask you to increase your balance. If it is still below $500
($250 for IRAs) after 30 days, the Fund may close your account and send you the
proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that remain
uncashed for six months will be canceled and the money reinvested in the
appropriate Fund.
40
<PAGE> 87
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
- -------------------------------------------------------------------------------
This section describes the sales charges and fees you will pay as an investor in
different share classes offered by the Funds and ways to qualify for reduced
sales charges.
<TABLE>
<CAPTION>
- -------------------------------------- ------------------------------------ -----------------------------------
CLASS A CLASS B
- -------------------------------------- ------------------------------------ -----------------------------------
<S> <C> <C>
Sales Charge (Load) Front-end sales charge (not No front-end sales charge. A
applicable to money market contingent deferred sales
funds); reduced sales charges charge (CDSC) may be imposed
available. on shares redeemed within six
years after purchase; shares
automatically convert to Class
A Shares after 8 years.
Maximum investment is $250,000.
- -------------------------------------- ------------------------------------ -----------------------------------
Distribution and Service (12b-1) Subject to annual Subject to annual
Fee distribution and shareholder distribution and shareholder
servicing fees of up to 0.35% servicing fees of up to 1.00%
of the Fund's average daily of the Fund's average daily
net assets. net assets.
- -------------------------------------- ------------------------------------ -----------------------------------
Fund Expenses Lower annual expenses than Higher annual expenses than
Class B shares. Class A shares.
- -------------------------------------- ------------------------------------ -----------------------------------
</TABLE>
There is also an Institutional Class open to certain institutional investors.
Institutional Class shares are offered through another prospectus.
41
<PAGE> 88
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES, CONTINUED
- -------------------------------------------------------------------------------
CALCULATION OF SALES CHARGES
CLASS A SHARES
Class A shares are sold at their public offering price. This price includes the
initial sales charge. Therefore, part of the money you invest will be used to
pay the sales charge. The remainder is invested in Fund shares. The sales charge
decreases with larger purchases. There is no sales charge on reinvested
dividends and distributions.
The current sales charge rates are as follows:
ALL FUNDS EXCEPT MONEY MARKET FUND AND SHORT TERM GOVERNMENT INCOME FUND:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT
- ----------------------------------------- ----------------------- ----------------------
<S> <C> <C>
Up to $50,000 5.25% 5.54%
- ----------------------------------------- ----------------------- ----------------------
$50,001 up to $100,000 4.75% 4.98%
- ----------------------------------------- ----------------------- ----------------------
$100,001 up to $250,000 3.75% 3.89%
- ----------------------------------------- ----------------------- ----------------------
$250,001 up to $500,000 2.75% 2.82%
- ----------------------------------------- ----------------------- ----------------------
$500,001 up to $1,000,000 1.75% 1.78%
- ----------------------------------------- ----------------------- ----------------------
$1,000,001 and above(1) 0.00% 0.00%
- ----------------------------------------- ----------------------- ----------------------
</TABLE>
SHORT TERM GOVERNMENT INCOME FUND ONLY:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT
- ----------------------------------------- ----------------------- ----------------------
<S> <C> <C>
Up to $50,000 3.00% 3.09%
- ----------------------------------------- ----------------------- ----------------------
$50,00 up to $100,000 2.50% 2.56%
- ----------------------------------------- ----------------------- ----------------------
$100,001 up to $250,000 2.00% 2.04%
- ----------------------------------------- ----------------------- ----------------------
$250,001 up to $500,000 1.50% 1.52%
- ----------------------------------------- ----------------------- ----------------------
$500,001 up to $1,000,000 1.00% 1.01%
- ----------------------------------------- ----------------------- ----------------------
$1,000,001 and above(1) 0.00% 0.00%
- ----------------------------------------- ----------------------- ----------------------
</TABLE>
The Money Market Fund does not charge an initial sales charge.
- --------------------------
1 There is no initial sales charge on purchases of more than $1 million.
However, a contingent deferred sales charge (CDSC) of up to 1.00% of the
purchase price will be charged to the shareholder if shares are redeemed in the
first 12 months after purchase of shares. This charge will be based on the lower
of your cost for the shares or their NAV at the time of redemption. There will
be no CDSC on reinvested distributions.
42
<PAGE> 89
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES, CONTINUED
- -------------------------------------------------------------------------------
CLASS B - ALL FUNDS EXCEPT SHORT TERM GOVERNMENT INCOME FUND
Class B shares are offered at NAV, without any up-front sales charge. Therefore,
all the money you invest is used to purchase Fund shares. However, if you sell
your Class B shares of the Fund before the seventh anniversary, you will have to
pay a contingent deferred sales charge at the time of redemption. The CDSC will
be based upon the lower of the NAV at the time of purchase or the NAV at the
time of redemption according to the schedule below. There is no CDSC on
reinvested dividends or distributions.
CONTINGENT DEFERRED SALES CHARGE
<TABLE>
<CAPTION>
CLASS B
YEARS SINCE PURCHASE CDSC
- -------------------- -------------------
<S> <C>
1 5.0%
2 4.0%
3 3.0%
4 3.0%
5 2.0%
6 1.0%
7 0.0%
</TABLE>
If you sell some but not all of your Class B shares, certain shares not subject
to the CDSC (i.e., shares purchased with reinvested dividends) will be redeemed
first, followed by shares subject to the lowest CDSC (typically shares held for
the longest time).
CONVERSION FEATURE - CLASS B SHARES
o Class B shares automatically convert to Class A shares of the same Fund
after eight years from the end of the month of the original purchase.
o After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares which will increase
your investment return compared to the Class B shares.
o You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
o If you purchased Class B shares of one Fund which you exchanged for Class B
shares of another Fund, your holding period will be calculated from the
time of your original purchase of Class B shares. The dollar value of Class
A shares you receive will equal the dollar value of the Class B shares
converted.
43
<PAGE> 90
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES, CONTINUED
- -------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS
Reduced sales charges for Class A shares are available to shareholders with
investments of more than $50,000 (investments of more than $1 million are not
subject to sales charges; however, they are subject to a CDSC). In addition, you
may qualify for reduced sales charges under the following circumstances.
o Letter of Intent. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge.
o Rights of Accumulation. When the value of shares you already own plus
the amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
o Combination Privilege. Combine accounts of multiple Funds (excluding
the Money Market Fund) or accounts of immediate family household members
(spouse and children under 21) to achieve reduced sales charges.
SALES CHARGE WAIVERS
CLASS A SHARES
- --------------
The following qualify for waivers of sales charges:
o Existing shareholders of a Fund upon the reinvestment of dividend and
capital gain distributions.
o Officers, trustees, directors, advisory board members, employees and
retired employees of Trustmark and its affiliates, the Distributor and its
affiliates, and employees of the Adviser (and spouses, children and parents
of each of the foregoing);
o Investors for whom a Trustmark, a Trustmark correspondent bank, or
other financial institution acts in a fiduciary, advisory, custodial,
agency, or similar capacity;
o 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);
o 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;
- ------------------------------------------------------------------------------
REINSTATEMENT PRIVILEGE
If you have sold Class A shares and decide to reinvest in the Fund within a 90
day period, you will not be charged the applicable sales load on amounts up to
the value of the shares you sold. You must provide a written reinstatement
request and payment within 90 days of the date your instructions to sell were
processed.
- ------------------------------------------------------------------------------
44
<PAGE> 91
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES, CONTINUED
- -------------------------------------------------------------------------------
CLASS B SHARES
- --------------
The CDSC will be waived under certain circumstances, including the following:
o Redemptions from accounts other than retirement accounts following the
death or disability of the shareholder.
o Returns of excess contributions to retirement plans.
o Shares issued in a plan of reorganization sponsored by the Adviser, or
shares redeemed involuntarily in a similar situation.
DISTRIBUTION AND SERVICE (12b-1) FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and distribution
of the Funds' shares and/or for providing shareholder services. 12b-1 fees are
paid from Fund assets on an ongoing basis, and will increase the cost of your
investment.
o The 12b-1 fees vary by share class as follows:
o Class A shares may pay a 12b-1 fee of up to .35% of the average
daily net assets of a Fund.
o Class B shares pay a 12b-1 fee of up to 1.00% of the average
daily net assets of the applicable Fund. The higher Class B plan
fees will cause expenses for Class B shares to be higher and
dividends to be lower than for Class A shares.
o While all of Class A shares' Rule 12b-1 fee constitutes a
"distribution fee," only 0.75% of Class B shares' fees constitute
distribution fee.
o The higher 12b-1 fee on Class B shares, together with the CDSC, help
the Distributor sell Class B shares without an "up-front" sales charge.
In particular, these fees help to defray the Distributor's costs of
advancing brokerage commissions to investment representatives.
Over time shareholders will pay more than the equivalent of the maximum
permitted front-end sales charge because 12b-1 distribution and service fees are
paid out of the Fund's net assets on an on-going basis.
45
<PAGE> 92
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
- -------------------------------------------------------------------------------
You can exchange your shares in one Fund for shares of the same class of another
Performance Fund, usually without paying additional sales charges (see "Notes on
exchanges" below). No transaction fees are charged for exchanges.
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to Performance Funds Trust,
P.O. Box 182484, Columbus OH 43218-2484, or by calling 1-800-737-3676. Please
provide the following information:
o Your name and telephone number
o The exact name on your account and account number
o Taxpayer identification number (usually your Social Security number)
o Dollar value or number of shares to be exchanged
o The name of the Fund from which the exchange is to be made
o The name of the Fund into which the exchange is being made.
See "Selling your Shares" for important information about telephone
transactions.
[To prevent disruption in the management of the Funds, due to market timing
strategies, exchange activity may be limited to _____ exchanges within a _____
period.]?
- -------------------------------------------------------------------------------
NOTES ON EXCHANGES
When exchanging from a Fund that has no sales charge or a lower sales charge to
a Fund with a higher sales charge, you will pay the difference.
The registration and tax identification numbers of the two accounts must be
identical.
The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon a 60-day notice to shareholders.
Be sure to read carefully he Prospectus of any Fund into which you wish to
exchange shares.
AUTOMATIC EXCHANGES (CLASS B SHARES ONLY)
You can use the Funds' Automatic Exchange feature to purchase shares of the
Funds at regular intervals through regular, automatic redemptions from Class B
Shares of the Funds. To participate in the Automatic Exchange:
o Complete the appropriate section of the Account Application.
o Shareholders must have a minimum initial purchase of $10,0000 in their
Performance Fund accounts.
To change the Automatic Exchange instructions or to discontinue the feature, you
must send a written request to Performance Funds, P.O. Box 182484, Columbus,
Ohio 43218-2484.
46
<PAGE> 93
SHAREHOLDER INFORMATION
SERVICE ORGANIZATIONS
- -------------------------------------------------------------------------------
Various banks, trust companies, broker-dealers (other than the Distributor) and
other financial organizations ("Service Organization(s)") may provide certain
administrative services for its customers who invest in the Funds through
accounts maintained at that Service Organization. The Funds, under servicing
agreements with the Service Organization, will pay the Service Organization an
annual rate up to .35% of the Fund's average daily net assets for these
services, which include:
o receiving and processing shareholder orders
o performing the accounting for customers' sub-accounts
o maintaining retirement plan accounts
o answering questions and handling correspondence for customer accounts
o acting as the sole shareholder of record for customer accounts
o issuing shareholder reports and transaction confirmations
o performing daily "sweep" functions
Investors who purchase, sell or exchange shares of the Funds through a customer
account maintained at a Service Organization may be charged extra for other
services which are not specified in the servicing agreement with the Fund but
are covered under separate fee schedules provided by the Service Organization to
their customers. Customers with accounts at Service Organizations should consult
their Service Organization for information concerning their sub-accounts. The
Adviser or Administrator also may pay Service Organizations for rendering
services to customers' sub-accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -------------------------------------------------------------------------------
Any income a Fund receives is paid out, less expenses, in the form of dividends
to its shareholders. Income dividends on each Equity Fund are declared and paid
monthly. Dividends on all other Funds are declared daily and paid monthly.
Capital gains for all Funds are distributed at least annually.
An exchange of shares is considered a sale, and any related gains may be subject
to applicable taxes.
Taxes on capital gains distributions paid by the Funds will vary with the length
of time the Fund has held the security - not how long you have invested in the
Fund.
Some dividends may be taxable in the year in which they are declared, even if
they are paid or appear on your account statement the following year. Dividends
and distributions are treated in the same manner for federal income tax purposes
whether you receive them in cash or in additional shares.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements.
There is a penalty on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
47
<PAGE> 94
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE FUNDS'
FINANCIAL PERFORMANCE FOR THE PAST 5 YEARS [OR, IF SHORTER, THE PERIOD OF THE
FUNDS' OPERATIONS]. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE
FUND SHARE. THE TOTAL RETURNS IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR
WOULD HAVE EARNED [OR LOST] ON AN INVESTMENT IN THE FUND (ASSUMING REINVESTMENT
OF ALL DIVIDENDS AND DISTRIBUTIONS). THIS INFORMATION HAS BEEN AUDITED BY
PRICEWATERHOUSECOOPERS, LLP, WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL
STATEMENTS, ARE INCLUDED IN ANNUAL REPORT, WHICH IS AVAILABLE UPON REQUEST.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
MONEY MARKET FUND FINANCIAL HIGHLIGHTS
BOND FUNDS FINANCIAL HIGHLIGHTS
EQUITY FUNDS FINANCIAL HIGHLIGHTS
48
<PAGE> 95
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on each Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including each Fund's operations and investment
policies. It is incorporated by reference and is legally considered a part of
this prospectus.
- -------------------------------------------------------------------------------
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING A BROKER OR BANK THAT SELLS
THE FUND. OR CONTACT THE FUND AT:
PERFORMANCE FUNDS TRUST
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-PERFORM
- -------------------------------------------------------------------------------
You can review the Funds' reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-6603.
49
<PAGE> 96
PERFORMANCE MONEY MARKET FUND
A SERIES OF PERFORMANCE FUNDS TRUST
INSTITUTIONAL CLASS
================================================================================
PROSPECTUS
SEPTEMBER __, 1999
QUESTIONS?
CALL 1-800-PERFORM
OR YOUR INVESTMENT
REPRESENTATIVE.
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED
OR DISAPPROVED THE SHARES
DESCRIBED IN THIS
PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
================================================================================
<PAGE> 97
TABLE OF CONTENTS
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES EACH FUND'S
INVESTMENTS, RISKS, PAST PERFORMANCE, AND FEES.
RISK/RETURN SUMMARY AND FUND EXPENSES
3 INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT
STRATEGIES
4 PRINCIPAL INVESTMENT RISKS
5 PERFORMANCE INFORMATION
7 FEES AND EXPENSES
================================================================================
ADDITIONAL INFORMATION
9 YEAR 2000 AND THE PERFORMANCE FUNDS
================================================================================
FUND MANAGEMENT
10 INVESTMENT ADVISER
10 PORTFOLIO MANAGER
10 DISTRIBUTOR AND ADMINISTRATOR
================================================================================
SHAREHOLDER INFORMATION
11 PRICING OF FUND SHARES
13 PURCHASING AND ADDING TO YOUR SHARES
16 SELLING YOUR SHARES
19 EXCHANGING YOUR SHARES
20 SERVICE ORGANIZATIONS
20 DIVIDENDS, DISTRIBUTIONS AND TAXES
================================================================================
FINANCIAL HIGHLIGHTS
21
================================================================================
BACK COVER
22 WHERE TO LEARN MORE ABOUT THE FUND
2
<PAGE> 98
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
THE MONEY MARKET FUND
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE As high a level of current income as is consistent
with preservation of capital and liquidity.
PRINCIPAL INVESTMENT The Fund invests in a broad range of high quality,
STRATEGIES short-term, money instruments which have remaining
maturities not to exceed 397 days. The Fund is
required to maintain a portfolio maturity of 90 days
or less.
The Fund's investments may include any investments
permitted under federal rules governing money market
funds, including: U.S. Government Securities, bank
obligations, commercial paper, corporate debt
securities, variable rate demand notes and repurchase
agreements and other high quality short-term
securities. Generally, securities in which the Fund
may invest will not earn as high a yield as
securities with longer maturities or of lower
quality.
The Adviser selects only those U.S.
dollar-denominated debt instruments that meet the
high quality and credit risk standards established by
the Board of Trustees and consistent with Federal
requirements applicable to money market funds. In
accordance with such requirements, the Fund will
purchase securities that are rated within the top two
rating categories by at least two nationally
recognized statistical rating organizations
("NRSROs") or, if only one NRSRO has rated the
security, by that NRSRO, or if not rated, the
securities are deemed of comparable quality pursuant
to standards adopted by the Board of Trustees. The
Fund's investments in securities with the
second-highest rating (or deemed of comparable
quality) may not exceed 5% of its total assets, and
all the Fund's commercial paper investments must be
in the highest rating category (or deemed of
comparable quality).
3
<PAGE> 99
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
PRINCIPAL RISKS
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Investing in the Money Market Fund involves risks
common to any investment in securities. By itself, no
Fund constitutes a balanced investment program.
An investment in the Money Market Fund is not a bank
deposit of Trustmark National Bank or any other bank
and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
The Money Market Fund expects to maintain a net asset
value of $1.00 per share, but there is no assurance
that it will be able to do so on a continuous basis.
It is possible to lose money by investing in the
Fund.
There can be no assurance that the investment
objective of the Money Market Fund will be achieved.
SELECTION RISK
Like all investment funds, the Money Market Fund is
subject to the chance that poor security selection
will cause the Fund to underperform other funds with
similar objectives.
INTEREST RATE RISK
Interest rate risk is the chance that the value of
the instruments held by the Fund will decline due to
rising interest rates. When interest rates rise, the
price of most debt instruments goes down. When
interest rates go down, prices go up. The price of a
debt instrument is also affected by its maturity.
Debt instruments with shorter maturities, such as
those permitted for money market funds, tend to be
less sensitive to changes in interest rates than
instruments with longer maturities.
CREDIT RISK
Credit risk is the chance that the issuer of a debt
instrument will fail to repay interest and principal
in a timely manner or may be unable to fulfill an
obligation to repurchase securities from the Fund,
reducing the Fund's return. Credit risk is minimized
by the Fund's policy of adequate diversification
among issuers and industries and minimum credit risk
requirements for money market funds under applicable
law.
INCOME RISK
Income risk is the chance that falling interest rates
will cause the Fund's income to decline. Income risk
is generally higher for short-term debt instruments.
4
<PAGE> 100
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
PRINCIPAL RISKS, CONTINUED
- --------------------------------------------------------------------------------
ADDITIONAL PRINCIPAL PREPAYMENT RISK
INVESTMENT RISK The Fund's investments in mortgage-related securities
are subject to the risk that the principal amount of
the underlying mortgage may be repaid prior to the
security's maturity date. Such repayments are common
when interest rates decline. When such a repayment
occurs, no additional interest will be paid on the
investment. Prepayment exposes the Fund to a lower
return upon subsequent reinvestment of the principal.
A full discussion of all permissible investments can
be found in the Statement of Additional Information
("SAI").
WHO MAY WANT TO INVEST? Consider investing in the Money Market Fund if you:
|X| ARE SEEKING PRESERVATION OF CAPITAL
|X| HAVE A LOW RISK TOLERANCE
|X| ARE WILLING TO ACCEPT LOWER POTENTIAL RETURNS IN
EXCHANGE FOR A HIGHER DEGREE OF SAFETY
|X| ARE INVESTING SHORT-TERM RESERVES
The Money Market Fund will not be appropriate for
anyone:
|X| SEEKING HIGH TOTAL RETURNS
|X| PURSUING A LONG-TERM GOAL OR INVESTING FOR
RETIREMENT
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year.
PERFORMANCE BAR CHART AND TABLE YEAR-BY-YEAR TOTAL RETURNS FOR INSTITUTIONAL
CLASS SHARES
(Both the chart and the table assume reinvestment of dividends and
distributions.)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
4.19% 5.85% 5.33% 5.43% 5.31%
</TABLE>
Best quarter: 3rd Qtr 1995 1.42%
Worst quarter: 3rd Qtr 1993 1.16%
Past performance does not indicate how the Fund will perform in the future.
5
<PAGE> 101
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
PERFORMANCE INFORMATION, CONTINUED
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Since Inception
-------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS SHARES 9/30/93 5.31% 5.22% 5.12%
</TABLE>
- --------------------------------------------------------------------------------
For the period January 1, 1999 through June 30, 1999 the aggregate
(non-annualized) total returns of the Fund was 2.33%.
As of May 31, 1999 the 7-day current yield of the Fund's Institutional shares
was 4.68%. For current yield information on the Fund, call 1-800-PERFORM. The
Money Market Fund's yield appears in the Wall Street Journal each Thursday.
6
<PAGE> 102
RISK/RETURN SUMMARY AND FUND EXPENSES - MONEY MARKET FUND
FEES AND EXPENSES
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Class shares of the Fund.
FEE TABLE
---------
<TABLE>
<CAPTION>
The Money Market
Fund
INSTITUTIONAL CLASS SHARES
-------------------------------------- -----------------------------
<S> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge (Load)
Imposed on Purchases None
ANNUAL FUND OPERATING EXPENSES
(EXPENSE THAT ARE DEDUCTED FROM FUND
ASSETS)
Management fees(1) 0.30%
12b-1 Fees None
Service Organization Fees(1) 0.35%
Other expenses 0.29%
TOTAL ANNUAL FUND
OPERATING EXPENSES 0.94%
FEE WAIVER(1) 0.45%
NET ANNUAL FUND
OPERATING EXPENSES 0.49%
</TABLE>
- --------
(1) The Fund's Adviser and Distributor have contractually agreed to waive a
portion of the advisory fees and the service organization fee at least
until May 31, 2000. As a result, Management fees would be 0.20% and
service organization fee would be 0.0%. You will be notified if the
waiver is discontinued after that date.
7
<PAGE> 103
EXAMPLE: THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES:
o $10,000 INVESTMENT
o 5% ANNUAL RETURN
o REDEMPTION AT THE END OF EACH PERIOD
o NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION
OF THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2000.
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
<TABLE>
<CAPTION>
MONEY MARKET FUND
Institutional Class
Shares
-------------------------------- ------------------------------
<S> <C>
One Year After Purchase $ 50
Three Years After Purchase $ 256
Five Years After Purchase $ 480
Ten Years After Purchase $1,136
</TABLE>
8
<PAGE> 104
ADDITIONAL INFORMATION
YEAR 2000 AND THE Like other funds and business organizations around
PERFORMANCE FUNDS the world, the Fund could be adversely affected if
the computer systems used by the Adviser and the
Fund's other service providers do not properly
process dates beyond December 31, 1999. In addition,
year 2000 issues may adversely affect companies in
which the Fund invests where, for example, such
companies incur substantial costs to address year
2000 issues or suffer losses caused by the failure to
do so in an adequate or timely manner.
The Fund has been assured that the Adviser and other
service providers have developed and are implementing
clearly defined and documented plans intended to
minimize risks to services critical to the Fund's
operations associated with year 2000 issues. Internal
efforts include a commitment to dedicate adequate
staff and funding to identify and remedy year 2000
issues, and specific actions such as inventorying
software systems, determining inventory items that
may not function properly after December 31, 1999,
reprogramming or replacing such systems, and
retesting for year 2000 readiness. The Adviser and
the Fund's service providers are likewise seeking
assurances from their respective vendors and
suppliers that such entities are addressing any year
2000 issues, and each provider intends to engage,
where appropriate, in private and/or industry
interface testing of systems for year 2000 readiness.
In the event that any systems upon which the Fund is
dependent are not year 2000 ready by December 31,
1999, administrative errors and account maintenance
failures would likely occur.
While the ultimate costs or consequences of
incomplete or untimely resolution of year 2000 issues
by the Adviser or the Fund's service providers cannot
be accurately assessed at this time, the Fund
currently has no reason to believe that the year 2000
plans of the Adviser and the Fund's service providers
will not be completed by December 31, 1999, or that
the anticipated costs associated with full
implementation of their plans will have a material
adverse impact on either their business operations or
financial conditions or those of the Fund. The Fund
and the Adviser will continue to closely monitor
developments relating to this issue, including
development by the Adviser and the Fund's service
providers of contingency plans for providing back-up
computer services in the event of a systems failure
or the inability of any provider to achieve year 2000
readiness. Separately, the Adviser will monitor
potential investment risk related to year 2000
issues.
9
<PAGE> 105
FUND MANAGEMENT
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Trustmark National Bank, 248 East Capital 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 review, 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.
For these advisory services, the Fund paid an annual fee of 0.10% of its average
daily net assets during the fiscal year ended May 31, 1999.*
*Trustmark National Bank waived a portion of its contractual fees for the Fund
for the most recent fiscal year. Contractual fees (without waivers) are 0.30%
for the Fund.
PERFORMANCE PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
Trustmark has an investment management staff of highly trained professionals who
manage the assets of each Performance 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.
Zach 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.
DISTRIBUTOR AND ADMINISTRATOR
- --------------------------------------------------------------------------------
BISYS Fund Services ("BISYS") provides management and administrative services to
the Fund, including providing office space, equipment and clerical personnel to
the Fund and supervising custodial, auditing, valuation, bookkeeping and legal
services. BISYS Fund Services, Inc., an affiliate of BISYS, acts as the fund
accountant, transfer agent and dividend paying agent of the Fund. BISYS and
BISYS Fund Services, Inc. are each located at 3435 Stelzer Road, Columbus, Ohio
43219.
Performance Funds Distributor, Inc. 3435 Stelzer Road, Columbus, Ohio 43219 acts
as the Fund's distributor. The Distributor is an affiliate of BISYS and was
formed specifically to distribute the Fund.
10
<PAGE> 106
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
- --------------------------------------------------------------------------------
HOW NAV IS CALCULATED The Fund's net asset value, or NAV, is expected to be
The NAV is calculated constant at $1.00 per share, although its value is
by adding the total not guaranteed. The NAV is determined at 12:00 noon
value of the Fund's Eastern time on days the New York Stock Exchange is
investments and other open. The Fund values its securities at their
assets, subtracting amortized cost. The amortized cost method involves
its liabilities and valuing a portfolio security initially at its cost on
then dividing that the date of the purchase and thereafter assuming a
figure by the number constant amortization to maturity of the difference
of outstanding shares between the principal amount due at maturity and
of the Fund: initial cost.
Your order for purchase, sale or exchange of shares
NAV = is priced at the next NAV calculated after your order
is received in good order by the Fund on any day that
TOTAL ASSETS-LIABILITIES both the New York Stock Exchange and the Fund's
- ------------------------ custodian are open for business. For example: If you
Number of Shares properly place a purchase order to buy shares of the
Outstanding Fund, that is delivered to the Fund by 12:00 noon
Eastern time, the order receives the share price next
determined if the Fund receives payment in federal
funds or other immediately available funds by 4:00
p.m. (Eastern time) that day. If your order is
received after 12:00 noon Eastern time, you will
receive the NAV calculated on the next day at 12:00
noon Eastern time.
11
<PAGE> 107
SHAREHOLDER INFORMATION
PURCHASING AND SELLING YOUR SHARES
- --------------------------------------------------------------------------------
PURCHASING AND ADDING TO YOUR SHARES
You may purchase
shares of the Fund Institutional Class shares of the Fund are offered at
through the net asset value without a sales load. Purchases of
Performance Funds Institutional Class shares may only be made by one of
Distributor or through the following types of "Institutional Investors": (1)
banks, brokers and trusts, or investment management and other fiduciary
other investment accounts managed or administered by Trustmark or its
representatives, which affiliates or correspondents pursuant to a written
may charge additional agreement, (2) employees of Trustmark (and family
fees and may require members), the Distributor, Administrator, and
higher minimum affiliates and correspondents, (3) or Trustees of the
investments or impose Trust (and family members) or Directors of Trustmark
other limitations on (and family members), (4) any persons purchasing
buying and selling shares with the proceeds of a distribution from a
shares. If you trust, investment management and other fiduciary
purchase shares account managed or administered by Trustmark or its
through an investment affiliates or correspondents, pursuant to a written
representative, that agreement and (5) other persons or organizations
party is responsible authorized by the Distributor. The Trust and the
for transmitting Distributor reserve the right to waive or reduce the
orders by close of minimum initial investment amount with respect to
business and may have certain accounts. All initial investments should be
an earlier cut-off accompanied by a completed Purchase Application, a
time for purchase and form of which accompanies this Prospectus. A separate
sale requests. Consult application is required for Individual Retirement
your investment Account investments.
representative or
institution for All purchases must be in U.S. dollars. A fee will be
specific information. charged for any checks that do not clear. Third-party
checks are not accepted.
The Distributor may reject a purchase order if it
considers it in the best interest of the Fund and its
shareholders.
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 p.m. Eastern time, will
become effective that day.
- --------------------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
- --------------------------------------------------------------------------------
12
<PAGE> 108
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
BY MAIL
If purchasing through your financial advisor or brokerage account, simply tell
your advisor or broker that you wish to purchase shares of the Fund and he or
she will take care of the necessary documentation. For all other purchases,
follow the instructions below.
All investments made by regular mail or express delivery, whether initial or
subsequent, should be sent:
BY REGULAR MAIL: BY EXPRESS MAIL:
Performance Funds Performance Funds
P.O. Box 182484 3435 Stelzer Road
Columbus, OH 43218-2484 Columbus, OH 43219
For Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "Performance Funds Trust"
and include the name "Money Market Fund" on the check.
3. Mail or deliver application and payment to address above.
For Subsequent Investment:
1. Use the investment slip attached to your account statement. Or, if
unavailable, provide the following information:
o Fund name
o Share class
o Amount invested
o Account name and account number
2. Make check, bank draft or money order payable to "Performance Funds Trust"
and include your account number on the check.
3. Mail or deliver investment slip and payment to the address above.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be a
U. S. Bank. Your bank or broker may charge for this service.
Establish the electronic purchase option on your account application or call
1-800-737-3676. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-737-3676 to arrange a transfer from your bank account.
13
<PAGE> 109
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial institutions to send
funds to each other, almost instantaneously. With an
electronic purchase or sale, the transaction is made
through the Automated Clearing House (ACH) and may
take up to eight days to clear. There is generally no
fee for ACH transactions.
-----------------------------------------------------
BY WIRE TRANSFER
Call 1-800-737-3676 to obtain a new account number and instructions for sending
your application, and for instructing your bank to wire transfer your
investment.
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
- --------------------------------------------------------------------------------
You can add to your account by using the convenient options described below. The
Fund reserves the right to change or eliminate these privileges at any time with
60 days notice.
- --------------------------------------------------------------------------------
14
<PAGE> 110
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM PAYROLL DIRECT DEPOSIT
You can make automatic investments in You may set up a payroll direct
the Fund from your bank account. deposit arrangement through your
Automatic investments can be as little employer or retirement benefit
as $25; no investment is required to source. You may make periodic
establish an automatic investment investments of at least $20 per
account. pay period.
To invest regularly from your bank To invest regularly from your
account: paycheck or government check:
| | Complete the Automatic Call 1-800-737-3676 for an
Investment Plan portion on your enrollment form.
Account Application.
Make sure you note:
o Your bank name,
address and account
number
o The amount you wish to
invest automatically
(minimum $25)
o How often you want to
invest (every month or
4 times a year)
| | Attach a voided personal check.
- --------------------------------------------------------------------------------
Dividends and Distributions
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions
Capital gains are distributed at least annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE OWNED
YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION DATE, SOME
OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A DISTRIBUTION.
- --------------------------------------------------------------------------------
15
<PAGE> 111
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
- --------------------------------------------------------------------------------
You may sell your WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
shares at any time.
Your sales price will As a mutual fund shareholder, you are technically
be the next NAV after selling shares when you request a withdrawal in cash.
your sell order is This is also known as redeeming shares or a
received in good order redemption of shares.
by the Fund, its
transfer agent, or -----------------------------------------------------
your investment
representative. INSTRUCTIONS FOR SELLING SHARES
Normally you will If selling your shares through your financial adviser
receive your proceeds or broker, ask him or her for redemption procedures.
within a week after Your adviser and/or broker may have transaction
your request is minimums and/or transaction times which will affect
received. See section your redemption. For all other sales transactions,
on "General Policies on follow the instructions below.
By telephone 1. Call 1-800-737-3676 with instructions as to how
(unless you have you wish to receive your funds (mail, wire,
declined telephone electronic transfer). (See "General Policies on
sales privileges) Selling Shares--Verifying Telephone Redemptions"
below)
- --------------------------------------------------------------------------------
By mail 1. Call 1-800-737-3676 to request redemption forms or
(See "General Policies write a letter of instruction indicating:
on Selling Shares - o your Fund and account number
Redemptions in Writing o amount you wish to redeem
Required") o address where your check should be sent
o account owner signature
2. Mail to:
Performance Funds
P.O. Box 182484
Columbus, OH 43218-2484
- --------------------------------------------------------------------------------
By overnight service See "By mail" instruction 1 above.
(See "General Policies 2. Send to
on Selling Shares-- Performance Funds
Redemptions in Writing c/o BISYS Fund Services
Required" below) Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
- --------------------------------------------------------------------------------
Wire transfer Call 1-800-737-3676 to request a wire transfer.
You must indicate this
option on your
application. If you call by 4 p.m. Eastern time, your payment will
normally be wired to your bank on the next business
day.
Note: Your financial
institution may charge
a fee.
16
<PAGE> 112
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
Electronic Redemptions Call 1-800-737-3676 to request an electronic
redemption.
Your bank must If you call by 4 p.m. Eastern time, the NAV of your
participate in the shares will normally be determined on the same day
Automated Clearing House and the proceeds credited within 8 days.
(ACH) and must be a U.S.
bank.
Your bank may charge
for this service.
AUTOMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The minimum periodic withdrawal is $100. To
activate this feature:
o Make sure you've checked the appropriate box on the Account
Application. Or call 1-800-737-3676
o Include a voided personal check.
o You must have a value of $25,000 or more to start withdrawals.
REDEMPTION BY CHECK WRITING
You may write checks in amounts of $100 or more on your account in the Money
Market Fund. To obtain checks, complete the signature card section of the
Account Application or contact the Fund to obtain a signature card. Dividends
and distributions will continue to be paid up to the day the check is presented
for payment. You may not close your Money Market Fund account by writing a
check.
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee, which include each of
the following:
o Redemptions over $25,000
o Your account registration or the name(s) in your account has changed
within the last 15 days
o The check is not being mailed to the address on your account
o The check is not being made payable to the owner of the account
o The redemption proceeds are being transferred to another Fund account
with a different registration.
A signature guarantee can be obtained from a financial institution, such
as a bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock
Exchange Medallion Signature Program) or SEMP (Stock Exchanges Medallion
Program). Members are subject to dollar limitations which must be
considered when requesting their guarantee. The Transfer Agent may reject
any signature guarantee if it believes the transaction would otherwise be
improper.
17
<PAGE> 113
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
- --------------------------------------------------------------------------------
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to ensure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders. If appropriate precautions have not been taken, the
Transfer Agent may be liable for losses due to unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, your redemption proceeds
will not be mailed until the Transfer Agent is satisfied that the check has
cleared (which may require up to 15 business days). You can avoid this delay by
purchasing shares with a certified check or federal funds wire.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders. If you experience difficulty making a telephone
redemption during periods of drastic economic or market change, you can send the
Fund your request by regular mail or express mail.
REDEMPTION IN KIND
The Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind" for amounts redeemed by a shareholder, in any
90-day period, in excess of $250,000 or 1% of Fund net assets, whichever is
less. If the Fund deems it advisable for the benefit of all shareholders,
redemption in kind will consist of securities equal in market value to your
shares. When you convert these securities to cash, you will pay brokerage
charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below (not as a result of market action) $500, ($250 for
IRAs), the Fund may ask you to increase your balance. If it is still below $500
($250 for IRAs) after 30 days, the Fund may close your account and send you the
proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that remain
uncashed for six months will be canceled and the money reinvested in the Fund.
18
<PAGE> 114
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
- --------------------------------------------------------------------------------
You can exchange your INSTRUCTIONS FOR EXCHANGING SHARES
shares in the Fund for Exchanges may be made by sending a written request to
shares of the same Performance Funds, P.O. Box 182484 Columbus OH
class of another 43218-2484, or by calling 1-800-737-3676. Please
Performance Fund. No provide the following information:
transaction fees are o Your name and telephone number
charged for exchanges o The exact name on your account and account number
(see "Notes on o Taxpayer identification number (usually your Social
exchanges" below). Security number)
o Dollar value or number of shares to be exchanged
o The name of the Fund from which the exchange is to
be made
You must meet the o The name of the Fund into which the exchange is
minimum investment being made.
requirements for the
Fund into which you See "Selling your Shares" for important information
are exchanging. about telephone transactions.
Exchanges from one
Fund to another are -----------------------------------------------------
taxable.
NOTES ON EXCHANGES
AUTOMATIC EXCHANGES
You can use the Fund's The registration and tax identification numbers of
Automatic Exchange the two accounts must be identical.
feature to purchase
shares of the The Exchange Privilege (including automatic
Performance Funds at exchanges) may be changed or eliminated at any time
regular intervals upon a 60-day notice to shareholders.
through regular,
automatic redemptions Be sure to read carefully the Prospectus of any other
from the Money Market Performance Fund into which you wish to exchange
Fund. To participate shares.
in the Automatic
Exchange:
o Complete the
appropriate
section of the
Account
Application.
o Shareholders must
have a minimum
initial purchase of
$10,000 in their
Performance Funds
accounts.
To change the
Automatic Exchange
instructions or to
discontinue the
feature, you must send
a written request to
Performance Funds,
P.O. Box 182484,
Columbus, Ohio
43218-2484.
19
<PAGE> 115
SHAREHOLDER INFORMATION
SERVICE ORGANIZATIONS
- --------------------------------------------------------------------------------
Various banks, trust companies, broker-dealers (other than the Distributor) and
other financial organizations ("Service Organization(s)") may provide certain
administrative services for its customers who invest in the Fund through
accounts maintained at that Service Organization. The Fund, under servicing
agreements with the Service Organization, will pay the Service Organization an
annual rate up to .35% of the Fund's average daily net assets for these
services, which include:
| | receiving and processing shareholder orders
| | performing the accounting for customers' sub-accounts
| | maintaining retirement plan accounts
| | answering questions and handling correspondence for customer
accounts
| | acting as the sole shareholder of record for customer accounts
| | issuing shareholder reports and transaction confirmations
| | performing daily "sweep" functions
Investors who purchase, sell or exchange shares of the Fund through a customer
account maintained at a Service Organization may be charged extra for other
services which are not specified in the servicing agreement with the Fund but
are covered under separate fee schedules provided by the Service Organization to
their customers. Customers with accounts at Service Organizations should consult
their Service Organization for information concerning their sub-accounts. The
Adviser or Administrator also may pay Service Organizations for rendering
services to customers' sub-accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Any income the Fund receives is paid out, less expenses, in the form of
dividends to its shareholders. Dividends are declared daily and paid monthly.
Capital gains are distributed at least annually.
An exchange of shares is considered a sale, and any related gains may be subject
to applicable taxes.
Dividends are taxable as ordinary income. Taxes on capital gains by the Fund
will vary with the length of time the Fund has held the security - not how long
you have invested in the Fund.
Some dividends may be taxable in the year in which they are declared, even if
they are paid or appear on your account statement the following year. Dividends
and distributions are treated in the same manner for federal income tax purposes
whether you receive them in cash or in additional shares.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements.
There is a penalty on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
20
<PAGE> 116
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE FUND'S
FINANCIAL PERFORMANCE FOR THE PERIOD OF THE FUND'S OPERATIONS. CERTAIN
INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE FUND SHARE. THE TOTAL
RETURNS IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR WOULD HAVE EARNED ON AN
INVESTMENT IN THE FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS). THIS INFORMATION HAS BEEN AUDITED BY PRICEWATERHOUSECOOPERS LLP,
WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL STATEMENTS, ARE INCLUDED IN THE
ANNUAL REPORT, WHICH IS AVAILABLE UPON REQUEST.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
MONEY MARKET FUND FINANCIAL HIGHLIGHTS
21
<PAGE> 117
For more information about the Fund, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund, including its operations and investment policies. It
is incorporated by reference and is legally considered a part of this
prospectus.
- --------------------------------------------------------------------------------
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE FUND BY CONTACTING A BROKER OR BANK THAT SELLS
THE FUND. OR CONTACT THE FUND AT:
PERFORMANCE FUNDS
P.O. BOX 182484
COLUMBUS, OHIO 43218-2484
TELEPHONE: 1-800-737-3676
- --------------------------------------------------------------------------------
You can review the Fund's reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-6603.
22
<PAGE> 118
PERFORMANCE FUNDS TRUST
TELEPHONE: 1-800 PERFORM (737-3676)
STATEMENT OF ADDITIONAL INFORMATION - SEPTEMBER 30, 1999
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 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, 1999. All terms used in this SAI that are
defined in the Prospectus will have the meanings assigned in the Prospectus. The
financial statements and related report of the independent accountants in the
Funds' Annual Report for the fiscal year ended May 31, 1999 are incorporated by
reference into this SAI. Copies of the Prospectus and the Annual Report 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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Investment Policies...................................................... 1
Description of Securities and Investment Practices....................... 3
Investment Restrictions
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>
Neither the Prospectus nor SAI constitutes an offer to sell or a solicitation of
an offer to buy any securities other than the registered securities to which it
relates. Neither the Prospectus nor SAI constitutes 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.
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INVESTMENT POLICIES
The Prospectus discusses the investment objectives of the Funds and the policies
to be employed to achieve those objectives. This section contains supplemental
information concerning certain types of securities and other instruments in
which the Funds may invest, the investment policies and portfolio strategies
that the Funds may utilize, and certain risks attendant to such investments,
policies and strategies. The investment objective of each Fund is a fundamental
policy of the Fund and may not be changed without the approval of the Fund's
shareholders.
THE FUNDS
THE MONEY MARKET FUND. The Fund pursues its objective to provide
investors with as high a level of current income as is consistent with
preservation of capital and liquidity by investing in a broad range of high
quality, short-term, money market instruments that have remaining maturities not
exceeding 397 days. The Fund is required to maintain a dollar-weighted average
portfolio maturity no greater than 90 days. The Fund's investments may include
any investments permitted under federal rules governing money market funds,
including: U.S. Government Securities; domestic and foreign bank obligations;
commercial paper, corporate debt securities, variable rate demand notes and
repurchase agreements and other high quality short-term securities (see "U.S.
Government Securities", "Domestic and Foreign Bank Obligations", "Commercial
Paper", "Corporate Debt Securities", "Repurchase Agreements", and "Variable and
Floating Rate Demand, and Master Demand Notes").
The Adviser selects only those U.S. dollar-denominated debt instruments
that meet the high quality and credit risk standards established by the Board of
Trustees and consistent with Federal requirements applicable to money market
funds. In accordance with such requirements, the Fund will purchase securities
that are rated within the top two rating categories by at least two nationally
recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has
rated the security, by that NRSRO, or if not rated, the securities are deemed of
comparable quality pursuant to standards adopted by the Board of Trustees. The
Fund will purchase commercial paper only if, at the time of the investment, the
paper is rated within the top rating category or deemed of comparable quality
pursuant to standards adopted by the Board of Trustees. The Fund will invest no
more than 5% of its total assets in securities rated below the highest rating
category or, if unrated, deemed of comparable quality.
The Fund may also invest in the securities of other investment
companies (see "Investment Company Securities"). The Fund may also lend its
portfolio securities (see "Lending Securities").
THE SHORT TERM AND INTERMEDIATE TERM GOVERNMENT INCOME FUNDS. Each
Government Income Fund pursues its objective as described in the prospectus by
investing primarily in securities issued by the U.S. Government, its agencies
and instrumentalities (see "U.S. Government Securities" and "Mortgage Related
Securities") within such Fund's given maturity restrictions described in the
prospectus. These securities may also include zero coupon securities (see "Zero
Coupon Securities").
To permit desirable flexibility, each Fund has authority to invest up
to 35% of its total assets in corporate debt securities rated BBB or better by
Standard &Poor's (S&P) or Baa or better by Moody's Investment Services, Inc.
("Moody's") (or deemed of comparable quality by the Adviser) and high quality
money market instruments including commercial paper rated A-2 or better by S&P
or Prime-2 or better by Moody's (or deemed by the Adviser to be of comparable
quality); certificates of deposit, bankers' acceptances and other short-term
debt obligations of domestic and foreign banks variable and floating rate demand
and master demand notes; and repurchase agreements with respect to securities in
which the Fund is authorized to invest (see "Domestic and Foreign Bank
Obligations", "Commercial Paper", "Corporate Debt Securities", "Repurchase
Agreements", and "Variable and Floating Rate Demand and Master Demand Notes").
In addition, the Fund may enter into interest rate futures contracts, options on
securities and options on futures contracts to a limited extent (see "Interest
Rate Futures Contracts and Options Thereon", "Investment in Bond Options" and
"Risks Involving Futures Contracts"). The Fund may also invest in investment
companies, securities on a when-issued basis or forward commitment basis and
lend its portfolio
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securities (see "Investment Company Securities", "When-Issued, Delayed Delivery
Securities and Forward Commitments" and "Lending Securities").
THE SMALL CAP EQUITY FUND. The Small Cap Equity Fund pursues its
objective of long-term capital appreciation by investing primarily in a
diversified portfolio of common and preferred stocks and securities convertible
into common stock of small companies as described in the prospectus (see
"Convertible Securities").
Its investments in non-U.S. issuers will generally be in the form of
American Depository Receipts ("ADRs") (see "Foreign Securities and American
Depositary Receipts"). In addition, the Fund may enter into stock index futures
contracts, options on securities, options on futures contracts and forward
foreign currency exchange contracts to a limited extent (see "Stock Index
Futures Contracts", "Options on Common Stocks and Stock Indices" and "Options on
Index Futures"). The Fund may also invest in investment companies and corporate
reorganizations and lend its portfolio securities (see "Investment Company
Securities", "Corporate Reorganizations", and "Lending Securities"). The Fund
may also engage in short sales (see "Short Sales").
THE MID CAP EQUITY FUND. The Mid Cap Equity Fund pursues its objective
of long-term capital appreciation by investing primarily in a diversified
portfolio of publicly traded common stocks. Under normal circumstances, at least
65% of the Fund's total assets will be invested in equity securities of
mid-sized companies. Mid-sized companies are defined as those with market
capitalizations that fall within the range of companies in the S&P Mid Cap Index
at the time of investment. The S&P Mid Cap Index is an unmanaged index that is
designed to track the performance of medium sized companies. The index is
updated quarterly, and the companies included in the index, as well as their
capitalization ranges, change from time to time. A company that was within the
range of the index at the time its stock was purchased by the Fund will continue
to be considered mid-sized for purposes of the 65% test even if its
capitalization subsequently falls outside the range of the index. Under normal
market conditions, up to 35% of the Fund's total assets may be invested in
options, warrants, preferred stock, foreign securities, money market
instruments, investment grade debt securities and securities convertible into
common or preferred stock, futures contracts and equity securities of larger
capitalized companies (see "Options on Common Stock and Stock Indices,"
"Warrants," "Convertible Securities," "Foreign Securities and American
Depository Receipts," "Corporate Debt Securities," "Stock Index Future
Contracts" and "Options on Index Futures") The Fund may invest without limit in
debt instruments, preferred stock and equity securities of larger capitalized
companies for temporary defensive purposes when the Adviser has determined that
abnormal market or economic conditions so warrant. These debt obligations may
include U.S. Government Securities; certificates of deposit, bankers'
acceptances and other short-term debt obligations of banks, short term money
market instruments including commercial paper rated "A-1" or better by Standard
& Poor's, S&P, or "P-1" or better by Moodys ; and repurchase agreements with
respect to securities in which the Fund is authorized to invest. (See "Domestic
and Foreign Bank Obligations", "Commercial Paper", "Repurchase Agreements" and
"Variable and Floating Rate Demand Notes." The Fund may also invest in
investment companies and lend portfolio securities (See "Investment Company
Securities" and "Lending Securities".)
THE LARGE CAP EQUITY FUND. The Large Cap Equity Fund pursues its
objective of long-term capital appreciation by investing primarily in common
stocks. The Fund may also enter into stock index futures contracts, options on
securities, and options on futures contracts to a limited extent (see "Stock
Index Futures Contracts", "Options on Common Stocks and Stock Indices" and
"Options on Index Futures "). The Fund expects to invest primarily in securities
of U.S.-based companies, but it may also invest in securities of non-U.S.
companies, generally through ADRs (see "Foreign Securities"). Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
equity securities of large U.S. companies. Large companies are defined as those
with market capitalization in excess of $1 billion at the time of purchase.
Companies that satisfy this test at the time of purchase will continue to be
considered "large" for purposes of the 65% test even if they subsequently fall
below this range. 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 (see "U.S. Government Securities," "Corporate
Debt Securities," "Mortgage Related Securities" and "Other Asset Backed
Securities"). When warranted by business or financial conditions, or when, in
the opinion of the Adviser, it is 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
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(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.
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 Funds will not invest in any obligations of its affiliates,
as defined under the Investment Company Act of 1940, as amended (the "1940
Act"). The Funds limit their investments in U.S. bank obligations to obligations
of U. S. banks (including foreign branches). The Funds limit their investments
in foreign bank obligations to U. S. dollar-denominated obligations of foreign
banks (including U.S. branches of foreign banks) which, in the opinion of the
Adviser, are of an investment quality comparable to obligations of U.S. 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 U.S. 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 U. S. 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 U.S. banks. Foreign banks are
not subject to examination by any U.S. 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 U.S. banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements.
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COMMERCIAL PAPER (all Funds). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by U.S. banks and bank holding companies, U.S. corporations
and financial institutions, as well as similar taxable and tax-exempt
instruments issued by government agencies and instrumentalities. Each Fund
establishes its own standards of creditworthiness for issuers of such
investments.
CORPORATE DEBT SECURITIES (all Funds). 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.
UNRATED INVESTMENTS (all Funds). 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 (all Funds). 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 (all Funds). 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. 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. 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
U.S. 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
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securities loaned rises (i.e., the borrower "marked-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
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 between two parties to buy and
sell a security for a set price on a future date. Future contracts are traded on
designated "contracts markets" which, through their clearing corporations,
guarantee performance of the contracts. Currently, there are futures contracts
based on securities such as long-term U.S. Treasury bonds, U.S. Treasury notes,
GNMA Certificates and three-month U.S. Treasury bills.
Generally, if market interest rates increase, the value of outstanding
debt securities decline (and vice versa). Entering into a futures contract for
the sale of securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if a Fund holds long-term U.S. Government securities and
the Adviser anticipates a rise in long-term interest rates, it could, in lieu of
selling its portfolio securities, enter into futures contracts for the sale of
similar long-term securities. If rates increased and the value of a Fund's
portfolio securities declined, the value of the Fund's futures contracts would
increase, thereby protecting the Fund by preventing its net asset value from
declining as much as it otherwise would have declined. Similarly, entering into
futures contracts for the purchase of securities has an effect similar to actual
purchase of the underlying securities, but permits the continued investment of
securities other than the underlying securities. For example, if the Adviser
expects long-term interest rates to decline, the Fund might enter into futures
contracts for the purchase of long-term securities, so that it could gain rapid
market exposure that may offset anticipated increases in the cost of securities
it intends to purchase, while continuing to hold higher-yielding short-term
securities or waiting for the long-term market to stabilize.
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, a
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.
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.
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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.
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.
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,
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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.
INDEX FUTURES CONTRACTS (EQUITY FUNDS). 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 total assets are at
risk due to such transactions. An index futures contract is a contract to buy or
sell units of an index at a specified future date at a price agreed upon when
the contract is made. Entering into a contract to buy units of an index is
commonly referred to as buying or purchasing a contract or holding a long
position in the index. Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a short position. A unit
is the current value of the index. The Funds may enter into stock index futures
contracts and may purchase and sell options thereon.
There are several risks in connection with the use by the Funds of
index futures as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the index futures and movements
in the prices of securities which are the subject of the hedge. The Fund will
attempt to reduce this risk by selling, to the extent possible, futures on
indices the movements of which will, in the Adviser's judgment, have a
significant correlation with movements in the prices of the Fund's portfolio
securities sought to be hedged.
Successful use of the index futures by the Funds for hedging purposes
is also subject to a Fund's ability to predict correctly movements in the
direction of the market. It is possible that, where a Fund has sold futures to
hedge its portfolio against a decline in the market, the index on which the
futures are written may advance and the value of securities held in the Fund's
portfolio may decline. If this occurs, the Fund would lose money on the futures
and also experience a decline in the value in its portfolio securities. However,
while this could occur to a certain degree, the Adviser believes that over time
the value of a Fund's portfolio will tend to move in the same direction as the
market indices which are intended to correlate to the price movements of the
portfolio securities sought to be hedged. It is also possible that, if a Fund
has hedged against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices increase
instead, the Fund will lose part or all of the benefit of the increased value of
those securities that it has hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if a Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the index futures
and the securities of the portfolio being hedged, the prices of index futures
may not correlate perfectly with movements in the underlying index due to
certain market distortions. First, all participants in the futures markets are
subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions which would distort the normal relationship
between the index and futures markets. Second, margin requirements in the
futures market are less onerous than margin requirements in the securities
market, and as a result the futures market may attract more speculators than the
securities market. Increased participation by speculators in the futures market
may
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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
(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 Equity Fund and
Large Cap Equity 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. The use of stock index
futures contracts and put options on stock index futures contracts may impair
the liquidity of the Funds' assets and the ability to operate as an open-end
investment company. The Adviser will monitor the Funds' use of such techniques
and report to the Board of Trustees concerning their impact, if any, on
liquidity and the Funds' ability to meet redemptions.
Repurchase Agreements. Securities held by the Funds may be subject to
repurchase agreements. A repurchase agreement is an instrument under which the
purchaser (i.e.,
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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 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. 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 the 1940
Act, repurchase agreements are considered loans. Repurchase agreements usually
are for short periods, such as one week or less, but could be longer. The Fund
will not enter into repurchase agreements of a duration of more than seven days
if, taken together with illiquid securities and other securities for which there
are no readily available quotations, more than 15% (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
Equity Fund, respectively.
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.
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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 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.
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. In addition, with respect to all ADRs, there is always the risk of
loss due to currency fluctuations.
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 a 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, consistent with
its respective investment objective and policies, invest in mortgage-related
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
Mortgage-related securities, for purposes of the Funds' Prospectus and
this SAI, represent pools of mortgage loans assembled for sale to investors by
various governmental agencies such as the Government National Mortgage
Association and government-related organizations such as the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation, as well as
by nongovernmental issuers such as commercial banks,
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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 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;
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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.
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.
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(C)("CARS(C)"). CARS(C) 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(C) 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(C)
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.
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 Act"), 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
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fund might also have to register such restricted securities in order to dispose
of them resulting in additional expense and delay. Adverse market conditions
could impede such a public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act,
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
The Funds may also invest in restricted securities issued under Section
4(2) of the Securities Act, which exempts from registration "transactions by an
issuer not involving any public offering." Section 4(2) instruments are
restricted in the sense that they can only be resold through the issuing dealer
and only to institutional investors; they cannot be resold to the general public
without registration. Restricted securities issued under Section 4(2) of the
Securities Act will be treated as 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 Fund
does 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.
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
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<PAGE> 133
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. 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. 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.
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 1940 Act as amended, 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
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<PAGE> 134
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.
INVESTMENTS IN SMALL, UNSEASONED COMPANIES. The Small Cap Equity, Large
Cap Equity and Mid Cap Equity Funds may invest in small unseasoned companies.
The securities of small, unseasoned companies may have a limited trading market,
which may adversely affect their disposition and can result in their being
priced lower than might otherwise be the case. If other investment companies and
investors who invest in such issuers trade the same securities when the Fund
attempts to dispose of its holdings. The Fund may receive lower prices than
might otherwise be obtained.
CORPORATE REORGANIZATIONS. The Small Cap Equity, Mid Cap Equity and
Large 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 Small Cap Equity and Mid 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.
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<PAGE> 135
The Funds' obligation to replace the borrowed security will be secured
by collateral deposited with the broker-dealer, usually cash, U. S. Government
securities or other highly liquid securities. The Fund will also be required to
deposit similar collateral with its Custodian to the extent, if any, necessary
so that the value of both collateral deposits in the aggregate is at all times
equal to the greater of the price at which the security is sold short or 100% of
the current market value of the security sold short. Depending on arrangements
made with the broker-dealer from which it borrowed the security regarding
payments received by the Fund on such security, the Fund may not receive any
payments (including interest) on its collateral deposited with such
broker-dealer.
If the price of the security sold short increases between the time of
the short sale and the time a Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a capital
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. Although a Fund's gain is limited to the price at which
it sold the security short, its potential loss is theoretically unlimited.
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.
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 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
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<PAGE> 136
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
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 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 thereunder, if any, is "covered" (i.e., the
Fund establishes a segregated account in which
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<PAGE> 137
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.
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 40, Trustee - 18 Campus Boulevard, Suite 200, New Town
Square, PA. 19073. President and Chief Executive Officer, ING Mutual Funds
Management Co., LLC, a registered investment adviser and wholly-owned subsidiary
of ING North America, an integrated financial services company, 1998 to present;
director of Furman Selz LLC, an institutional brokerage firm, 1994 through 1998;
Senior Managing Director of Furman Selz LLC, 1992 through 1994.
Charles M. Carr, age 65, Trustee - 1451 Highland Park Drive, Jackson, MS 39211.
Petroleum Consultant since 1992. From 1991 to April, 1992 Managing Director at
Amoco (U.K.) Exploration Co., West Gate, London, U.K.
John William Head*, age 73, 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 52, 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 39, 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 53, 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 54, Trustee and President of the Trust, Senior Vice
President & Client Services Executive, BISYS Fund Services since June, 1992.
Curtis Barnes, Age 45, Secretary, Legal Administrative Offices, BISYS Fund
Services, since May 1995; formerly, Senior Legal Analyst, John Hancock Advisers,
Inc.
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.
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<PAGE> 138
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, 1999. 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, 1999 in excess of $60,000.
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<PAGE> 139
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT ESTIMATED TOTAL
AGGREGATE BENEFITS ANNUAL COMPENSATION
COMPENSATION FROM ACCRUED AS PART BENEFITS UPON FROM REGISTRANT
NAME OF PERSON, POSITION THE REGISTRANT OF FUND EXPENSES RETIREMENT AND FUND COMPLEX
- ------------------------ ----------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
John J. Pileggi, Trustee
0 N/A
James H. Johnston, III, M.D., Trustee
0 N/A
James T. Mallette, Trustee
Walter P. Neely, Ph.D., CFA Trustee 0 N/A
Charles M. Carr, Trustee 0 N/A
John William Head, Trustee 0 N/A
</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, 1997, May 31, 1998 and May 31, 1999,
Trustmark was entitled to and waived advisory fees as listed below:
<TABLE>
<CAPTION>
TRUSTMARK ENTITLED TRUSTMARK WAIVED
1997 1998 1999 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
The Money Market Fund $1,265,939 $1,358,311 $_______ $ 826,237 $679,155 $_______
The Short Term Government Income Fund 473,742 490,543 _______ -- -- _______
The Intermediate Term
Government Income Fund 440,376 572,600 _______ 44,038 57,262 _______
The Mid Cap Equity Fund 762,354 1,240,502 _______ 136,382 -- _______
The Large Cap Equity Fund 1,154,404 1,671,113 _______ 171,304 -- _______
The Small Cap Equity Fund
(commenced operations on 10/1/97) 330,599 _______ -- _______
</TABLE>
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<PAGE> 140
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.
For the fiscal year ended May 31, 1999, BISYS earned fees totaling
$____, $____, $____, $____, $____, $____, and $____from the Money Market Fund,
the Short Term Fund, the Intermediate Fund, Large Cap Equity Fund, the Mid Cap
Equity Fund and the Small Cap Equity Fund respectively, pursuant to each Fund's
Administration Agreement.
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, LLC (the prior
Administrator to the Funds)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>
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
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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, 1999, the Class B Shares of the Money
Market, Intermediate Fund, the Large Cap Equity Fund, Mid Cap Equity Fund and
Small Cap Equity Fund paid $____, $____, $____, $____ and $____ respectively
pursuant to each Fund's Class B Distribution Plan.
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 1999 for the Short Term Government Fund, since
there were no Class B Shares outstanding.
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 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
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<PAGE> 142
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.
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.
CALCULATION OF YIELD AND TOTAL RETURN
Current yield for the Money Market Fund will be calculated based on the
net changes, exclusive of capital changes, over a seven-day period, in the value
of a hypothetical pre-existing account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting deductions
from shareholder accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return,
and then multiplying the base period return by (365/7) with the resulting yield
figure carried to at least the nearest hundredth of one percent.
Based on the seven day period ended May 31, 1999, the seven day yield
of each of the Class A Shares, Class B Shares and Institutional Class Shares of
the Money Market was 4.43%, 3.43% and 4.68%, 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
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(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, 1999 ("30-day base
period") the 30 day yield for the Class A Shares and the Institutional Class of
the Short Term Fund was 4.78% and 5.18%, respectively, and the 30 day yield for
the Class A Shares, Class B Shares and the Institutional Class of the
Intermediate Fund was 4.79%, 4.31% and 5.32%, respectively.
The average annual total return information for Class A, Class B and
Institutional Class Shares for the periods indicated below is as follows:
<TABLE>
<CAPTION>
TOTAL RETURN
SHORT TERM GOVERNMENT INCOME FUND CLASS A CLASS B INSTITUTIONAL
------- ------------- -------------
<S> <C> <C> <C>
One year ended May 31, 1999 1.23% _____% 4.57%
5 year 4.71% _____% 5.60%
Inception (6/1/92) to May 31, 1999 4.48% _____% 5.17%
INTERMEDIATE TERM GOVERNMENT INCOME FUND
One year ended May 31, 1999 (3.23)% (3.26)% 2.47%
5-year 4.93% 5.65% 6.36%
Inception (6/1/92) to May 31, 1998 5.29% 6.02% 6.35%
</TABLE>
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<PAGE> 144
LARGE CAP EQUITY FUND
<TABLE>
<CAPTION>
TOTAL RETURN
------------
CLASS A CLASS B INSTITUTIONAL
------- ------- -------------
<S> <C> <C> <C>
One year ended May 31, 1999 11.75% 12.46% 18.25%
5-year 22.95% 24.02% 24.60%
Inception (6/1/92) to May 31, 1999 18.64% 19.48% 19.82%
MID CAP EQUITY FUND
One year ended May 31, 1999 (6.48)% (6.41)% (1.06)%
5-year 17.65% 18.60% 19.21%
Inception (6/1/92) to May 31, 1999 15.87% 16.85% 17.34%
SMALL CAP EQUITY FUND
One year ended May 31, 1998 (21.90)% (21.94)% (17.25)%
Inception (10/1/97) to May 31, 1998 (14.26)% (13.77)% (11.19)%
</TABLE>
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<PAGE> 145
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 Funds 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 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
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<PAGE> 146
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.
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
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<PAGE> 147
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. 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.
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
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
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<PAGE> 148
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.
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
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<PAGE> 149
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 the 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.
As permitted by Section 28 (e) of the Securities Exchange Act of 1934
(the "Act"), the Adviser may cause a Fund to pay a broker-dealer that provides
"brokerage and research services" (as defined in the Act) to the Adviser an
amount of disclosed commission for effecting a securities transaction for the
Fund in excess of the commission which another broker-dealer would have charged
for effecting that transaction.
In the fiscal year ended May 31, 1999, the Funds paid brokerage
commissions as follows: [ ]. 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 year ended 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
$152,907 and the Large Cap Fund paid $88,895, in brokerage commissions.
Portfolio Turnover. Because the portfolio of the Money Market Fund
consists of securities with relatively short-term maturities, the Fund can
expect to experience high portfolio turnover. A high portfolio turnover rate
should not adversely affect the Fund, however, because the portfolio securities
will in most cases be held to maturity and will not be resold. Also, it is not
anticipated that the Money Market Fund will incur brokerage commissions in
connection with any of its portfolio transactions.
The portfolio turnover rate for the Government Income Funds generally
is not expected to exceed 250%. The portfolio turnover rate for the Small Cap,
Mid Cap and Large Cap Fund are not expected to exceed 200%, 200% and 100%,
respectively . The portfolio turnover rate will not be a limiting factor when
the Adviser deems portfolio changes appropriate. For the fiscal year ended May
31, 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, 1999, the portfolio turnover rates for the Short Term
Fund, the Intermediate Fund, the Mid Cap Equity Fund and the Large Cap Fund were
____%____%, ____% and ____%, 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
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<PAGE> 150
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.
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.
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<PAGE> 151
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 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
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 SAI. 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.
Each Fund offers Class A shares, Class B shares (except for the Short
Term Government Fund) and Institutional 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
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<PAGE> 152
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. 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.
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.
35
<PAGE> 153
As of June , 1999, the following were five percent or greater
shareholders of the Funds:
[ to be updated]
SHORT TERM FUND
INSTITUTIONAL CLASS
Harman & Co.
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
Harman & Co.
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
CLASS A SHARES
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Corelink Financial Inc.
P.O. 4054
Concord, CA 94524
CLASS B SHARES
None.
INSTITUTIONAL CLASS
Harman & Co.
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
Harman & Co.
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
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<PAGE> 154
SHORT TERM FUND
INSTITUTIONAL CLASS
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> 155
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
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<PAGE> 156
CLASS A SHARES
W.G. Yates & Sons Construction Co. 5.47%
Attn Marvin Blanks
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.
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer or other person is authorized to
give any information or make any representation other than those contained in
the Prospectus and this Statement of Additional Information.
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, 1999, the Money Market Fund, the
Short Term Fund, the Intermediate Fund, the Mid Cap Equity Fund , the Large Cap
Equity Fund and Small Cap Equity Fund paid $_____, $_____, $_____, $_____ and
$_____, respectively, to the Custodian.
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.
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<PAGE> 157
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.
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FINANCIAL STATEMENTS
Financial Statements for the Funds as of May 31, 1999 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.
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.
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<PAGE> 159
2. The issue or issuer belongs to a group of securities that are
not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is
not published in Moody's Investors Services, Inc.'s
publications.
Suspension or withdrawal may occur if new and material circumstances
arise the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa-1, A-1, Baa-1 and B-1
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA have the highest rating assigned by Standard &
Poor's Corporation ("SAP"). Capacity to pay interest and repay principal is
extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the highest rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of this obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties of major risk
exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no interest is
being paid.
D: Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR: Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
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<PAGE> 160
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Trust Instrument. (1)
(b) (1) Bylaws of Registrant. (1)
(b) (2) Amendment to Bylaws. (8)
(c) None.
(d) (1) Revised Form of Master Investment Advisory Contract between
Registrant and Trustmark National Bank. (4)
(d) (2) Form of Investment Advisory Contract Supplement for The Small
Cap Fund. (7)
(e) (1) Form of Revised Distribution Agreement between Registrant and
Performance Funds Distributor, Inc. (7)
(e) (2) Form of Amendment to Distribution Agreement between Registrant
and Performance Funds Distributor, Inc. (9)
(f) None.
(g) Custodian Agreement between Registrant and Trustmark National
Bank. (2)
(h) (1) Master Administration Agreement between Registrant and BISYS
Fund Services. (7)
(h) (2) Form of Amendment to Administration Agreement between
Registrant and BISYS Fund Services Ohio, Inc. (9)
(h) (3) Transfer Agency Agreement between Registrant and BISYS Fund
Services, Inc. (7)
(h) (4) Fund Accounting Agreement between Registrant and BISYS Fund
Services, Inc. (7)
(h) (5) Form of Amendment to Transfer Agency Agreement between
Registrant and BISYS Fund Services Ohio, Inc. (9)
(h) (6) Form of Amendment to Fund Accounting Agreement between
Registrant and BISYS Fund Services Ohio, Inc. (9)
(i) Opinion of Counsel -- to be filed by post effective amendment
(j) Consent of Independent Accountants to be filed by post
effective amendment
(k) None.
(l) Subscription Agreement. (3)
(m) (1) Amendment to Rule 12b-1 Distribution Plan and Agreement
between Registrant and Performance Funds Distributor, Inc. (7)
<PAGE> 161
(m) (2) Supplement to the Rule 2b-1 Distribution Plan and Agreement
between The Small Cap Fund and Performance Funds
Distributor, Inc. (7)
(m) (3) Revised Plan of Distribution Pursuant to Rule 12b-1 for Class
A Shares (9)
(m) (4) Revised Plan of Distribution Pursuant to Rule 12b-1 for Class
B Shares (9)
(m) (5) Form of Services Agreement between Performance Funds
Distributor, Inc. and BISYS FUND SERVICES LIMITED PARTNERSHIP
d/b/a BISYS Fund Services. (7)
(m) (6) Form of Compensation Agreement between Trustmark National Bank
and BISYS FUND SERVICES LIMITED PARTNERSHIP d/b/a BISYS Fund
Services. (7)
(m) (7) Form of Dealer and Selling Group Agreement with Performance
Funds Trust. (7)
(m) (8) Form of Service Organization Agreement--Class A Shares (9)
(m) (9) Form of Service Organization Agreement--Class B Shares (9)
(m) (10) Form of Service Organization Agreement--Institutional Class
Shares (9)
(m) (11) Form of Revised Dealer and Selling Group Agreement (9)
(n) Financial Data Scheduled to be filed by post effective
amendment
(o) Amended and Restated Rule 18f-3 Plan to incorporate Class A
and B Shares--(9)
(1) Filed with original Registration Statement on March 12, 1992.
(2) Filed with Pre-Effective Amendment No. 3 on May 22, 1992.
(3) Filed with Pre-Effective Amendment No. 1 on April 29, 1992.
(4) Filed with Post-Effective Amendment No. 1 on November 23, 1992.
(5) Filed with Post-Effective Amendment No. 4 on September 30, 1994.
(6) Filed with Post-Effective Amendment No. 6 on September 27, 1996.
(7) Filed with Post-Effective Amendment No. 8 on September 26, 1997.
(8) Filed with Post-Effective Amendment No. 9 on March 31, 1998.
(9) Filed with Post-Effective Amendment No. 11 on September 30, 1998
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
<PAGE> 162
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.
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 26. 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.
<PAGE> 163
Harry Walker, President of Trustmark National Bank.
Gerard Host, Executive Vice President and Chief Financial Officer.
ITEM 27. PRINCIPAL UNDERWRITER.
(a) Performance Funds Distributor, Inc. acts as
Distributor/ Underwriter for no other registered
investment company.
(b) Officers and Directors.
NAME AND PRINCIPAL
POSITIONS AND OFFICES
BUSINESS ADDRESS* POSITIONS AND OFFICES
WITH UNDERWRITER WITH REGISTRANT
- ---------------- ---------------
Lynn J. Magnum None
Chairman/CEO
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
Michael Burns None
Vice President
Annamaria Porcaro None
Assistant Secretary
(c) Not applicable.
ITEM 28. 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.*
<PAGE> 164
(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., 90 Park Avenue, New York, New York, 10019.
* All addresses are 3435 Stelzer Road, Columbus, Ohio 43219.
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS.
(a) Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the removal of a trustee if
requested to do so by the holders of at least 10% of the
Registrant's outstanding shares.
(b) Registrant undertakes to provide the support to shareholders
specified in Section 16(c) of the 1940 Act as though that
section applied to the Registrant.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request without charge.
* All addresses are 3435 Stelzer Road, Columbus, Ohio 43219.
<PAGE> 165
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. 12 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 July 30, 1999.
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.
SIGNATURE DATE TITLE
- -------------- -----
/s/ JOHN J. PILEGGI Trustee
July 30, 1999
John J. Pileggi
JAMES H. JOHNSTON, III* Trustee
July 30, 1999
James H. Johnston, III
JAMES T. MALLETTE* Trustee
July 30, 1999
James T. Mallette
WALTER P. NEELY* Trustee
July 30, 1999
Walter P. Neely
CHARLES M. CARR** Trustee
July 30, 1999
Charles M. Carr
JOHN WILLIAM HEAD** Trustee
July 30, 1999
John William Head
/s/ WALTER B. GRIMM President
July 30, 1999
Walter B. Grimm
*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.
