<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 2000
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. 14
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 18
(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 [DATE] PURSUANT TO RULE 485(b)
60 DAYS AFTER FILING PURSUANT TO RULE 485(a)
[X] 75 DAYS AFTER FILING PURSUANT TO RULE 485(a)
ON [DATE] PURSUANT TO RULE 485(a)
<PAGE> 2
[PERFORMANCE FUNDS LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MONEY MARKET FUND
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE LARGE CAP EQUITY FUND
THE MID CAP EQUITY FUND
THE SMALL CAP EQUITY FUND
THE FOCUS EQUITY FUND
THE INTERNATIONAL EQUITY FUND
CLASS A AND CLASS B
PROSPECTUS
[TRUSTMARK LOGO]
National Bank
Performance Funds'
Investment Adviser
AUGUST 16, 2000
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
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
Carefully review this 3 Overview
important section, for each
Fund's investment
strategies, risks, past
performance, and fees.
MONEY MARKET FUND
4 Investment Objective, Principal Investment Strategies,
Principal Investment Risks and Performance Information
6 Fees and Expenses
BOND FUNDS
7 Short Term Government Income Fund -- Investment Objectives,
Principal Investment Strategies, Principal Investment Risks
and Performance Information
9 Intermediate Term Government Income Fund -- Investment
Objectives, Principal Investment Strategies, Principal
Investment Risks and Performance Information
11 Fees and Expenses
EQUITY FUNDS
12 Large Cap Equity Fund -- Investment Objectives, Principal
Investment Strategies, Principal Investment Risks and
Performance Information
14 Mid Cap Equity Fund -- Investment Objectives, Principal
Investment Strategies, Principal Investment Risks and
Performance Information
16 Small Cap Equity Fund -- Investment Objectives, Principal
Investment Strategies, Principal Investment Risks and
Performance Information
18 Focus Equity Fund -- Investment Objectives, Principal
Investment Strategies, Principal Investment Risks
20 International Equity Fund -- Investment Objectives,
Principal Investment Strategies, Principal Investment Risks
23 Fees and Expenses
ADDITIONAL INFORMATION
25 Investing for Defensive Purposes
25 Portfolio Turnover
FUND MANAGEMENT
Review this section for Fund 26 Investment Adviser
Management details on the 26 Portfolio Managers
people and organizations who 27 Distributor and Administrator
oversee the Funds.
SHAREHOLDER INFORMATION
Review this section for 28 Pricing of Fund Shares
shareholder information 28 Purchasing and Adding to Your Shares
details on how shares are 30 Selling Your Shares
valued, how to purchase, 32 General Policies on Selling Shares
sell and exchange shares, 34 Distribution Arrangements/Sales Charges
related fees and payments of 36 Distribution and Service (12b-1) Fees
dividends and distributions. 37 Exchanging Your Shares
38 Service Organizations
38 Dividends, Distributions and Taxes
FINANCIAL HIGHLIGHTS
LOGO
39 Money Market Fund
40 Bond Funds
42 Equity Funds
BACK COVER
Where To Learn More About The Funds
</TABLE>
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
The Money Market Fund
BOND FUNDS
The Short Term Government Income Fund
The Intermediate Term Government Income
Fund
EQUITY FUNDS
The Large Cap Equity Fund
The Mid Cap Equity Fund
The Small Cap Equity Fund
The Focus Equity Fund
The International Equity Fund
On the following pages, you will find
important information about each Fund,
including:
- the investment objective
- principal investment strategy
- principal risks
- performance information and
- fees and expense associated with each
Fund
The Funds are managed by Trustmark National
Bank ("Trustmark" or the "Adviser").
WHO MAY WANT TO INVEST?
CONSIDER INVESTING IN THE MONEY MARKET FUND IF YOU ARE:
- seeking preservation of capital
- investing short-term reserves
- willing to accept lower potential returns in exchange for a higher
degree of safety
CONSIDER INVESTING IN THE BOND FUNDS IF YOU ARE:
- looking to add a monthly income component to your portfolio
- willing to accept the risks of price and dividend fluctuations
CONSIDER INVESTING IN THE EQUITY FUNDS IF YOU ARE:
- seeking a long-term goal such as retirement
- looking to add a growth component to your portfolio
- willing to accept the risks of investing in the stock markets
3
<PAGE> 5
[ICON]
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 ("Rating Agency")
or, if only one Rating Agency has rated the security, within the top two
ratings by that Rating Agency, 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).
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. 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. 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.
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.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
PREPAYMENT RISK. The Fund's investments in mortgage-related securities are
subject to the risk that the principal amount of the underlying mortgage may
be prepaid prior to the security's maturity date. Such prepayments are common
when interest rates decline. When such a prepayment 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").
4
<PAGE> 6
[ICON]
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
-
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Money Market Fund by showing its performance from year to year. The
returns for Class B shares will be lower than 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. Past performance does not indicate how the Fund will
perform in the future. Both the chart and the table assume reinvestment of
dividends and distributions and reflect voluntary fee reductions. Without
voluntary fee reductions, the Fund's performance would have been lower.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR CLASS A SHARES(1)
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
1994 3.93
---- ----
<S> <C>
1995 5.58
1996 5.07
1997 5.16
1998 5.05
1999 4.69
</TABLE>
<TABLE>
<S> <C>
Best quarter: Q3 1995 1.36%
Worst quarter: Q1 1994 0.71%
</TABLE>
For the period January 1, 2000
through June 30, 2000 the aggregate
(non-annualized) total returns of the
Fund's Class A Shares was %.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31,
1999)(2)
<TABLE>
<CAPTION>
SINCE
PAST PAST 5 INCEPTION
YEAR YEARS 9/30/93
<S> <C> <C> <C>
Class A Shares 4.69% 5.11% 4.84%
Class B Shares
(with applicable
Contingent Deferred Sales
Charge) 3.76% 4.87% 4.64%
</TABLE>
(1) As of May 31, 2000 the 7-day current yields of the Fund's Class A and B
shares were % and %, 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.
(2) The table above reflects the impact of any contingent deferred sales
charges that apply to Class B shares of the Money Market Fund.
5
<PAGE> 7
[ICON]
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>
MONEY MARKET FUND
A SHARES B SHARES
<S> <C> <C>
---------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases 0.00% 0.00%
Maximum Deferred Sales Charge (Load)(1) 0.00% 5.00%
ANNUAL FUND OPERATING EXPENSES
(expense that are deducted from fund assets)
Management Fees(2) 0.30% 0.30%
Distribution and Service (12b-1) Fees(2) 0.35% 1.00%
Service Organization Fees(2) 0.35% 0.35%
Other Expenses % %
TOTAL ANNUAL FUND OPERATING EXPENSES % %
---- ----
FEE WAIVER(2) 0.55% 0.45%
---- ----
NET ANNUAL FUND OPERATING EXPENSES % %
==== ====
</TABLE>
(1) A Contingent Deferred Sales Charge (CDSC) on Class B Shares declines over
five years starting with year one and ending in year seven as follows:
5%, 4%, 3%, 3%, 2%, 1%, 0%.
(2) The Adviser, Fund and Distributor have contractually agreed to waive
respectively a portion of the advisory fee, service organization fees and
Class A Shares' 12b-1 fees at least until May 31, 2001. As a result,
Management fees would be 0.20%, service organization fees would be 0.00%
for each class and 12b-1 fees for Class A Shares would be 0.25%. You will
be notified if the waiver is discontinued after that date.
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:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF EACH PERIOD
- NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION OF
THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2001.
- REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
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 B WITHOUT
SHARES SHARES REDEMPTION
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------
ONE YEAR AFTER PURCHASE $ $ $
THREE YEARS AFTER PURCHASE $ $ $
FIVE YEARS AFTER PURCHASE $ $ $
TEN YEARS AFTER PURCHASE $ $ $
</TABLE>
6
<PAGE> 8
[ICON]
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUNDS
-
THE SHORT TERM GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES. As high a level of current income as is consistent
with limiting the risk of potential loss.
PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 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, under normal conditions up to 35% of is total
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. The Adviser will sell
securities based upon the Fund's current strategic outlook.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program. An
investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
The Fund will invest primarily in fixed income securities, which present a
lesser potential for capital appreciation than equity securities. There is no
guarantee that the Fund will meet its goals. When you sell your shares in the
Fund, they may be worth more or less than you paid for them. It is possible
to lose money by investing in the Fund.
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. 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 Fund invests 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. The 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, the
Fund could lose money.
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 RISKS
PREPAYMENT 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 bond's maturity date. Such prepayments are common when
interest rates decline. When such a prepayment occurs, no additional interest
will be paid on the investment. Prepayment exposes the 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 higher for
longer-term bonds.
A full discussion of all permissible investments can be found in the SAI.
7
<PAGE> 9
[ICON]
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUNDS
-
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Short Term Government Income 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. Past performance does not
indicate how the Fund will perform in the future. Both the chart and the
table assume reinvestment of dividends and distributions and reflect
voluntary fee reductions. Without voluntary fee reductions, the Fund's
performance would have been lower.
<TABLE>
<S> <C>
Best quarter: Q2 1995 2.80%()
Worst quarter: Q1 1994 -0.50%
</TABLE>
For the period January 1, 2000
through June 30, 2000, the aggregate
(non-annualized) total return of the
Fund was %.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
SINCE
PAST PAST 5 INCEPTION
YEAR YEARS 6/1/92
<S> <C> <C> <C>
Class A Shares (with maximum
3% sales charge) -0.75% 4.89% 4.36%
Lehman Brothers 1-3 Year
Government Index 2.96% 6.47% 5.59%
</TABLE>
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR CLASS A SHARES(1)
[PERFORMANCE CHART]
<TABLE>
<S> <C>
1993 4.55
94 -0.10
95 9.51
96 3.91
97 6.03
98 6.01
99 2.35
</TABLE>
(1) Excluding sales charges, which if included, would cause return(s) to be
lower.
8
<PAGE> 10
ICON
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUNDS
-
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES. A high level of current income. Total return, within
certain parameters, is a secondary consideration.
PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 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:
- current yield and yield to maturity
- potential for capital gain
The Fund may also invest under normal conditions, up to 35% of its total
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. 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.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program. An
investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
The Fund will invest primarily in fixed income securities, which present a
lesser potential for capital appreciation than equity securities. There is no
guarantee that the Fund will meet its goals. When you sell your shares in the
Fund, they may be worth more or less than you paid for them. It is possible
to lose money by investing in the Fund.
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. 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 Fund invests 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. The 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, the
Fund could lose money.
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 RISKS
PREPAYMENT RISK. The Fund's investments in mortgage-related securities are
subject to the risk that the principal amount of the underlying mortgage may
be prepaid prior to the bond's maturity date. Such prepayments are common
when interest rates decline. When such a prepayment occurs, no additional
interest will be paid on the investment. Prepayment exposes the 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.
9
<PAGE> 11
ICON
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUNDS
-
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Intermediate Term Government Income 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. 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. Past performance does
not indicate how the Fund will perform in the future. Both the chart and the
table assume reinvestment of dividends and distributions and reflect
voluntary fee reductions. Without voluntary fee reductions, the Fund's
performance would have been lower.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR CLASS A SHARES*
PERFORMANCE CHART
<TABLE>
<S> <C>
1993 10.54
94 -4.95
95 16.77
96 1.12
97 8.97
98 8.22
99 -4.14
</TABLE>
<TABLE>
<S> <C>
Best quarter: Q2 1995 5.94%
Worst quarter: Q1 1994 -3.31%
</TABLE>
For the period January 1, 2000
through June 30, 2000, the aggregate
(non-annualized) total return of the
Fund was %.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
SINCE
PAST PAST INCEPTION
YEAR 5 YEARS 6/1/92
<S> <C> <C> <C>
Class A Shares
(with 5.25% sales
charge) -9.21% 4.82% 4.71%
Class B Shares
(with applicable CDSC) -9.41% 5.42% 5.32%
Lehman Brothers
Government/Corporate
Index -2.15% 7.60% 6.79%
</TABLE>
* Excludes sales charges, which, if included, would cause returns to be
lower.
10
<PAGE> 12
ICON
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 GOVERNMENT INCOME
FUND FUND
A A B
SHARES SHARES SHARES
<S> <C> <C> <C>
--------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases(1) 3.00% 5.25% 0.00%
Maximum Deferred Sales Charge (Load)(2) 0.00% 0.00% 5.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
Management Fees 0.40% 0.50% 0.50%
Distribution (12b-1) Fees(3) 0.35% 0.35% 1.00%
Service Organization Fees(3) 0.35% 0.35% 0.35%
Other Expenses % % %
---- ----- ----
TOTAL ANNUAL FUND OPERATING EXPENSES % % %
FEE WAIVER(3) 0.45% 0.45% 0.35%
---- ----- ----
NET ANNUAL FUND OPERATING EXPENSES(3) % % %
==== ===== ====
</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 as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%.
(3) The Distributor and the Fund have contractually agreed to waive
respectively a portion of the 12b-1 fees for Class A Shares and the
service organization fees at least until May 31, 2001. As a result, the
12b-1 fees would be 0.25% for Class A Shares and service organization
fees for each class would be 0.00%. You will be notified if this waiver
is discontinued after that date.
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:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF EACH PERIOD
- NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION OF
THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2001
- REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
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 GOVERNMENT FUND
INCOME FUND B SHARES
A A B WITHOUT
SHARES SHARES SHARES REDEMPTION
<S> <C> <C> <C> <C>
------------------------------------------------
ONE YEAR AFTER PURCHASE $ $ $ $
THREE YEARS AFTER PURCHASE $ $ $ $
FIVE YEARS AFTER PURCHASE $ $ $ $
TEN YEARS AFTER PURCHASE $ $ $ $
</TABLE>
11
<PAGE> 13
ICON
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 $3 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 small capitalization stocks, foreign securities/ADRs,
preferred stock, warrants, 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 debt securities rated A or better by a Rating Agency, bank
obligations and money market instruments. The Fund may not achieve its
investment objective when it invests for defensive purposes.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Fund will invest principally in common stocks which do not provide the
same protection of capital or assurance of income as fixed income securities.
There is no guarantee that the Fund will meet its goals. When you sell your
shares in the Fund, they may be worth less than you paid for them. It is
possible to lose money by investing in the Fund.
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 the Fund may underperform the
market or other funds with similar objectives.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
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.
CAPITALIZATION RISK. Although the Fund invests only a small portion of its
assets in small capitalization stocks, it is subject to capitalization risk.
Stocks of smaller companies carry higher risks than those of larger
companies. They may trade infrequently or in lower volumes, making it
difficult for the Fund to sell its shares at the desired price. 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.
A full discussion of all permissible investments can be found in the SAI.
12
<PAGE> 14
ICON
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Large Cap Equity 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. 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. Past performance does not indicate how the
Fund will perform in the future. Both the chart and the table assume
reinvestment of dividends and distributions and reflect voluntary fee
reductions. Without voluntary fee reductions, the Fund's performance would
have been lower.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR CLASS A SHARES(1)
[PERFORMANCE BAR CHART AND TABLE]
<TABLE>
<S> <C>
1993 11.75
94 -4.01
95 35.68
96 23.49
97 32.67
98 28.45
99 19.45
</TABLE>
(1) Excludes sales charges, which if
included, would cause returns to be
lower.
<TABLE>
<S> <C>
Best quarter: Q4 1998 20.56%
Worst quarter: Q3 1998 -10.53%
</TABLE>
For the period January 1, 2000
through June 30, 2000, the aggregate
(non-annualized) total return of the
Fund was %.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
SINCE
PAST PAST 5 INCEPTION
YEAR YEARS 6/1/92
<S> <C> <C> <C>
Class A Shares (with
maximum 5.25% sales
charge) 9.34% 25.57% 18.61%
Class B Shares (with
applicable CDSC) 9.56% 26.56% 19.32%
S&P 500(R) Index 21.04% 28.55% 20.75%
</TABLE>
13
<PAGE> 15
ICON
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 $244 million to $21.6 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 $244 million to $21.6 billion.
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, 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. The Fund may not achieve
its investment objective when it invests for defensive purposes.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Fund will invest principally in common stocks which do not provide the
same protection of capital or assurance of income as fixed income securities.
There is no guarantee that the Fund will meet its goals. When you sell your
shares in the Fund, they may be worth less than you paid for them. It is
possible to lose money by investing in the Fund.
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 the Fund may underperform the
market or other funds with similar objectives.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
CAPITALIZATION RISK. Stocks of smaller companies carry higher risks than
those of larger companies. They may trade infrequently or in lower volumes,
making it difficult for the Fund to sell its shares at the desired price.
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 Fund's net asset value may be subject to
rapid and substantial changes.
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.
14
<PAGE> 16
ICON
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Mid Cap Equity 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. 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. Both the chart and the table assume reinvestment of dividends and
distributions and reflect voluntary fee reductions. Without voluntary fee
reductions, the Fund's performance would have been lower.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR CLASS A SHARES(1)
[PERFORMANCE BAR CHART AND TABLE]
<TABLE>
<S> <C>
1995 38.66
96 26.69
97 31.45
98 5.40
99 13.36
</TABLE>
(1) Excludes sales charges, which if
included, would cause returns to be
lower.
<TABLE>
<S> <C>
Best quarter: Q4 1998 19.42%
Worst quarter: Q3 1998 -15.51%
</TABLE>
For the period January 1, 2000
through June 30, 2000, the aggregate
(non-annualized) total return of the
Fund was %.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
PAST SINCE
INCEPTION YEAR INCEPTION
<S> <C> <C> <C>
Class A Shares
(with maximum 5.25%
sales charge) 2/24/94 7.39% 20.67%
Class B Shares
(with applicable CDSC) 2/24/94 7.71% 21.53%
S&P MidCap Index 2/28/94 14.72% 18.54%
</TABLE>
15
<PAGE> 17
[ICON]
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
THE SMALL CAP EQUITY FUND
INVESTMENT OBJECTIVE. Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 65% 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 range of market capitalization of companies in the S&P 600 SmallCap Index
was $45 million to $2.6 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"), 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. The Fund may not achieve
its investment objective when it invests for defensive purposes.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Fund will invest principally in common stocks which do not provide the
same protection of capital or assurance of income as fixed income securities.
There is no guarantee that the Fund will meet its goals. When you sell your
shares in the Fund, they may be worth less than you paid for them. It is
possible to lose money by investing in the Fund.
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 the Fund may underperform the
market or other funds with similar objectives.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
CAPITALIZATION RISK. Stocks of smaller companies carry higher risks than
those of larger companies. They may trade infrequently or in lower volumes,
making it difficult for the Fund to sell its shares at the desired price.
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 Fund's net asset value may be subject to
rapid and substantial changes.
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.
16
<PAGE> 18
ICON
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Small Cap Equity 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. 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. Past performance does not indicate how the Fund will perform in the
future. Both the chart and the table assume reinvestment of dividends and
distributions and reflect voluntary fee reductions. Without voluntary fee
reductions, the Fund's performance would have been lower.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR CLASS A SHARES(1)
[PERFORMANCE CHART]
<TABLE>
<S> <C>
1998 -3.94
1999 -1.25
</TABLE>
(1) Excludes sales charges, which if
included, would cause returns to be
lower.
<TABLE>
<S> <C>
Best quarter: Q2 1999 15.28%
Worst quarter: Q3 1998 -21.86%
</TABLE>
For the period January 1, 2000
through June 30, 2000, the aggregate
(non-annualized) total return of the
Fund was %.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31,
1999)
<TABLE>
SINCE
PAST PAST 5 INCEPTION
YEAR YEARS 10/1/97
<S> <C> <C> <C>
Class A Shares (with
maximum 5.25% sales
charge) -6.47% N/A -7.91%
Class B Shares (with
applicable CDSC) -6.84% N/A -7.28%
S&P SmallCap 600 Index 12.40% N/A 3.27%
</TABLE>
17
<PAGE> 19
[ICON]
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
THE FOCUS EQUITY FUND
INVESTMENT OBJECTIVE: Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES: The Fund normally invests at least 65% of
its total assets in equity securities of companies with market
capitalizations greater than $500 million at the time of purchase. The Fund
typically focuses its investments in a core group of 30-50 stocks and is
considered a non-diversified Fund. In selecting securities, the Adviser will
pursue an investment blend of two types of stocks:
Growth Stocks typically represent financially secure firms with established
operating histories that are proven leaders in their industry or market
sector. These companies may demonstrate characteristics such as
participation in expanding markets, increasing unit sales volume, growth in
revenues and earnings per share and in companies not meeting the foregoing
criteria if such companies are expected to undergo an acceleration in
growth of earnings because of special factors such as new management, new
products or changes in consumer demand.
Value Stocks typically represent companies which the Adviser believes to be
undervalued relative to assets, earnings, growth potential or cash flows.
Investment decisions are based upon fundamental research and internally
developed valuations systems.
The Adviser uses a "bottom up" approach in selecting stocks. The Fund is not
limited by a fixed allocation of assets to either growth or value stocks and
depending upon the economic environment and judgment of the Investment
Adviser, may emphasize either growth stocks or value stocks to the exclusion
of the other.
The Fund usually will sell portfolio securities if:
- the price of the security is overvalued
- the companies' earnings are consistently lower than expected
- more favorable opportunities are identified.
The Fund may trade its investments without regard to the length of time they
have been owned by the Fund.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Fund will invest principally in common stocks which do not provide the
same protection of capital or assurance of income as fixed income securities.
There is no guarantee that the Fund will meet its goals. When you sell your
shares in the Fund, they may be worth less than you paid for them. It is
possible to lose money by investing in the Fund.
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 the Fund may underperform the
market or other funds with similar objectives.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
VALUE STOCKS. Investments in value stocks are subject to the risk that their
intrinsic values may never be realized by the market, that a stock judged to
be undervalued may actually be appropriately priced, or that their prices may
go down. While the Fund's investments in value stocks may limit downside risk
over time, the Fund may, as a trade-off, produce more modest gains than more
aggressive stock funds.
18
<PAGE> 20
[ICON]
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
GROWTH STOCKS. While potentially offering greater or more rapid capital
appreciation potential than value stocks, investments in growth stocks may
lack the dividend yield that can cushion stock prices in market downturns.
Growth companies often are expected to increase their earnings at a certain
rate. If expectations are not met, investors can punish the stocks, even if
earnings do increase.
NON-DIVERSIFICATION RISK. The Fund may invest a substantial portion of its
assets in a particular company or in a small number of companies. The use of
a focused investment strategy may increase the volatility of its investment
performance, as the Fund may be more susceptible to risks associated with
negative economic, political or regulatory developments affecting a single
company, or a limited number of companies, than a more diversified portfolio.
If the securities of a limited number of issuers in which the Fund invests
perform poorly, the Fund could incur greater losses than it would have had it
been invested in a greater number of issuers.
CAPITALIZATION RISK. Stocks of companies having capitalizations of less than
$1 billion carry higher risks than those of larger companies. They may trade
infrequently or in lower volumes, making it difficult for the Fund to sell
its shares at the desired price. 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 Fund's net
asset value may be subject to rapid and substantial changes.
A full discussion of all permissible investments can be found in the SAI.
PERFORMANCE INFORMATION
This is a new Fund for which performance information is not yet available.
19
<PAGE> 21
[ICON]
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
THE INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE: Total return consisting of two components: changes in
the market value of its portfolio securities (both realized and unrealized
appreciation) and income received from its portfolio securities. The Fund
expects that changes in market value will comprise the largest component of
its total return.
PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 65% of
its total assets in equity securities, including common stocks and preferred
stocks, of issuers based outside the United States. The Fund considers an
issuer to be based outside the United States if:
- it is organized under the laws of, or has a principal office located in,
another country;
- the principal trading market for its securities is in another country; or
- it (or its subsidiaries) derived in its most current fiscal year at least
50% of its total assets, capitalization, growth in revenue or profit from
goods produced, services performed, or sales made in another country.
The Fund intends to invest in companies with public stock market
capitalizations that are larger than $500 million at the time of investment.
The Fund may allocate its assets among countries as determined by the
SubAdviser from time to time provided that the Fund's assets are invested in
at least three foreign countries. The SubAdviser manages the Fund based on
the view that international equity markets are inefficient at pricing
securities and that careful security selection offers the best potential for
superior long-term investment returns. Selection of industry and country are
secondary considerations. However, the Fund expects a substantial portion of
its investments will be in the securities of issuers located in the developed
countries such as Japan and countries of Western Europe.
The SubAdviser emphasizes growth stocks at a reasonable price. The SubAdviser
takes a "bottom-up" approach and looks for companies which it perceives as
being undervalued in the market place. Using its own quantitative process,
the SubAdviser ranks the potential future performance of select companies.
The SubAdviser evaluates each company's earnings potential in light of its
current valuation to narrow the list of attractive companies. The SubAdviser
reviews such factors as the company's price-to-earnings ratio, enterprise
value, organic growth rates versus growth through acquisition, product niche
and its pricing power. The SubAdviser then evaluates management quality and
may meet with company representatives, company suppliers, customers, or
competitors. The SubAdviser also reviews the company's financial statements
and forecasts of earnings. Based on this information, the SubAdviser
evaluates the sustainability of the company's current growth trends and
potential catalysts for increased growth. Using this type of fundamental
analysis, the SubAdviser selects the most promising companies for the Fund's
portfolio.
The SubAdviser frequently identifies benchmarks for certain securities such
as price-to-earnings ratios or stock prices. Once those benchmarks are
achieved, the SubAdviser will often consider selling all or a portion of the
Fund's holdings to lock in profit. Holdings will also be sold if they fail to
meet performance expectations or better investment opportunities are
identified.
With respect to the Fund's investments in developed markets, companies may be
grouped together in broad categories called business sectors. The SubAdviser
may emphasize certain business sectors in the portfolio that exhibit stronger
growth potential or higher profit margins. Although the Fund does not expect
to invest so, it may invest up to 15% of its assets in companies located in
emerging markets.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
20
<PAGE> 22
[ICON]
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
The Fund will invest principally in common stocks which do not provide the
same protection of capital or assurance of income as fixed income securities.
There is no guarantee that the Fund will meet its goals. When you sell your
shares in the Fund, they may be worth less than you paid for them. It is
possible to lose money by investing in the Fund.
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 the Fund may underperform the
market or other funds with similar objectives.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
CAPITALIZATION RISK. Stocks of companies having capitalizations of less than
$1 billion carry higher risks than those of larger companies. They may trade
infrequently or in lower volumes, making it difficult for the Fund to sell
its shares at the desired price. 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 Fund's net
asset value may be subject to rapid and substantial changes.
RISKS OF FOREIGN INVESTING.
- Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United
States. Foreign financial markets may also have fewer investor
protections. Securities in foreign markets may also be subject to
taxation policies that reduce returns for U.S. investors.
- Foreign countries may have restrictions on foreign ownership of
securities or may impose exchange controls, capital flow restrictions or
repatriation restrictions which could adversely affect the liquidity of
the Fund's investments.
- Legal remedies available to investors in certain foreign countries may be
more limited than those available with respect to investments in the U.S.
or in other foreign countries.
- Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the
United States. Foreign companies may also receive less coverage than
United States companies by market analysts and the financial press. In
addition, foreign countries may lack financial controls and reporting
standards, or regulatory requirements comparable to those applicable to
U.S. companies. These factors may prevent the Fund and its SubAdviser
from obtaining information concerning foreign companies that is as
frequent, extensive and reliable as the information available concerning
companies in the United States.
- The foreign exchanges on which foreign equity securities are traded or
are listed may be less technologically developed or less regulated than
those in the U.S. possibly increasing the volatility and decreasing the
efficiency of those markets.
CUSTODIAL SERVICES AND RELATED INVESTMENT COSTS.
- Custodial services and other costs relating to investment in
international securities markets are generally more expensive than in the
U.S. Such markets have settlement and clearance procedures that differ
from those in the U.S. In certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. The
inability of the Fund to make intended securities purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. The inability to dispose of a portfolio security caused by
settlement problems could result either in losses to the Fund due to a
subsequent decline in value of the portfolio security or could result in
possible liability to the Fund. In addition, security settlement and
clearance procedures in some emerging countries may not fully protect the
Fund against loss or theft of its assets.
21
<PAGE> 23
[ICON]
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
CURRENCY RISKS.
- Exchange rates for currencies fluctuate daily. Foreign securities are
normally denominated and traded in foreign currencies. As a result, the
value of the Fund's foreign investments and the value of its shares may
be affected favorably or unfavorably by changes in currency exchange
rates relative to the U.S. Dollar. The combination of currency risk and
market risks tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the U.S.
- The SubAdviser attempts to manage currency risk by limiting the amount
the Fund invests in securities denominated in a particular currency.
However, diversification will not protect the Fund against a general
increase in the value of the U.S. Dollar relative to other currencies.
PERFORMANCE INFORMATION
This is a new Fund for which performance information is not yet available.
22
<PAGE> 24
ICON
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.
FEE TABLE
<TABLE>
<CAPTION>
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> <C>
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on
Purchases(1) 5.25% 0.00% 5.25% 0.00% 5.25% 0.00%
Maximum Deferred Sales Charge (Load)(2) 0.00% 5.00% 0.00% 5.00% 0.00% 5.00%
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 Service (12b-1) Fees(3) 0.35%(3) 1.00% 0.35% 1.00% 0.35% 1.00%
Service Organization Fees(3) 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Other Expenses % % % % % %
---- ---- ---- ---- ---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES % % % % % %
FEE WAIVER(3) 0.65%(3) 0.55% 0.45% 0.35% 0.45% 0.35%
---- ---- ---- ---- ---- ----
NET ANNUAL FUND OPERATING EXPENSES(3) % % % % % %
==== ==== ==== ==== ==== ====
</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 as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%.
(3) The Adviser, Distributor and the Fund have contractually agreed to waive
respectively a portion of the advisory fee of the Small Cap Equity Fund
and, for the Equity Funds, the 12b-1 fees for Class A Shares and service
organization fees for each class at least until May 31, 2001. As a
result, the Small Cap Equity Fund's Management Fees would be 0.80%. For
the Equity Funds, service organization fees would be 0.00% and the Class
A Shares' 12b-1 fees would be 0.25%. You will be notified if the waivers
are discontinued after that date.
FEE TABLE
<TABLE>
<CAPTION>
THE FOCUS THE INTERNATIONAL
EQUITY FUND EQUITY FUND
A SHARES B SHARES A SHARES B SHARES
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases(1) 5.25% 0.00% 5.25% 0.00%
Maximum Deferred Sales Charge (Load)(2) 0.00% 5.00% 0.00% 5.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
Management Fees 1.00% 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.35%(1) 1.00% 0.35%(3) 1.00%
Service Organization Fees(3) 0.35% 0.35% 0.35% 0.35%
Other Expenses
---- ---- ---- ----
FEE WAIVER(3)
---- ---- ---- ----
NET ANNUAL FUND OPERATING EXPENSES(3)
==== ==== ==== ====
</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.
23
<PAGE> 25
ICON
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
(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%, 0%.
(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, 2001. 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
this date.
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:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF EACH PERIOD
- NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION OF
THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2001
- REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON THESE
ASSUMPTIONS, YOUR COSTS WOULD BE:
<TABLE>
<CAPTION>
THE SMALL CAP THE MID CAP
EQUITY FUND EQUITY FUND
B SHARES B SHARES
WITHOUT WITHOUT
A SHARES B SHARES REDEMPTION A SHARES B SHARES REDEMPTION
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ONE YEAR AFTER PURCHASE $ $ $ $ $ $
THREE YEARS AFTER PURCHASE $ $ $ $ $ $
FIVE YEARS AFTER PURCHASE $ $ $ $ $ $
TEN YEARS AFTER PURCHASE $ $ $ $ $ $
<CAPTION>
THE LARGE CAP
EQUITY FUND
B SHARES
WITHOUT
A SHARES B SHARES REDEMPTION
-------------------------- -------------------------------------
<S> <C> <C> <C> <C>
ONE YEAR AFTER PURCHASE $ $ $
THREE YEARS AFTER PURCHASE $ $ $
FIVE YEARS AFTER PURCHASE $ $ $
TEN YEARS AFTER PURCHASE $ $ $
</TABLE>
<TABLE>
<CAPTION>
THE FOCUS THE INTERNATIONAL
EQUITY FUND EQUITY FUND
B SHARES B SHARES
WITHOUT WITHOUT
A SHARES B SHARES REDEMPTION A SHARES B SHARES REDEMPTION
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ONE YEAR AFTER PURCHASE $ $ $ $ $ $
THREE YEARS AFTER PURCHASE $ $ $ $ $ $
</TABLE>
24
<PAGE> 26
ICON
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.
25
<PAGE> 27
ICON
FUND MANAGEMENT
-
INVESTMENT ADVISER
Trustmark Registered Investment Advisor, Inc ("Trustmark" or "Advisor"), 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 reviews, supervises and administers the Funds'
investments. Trustmark is responsible for placing orders for the purchase and
sale of the Funds' investments directly with brokers and dealers selected by
it in its discretion.
Trustmark is a wholly owned subsidiary of Trustmark National Bank. Trustmark
assumed responsibility as investment advisor from Trustmark National Bank on
August , 2000 as a result of recent changes to investment advisor
regulations. Trustmark has assets in excess of $1.6 billion under management
in addition to the Trust's Funds. Trustmark National Bank was founded in 1890
and is the second largest commercial bank headquartered in Mississippi.
Trustmark National Bank 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, 2000:
<TABLE>
<CAPTION>
AS A PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 5/31/2000
<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%
The Focus Equity Fund 0.00%**
The International Equity Fund 0.00%**
</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.
** No Advisory fees were paid by these Funds for the period shown as the
Funds had not yet commenced operations. Contractual fees are 1.00% for
each Fund.
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 and the Short Term Government Income
Fund. Mr. Collins has been with Trustmark since 1991.
JONATHAN ROGERS, CFA, a Vice President and Portfolio Manager at Trustmark
National Bank since 1985, is responsible for the day-to-day management of the
Intermediate Term Government Income Fund's portfolio.
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 14
years' investment experience. Mr. Ralston joined Trustmark in 1991. Prior to
joining Trustmark, Mr. Ralston was employed by Third National Bank of
Nashville.
26
<PAGE> 28
ICON
FUND MANAGEMENT
-
PORTFOLIO MANAGERS -- CONTINUED
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 an Executive Vice President and Chief Financial Officer
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.
SUB-ADVISER -- THE INTERNATIONAL EQUITY FUND
[Investment Services, Inc. ("ISI")] serves as sub-adviser to the
International Equity Fund. ISI is located at and has
over $ million in assets under management as of December 31, 1999.
[ ] is responsible for the day-to-day management of the Fund.
[ ] has served Portfolio Manager with [ISI] since
[ ].
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.
27
<PAGE> 29
ICON
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.
PURCHASING AND ADDING TO YOUR 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.
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM SUBSEQUENT
ACCOUNT TYPE INVESTMENT INVESTMENT
<S> <C> <C>
CLASS A OR B
Regular (non-retirement) $1,000 $100
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.
28
<PAGE> 30
ICON
SHAREHOLDER INFORMATION
-
PURCHASING AND ADDING TO YOUR SHARES -- CONTINUED
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
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.
You can add to your account by using the convenient options described below.
Each Fund reserves the right to change or eliminate these privileges at any
time with 60 days notice.
All investments made by regular mail or express delivery, whether initial or
subsequent, should be sent:
<TABLE>
<S> <C> <C>
BY MAIL 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:
- Fund name
- Share class
- Amount invested
- 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.
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.
</TABLE>
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.
QUESTIONS?
Call 1-800-PERFORM
29
<PAGE> 31
ICON
SHAREHOLDER INFORMATION
-
PURCHASING AND ADDING TO YOUR SHARES -- CONTINUED
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.
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:
- Complete the Automatic Investment Plan portion on your Account
Application.
Make sure you note:
- Your bank name, address and account number
- The amount you wish to invest automatically (minimum $25)
- How often you want to invest (every month or 4 times a year)
- 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.
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.
30
<PAGE> 32
ICON
SHAREHOLDER INFORMATION
-
SELLING YOUR SHARES -- CONTINUED
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.
<TABLE>
<S> <C>
BY TELEPHONE 1. Call 1-800-737-3676 with instructions as to how you wish
(unless you have declined telephone to receive your funds (mail, wire, electronic transfer).
sales privileges on your account (See "General Policies on Selling Shares -- Verifying
application) Telephone Redemptions" below)
BY MAIL 1. Call 1-800-737-3676 to request redemption forms or write
(See "General Policies on Selling a letter of instruction indicating:
Shares -- Redemptions in Writing - your Fund and account number
Required" below) - amount you wish to redeem
- address where your check should be sent
- 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 Performance Funds Trust
Shares -- 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 If you call by 4 p.m. Eastern time, your payment will
your account application 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 the If you call by 4 p.m. Eastern time, the NAV of your shares
Automated Clearing House (ACH) and will normally be determined on the same day and the proceeds
must be a U.S. bank credited within 8 days.
Your bank may charge for this
service
</TABLE>
QUESTIONS?
Call 1-800-PERFORM
31
<PAGE> 33
ICON
SHAREHOLDER INFORMATION
-
SELLING YOUR SHARES -- CONTINUED
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:
- Make sure you've checked the appropriate box on the Account Application.
Or call 1-800-737-3676.
- Include a voided personal check.
- 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.
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.
- Redemptions over $25,000
- Your account registration or the name(s) in your account has changed
within the last 15 days
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- 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.
32
<PAGE> 34
ICON
SHAREHOLDER INFORMATION
-
GENERAL POLICIES ON SELLING SHARES -- CONTINUED
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.
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.
33
<PAGE> 35
ICON
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 applicable to No front-end sales charge. A contingent
the Money Market Fund); reduced sales deferred sales charge (CDSC) may be imposed
charges 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 Subject to annual distribution and Subject to annual distribution and
Service (12b-1) Fee shareholder servicing fees of up to 0.35% shareholder servicing fees of up to 1.00%
of the Fund's average daily net assets. of the Fund's average daily net assets.
Fund Expenses Lower annual expenses than Class B shares. Higher annual expenses than Class A shares.
</TABLE>
There is also an Institutional Class open to certain institutional investors.
Institutional Class shares are offered through another prospectus.
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 AS A % SALES CHARGE AS A %
YOUR INVESTMENT OF OFFERING PRICE OF 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 AS A % SALES CHARGE AS A %
YOUR INVESTMENT OF OFFERING PRICE OF YOUR INVESTMENT
<S> <C> <C>
Up to $50,000 3.00% 3.09%
$50,001 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.
34
<PAGE> 36
ICON
SHAREHOLDER INFORMATION
-
DISTRIBUTION ARRANGEMENTS/SALES CHARGES -- CONTINUED
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>
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 to the right. There is
no CDSC on reinvested dividends or
distributions.
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
- 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.
- 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.
- You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
- 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.
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.
- 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. Shares purchased under the non-binding Letter of Intent will
be held in escrow until the total investment has been completed. In the
event the Letter of Intent is not completed, sufficient escrowed shares
will be redeemed to pay any applicable front-end sales charges.
- 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.
- 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.
35
<PAGE> 37
ICON
SHAREHOLDER INFORMATION
-
DISTRIBUTION ARRANGEMENTS/SALES CHARGES -- CONTINUED
SALES CHARGE WAIVERS -- CLASS A SHARES
The following qualify for waivers of sales charges:
- Existing shareholders of a Fund upon the reinvestment of dividend and
capital gain distributions.
- 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);
- Investors for whom a Trustmark, a Trustmark correspondent bank, or other
financial institution acts in a fiduciary, advisory, custodial, agency,
or similar capacity;
- 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);
- 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; and
- For purchases from proceeds of redemptions of another non-money market
mutual fund that imposes a sales charge, such purchase having been made
within 60 days of the redemption.
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.
CLASS B SHARES -- CDSC WAIVERS
The CDSC will be waived under certain circumstances, including the following:
- Redemptions from accounts other than retirement accounts following the
death or disability of the shareholder.
- Returns of excess contributions to retirement plans.
- 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.
- The 12b-1 fees vary by share class as follows:
- Class A shares may pay a 12b-1 fee of up to .35% of the average daily
net assets of a Fund. The Distributor currently limits Class A Plan
fees of 0.25%.
- 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.
- While all of Class A shares' Rule 12b-1 fee constitutes a "distribution
fee," only 0.75% of Class B shares' fees constitutes a distribution fee
and the remainder is used for shareholder servicing fees.
- 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.
36
<PAGE> 38
ICON
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:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security number)
- Dollar value or number of shares to be exchanged
- The name of the Fund from which the exchange is to be made
- 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 five exchanges within a one
year period or three exchanges in a calendar quarter.
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 the 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:
- Complete the appropriate section of the Account Application.
- Shareholders must have a minimum initial purchase of $10,000 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 Trust, P.O. Box 182484,
Columbus, Ohio 43218-2484.
QUESTIONS?
Call 1-800-PERFORM
37
<PAGE> 39
ICON
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:
- 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 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.
A Fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, a Fund's yield on those securities would
be decreased. Except with respect to the International Equity Fund,
shareholders generally will not be entitled to claim a credit or deduction
with respect to foreign taxes. In addition, a Fund's investments in
foreign securities or foreign currencies may increase or accelerate a
Fund's recognition of ordinary income and may affect the timing or amount
of a Fund's distributions.
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.
38
<PAGE> 40
ICON
FINANCIAL HIGHLIGHTS MONEY MARKET FUND
-
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 LLP, whose report, along with the Funds' financial statements, are
included in the annual report, which is available upon request.
MONEY MARKET FUND
CLASS A (a)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.04 0.05
-------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.05) (0.05) (0.04) (0.05)
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------------------------------
Total Return 4.79% 5.18% 5.07% 5.33%
-------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $94,347 $73,794 $92,220 $25,216
Net investment income before waivers/reimbursements 4.43% 4.82% 5.13% 4.87%
Net investment income net of waivers/reimbursements 4.67% 5.06% 5.23% 5.17%
Expenses before waivers/reimbursements 0.84% 0.82% 0.48% 0.79%
Expenses net of waivers/reimbursements 0.60% 0.58% 0.38% 0.49%
<CAPTION>
YEAR
ENDED
MAY 31,
1995
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
--------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05
-------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.05)
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00
-------------------------------------------------------------------------------------------------
Total Return 5.02%
-------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $3,564
Net investment income before waivers/reimbursements 4.66%
Net investment income net of waivers/reimbursements 5.02%
Expenses before waivers/reimbursements 0.84%
Expenses net of waivers/reimbursements 0.48%
</TABLE>
CLASS B*
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 2000
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02
----------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.02)
----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00
----------------------------------------------------------------------------------
Total Return 2.30%***
----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $ 198
Net investment income before waivers/reimbursements 3.20%**
Net investment income net of waivers/reimbursements 3.43%**
Expenses before waivers/reimbursements 1.73%**
Expenses net of waivers/reimbursements 1.51%**
</TABLE>
* Class B commenced operations on October 2, 1998.
** Annualized
*** Not Annualized
(a) On September 30, 1998 the portfolio designated the Consumer Service Class
as Class A shares.
39
<PAGE> 41
ICON
FINANCIAL HIGHLIGHTS BOND FUNDS
-
SHORT TERM GOVERNMENT INCOME FUND
CLASS A*
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.85 $ 9.75 $ 9.75 $ 9.84 $ 9.77
---------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) 0.48 0.52 0.49 0.51 0.50
Net realized and unrealized gain/(loss)
on investments (0.06) 0.10 -- (0.09) 0.07
---------------------------------------------------------------------------------------------------------
Total from investment operations 0.42 0.62 0.49 0.42 0.57
---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.48) (0.52) (0.49) (0.51) (0.50)
---------------------------------------------------------------------------------------------------------
Total distributions to shareholders (0.48) (0.52) (0.49) (0.51) (0.50)
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.79 $ 9.85 $ 9.75 $ 9.75 $ 9.84
---------------------------------------------------------------------------------------------------------
Total Return (Excludes sales charge) 4.31% 6.48% 5.44% 4.38% 6.12%
---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $5,596 $3,181 $1,205 $1,477 $ 739
Net investment income before
waivers/reimbursements 4.82%* 5.28% 5.01% 5.22% 5.15%
Net investment income net of
waivers/reimbursements 4.82%* 5.28% 5.01% 5.23% 5.18%
Expenses before waivers/reimbursements 0.94%* 0.89% 0.87% 0.96% 1.02%
Expenses net of waivers/reimbursements 0.94%* 0.89% 0.87% 0.95% 0.99%
Portfolio turnover rate 49.19% 65.07% 85.21% 120.00% 267.65%
</TABLE>
* On September 30, 1998 the portfolio designated the Consumer Service Class
as Class A shares subject to a maximum sales charge of 3%.
40
<PAGE> 42
ICON
FINANCIAL HIGHLIGHTS BOND FUNDS
-
INTERMEDIATE TERM GOVERNMENT INCOME FUND
CLASS A (a)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.34 $ 9.93 $ 9.82 $10.11 $ 9.87
-----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.52 0.57 0.57 0.54 0.60
Net realized and unrealized gains/(loss) on
investments (0.29) 0.42 0.10 (0.29) 0.25
-----------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.23 0.99 0.67 0.25 0.85
-----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.52) (0.57) (0.56) (0.54) (0.60)
In excess of net investment income -- (0.01) -- -- --
In excess of net realized gain on
investments -- -- -- -- (0.01)
-----------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (0.52) (0.58) (0.56) (0.54) (0.61)
-----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.05 $10.34 $ 9.93 $ 9.82 $10.11
-----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes sales charge) 2.11% 10.15% 6.92% 2.40% 9.06%
-----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in thousands) $8,219 $3,965 $1,465 $2,174 $3,225
Net investment income before
waivers/reimbursements 4.87% 5.48% 5.55% 5.25% 6.08%
Net investment income net of
waivers/reimbursements 4.92% 5.53% 5.60% 5.30% 6.19%
Expenses before waivers/reimbursements 1.10% 1.02% 1.08% 1.11% 1.07%
Expenses net of waivers/reimbursements 1.05% 0.97% 1.03% 1.06% 0.96%
Portfolio turnover rate 74.03% 35.62% 46.23% 183.00% 339.95%
</TABLE>
CLASS B*
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
MAY 31, 1999
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.81
---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28
Net realized and unrealized gain on
investments (0.76)
---------------------------------------------
Total from investment operations (0.48)
---------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.28)
---------------------------------------------
Total distributions to shareholders (0.28)
---------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.05
---------------------------------------------
Total Return (Excludes sales charge) (4.54%)***
---------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in thousands) $ 95
Net investment income before
waivers/reimbursements 3.96%**
Net investment income net of
waivers/reimbursements 4.01%**
Expenses before waivers/reimbursements 1.84%**
Expenses net of waivers/reimbursements 1.79%**
Portfolio turnover rate 74.03%
</TABLE>
* Class B commenced operations on October 2, 1998.
** Annualized
*** Not Annualized
(a) On September 30, 1998 the portfolio designated the Consumer Service Class
as Class A shares subject to a maximum sales charge of 5.25%.
41
<PAGE> 43
ICON
FINANCIAL HIGHLIGHTS EQUITY FUNDS
-
SMALL CAP EQUITY FUND
CLASS A (A)
<TABLE>
<CAPTION>
YEAR FOR THE
ENDED PERIOD ENDED
MAY 31, 1999 MAY 31, 1998*
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.91 $10.00
-----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.05) (0.04)(b)
Net realized and unrealized gain/(loss) on
investments (1.69) (0.05)
-----------------------------------------------------
Total from investment operations (1.74) (0.09)
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net realized gain on investments (0.08) --
-----------------------------------------------------
Total distributions to shareholders (0.08) --
-----------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.09 $ 9.91
-----------------------------------------------------
Total Return (Excludes sales charge) (17.57%) (0.90%)****
-----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $5,071 $3,704
Net investment income/(loss) before
waivers/reimbursements (0.61%) (0.66%)***
Net investment income/(loss) net of
waivers/reimbursements (0.61%) (0.66%)***
Expenses before waivers/reimbursements 1.65% 1.70%***
Expenses net of waivers/reimbursements 1.65% 1.70%***
Portfolio turnover rate 34.52% 12.28%
</TABLE>
CLASS B*
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31,
1999**
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.47
-----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.05)
Net realized and unrealized gain/(loss) on
investments 0.72
-----------------------------------------------------
Total from investment operations 0.67
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net realized gain on investments (0.08)
-----------------------------------------------------
Total distributions to shareholders (0.08)
-----------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.06
-----------------------------------------------------
Total Return (Excludes sales charge) 8.95%****
-----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 48
Net investment income/(loss) before
waivers/reimbursements (1.40%)***
Net investment income/(loss) net of
waivers/reimbursements (1.40%)***
Expenses before waivers/reimbursements 2.40% ***
Expenses net of waivers/reimbursements 2.40% ***
Portfolio turnover rate 34.52%
<CAPTION>
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD
-----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss)
Net realized and unrealized gain/(loss) on
investments
-----------------------------------------------------
Total from investment operations
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net realized gain on investments
-----------------------------------------------------
Total distributions to shareholders
-----------------------------------------------------
NET ASSET VALUE, END OF PERIOD
-----------------------------------------------------
Total Return (Excludes sales charge)
-----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)
Net investment income/(loss) before
waivers/reimbursements
Net investment income/(loss) net of
waivers/reimbursements
Expenses before waivers/reimbursements
Expenses net of waivers/reimbursements
Portfolio turnover rate
</TABLE>
* Fund commenced operations on October 1, 1997.
** Class B commenced operations on October 2, 1998.
*** Annualized
**** Not Annualized
(a) On September 30, 1998 the portfolio designated the Consumer Service
Class as Class A shares subject to a maximum sales charge of 5.25%.
(b) Calculated based on average shares during the period.
42
<PAGE> 44
ICON
FINANCIAL HIGHLIGHTS EQUITY FUNDS
-
MID CAP EQUITY FUND
CLASS A (a)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.10 $ 16.72 $14.05 $11.11 $ 9.60
-----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) 0.02 0.03 0.09 0.10 0.11
Net realized and unrealized gain/(loss) on
investments (0.34) 4.39 3.00 3.44 1.51
-----------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.32) 4.42 3.09 3.54 1.62
-----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.03) (0.03) (0.09) (0.10) (0.11)
In excess of net investment income -- (0.01) -- -- --
Net realized gain on investments (1.16) (1.00) (0.33) (0.50) --
-----------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1.19) (1.04) (0.42) (0.60) (0.11)
-----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.59 $ 20.10 $16.72 $14.05 $11.11
-----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes sales charge) (1.31%) 26.82% 22.33% 32.76% 17.06%
-----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in thousands) $20,409 $19,298 $5,911 $1,437 $ 277
Net investment income/(loss) before
waivers/reimbursements 0.10% 0.16% 0.54% 0.63% 0.86%
Net investment income/(loss) net of
waivers/reimbursements 0.10% 0.16% 0.65% 0.79% 1.12%
Expenses before waivers/reimbursements 1.35% 1.32% 1.30% 1.39% 1.47%
Expenses net of waivers/reimbursements 1.35% 1.32% 1.19% 1.23% 1.21%
Portfolio turnover rate 33.27% 20.48% 7.72% 28.00% 20.39%
</TABLE>
CLASS B*
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
MAY 31, 1999
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.40
-----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment (loss) (0.06)
Net realized and unrealized gain on
investments 3.32
-----------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.26
-----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.01)
Net realized gain on investments (1.16)
-----------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1.17)
-----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $18.49
-----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes sales charge) 20.28%***
-----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in thousands) $ 138
Net investment income/(loss) before
waivers/reimbursements (0.73%)**
Net investment income/(loss) net of
waivers/reimbursements (0.73%)**
Expenses before waivers/reimbursements 2.10%**
Expenses net of waivers/reimbursements 2.10%**
Portfolio turnover rate 33.27%
</TABLE>
* Class B commenced operations on October 2, 1998.
** Annualized
*** Not Annualized
(a) On September 30, 1998 the portfolio designated the Consumer Service Class
as Class A shares.
43
<PAGE> 45
ICON
FINANCIAL HIGHLIGHTS EQUITY FUNDS
-
LARGE CAP EQUITY FUND
CLASS A (a)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.97 $ 19.16 $ 15.29 $ 12.51 $ 11.33
-------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.09 0.13 0.20 0.19 0.22
Net realized and unrealized gain on investments 4.30 5.99 4.13 3.29 1.42
-------------------------------------------------------------------------------------------------
Total from investment operations 4.39 6.12 4.33 3.48 1.64
-------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.10) (0.13) (0.21) (0.19) (0.21)
Net realized gain on investments (1.10) (0.18) (0.25) (0.51) (0.25)
-------------------------------------------------------------------------------------------------
Total distributions to shareholders (1.20) (0.31) (0.46) (0.70) (0.46)
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 28.16 $ 24.97 $ 19.16 $ 15.29 $ 12.51
-------------------------------------------------------------------------------------------------
Total Return (Excludes sales charge) 17.92% 32.20% 28.75% 28.42% 15.10%
-------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $59,045 $41,474 $19,531 $ 9,831 $ 5,234
Net investment income before waivers/reimbursements 0.33% 0.58% 1.10% 1.30% 1.77%
Net investment income net of waivers/reimbursements 0.33% 0.58% 1.18% 1.40% 1.90%
Expenses before waivers/reimbursements 1.15% 1.16% 1.14% 1.16% 1.17%
Expenses net of waivers/reimbursements 1.15% 1.16% 1.06% 1.06% 1.04%
Portfolio turnover rate 7.20% 4.78% 1.41% 6.00% 58.08%
</TABLE>
CLASS B*
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
MAY 31, 1999
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $23.12
-------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment (loss) (0.02)
Net realized and unrealized gain on investments 6.11
-------------------------------------------------------------------
Total from investment operations 6.09
-------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.03)
Net realized gain on investments (1.10)
-------------------------------------------------------------------
Total distributions to shareholders (1.13)
-------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $28.08
-------------------------------------------------------------------
Total Return (Excludes sales charge) 26.80%***
-------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $2,975
Net investment income/(loss) before
waivers/reimbursements (0.33%)**
Net investment income/(loss) net of
waivers/reimbursements (0.33%)**
Expenses before waivers/reimbursements 1.88%**
Expenses net of waivers/reimbursements 1.88%**
Portfolio turnover rate 7.20%
</TABLE>
* Class B commenced on October 2, 1998
** Annualized
*** Not Annualized
(a) On September 30, 1998 the portfolio designated the Consumer Service Class
as Class A shares subject to a maximum sales charge of 5.25%.
44
<PAGE> 46
(This page intentionally left blank.)
<PAGE> 47
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 Funds. Or contact the Funds at:
Performance Funds Trust
3435 Stelzer Road
Columbus, Ohio 43219
Telephone: 1-800-PERFORM
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION
You can obtain copies of Fund documents from the SEC as follows:
IN PERSON:
Public Reference Room in Washington, D.C. (For their hours of operation, call
1-202-942-8090.)
BY MAIL:
Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-0102
(The SEC charges a fee to copy any documents.)
ON THE EDGAR DATABASE VIA THE INTERNET:
www.sec.gov
BY ELECTRONIC REQUEST:
[email protected]
Investment Company Act file no. 811-6603.
PR-PRO-6008-999
<PAGE> 48
[PERFORMANCE FUNDS LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MONEY MARKET FUND
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE LARGE CAP EQUITY FUND
THE MID CAP EQUITY FUND
THE SMALL CAP EQUITY FUND
THE FOCUS EQUITY FUND
THE INTERNATIONAL EQUITY FUND
INSTITUTIONAL CLASS
PROSPECTUS
[TRUSTMARK LOGO]
National Bank
Performance Funds'
Investment Adviser
AUGUST 16, 2000
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> 49
TABLE OF
CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
[Logo]
Carefully review this 3 Overview
important section, for each
Fund's investment
strategies, risks, past
performance, and fees.
MONEY MARKET FUND
[Logo]
4 Investment Objective, Principal Investment Strategies,
Principal Investment Risks and Performance Information
6 Fees and Expenses
BOND FUNDS
[Logo]
7 Short Term Government Income Fund -- Investment Objectives,
Principal Investment Strategies, Principal Investment Risks
and Performance Information
9 Intermediate Term Government Income Fund -- Investment
Objectives, Principal Investment Strategies, Principal
Investment Risks and Performance Information
11 Fees and Expenses
EQUITY FUNDS
[Logo]
12 Large Cap Equity Fund -- Investment Objectives, Principal
Investment Strategies, Principal Investment Risks and
Performance Information
14 Mid Cap Equity Fund -- Investment Objective, Principal
Investment Strategies, Principal Investment Risks and
Performance Information
16 Small Cap Equity Fund -- Investment Objectives, Principal
Investment Strategies, Principal Investment Risks and
Performance Information
18 Focus Equity Fund -- Investment Objectives, Principal
Investment Strategies, Principal Investment Risks
20 International Equity Fund -- Investment Objectives Principal
Investment Strategies, Principal Investment Risks
23 Fees and Expenses
ADDITIONAL INFORMATION
[Logo]
25 Investing for Defensive Purposes
25 Portfolio Turnover
FUND MANAGEMENT
[Logo]
Review this section for Fund 26 Investment Adviser
management details on the 26 Portfolio Managers
people and organizations who 27 Distributor and Administrator
oversee the Funds.
SHAREHOLDER INFORMATION
[Logo]
Review this section for 28 Pricing of Fund Shares
shareholder information 29 Purchasing and Adding to Your Shares
details on how shares are 31 Selling Your Shares
valued, how to purchase, 33 General Policies on Selling Shares
sell and exchange shares, 35 Exchanging Your Shares
related charges and payments 35 Service Organizations
of dividends and 36 Dividends, Distributions and Taxes
distributions.
FINANCIAL HIGHLIGHTS
[Logo]
37 Money Market Fund
38 Bond Funds
39 Equity Funds
BACK COVER
[Logo]
Where To Learn More About The Funds
</TABLE>
2
<PAGE> 50
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
OVERVIEW
This prospectus describes the following
funds offered by Performance Funds Trust (the "Funds").
MONEY MARKET FUND
The Money Market Fund
BOND FUNDS
The Short Term Government Income Fund
The Intermediate Term Government Income Fund
EQUITY FUNDS
The Large Cap Equity Fund
The Mid Cap Equity Fund
The Small Cap Equity Fund
The Focus Equity Fund
The International Equity Fund
On the following pages, you will find important
information about each Fund, including:
- the investment objective
- principal investment strategy
- principal risks
- performance information and
- fees and expense associated with each Fund
The Funds are managed by Trustmark National
Bank ("Trustmark" or the "Adviser").
WHO MAY WANT TO INVEST?
CONSIDER INVESTING IN THE MONEY MARKET FUND IF YOU ARE:
- seeking preservation of capital
- investing short-term reserves
- willing to accept lower potential returns in exchange for a higher
degree of safety
CONSIDER INVESTING IN THE BOND FUNDS IF YOU ARE:
- looking to add a monthly income component to your portfolio
- willing to accept the risks of price and dividend fluctuations
CONSIDER INVESTING IN THE EQUITY FUNDS IF YOU ARE:
- seeking a long-term goal such as retirement
- looking to add a growth component to your portfolio
- willing to accept the risks of investing in the stock markets
3
<PAGE> 51
[LOGO]
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 ("Rating Agency")
or, if only one Rating Agency has rated the security, within the top two
ratings by that Rating Agency, 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).
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. 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. 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.
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.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
PREPAYMENT RISK. The Fund's investments in mortgage-related securities are
subject to the risk that the principal amount of the underlying mortgage may
be prepaid prior to the security's maturity date. Such prepayments are common
when interest rates decline. When such a prepayment 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").
4
<PAGE> 52
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES 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. (Both the chart and
the table assume reinvestment of dividends and distributions and reflect
voluntary fee reductions. Without voluntary fee reductions, the Fund's
performance would have been lower.)
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS FOR
INSTITUTIONAL CLASS SHARES*
[PERFORMANCE CHART]
<TABLE>
<S> <C>
1994 4.19
95 5.85
96 5.33
97 9.43
98 5.31
99 4.95
</TABLE>
<TABLE>
<S> <C>
Best quarter: Q3 1995 1.42%
Worst quarter: Q1 1994 0.77%
</TABLE>
Past performance does not indicate
how the Fund will perform in the
future.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
SINCE
PAST PAST 5 INCEPTION
YEAR YEARS 9/30/93
<S> <C> <C> <C>
Institutional Class Shares 4.95% 5.37% 5.10%
</TABLE>
* For the period January 1, 2000 through June 30, 2000 the aggregate
(non-annualized) total return of the Fund was %.
As of May 31, 2000 the 7-day current yield of the Fund's Institutional shares
was %. 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.
5
<PAGE> 53
[LOGO]
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 %
----
TOTAL ANNUAL FUND OPERATING EXPENSES %
FEE WAIVER(1) %
----
NET ANNUAL FUND OPERATING EXPENSES %
====
</TABLE>
(1) The Adviser and the Fund have contractually agreed to waive respectively
a portion of the advisory fees and service organization fees at least
until May 31, 2001. As a result, Management fees would be 0.20% and
service organization fees would be 0.00%. You will be notified if the
waiver is discontinued after that date.
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:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF EACH PERIOD
- NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION OF
THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2000
- REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS.
ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON THESE
ASSUMPTIONS, YOUR COSTS WOULD BE:
<TABLE>
<CAPTION>
THE MONEY MARKET FUND
INSTITUTIONAL CLASS SHARES
<S> <C>
----------------------------------------------------------------------------------------
ONE YEAR AFTER PURCHASE $
THREE YEARS AFTER PURCHASE $
FIVE YEARS AFTER PURCHASE $
TEN YEARS AFTER PURCHASE $
</TABLE>
6
<PAGE> 54
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUNDS
THE SHORT TERM GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES. As high a level of current income as is consistent
with limiting the risk of potential loss.
PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 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, under normal conditions, up to 35% of its total
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. The Adviser will sell
securities based upon the Fund's current strategic outlook.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program. An
investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
The Fund will invest primarily in fixed income securities, which present a
lesser potential for capital appreciation than equity securities. There is no
guarantee that the Fund will meet its goals. When you sell your shares in the
Fund, they may be worth more or less than you paid for them. It is possible
to lose money by investing in the Fund.
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. 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 Fund invests 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. The 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, the
Fund could lose money.
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 the Fund may underperform the market or other funds with similar
objectives.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
PREPAYMENT RISK. The Fund's investments in mortgage-related securities are
subject to the risk that the principal amount of the underlying mortgage may
be prepaid prior to the bond's maturity date. Such prepayments are common
when interest rates decline. When such a prepayment occurs, no additional
interest will be paid on the investment. Prepayment exposes the 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 higher for
longer-term bonds.
A full discussion of all permissible investments can be found in the SAI.
7
<PAGE> 55
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUNDS
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Short Term Government Income 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. (Both the chart and the
table assume reinvestment of dividends and distributions and reflects
voluntary fee reductions. Without voluntary fee reductions, the Fund's
performance would have been lower.)
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL CLASS SHARES*
PERFORMANCE CHART
<TABLE>
<S> <C>
1993 4.78
94 0.15
95 9.79
96 4.17
97 6.29
98 6.28
99 2.61
</TABLE>
<TABLE>
<S> <C>
Best quarter: 2nd Qtr 1995 2.86%()
Worst quarter: 1st Qtr 1994 -0.44%
</TABLE>
Past performance does not indicate
how the Fund will perform in the
future.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
INCEPTION PAST PAST 5 SINCE
DATE YEAR YEARS INCEPTION
<S> <C> <C> <C> <C>
Institutional Class
Shares 6/1/92 2.61% 5.80% 5.01%
Lehman Brothers 1-3
Year Government
Index 6/1/92 2.96% 6.47% 5.59%
</TABLE>
* For the period January 1, 2000 through June 30, 2000, the aggregate
(non-annualized) total return of the Fund was %.
8
<PAGE> 56
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RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUNDS
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES. A high level of current income. Total return, within
certain parameters, is a secondary consideration.
PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 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:
- current yield and yield to maturity
- potential for capital gain
The Fund may also invest under normal conditions, up to 35% of its total
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. 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.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program. An
investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
The Fund will invest primarily in fixed income securities, which present a
lesser potential for capital appreciation than equity securities. There is no
guarantee that the Fund will meet its goals. When you sell your shares in the
Fund, they may be worth more or less than you paid for them. It is possible
to lose money by investing in the Fund.
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. 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 Fund invests 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. The 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, the
Fund could lose money.
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 the Fund may underperform the market or other funds with similar
objectives.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
PREPAYMENT RISK. The Fund's investments in mortgage-related securities are
subject to the risk that the principal amount of the underlying mortgage may
be prepaid prior to the bond's maturity date. Such prepayments are common
when interest rates decline. When such a prepayment occurs, no additional
interest will be paid on the investment. Prepayment exposes the 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 higher for
longer-term bonds.
A full discussion of all permissible investments can be found in the SAI.
9
<PAGE> 57
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RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUNDS
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Intermediate Government Income 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. (Both the chart and the
table assume reinvestment of dividends and distributions and reflect
voluntary fee reductions. Without voluntary fee reductions, the Funds
performance would have been lower.)
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL CLASS SHARES
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
1993 10.78
---- -----
<S> <C>
94 -4.72
95 17.06
96 1.37
97 9.24
98 8.56
99 -3.89
</TABLE>
<TABLE>
<S> <C>
Best quarter: 3rd Qtr 1998 4.78%
Worst quarter: 1st Qtr 1994 -3.25%
</TABLE>
Past performance does not indicate
how the Fund will perform in the
future.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
INCEPTION PAST PAST 5
DATE YEAR YEARS
<S> <C> <C> <C>
Institutional
Class Shares 6/1/92 -3.89% 6.23%
Lehman Brothers
Government/ Corporate
Index 6/1/92 -2.15% 7.60%
<CAPTION>
SINCE
INCEPTION
<S> <C>
5.71%
6.79%
</TABLE>
*For the period January 1, 2000 through June 30, 2000, the aggregate
(non-annualized) total return of the Fund was %.
10
<PAGE> 58
[LOGO]
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
(expenses 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 % %
---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES % %
FEE WAIVER(1) 0.35% 0.35%
---- ----
NET ANNUAL FUND OPERATING EXPENSES % %
==== ====
</TABLE>
(1) The Fund has contractually agreed to waive the service organization fees
at least until May 31, 2001. As a result, service organization fees would
be 0.00%. You will be notified if the waiver is discontinued after that
date.
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:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF EACH PERIOD
- NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION OF
THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2000
- REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS.
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 $ $
THREE YEARS AFTER PURCHASE $ $
FIVE YEARS AFTER PURCHASE $ $
TEN YEARS AFTER PURCHASE $ $
</TABLE>
11
<PAGE> 59
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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 $3 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 small capitalization stocks, foreign securities/ADRs,
preferred stock, warrants, 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 debt securities rated A or better by a Rating Agency, bank
obligations and money market instruments. The Fund may not achieve its
investment objective when it invests for defensive purposes.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Fund will invest principally in common stocks which do not provide the
same protection of capital or assurance of income as fixed income securities.
There is no guarantee that the Fund will meet its goals. When you sell your
shares in the Fund, they may be worth less than you paid for them. It is
possible to lose money by investing in the Fund.
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 the Fund may underperform the
market or other funds with similar objectives.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
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.
CAPITALIZATION RISK. Although the Fund invests only a small portion of its
assets in small capitalization stocks, it is subject to capitalization risk.
Stocks of smaller companies carry higher risks than those of larger
companies. They may trade infrequently or in lower volumes, making it
difficult for the Fund to sell its shares at the desired price. 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.
A full discussion of all permissible investments can be found in the SAI.
12
<PAGE> 60
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RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Large Cap Equity 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. (Both the chart and the table
assume reinvestment of dividends and distributions and reflect voluntary fee
reductions. Without voluntary fee reductions, the Fund's performance would
have been lower.)
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL CLASS SHARES*
[PERFORMANCE BAR CHART AND TABLE]
<TABLE>
<S> <C>
1993 12.01
94 -3.77
95 36.02
96 23.79
97 32.99
98 28.78
99 15.67
</TABLE>
<TABLE>
<S> <C>
Best quarter: 4th Qtr 1998 20.61%
Worst quarter: 3rd Qtr 1998 -10.46%
</TABLE>
Past performance does not indicate
how the Fund will perform in the
future.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
INCEPTION PAST PAST 5 SINCE
DATE YEAR YEARS INCEPTION
<S> <C> <C> <C> <C>
Institutional Class
Shares 6/1/92 15.67% 27.24% 19.73%
S&P 500(R)Index 6/1/92 21.04% 28.55% 20.75%
</TABLE>
*For the period January 1, 2000 through June 30, 2000, the aggregate
(non-annualized) total return of the Fund was %.
13
<PAGE> 61
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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 $244 million to $21.6 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 $244 million to $21.6 billion.
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, 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. The Fund may not achieve
its investment objective when it invests for defensive purposes.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Fund will invest principally in common stocks which do not provide the
same protection of capital or assurance of income as fixed income securities.
There is no guarantee that the Fund will meet its goals. When you sell your
shares in the Fund, they may be worth less than you paid for them. It is
possible to lose money by investing in the Fund.
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 the Fund may underperform the
market or other funds with similar objectives.
14
<PAGE> 62
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
ADDITIONAL PRINCIPAL INVESTMENT RISKS
CAPITALIZATION RISK. Stocks of smaller companies carry higher risks than
those of larger companies. They may trade infrequently or in lower volumes,
making it difficult for the Fund to sell its shares at the desired price.
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 Fund's net asset value may be subject to
rapid and substantial changes.
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.
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Mid Cap Equity 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. (Both the chart and the table assume reinvestment of
dividends and distributions and reflect voluntary fee reductions. Without
voluntary fee reductions, the Fund's performance would have been lower.)
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL CLASS SHARES*
<TABLE>
<S> <C>
1995 35.98
96 26.98
97 31.76
98 5.66
99 13.66
</TABLE>
<TABLE>
<S> <C>
Best quarter: 4th Qtr 1998 19.46%
Worst quarter: 3rd Qtr 1998 -15.44%
</TABLE>
Past performance does not indicate
how the Fund will perform in the
future.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
<S> <C> <C> <C>
Institutional Class Shares 2/24/94 13.66% 18.14%
S&P Mid Cap Index 2/28/94 14.72% 18.54%
</TABLE>
*For the period, January 1, 2000 through June 30, 2000, the aggregate
(non-annualized) total return of the Fund was %.
15
<PAGE> 63
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
THE SMALL CAP EQUITY FUND
INVESTMENT OBJECTIVE. Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 65% 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 range of market capitalization of companies in the S&P 600 SmallCap Index
was $45 million to $2.6 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"), 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. The Fund may not achieve its
objective when it invests for defensive purposes.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Fund will invest principally in common stocks which do not provide the
same protection of capital or assurance of income as fixed income securities.
There is no guarantee that the Fund will meet its goals. When you sell your
shares in the Fund, they may be worth less than you paid for them. It is
possible to lose money by investing in the Fund.
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 the Fund may underperform the
market or other funds with similar objectives.
16
<PAGE> 64
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
ADDITIONAL PRINCIPAL INVESTMENT RISKS
CAPITALIZATION RISK. Stocks of smaller companies carry higher risks than
those of larger companies. They may trade infrequently or in lower volumes,
making it difficult for the Fund to sell its shares at the desired price.
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 Fund's net asset value may be subject to
rapid and substantial changes.
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.
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment
in the Small Cap Equity 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. (Both the
chart and the table assume reinvestment of dividends and distributions and
reflect voluntary fee reductions. Without voluntary fee reductions, the
Fund's performance would have been lower.)
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR INSTITUTIONAL CLASS SHARES*
<TABLE>
<S> <C>
1998 -3.62
99 -0.91
</TABLE>
<TABLE>
<S> <C>
Best quarter: 4th Qtr 1998 15.06%
Worst quarter: 3rd Qtr 1998 -21.82%
</TABLE>
Past performance does not indicate
how the Fund will perform in the
future.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
INCEPTION PAST PAST 5 SINCE
DATE YEAR YEARS INCEPTION
<S> <C> <C> <C> <C>
Institutional Class
Shares 10/1/97 -0.91% N/A -5.40%
S&P Small Cap 600
Index 10/1/97 12.40% N/A 3.27%
</TABLE>
* For the period January 1, 2000 through June 30, 2000, the aggregate
(non-annualized) total return of the Fund was %.
17
<PAGE> 65
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RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
THE FOCUS EQUITY FUND
INVESTMENT OBJECTIVE: Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES: The Fund normally invests at least 65% of
its total assets in equity securities of companies with market
capitalizations greater than $500 million at the time of purchase. The Fund
typically focuses its investments in a core group of 30-50 stocks and is
considered a non-diversified Fund. In selecting securities, the Adviser will
pursue an investment blend of two types of stocks:
Growth Stocks typically represent financially secure firms with established
operating histories that are proven leaders in their industry or market
sector. These companies may demonstrate characteristics such as
participation in expanding markets, increasing unit sales volume, growth in
revenues and earnings per share and in companies not meeting the foregoing
criteria if such companies are expected to undergo an acceleration in
growth of earnings because of special factors such as new management, new
products or changes in consumer demand.
Value Stocks typically represent companies which the Adviser believes to be
undervalued relative to assets, earnings, growth potential or cash flows.
Investment decisions are based upon fundamental research and internally
developed valuations systems.
The Adviser uses a "bottom up" approach in selecting stocks. The Fund is not
limited by a fixed allocation of assets to either growth or value stocks and
depending upon the economic environment and judgment of the Investment
Adviser, may emphasize either growth stocks or value stocks to the exclusion
of the other.
The Fund usually will sell portfolio securities if:
- the price of the security is overvalued
- the companies' earnings are consistently lower than expected
- more favorable opportunities are identified.
The Fund may trade its investments without regard to the length of time they
have been owned by the Fund.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Fund will invest principally in common stocks which do not provide the
same protection of capital or assurance of income as fixed income securities.
There is no guarantee that the Fund will meet its goals. When you sell your
shares in the Fund, they may be worth less than you paid for them. It is
possible to lose money by investing in the Fund.
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 the Fund may underperform the
market or other funds with similar objectives.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
VALUE STOCKS. Investments in value stocks are subject to the risk that their
intrinsic values may never be realized by the market, that a stock judged to
be undervalued may actually be appropriately priced, or that their prices may
go down. While the Fund's investments in value stocks may limit downside risk
over time, the Fund may, as a trade-off, produce more modest gains than more
aggressive stock funds.
18
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RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
GROWTH STOCKS. While potentially offering greater or more rapid capital
appreciation potential than value stocks, investments in growth stocks may
lack the dividend yield that can cushion stock prices in market downturns.
Growth companies often are expected to increase their earnings at a certain
rate. If expectations are not met, investors can punish the stocks, even if
earnings do increase.
NON-DIVERSIFICATION RISK. The Fund may invest a substantial portion of its
assets in a particular company or in a small number of companies. The use of
a focused investment strategy may increase the volatility of its investment
performance, as the Fund may be more susceptible to risks associated with
negative economic, political or regulatory developments affecting a single
company, or a limited number of companies, than a more diversified portfolio.
If the securities of a limited number of issuers in which the Fund invests
perform poorly, the Fund could incur greater losses than it would have had it
been invested in a greater number of issuers.
CAPITALIZATION RISK. Stocks of companies having capitalizations of less than
$1 billion carry higher risks than those of larger companies. They may trade
infrequently or in lower volumes, making it difficult for the Fund to sell
its shares at the desired price. 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 Fund's net
asset value may be subject to rapid and substantial changes.
A full discussion of all permissible investments can be found in the SAI.
PERFORMANCE INFORMATION
This is a new Fund for which performance information is not yet available.
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RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
THE INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE: Total return consisting of two components: changes in
the market value of its portfolio securities (both realized and unrealized
appreciation) and income received from its portfolio securities. The Fund
expects that changes in market value will comprise the largest component of
its total return.
PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 65% of
its total assets in equity securities, including common stocks and preferred
stocks, of issuers based outside the United States. The Fund considers an
issuer to be based outside the United States if:
- it is organized under the laws of, or has a principal office located in,
another country;
- the principal trading market for its securities is in another country; or
- it (or its subsidiaries) derived in its most current fiscal year at least
50% of its total assets, capitalization, growth in revenue or profit from
goods produced, services performed, or sales made in another country.
The Fund intends to invest in companies with public stock market
capitalizations that are larger than $500 million at the time of investment.
The Fund may allocate its assets among countries as determined by the
SubAdviser from time to time provided that the Fund's assets are invested in
at least three foreign countries. The SubAdviser manages the Fund based on
the view that international equity markets are inefficient at pricing
securities and that careful security selection offers the best potential for
superior long-term investment returns. Selection of industry and country are
secondary considerations. However, the Fund expects a substantial portion of
its investments will be in the securities of issuers located in the developed
countries such as Japan and countries of Western Europe.
The SubAdviser emphasizes growth stocks at a reasonable price. The SubAdviser
takes a "bottom-up" approach and looks for companies which it perceives as
being undervalued in the market place. Using its own quantitative process,
the SubAdviser ranks the potential future performance of select companies.
The SubAdviser evaluates each company's earnings potential in light of its
current valuation to narrow the list of attractive companies. The SubAdviser
reviews such factors as the company's price-to-earnings ratio, enterprise
value, organic growth rates versus growth through acquisition, product niche
and its pricing power. The SubAdviser then evaluates management quality and
may meet with company representatives, company suppliers, customers, or
competitors. The SubAdviser also reviews the company's financial statements
and forecasts of earnings. Based on this information, the SubAdviser
evaluates the sustainability of the company's current growth trends and
potential catalysts for increased growth. Using this type of fundamental
analysis, the SubAdviser selects the most promising companies for the Fund's
portfolio.
The SubAdviser frequently identifies benchmarks for certain securities such
as price-to-earnings ratios or stock prices. Once those benchmarks are
achieved, the SubAdviser will often consider selling all or a portion of the
Fund's holdings to lock in profit. Holdings will also be sold if they fail to
meet performance expectations or better investment opportunities are
identified.
With respect to the Fund's investments in developed markets, companies may be
grouped together in broad categories called business sectors. The SubAdviser
may emphasize certain business sectors in the portfolio that exhibit stronger
growth potential or higher profit margins. Although the Fund does not expect
to invest so, it may invest up to 15% of its assets in companies located in
emerging markets.
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, the Fund does not constitute a balanced investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
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RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
The Fund will invest principally in common stocks which do not provide the
same protection of capital or assurance of income as fixed income securities.
There is no guarantee that the Fund will meet its goals. When you sell your
shares in the Fund, they may be worth less than you paid for them. It is
possible to lose money by investing in the Fund.
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 the Fund may underperform the
market or other funds with similar objectives.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
CAPITALIZATION RISK. Stocks of companies having capitalizations of less than
$1 billion carry higher risks than those of larger companies. They may trade
infrequently or in lower volumes, making it difficult for the Fund to sell
its shares at the desired price. 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 Fund's net
asset value may be subject to rapid and substantial changes.
RISKS OF FOREIGN INVESTING.
- Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United
States. Foreign financial markets may also have fewer investor
protections. Securities in foreign markets may also be subject to
taxation policies that reduce returns for U.S. investors.
- Foreign countries may have restrictions on foreign ownership of
securities or may impose exchange controls, capital flow restrictions or
repatriation restrictions which could adversely affect the liquidity of
the Fund's investments.
- Legal remedies available to investors in certain foreign countries may be
more limited than those available with respect to investments in the U.S.
or in other foreign countries.
- Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the
United States. Foreign companies may also receive less coverage than
United States companies by market analysts and the financial press. In
addition, foreign countries may lack financial controls and reporting
standards, or regulatory requirements comparable to those applicable to
U.S. companies. These factors may prevent the Fund and its SubAdviser
from obtaining information concerning foreign companies that is as
frequent, extensive and reliable as the information available concerning
companies in the United States.
- The foreign exchanges on which foreign equity securities are traded or
are listed may be less technologically developed or less regulated than
those in the U.S. possibly increasing the volatility and decreasing the
efficiency of those markets.
CUSTODIAL SERVICES AND RELATED INVESTMENT COSTS.
- Custodial services and other costs relating to investment in
international securities markets are generally more expensive than in the
U.S. Such markets have settlement and clearance procedures that differ
from those in the U.S. In certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. The
inability of the Fund to make intended securities purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. The inability to dispose of a portfolio security caused by
settlement problems could result either in losses to the Fund due to a
subsequent decline in value of the portfolio security or could result in
possible liability to the Fund. In addition, security settlement and
clearance procedures in some emerging countries may not fully protect the
Fund against loss or theft of its assets.
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RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
-
CURRENCY RISKS.
- Exchange rates for currencies fluctuate daily. Foreign securities are
normally denominated and traded in foreign currencies. As a result, the
value of the Fund's foreign investments and the value of its shares may
be affected favorably or unfavorably by changes in currency exchange
rates relative to the U.S. Dollar. The combination of currency risk and
market risks tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the U.S.
- The SubAdviser attempts to manage currency risk by limiting the amount
the Fund invests in securities denominated in a particular currency.
However, diversification will not protect the Fund against a general
increase in the value of the U.S. Dollar relative to other currencies.
PERFORMANCE INFORMATION
This is a new Fund for which performance information is not yet available.
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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.
FEE TABLE
<TABLE>
<CAPTION>
THE SMALL CAP THE MID CAP THE LARGE CAP
EQUITY FUND EQUITY FUND EQUITY FUND
INSTITUTIONAL CLASS SHARES INSTITUTIONAL CLASS SHARES INSTITUTIONAL 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% 0.75% 0.60%
Distribution [and/or Service] (12b-1)
fees None None None
Service Organization fees(1) 0.35% 0.35% 0.35%
Other expenses % % %
---- ---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES % % %
FEE WAIVER(1) 0.55% 0.35% 0.35%
---- ---- ----
NET ANNUAL FUND OPERATING EXPENSES(1) % % %
==== ==== ====
</TABLE>
(1) The Adviser and the Fund have contractually agreed to waive respectively
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.
FEE TABLE
<TABLE>
<CAPTION>
THE FOCUS THE INTERNATIONAL
EQUITY FUND EQUITY 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
(expenses that are deducted from fund assets)
Management Fees 1.00% 1.00%
Distribution (12b-1) Fees None None
Service Organization Fees(1) 0.35% 0.35%
Other Expenses
---- ----
FEE WAIVER(1)
---- ----
NET ANNUAL FUND OPERATING EXPENSES(1)
==== ====
</TABLE>
(1) The Fund's Distributor has contractually agreed to waive a portion of the
service organization fees at least until May 31, 2001. As a result, the
service organization fees would be 0.00%. You will be notified if this
waiver is discontinued after this date.
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RISK/RETURN SUMMARY AND FUND EXPENSES EQUITY FUNDS
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:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF EACH PERIOD
- NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION OF
THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2000.
- REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
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 CLASS SHARES INSTITUTIONAL CLASS SHARES INSTITUTIONAL CLASS SHARES
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------
ONE YEAR AFTER PURCHASE $ $ $
THREE YEARS AFTER PURCHASE $ $ $
FIVE YEARS AFTER PURCHASE $ $ $
TEN YEARS AFTER PURCHASE $ $ $
</TABLE>
<TABLE>
<CAPTION>
THE FOCUS THE INTERNATIONAL
EQUITY FUND EQUITY FUND
INSTITUTIONAL CLASS SHARES INSTITUTIONAL CLASS SHARES
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ONE YEAR AFTER PURCHASE $ $
THREE YEARS AFTER PURCHASE $ $
</TABLE>
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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.
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FUND MANAGEMENT
INVESTMENT ADVISER
Trustmark Registered Investment Advisor, Inc ("Trustmark" or "Advisor"), 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 is a wholly owned subsidiary of Trustmark National Bank. Trustmark
assumed responsibility as investment advisor from Trustmark National Bank on
August , 2000 as a result of recent changes to investment advisor
regulations. Trustmark has assets in excess of $1.6 billion under management
in addition to the Trust's Funds. Trustmark National Bank was founded in 1890
and is the second largest commercial bank headquartered in Mississippi.
Trustmark National Bank 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, 2000:
<TABLE>
<CAPTION>
AS A PERCENTAGE OF
AVERAGE DAILY NET
ASSETS AS OF 5/31/2000
<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%
The Focus Equity Fund 0.00%**
The International Equity Fund 0.00%**
</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.
** No Advisory fees were paid by these Funds for the period shown as the
Funds had not yet commenced operations. Contractual fees are 1.00% for
each Fund.
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 and Short Term Government Income Fund.
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
Intermediate Government Income Fund's portfolio.
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 14
years' investment experience. Mr. Ralston joined Trustmark in 1991. Prior to
joining Trustmark, Mr. Ralston was employed by Third National Bank of
Nashville.
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FUND MANAGEMENT
PORTFOLIO MANAGERS -- CONTINUED
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, an Executive Vice President and Chief Financial
Officer 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.
SUB-ADVISER -- THE INTERNATIONAL EQUITY FUND
[Investment Services, Inc. ("ISI")] serves as sub-adviser to the
International Equity Fund. ISI is located at and has
over $ million in assets under management as of December 31, 1999.
[ ] is responsible for the day-to-day management of the Fund.
[ ] has served Portfolio Manager with [ISI] since
[ ].
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.
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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
--------------------------------
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.
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SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR 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.
Institutional Class shares of the Funds are offered at net asset value
without a sales load. Purchases of Institutional Class shares may only be
made by one of the following types of "Institutional Investors": (1) trusts,
or investment management and other fiduciary accounts managed or administered
by Trustmark or its affiliates or correspondents pursuant to a written
agreement, (2) employees of Trustmark (and family members), the Distributor,
Administrator, and affiliates and correspondents, (3) or Trustees of the
Trust (and family members) or Directors of Trustmark (and family members),
(4) any persons purchasing shares with the proceeds of a distribution from a
trust, investment management and other fiduciary account managed or
administered by Trustmark or its affiliates or correspondents, pursuant to a
written agreement and (5) other persons or organizations authorized by the
Distributor. The Trust and the Distributor reserve the right to waive or
reduce the 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.
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SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES -- CONTINUED
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
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:
<TABLE>
<S> <C> <C>
BY MAIL 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:
- Fund name
- Share class
- Amount invested
- 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.
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.
</TABLE>
QUESTIONS?
Call 1-800-PERFORM
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.
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SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES -- CONTINUED
You can add to your account by using the convenient options described below.
Each Fund reserves the right to change or eliminate these privileges at any
time with 60 day's notice.
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:
- Complete the Automatic Investment Plan portion on your Account
Application.
Make sure you note:
- Your bank name, address and account number
- The amount you wish to invest automatically (minimum $25)
- How often you want to invest (every month or 4 times a year)
- 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.
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.
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.
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SHAREHOLDER INFORMATION
SELLING YOUR SHARES -- CONTINUED
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.
<TABLE>
<S> <C>
BY TELEPHONE 1. Call 1-800-737-3676 with instructions as to how you wish
(unless you have declined telephone to receive your funds (mail, wire, electronic transfer).
sales privileges on your account (See "General Policies on Selling Shares -- Verifying
application) Telephone Redemptions" below)
BY MAIL 1. Call 1-800-737-3676 to request redemption forms or write
(See "General Policies on Selling a letter of instruction indicating:
Shares -- Redemptions in Writing - your Fund and account number
Required") - amount you wish to redeem
- address where your check should be sent
- 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 Performance Funds Trust
Shares -- 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 If you call by 4 p.m. Eastern time, your payment will
your account application 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 the If you call by 4 p.m. Eastern time, the NAV of your shares
Automated Clearing House (ACH) and will normally be determined on the same day and the proceeds
must be a U.S. bank credited within 8 days.
Your bank may charge for this
service
</TABLE>
QUESTIONS?
Call 1-800-PERFORM
32
<PAGE> 80
[LOGO]
SHAREHOLDER INFORMATION
SELLING YOUR SHARES -- CONTINUED
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:
- Make sure you've checked the appropriate box on the Account Application.
Or call 1-800-737-3676.
- Include a voided personal check.
- 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.
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.
- Redemptions over $25,000
- Your account registration or the name(s) in your account has changed
within the last 15 days
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- 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.
33
<PAGE> 81
[LOGO]
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES -- CONTINUED
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.
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.
34
<PAGE> 82
[LOGO]
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:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security number)
- Dollar value or number of shares to be exchanged
- The name of the Fund from which the exchange is to be made
- 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.
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:
- 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 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.
35
<PAGE> 83
[LOGO]
SHAREHOLDER INFORMATION
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.
A Fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, a Fund's yield on those securities would be
decreased. Except with respect to the International Equity Fund, shareholders
generally will not be entitled to claim a credit or deduction with respect to
foreign taxes. In addition, a Fund's investments in foreign securities or
foreign currencies may increase or accelerate a Fund's recognition of
ordinary income and may affect the timing or amount of a Fund's
distributions.
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.
36
<PAGE> 84
[LOGO]
FINANCIAL HIGHLIGHTS MONEY MARKET FUND
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 whose report, along with the Fund's financial
statements, are included in the annual report, which is available upon
request.
MONEY MARKET FUND
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, 2000 MAY 31, 1999 MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.05 0.05 0.05
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.05) (0.05) (0.05) (0.05)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------------------------------------------
Total Return 5.05% 5.43% 5.34% 5.60%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $382,178 $349,024 $320,732 $366,966
Net investment income before
waivers/reimbursements 4.68% 5.07% 4.94% 5.12%
Net investment income net of
waivers/reimbursements 4.92% 5.31% 5.20% 5.42%
Expenses before waivers/reimbursements 0.59% 0.57% 0.51% 0.54%
Expenses net of waivers/reimbursements 0.35% 0.33% 0.25% 0.24%
</TABLE>
37
<PAGE> 85
[LOGO]
FINANCIAL HIGHLIGHTS BOND FUNDS
SHORT TERM GOVERNMENT INCOME FUND
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.85 $ 9.75 $ 9.75 $ 9.84 $ 9.77
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.50 0.54 0.55 0.54 0.53
Net realized and unrealized gain/(loss) on
investments (0.06) 0.10 (0.01) (0.09) 0.07
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.44 0.64 0.54 0.45 0.60
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.50) (0.54) (0.54) (0.54) (0.53)
-----------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (0.50) (0.54) (0.54) (0.54) (0.53)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.79 $ 9.85 $ 9.75 $ 9.75 $ 9.84
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes sales charge) 4.57% 6.73% 5.70% 4.65% 6.37%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $113,145 $120,203 $126,428 $106,617 $104,730
Net investment income before
waivers/reimbursements 5.09% 5.53% 5.63% 5.47% 5.40%
Net investment income net of
waivers/reimbursements 5.09% 5.53% 5.63% 5.48% 5.43%
Expenses before waivers/reimbursements 0.69% 0.64% 0.66% 0.72% 0.77%
Expenses net of waivers/reimbursements 0.69% 0.64% 0.66% 0.71% 0.74%
Portfolio turnover rate 49.19% 65.07% 85.21% 120.00% 267.65%
</TABLE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.34 $ 9.93 $ 9.82 $ 10.11 $ 9.87
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.54 0.59 0.60 0.56 0.62
Net realized and unrealized gain/(loss) on
investments (0.28) 0.42 0.09 (0.29) 0.25
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.26 1.01 0.69 0.27 0.87
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.54) (0.59) (0.58) (0.56) (0.62)
In excess of net investment income -- (0.01) -- -- --
In excess of net realized gain on investments -- -- -- -- (0.01)
-----------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (0.54) (0.60) (0.58) (0.56) (0.63)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.06 $ 10.34 $ 9.93 $ 9.82 $ 10.11
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes sales charge) 2.47% 10.42% 7.20% 2.66% 9.31%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $154,916 $118,743 $94,242 $77,677 $108,052
Net investment income before
waivers/reimbursements 5.13% 5.73% 6.43% 5.50% 6.33%
Net investment income net of
waivers/reimbursements 5.18% 5.78% 6.48% 5.55% 6.44%
Expenses before waivers/reimbursements 0.84% 0.77% 0.91% 0.86% 0.82%
Expenses net of waivers/reimbursements 0.79% 0.72% 0.86% 0.81% 0.71%
Portfolio turnover rate 74.03% 35.62% 46.23% 183.00% 339.95%
</TABLE>
38
<PAGE> 86
[LOGO]
FINANCIAL HIGHLIGHTS EQUITY FUNDS
SMALL CAP EQUITY FUND
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
YEAR FOR THE
ENDED PERIOD ENDED
MAY 31, 1999 MAY 31, 1998*
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.92 $ 10.00
---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) (0.03) (0.03)(a)
Net realized and unrealized gain/(loss) on
investments (1.68) (0.05)
---------------------------------------------------------------------------------
Total from investment operations (1.71) (0.08)
---------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (0.08) --
---------------------------------------------------------------------------------
Total distributions to shareholders (0.08) --
---------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.13 $ 9.92
---------------------------------------------------------------------------------
Total Return (Excludes sales charge) (17.25%) (0.80%)***
---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $54,722 $61,450
Net investment income/(loss) before
waivers/reimbursements (0.36%) (0.41%)**
Net investment income/(loss) net of
waivers/reimbursements (0.36%) (0.41%)**
Expenses before waivers/reimbursements 1.40% 1.45% **
Expenses net of waivers/reimbursements 1.40% 1.45% **
Portfolio turnover rate 34.52% 12.28%
</TABLE>
* Fund commenced operations on October 1, 1997.
** Annualized
*** Not Annualized
(a) Calculated based on average shares during the period.
MID CAP EQUITY FUND
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.11 $ 16.71 $ 14.05 $ 11.11 $ 9.60
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.06 0.08 0.13 0.13 0.13
Net realized and unrealized gain/(loss) on
investments (0.34) 4.40 2.99 3.44 1.51
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.28) 4.48 3.12 3.57 1.64
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.06) (0.08) (0.13) (0.13) (0.13)
Net realized gain on investments (1.16) (1.00) (0.33) (0.50) --
-----------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1.22) (1.08) (0.46) (0.63) (0.13)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.61 $ 20.11 $ 16.71 $ 14.05 $ 11.11
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes sales charge) (1.06%) 27.15% 22.62% 33.06% 17.31%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $106,330 $168,116 $125,035 $80,704 $48,068
Net investment income/(loss) before
waivers/reimbursements 0.34% 0.41% 0.75% 0.90% 1.11%
Net investment income/(loss) net of
waivers/reimbursements 0.34% 0.41% 0.89% 1.06% 1.37%
Expenses before waivers/reimbursements 1.09% 1.07% 1.06% 1.14% 1.22%
Expenses net of waivers/reimbursements 1.09% 1.07% 0.92% 0.98% 0.96%
Portfolio turnover rate 33.27% 20.48% 7.72% 28.00% 20.39%
</TABLE>
39
<PAGE> 87
[LOGO]
FINANCIAL HIGHLIGHTS EQUITY FUNDS
LARGE CAP EQUITY FUND
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1997 MAY 31, 1996 MAY 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.98 $ 19.16 $ 15.29 $ 12.51 $ 11.33
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.15 0.19 0.24 0.23 0.25
Net realized and unrealized gain on investments 4.30 6.00 4.13 3.29 1.42
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.45 6.19 4.37 3.52 1.67
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.15) (0.19) (0.25) (0.23) (0.24)
Net realized gain on investments (1.10) (0.18) (0.25) (0.51) (0.25)
-----------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1.25) (0.37) (0.50) (0.74) (0.49)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 28.18 $ 24.98 $ 19.16 $ 15.29 $ 12.51
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes sales charge) 18.25% 32.53% 29.06% 28.73% 15.35%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $288,804 $259,585 $233,454 $140,144 $100,110
Net investment income before
waivers/reimbursements 0.58% 0.83% 1.34% 1.55% 2.02%
Net investment income net of
waivers/reimbursements 0.58% 0.83% 1.43% 1.65% 2.15%
Expenses before waivers/reimbursements 0.90% 0.91% 0.92% 0.91% 0.92%
Expenses net of waivers/reimbursements 0.90% 0.91% 0.83% 0.81% 0.79%
Portfolio turnover rate 7.20% 4.78% 1.41% 6.00% 58.08%
</TABLE>
40
<PAGE> 88
(This Page Intentionally Left Blank.)
<PAGE> 89
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
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION:
You can obtain copies of Fund documents from the SEC as follows:
IN PERSON:
Public Reference Room in Washington, D.C. (For their hours of operation, call
1-202-942-8090.)
BY MAIL:
Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-0102
(The SEC charges a fee to copy any documents.)
ON THE EDGAR DATABASE VIA THE INTERNET:
www.sec.gov
BY ELECTRONIC REQUEST:
[email protected]
Investment Company Act file no. 811-6603
PR-PRO-6010-999
<PAGE> 90
[PERFORMANCE FUNDS LOGO]
PERFORMANCE FUNDS TRUST
A FAMILY OF MUTUAL FUNDS
THE MONEY MARKET FUND
INSTITUTIONAL CLASS
PROSPECTUS
[TRUSTMARK LOGO]
National Bank
Performance Funds'
Investment Adviser
AUGUST 16, 2000
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> 91
TABLE OF
CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
[Logo]
Carefully review this important 3 Investment Objective, Principal Investment Strategies
section, which summarizes each fund's Principal Investment Risks and Performance Information
investments, risks, past performance, 5 Fees and Expenses
and fees.
FUND MANAGEMENT
[Logo]
Review this section for Fund 6 Investment Adviser
Management details on the people and 6 Portfolio Manager
organizations who oversee the Funds. 6 Distributor and Administrator
SHAREHOLDER INFORMATION
[Logo]
Review this section for shareholders 7 Pricing of Fund Shares
information details on how shares are 7 Purchasing and Adding to Your Shares
valued, how to purchase, sell or 9 Selling your Shares
exchange shares, related fees and 11 General Policies on Selling Shares
payments of dividends and 13 Exchanging Your Shares
distributions. 14 Service Organizations
14 Dividends, Distributions and Taxes
FINANCIAL HIGHLIGHTS
[Logo]
15
BACK COVER
[Logo]
Where To Learn More About The Funds
</TABLE>
2
<PAGE> 92
[LOGO]
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 ("Rating Agency")
or, if only one Rating Agency has rated the security, within the top two
ratings by that Rating Agency, 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).
PRINCIPAL INVESTMENT RISKS
Investing in the Fund involves risks common to any investment in securities.
By itself, no Fund constitutes a balanced investment program.
An investment in the 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 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 Fund will be
achieved.
SELECTION RISK. Like all investment funds, the 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. 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.
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.
ADDITIONAL PRINCIPAL INVESTMENT RISK
PREPAYMENT RISK. The Fund's investments in mortgage-related securities are
subject to the risk that the principal amount of the underlying mortgage may
be prepaid prior to the security's maturity date. Such prepayments are common
when interest rates decline. When such a prepayment 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").
3
<PAGE> 93
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RISK/RETURN SUMMARY AND FUND EXPENSES 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. Past performance
does not indicate how the Fund will perform in the future. (Both the chart
and the table assume reinvestment of dividends and distributions and reflect
voluntary fee reductions. Without fee reductions, the Fund's performance
would have been lower.)
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS FOR
INSTITUTIONAL CLASS SHARES(1)
[PERFORMANCE CHART]
<TABLE>
<S> <C>
1994 4.19
1995 5.85
1996 5.33
1997 5.43
1998 5.31
199 4.95
</TABLE>
<TABLE>
<S> <C>
Best quarter: Q3 1995 1.42%
Worst quarter: Q1 1994 0.77%
</TABLE>
For the period January 1, 2000
through June 30, 2000 the aggregate
(non-annualized) total returns of the
Fund was %.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31,
1999)
<TABLE>
<CAPTION>
SINCE
PAST PAST 5 INCEPTION
YEAR YEARS 9/30/93
<S> <C> <C> <C>
Institutional Class
Shares 4.95% 5.37% 5.10%
</TABLE>
(1) As of May 31, 2000 the 7-day current yield of the Fund's Institutional
shares was %. 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.
WHO MAY WANT TO INVEST?
CONSIDER INVESTING IN THE MONEY MARKET FUND IF YOU:
- Are seeking preservation of capital
- Have a low risk tolerance
- Are willing to accept lower potential returns in exchange for a higher
degree of safety
- Are investing short-term reserves
4
<PAGE> 94
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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
(expenses that are deducted from fund assets)
Management Fees(1) 0.30%
12b-1 Fees None
Service Organization Fees(1) 0.35%
Other Expenses %
----
TOTAL ANNUAL FUND OPERATING EXPENSES %
FEE WAIVER(1) 0.45%
----
NET ANNUAL FUND OPERATING EXPENSES %
====
</TABLE>
(1) The Adviser and Fund have contractually agreed to waive respectively 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 0.00%. You will be notified if the
waiver is discontinued after that date.
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:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF EACH PERIOD
- NO CHANGES IN THE FUND'S OPERATING EXPENSES, EXCEPT FOR THE EXPIRATION OF
THE CURRENT CONTRACTUAL FEE WAIVERS ON MAY 31, 2001.
- REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS.
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 $
THREE YEARS AFTER PURCHASE $
FIVE YEARS AFTER PURCHASE $
TEN YEARS AFTER PURCHASE $
</TABLE>
5
<PAGE> 95
[Logo]
FUND MANAGEMENT
INVESTMENT ADVISER
Trustmark Registered Investment Adviser Inc. ("Trustmark"), 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 is a wholly owned subsidiary of Trustmark National
Bank. Trustmark assumed responsibility as investment advisor from Trustmark
National Bank on August , 2000 as a result of recent changes to investment
adviser regulations.
Trustmark has assets in excess of $1.6 billion under management in addition
to the Trust's Funds. Trustmark National Bank 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
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.
PORTFOLIO MANAGER
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.
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 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.
6
<PAGE> 96
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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
------------------------------------------------------
The 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 12:00
noon Eastern time on days the New York Stock Exchange is open. The 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.
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 Fund's custodian are open for
business. For example: If you properly place a purchase order to buy shares
of the 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.
PURCHASING AND ADDING TO YOUR SHARES
You may purchase shares of the Fund 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.
Institutional Class shares of the Fund are offered at net asset value without
a sales load. Purchases of Institutional Class shares may only be made by one
of the following types of "Institutional Investors": (1) trusts, or
investment management and other fiduciary accounts managed or administered by
Trustmark or its affiliates or correspondents pursuant to a written
agreement, (2) employees of Trustmark (and family members), the Distributor,
Administrator, and affiliates and correspondents, (3) or Trustees of the
Trust (and family members) or Directors of Trustmark (and family members),
(4) any persons purchasing shares with the proceeds of a distribution from a
trust, investment management and other fiduciary account managed or
administered by Trustmark or its affiliates or correspondents, pursuant to a
written agreement and (5) other persons or organizations authorized by the
Distributor. The Trust and the Distributor reserve the right to waive or
reduce the 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 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.
7
<PAGE> 97
[LOGO]
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES -- CONTINUED
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
If purchasing through your financial advisor or brokerage account, simply
tell your adviser 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.
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.
All investments made by regular mail or express delivery, whether initial or
subsequent, should be sent:
<TABLE>
<S> <C> <C>
BY MAIL 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
"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:
- Fund name
- Share class
- Amount invested
- 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.
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.
</TABLE>
QUESTIONS?
Call 1-800-PERFORM
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.
8
<PAGE> 98
[LOGO]
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES -- CONTINUED
AUTOMATIC INVESTMENT PROGRAM
You can make automatic investments in the Fund 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:
- Complete the Automatic Investment Plan portion on your Account
Application.
Make sure you note:
- Your bank name, address and account number
- The amount you wish to invest automatically (minimum $25)
- How often you want to invest (every month or 4 times a year)
- 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
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.
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.
9
<PAGE> 99
[LOGO]
SHAREHOLDER INFORMATION
SELLING YOUR SHARES -- CONTINUED
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.
<TABLE>
<S> <C>
BY TELEPHONE 1. Call 1-800-737-3676 with instructions as to how you wish
(unless you have declined telephone to receive your funds (mail, wire, electronic transfer).
sales privileges) (See "General Policies on Selling Shares -- Verifying
Telephone Redemptions" below)
BY MAIL 1. Call 1-800-737-3676 to request redemption forms or write
(See "General Policies on Selling a letter of instruction indicating:
Shares -- Redemptions in Writing - your Fund and account number
Required" below) - amount you wish to redeem
- address where your check should be sent
- 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 Performance Funds Trust
Shares -- 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 If you call by 4 p.m. Eastern time, your payment will
your application 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 the If you call by 4 p.m. Eastern time, the NAV of your shares
Automated Clearing House (ACH) and will normally be determined on the same day and the proceeds
must be a U.S. bank credited within 8 days.
Your bank may charge for this
service
</TABLE>
QUESTIONS?
Call 1-800-PERFORM
10
<PAGE> 100
[LOGO]
SHAREHOLDER INFORMATION
SELLING YOUR SHARES -- CONTINUED
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:
- Make sure you've checked the appropriate box on the Account Application.
Or call 1-800-737-3676
- Include a voided personal check.
- 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:
- Redemptions over $25,000
- Your account registration or the name(s) on your account has changed
within the last 15 days
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- 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 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.
11
<PAGE> 101
[LOGO]
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES -- CONTINUED
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.
12
<PAGE> 102
[LOGO]
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your shares in the Fund for shares of the same class of
another Performance Fund. No transaction fees are charged for exchanges (see
"Notes on exchanges" below).
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable.
AUTOMATIC EXCHANGES
You can use the Fund's Automatic Exchange feature to purchase shares of the
Performance Funds at regular intervals through regular, automatic redemptions
from the Money Market Fund. To participate in the Automatic Exchange:
- Complete the appropriate section of the Account Application.
- 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 Trust, P.O. Box 182484,
Columbus, Ohio 43218-2484.
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:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security number)
- Dollar value or number of shares to be exchanged
- The name of the Fund from which the exchange is to be made
- 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 other Performance Fund into
which you wish to exchange shares.
13
<PAGE> 103
[LOGO]
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.
14
<PAGE> 104
[LOGO]
FINANCIAL HIGHLIGHTS MONEY MARKET FUND
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 ,
whose report, along with the Fund's financial statements, are included in the
annual report, which is available upon request.
MONEY MARKET FUND
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
AUG. 31, 2000 MAY 31, 1999 MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.05 0.05 0.05
------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.05) (0.05) (0.05) (0.05)
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------------------------------------------------------------------------------------------------------------------
Total Return 5.05% 5.43% 5.34% 5.60%
------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $382,178 $349,024 $320,732 $366,966
Net investment income before
waivers/reimbursements 4.68% 5.07% 4.94% 5.12%
Net investment income net of
waivers/reimbursements 4.92% 5.31% 5.20% 5.42%
Expenses before waivers/reimbursements 0.59% 0.57% 0.51% 0.54%
Expenses net of waivers/reimbursements 0.35% 0.33% 0.25% 0.24%
</TABLE>
15
<PAGE> 105
(This Page Intentionally Left Blank.)
<PAGE> 106
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
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION:
You can obtain copies of Fund documents from the SEC as follows:
IN PERSON:
Public Reference Room in Washington, D.C. (For their hours of operation, call
1-202-942-8090.)
BY MAIL:
Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-0102
(The SEC charges a fee to copy any documents.)
ON THE EDGAR DATABASE VIA THE INTERNET:
www.sec.gov
BY ELECTRONIC REQUEST:
[email protected]
Investment Company Act file no. 811-6603.
PR-PRO-6012-999
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PERFORMANCE FUNDS TRUST
TELEPHONE: 1-800 PERFORM (737-3676)
STATEMENT OF ADDITIONAL INFORMATION - AUGUST 16,2000
THE MONEY MARKET FUND
THE SHORT TERM GOVERNMENT INCOME FUND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND
THE LARGE CAP EQUITY FUND
THE MID CAP EQUITY FUND
THE SMALL CAP EQUITY FUND
THE FOCUS EQUITY FUND
THE INTERNATIONAL 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 LARGE CAP EQUITY FUND, THE MID CAP EQUITY FUND,
THE SMALL CAP EQUITY FUND, THE FOCUS EQUITY FUND AND THE INTERNATIONAL 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 August 16,2000. 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, 2000 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>
<S> <C>
Investment Policies..................................................................................... 3
Description of Securities and Investment Practices...................................................... 5
Investment Restrictions ................................................................................ 19
Management of The Funds................................................................................. 20
Rule 12b-1 Distribution Plan............................................................................ 23
Calculation of Yield and Total Return................................................................... 24
Additional Purchase and Redemption Information.......................................................... 27
Determination of Net Asset Value........................................................................ 30
Portfolio Transactions.................................................................................. 31
Federal Income Taxes.................................................................................... 32
Shares of Beneficial Interest........................................................................... 34
Other Information....................................................................................... 42
Custodian............................................................................................... 42
Experts................................................................................................. 42
Financial Statements.................................................................................... 42
Appendix................................................................................................ 43
</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 (except for the
International Equity Fund and the Focus Equity Fund) is a fundamental policy of
the Fund and may not be changed without the approval of the Fund's shareholders.
All other investment limitations, other than the fundamental investment
restrictions listed under "Investment Restrictions", described in the Prospectus
or this Statement of Additional Information may be changed by the Trust's Board
of Trustees.
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 Funds 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 Funds may also invest in
investment companies, securities on a when-issued basis or forward commitment
basis and lend its portfolio securities (see "Investment Company Securities",
"When-Issued, Delayed Delivery Securities and Forward Commitments" and "Lending
Securities").
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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 3 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 (maturing in seven days or less) and debt obligations of corporations
(corporate bonds, debentures, notes and other similar corporate debt
instruments) which are rated A or better by at least two rating organizations.
THE 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 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 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").
The Fund may invest up to 35% of its total assets in foreign securities
and American Depository Receipts ("ADRs"), equity securities and equivalents of
larger capitalized companies, investment grade fixed income securities, such as
preferred stock, mortgage related and asset backed securities, debt securities
and securities convertible into common or preferred stock, and in obligations of
the U.S. government, its agencies or instrumentalities, (including such
obligations subject to repurchase agreements.) Investment grade bonds, for
example, are those rated "Baa" or better by Moody's Investor Services, Inc.
("Moodys") or "BBB" or better by
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Standard & Poor's ("S&P") or of a comparable rating by another nationally
recognized statistical rating organization or, if unrated, determined by the
Adviser to be of comparable investment quality. While "Baa"/"BBB" securities and
comparable unrated securities may produce a higher return, they are subject to a
greater degree of market fluctuation and credit risks than the higher quality
securities in which the Fund may invest and may be regarded as having
speculative characteristics as well. The Fund may also invest in short term
(maturing in less than one year) money market instruments, including commercial
paper rated "A-1" or better by S&P or "P-1" or better by Moody's. (See"U.S.
Government Securities," "Corporate Debt Securities," "Mortgage-Related
Securities," " Asset Backed Securities," "Zero Coupon Securities," "Convertible
Securities," "Repurchase Agreements," "Foreign Securities and American
Depository Receipts.") 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 FOCUS EQUITY FUND. The Focus 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 its total assets in equity securities of
companies with market capitalizations greater than $500 million at the time of
purchase. The Fund typically focuses its investments in a core group of 20-40
stocks and is considered a non-diversified Fund. 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 (i.e., constituting more than the
30-40 stocks of the core portfolio) 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 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 INTERNATIONAL EQUITY FUND. The International Equity Fund
pursues its objective of total return consisting of two components: changes in
the market value of its portfolio securities (both realized and unrealized
appreciation) and income received from its portfolio securities. The Fund
expects that changes in market value will comprise the largest component of its
total return. The Fund normally invests at least 65% of its total assets in
equity securities including common stocks and preferred stocks, of issuers based
outside the United States(see "Foreign Securities and American Depository
Receipts" and "Emerging Market Investments") The Fund intends to invest in
companies with public stock market capitalizations that are larger than $500
million at the time of investment. The Fund may allocate its assets among
countries as determined by the SubAdviser from time to time provided that the
Fund's assets are invested in at least three foreign countries. Under normal
market conditions, up to 35% of the Fund's total assets may be invested in
options, warrants, money market instruments, investment grade debt securities
and securities convertible into common or preferred stock of foreign issuers,
futures contracts (see "Options on Common Stock and Stock Indices," "Warrants,"
" Securities of Foreign Governments and Supranational Organizations", "Forward
Foreign Exchange Contracts", " Options on Foreign Currencies and Futures
Transactions", "Convertible Securities," "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
U.S.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 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
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Floating Rate Demand Notes." The Fund may also invest in investment
companies(including World Equity Benchmark Shares and Standard & Poors
Depository Receipts) and lend portfolio securities (See "Investment Company
Securities" and "Lending Securities".)
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 securities
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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.
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
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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, 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
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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 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,
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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., 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
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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.
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
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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.
SECURITIES OF FOREIGN GOVERNMENTS AND SUPRANATIONAL ORGANIZATIONS (THE
INTERNATIONAL EQUITYFUND). The International Equity Fund may invest in U.S.
dollar denominated debt securities issued by foreign governments, their
political subdivisions, governmental authorities, agencies and instrumentalities
and supranational organizations. A supranational organization is an entity
designated or supported by the national government of one or more countries to
promote economic reconstruction or development. Examples of supranational
organizations include, among others, the International Bank for Reconstruction
and Development (World Bank), the European Economic Community, the European Coal
and Steel Community, the European Investment Bank, the Inter-American
Development Bank, the Asian Development Bank, and the African Development Bank.
The Fund may also invest in "quasi-government securities" which are debt
obligations issued by entities owned by either a national, state or equivalent
government or are obligations of such a government jurisdiction which are not
backed by its full faith and credit and general taxing powers.
Investing in foreign government and quasi-government securities
involves considerations and possible risks not typically associated with
investing in obligations issued by the U.S. Government. The values of foreign
investments are affected by changes in governmental administration or economic
or monetary policy (in the U.S. or other countries) or changed circumstances in
dealings between countries. In addition, investments in foreign countries could
be affected by other factors not present in the United States, including
expropriation, confiscatory taxation and lack of uniform accounting and auditing
standards
EMERGING MARKET INVESTMENTS (THE INTERNATIONAL EQUITY FUND). Although
the International Equity Fund is permitted to invest up to 15% of its assets in
securities of issuers located in emerging
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markets, the Fund does not intend to invest presently in such securities.
Emerging market countries include, among others, most of Latin American
countries, African, Asian and Eastern European nations. In selecting emerging
markets countries in which to invest, the SubAdviser reviews the country's
economic outlook, its interest and inflation rates, and the political and
foreign exchange risk of investing in a particular country. The SubAdviser then
analyzes companies located in particular emerging market countries. Investments
in emerging markets present greater risk than investing in foreign issuers,
generally. The risk of political or social upheaval is greater in emerging
markets than in more economically developed countries. In addition, a number of
emerging markets restrict foreign investment in stocks. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain emerging market
countries. Moreover, many of the emerging securities markets are relatively
small, have low trading volumes, suffer periods of relative illiquidity, and are
characterized by significant price volatility.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (INTERNATIONAL EQUITY FUND)
The International Equity Fund, may invest in forward foreign currency exchange
contracts. The Fund will conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date which may be
any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
directly between currency traders (usually large commercial banks) and their
customers.
The Fund may enter into forward currency contracts in order to hedge
against adverse movements in exchange rates between currencies. The Fund will
conduct foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market, or
through forward contracts to purchase or sell foreign currencies. A forward
foreign currency exchange contract ("forward currency contract") involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These forward currency
contracts are traded directly between currency traders (usually large commercial
banks) and their customers. The Fund may enter into forward currency contracts
in order to hedge against adverse movements in exchange rates between
currencies.
By entering into a forward currency contract in U.S. dollars for the
purchase or sale of the amount of foreign currency involved in an underlying
security transaction, the Fund is able to protect itself against a possible loss
between trade and settlement dates resulting from an adverse change in the
relationship between the U.S. dollar and such foreign currency. However, this
tends to limit potential gains which might result from a positive change in such
currency relationships. The Fund also may hedge foreign currency exchange rate
risk by engaging in a currency financial futures and options transactions, which
are described below. The forecasting of short-term currency market movements is
extremely difficult and whether such a short-term heading strategy will be
successful is highly uncertain.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration of a forward currency contract.
Accordingly, it may be necessary for the Fund to purchase additional currency on
the spot market if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver when a decision is made to
sell the security and make delivery of the foreign currency in settlement of a
forward contract. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the Fund is obligated to
deliver.
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The Fund does not intend to enter into such forward foreign currency
exchange contracts if the Fund would have more than 15% of the value of its
total assets committed to such contracts on a regular or continuous basis. The
Fund also will not enter into such forward contracts or maintain a net exposure
on such contracts where the Fund would be obligated to deliver an amount of
foreign currency in excess of the value of its securities or other assets
denominated in that currency. The Adviser believes that it is important to have
the flexibility to enter into such forward contracts when it determines that to
do so is in the best interests of the Fund. The Fund's Custodian segregates cash
or liquid high-grade securities in an amount not less than the value of the
Fund's total assets committed to forward foreign currency exchange contracts
entered into for the purchase of a foreign security. If the value of the
securities segregated declines, additional cash or securities are added so that
the segregated amount is not less than the amount of the Fund's commitments with
respect to such contracts. The Fund generally does not enter into a forward
contract for a term longer than one year.
If the Fund retains the portfolio security and engages in an offsetting
transaction, it will incur a gain or a loss to the extent that there has been a
movement in forward currency contract prices. If the Fund engages in an
offsetting transaction it may subsequently enter into a new forward currency
contract to sell the foreign currency. Although such contracts tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they also
tend to limit any potential gain which might result should the value of such
currency increase. The Fund will have to convert its holdings of foreign
currencies into United States dollars from time to time. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are
buying and selling various currencies.
FOREIGN CURRENCY OPTIONS AND FUTURES TRANSACTIONS ( INTERNATIONAL EQUITYFUND)
The International Equity Fund may invest in foreign currency options. A
foreign currency option provides the option buyer with the right to buy or sell
a stated amount of foreign currency at the exercise price at a specified date or
during the option period. A call option gives its owner the right, but not the
obligation, to buy the currency while a put option gives its owner the right,
but not the obligation, to sell the currency. The option seller (writer) is
obligated to fulfill the terms of an option sold if it is exercised. However,
either seller or buyer may close its position during the option period in the
secondary market for such options at any time prior to expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect the Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if the Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against the
decline of the value of the currency, it would not have to exercise its put.
Similarly, if the Fund has entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency had
depreciated in value between the date of the purchase and the settlement date,
the Fund would not have to exercise its call, but could acquire in the spot
market the amount of foreign currency needed for settlement.
The Fund may invest in foreign currency futures transactions. As part
of its financial futures transactions, the Fund may use foreign currency futures
contracts and options on such futures contracts. Through the purchase or sale of
such contracts, the Fund may be able to achieve many of the same objectives it
may achieve through forward foreign currency exchange contracts more effectively
and possibly at a lower cost. Unlike forward foreign currency exchange
contracts, foreign currency futures contracts and options on foreign currency
futures contracts are standardized as to amount and delivery,
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and may be traded on boards of trade and commodities exchanges or directly with
a dealer which makes a market in such contracts and options. It is anticipated
that such contracts may provide greater liquidity and lower cost than forward
foreign currency exchange contracts.
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, 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,
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which is guaranteed by the FHLMC. The FHLMC currently guarantees timely payment
of interest and either timely payment of principal or eventual payment of
principal, depending upon the date of issue. When the FHLMC does not guarantee
timely payment of principal. FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
In addition to GNMA, FNMA or FHLMC Certificates, through which the
holder receives a share of all interest and principal payments from the
mortgages underlying the Certificate, the Funds also may invest in mortgage
pass-through securities, where all interest payments go to one class of holders
("Interest Only Securities" or "IOs") and all principal payments go to a second
class of holders ("Principal Only Securities" or "POs"). These securities are
commonly referred to as mortgage-backed security strips or MBS strips. The
yields to maturity on IOs and POs are particularly sensitive to interest rates
and the rate of principal payments (including prepayments) on the related
underlying mortgage assets, and principal payments may have a material effect on
yield to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Funds may not fully recoup its initial
investment in IOs. Conversely, if the underlying mortgage assets experience less
than anticipated prepayments of principal, the return of POs could be adversely
affected. The Funds will treat IOs and POs as illiquid securities except for IOs
and POs issued by the U.S. Government agencies and instrumentalities backed by
fixed-rate mortgages, whose liquidity is monitored by the Adviser.
The Funds may also invest in certain Collateralized Mortgage
Obligations ("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs")
which are hybrid instruments with characteristics of both mortgage-backed bonds
and mortgage pass-through securities. Interest and prepaid principal on a CMO or
REMIC are paid monthly or semi-annually. CMOs and REMICs may be collateralized
by whole mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC or FNMA. CMOs and
REMICs are structured into multiple classes, with each class bearing a different
expected maturity. Payments of principal, including repayments, are first
returned to investors holding the shortest maturity class; investors holding the
longer maturity classes generally receive principal only after the earlier
classes have been retired. 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.
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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 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
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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 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
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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 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
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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.
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 (Equity Funds 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
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to repurchase the securities. Reverse repurchase agreements are considered to be
borrowings by an investment company under the 1940 Act.
ZERO COUPON SECURITIES (all Funds). The Funds may invest in zero coupon
securities. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity. The market prices
of zero coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are more sensitive to changes in
interest rates than non-zero coupon securities having similar maturities and
credit qualities.
The Funds may invest in separately traded principal and interest
components of securities guaranteed or issued by the U.S. Treasury if such
components are traded independently. Under the STRIPS (Separate Trading of
Registered Interest and Principal of Securities) program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently.
Currently Federal income tax law requires that a holder of a zero
coupon security report as income each year the portion of the original issue
discount on such security that accrues that year, even though the holder
receives no cash payments of interest during the year.
PORTFOLIO TURNOVER. Purchases and sales are made for the Funds whenever
necessary, in the Adviser's opinion, to meet each Fund's objectives. Portfolio
turnover may involve the payment by the Funds of dealer spreads or underwriting
commissions, and other transaction costs, on the sale of securities, as well as
on the reinvestment of the proceeds in other securities. The greater the
portfolio turnover the greater the transaction costs to the Fund which will
increase the Fund's total operating expenses. Increased portfolio turnover may
increase the likelihood of additional capital gains for the Fund. The Small Cap
Equity Fund, Mid Cap Equity Fund and Large Cap Equity Fund do not anticipate
that the portfolio turnover rate will exceed 200%, 200% and 100% respectively.
The portfolio turnover rate is not expected to exceed 250% for the Short Term
Fund and 150% for the Intermediate Fund.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies of all
Funds except as noted. Fundamental investment restrictions may be changed with
respect to a particular Fund only by the vote of a majority of the outstanding
shares of that Fund (as defined under "Shares of Beneficial Interest" in this
Statement of Additional Information).
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;
23
<PAGE> 130
(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 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 (except for the Focus Equity 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. For purposes
of the above investment limitations, the Funds treat all supranational
organizations as a single industry and each foreign government (and all of its
agencies) as a separate industry. In addition, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back the
security.
If any percentage limitation described above is satisfied at the time
of investment, a later increase or decrease in such percentage resulting from a
change in net asset value will not constitute a violation of such restriction.
However, should a change in net asset value or other external events cause the
Fund's investments in illiquid securities to exceed the limitation set forth in
the Fund's Prospectus, the Fund will act to cause the aggregate amount of
illiquid securities to come within such limit as soon as reasonably practicable.
In such an event, however, the Fund would not be required to liquidate any
portfolio securities where the Fund would suffer a loss on the sale of such
securities.
24
<PAGE> 131
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 41, Trustee - 1475 Dunwoody Drive, West Chester, PA 19380.
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 66, 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.
James H. Johnston, III, M.D., Age 53, 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 41, 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 55, 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 55, Trustee and President of the Trust, Senior Vice
President & Client Services Executive, BISYS Fund Services since June, 1992.
Curtis Barnes +, Age 46, Secretary of the Trust, Legal Administrative Offices,
BISYS Fund Services, since May 1995; formerly, Senior Legal Analyst, John
Hancock Advisers, Inc.
Nadeem Yousaf +, Age 45, Treasurer of the Trust, Vice President, Tax & Financial
Services, BISYS Fund Services since August 1999. Formerly, Director of Canadian
Operations, Investors Bank and Trust. (dagger) address-3435 Stelzer Road
Columbus, OH 43219
As required by law, for as long as the Trust has a Distribution Plan,
the selection and nomination of trustees who are not "interested persons" of the
Trust will be made by such disinterested trustees. See "Rule 12b-1 Distribution
Plan" in this SAI.
Trustees of the Trust who are not affiliated with the Distributor or
the Adviser receive from the Trust an annual fee of $5,000 and a fee for each
Board of Trustees and Board committee meeting attended of $1,000. Trustees who
are affiliated with the Distributor or the Adviser do not receive compensation
from the Trust but all trustees are reimbursed for all out-of-pocket expenses
relating to attendance at meetings. Each of the Trustees serves on an Audit
Committee which meets at least annually to discuss audit matters. In addition,
each of the disinterested trustees serves on the Nominating Committee.
25
<PAGE> 132
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, 2000 in excess of $60,000.
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT ESTIMATED TOTAL
AGGREGATE BENEFITS ANNUAL COMPEN SATION
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
James H. Johnston, III, M.D., Trustee 0 N/A
James T. Mallette, Trustee 0 N/A
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 Registered Investment Adviser, Inc.
("Trustmark"or the "Adviser") and its parent Trustmark National Bank,
("Trustmark Bank"), each located at 248 East Capital Street, Jackson,
Mississippi 39201, have provided investment advisory services to the Funds since
inception pursuant to a Master Investment Advisory Contract with the Trust (the
"Advisory Contract"). Subject to such policies as the Trust's Board of Trustees
may determine, Trustmark makes investment decisions for the Funds.
To accommodate pending changes to the regulatory requirements
applicable to banks which serve as investment advisers to registered investment
companies contained in the Investment Advisers Act of 1940 as amended, the
responsibilities of Trustmark National Bank as adviser to the Funds will be
assumed by Trustmark, a wholly owned subsidiary of Trustmark National Bank, on
August , 2000. The assumption of these investment advisory responsibilities by
Trustmark will not result in any changes in staff or resources presently
employed to render advisory services.
Trustmark is a wholly-owned subsidiary of Trustmark National Bank which
in turn is a subsidiary of Trustmark Corporation, a bank holding company.
Trustmark National Bank is a national banking association which provides a full
range of banking and trust services to clients.
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%; the Focus Equity Fund, 1.00%; and the
International Equity Fund, 1.00%.
For the fiscal years ended May 31, 1998, May 31, 1999 and May 31, 2000,
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 $1,358,311 $1,450,586 $679,155 $725,293
The Short Term Government Income Fund 490,543 488,339 -- --
The Intermediate Term
Government Income Fund 572,600 673,317 57,262 67,333
</TABLE>
26
<PAGE> 133
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
The Mid Cap Equity Fund 1,240,502 1,187,417 -- --
The Large Cap Equity Fund 1,671,113 1,929,884 -- --
The Small Cap Equity Fund
(commenced operations on 10/1/97) 330,599 607,516 -- --
</TABLE>
s 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.
SUBADVISER- INTERNATIONAL EQUITY FUND
[Investment Services, Inc.] ("ISI ") serves as sub-adviser to the
International Equity Fund. [ISI], located at , is a wholly-owned subsidiary of
[ISI Corporation], the parent company of [ ], Inc. ISI was organized in 19__ to
provide business management, advisory, administrative and asset management
consulting services. As of December 31, 1999, ISI provides investment advice
with respect to approximately $____ billion in assets, including approximately
$____ billion of assets on behalf of ISI Corporation. For the subadvisory
services it provides to the International Equity Fund, ISI receives from the
Adviser and not the Fund monthly fees based upon average daily net assets at the
annual rate of 0.[ ]%.
ISI has entered into a Sub-Advisory Contract dated August 15, 2000,
with Trustmark. The Sub-Advisory Contract will continue in effect for a period
beyond two years from the date of their execution only as long as such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Fund or by the Board of Trustees and (ii)
by a majority of the Trustees who are not parties to such Contract or
"interested persons" (as defined in the 1940 Act) of any such party. The
Contract may be terminated without penalty by vote of the Trustees or the
shareholders of the Fund, or by the Adviser, or ISI, on 60 days' written notice
by either party to the Contract and will terminate automatically if assigned.
ISI provides the Fund with office space, office equipment and personnel
necessary to manage and administer the Fund's investment operations.
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
$721,334, $180,888, $199,791, $476,854, $234,234, and $89,982 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. BISYS waived administration fees of
$397,652 for the Money Market Fund.
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 administration fees of $403,393 for the Money Market Fund.
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
27
<PAGE> 134
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 period October 2, 1998 through May 31, 1999, the Class B Shares
of the Money Market, the Intermediate Fund, the Large Cap Equity Fund, the Mid
Cap Equity Fund and the Small Cap Equity Fund paid $358, $368, $8,307, $683 and
$224 respectively pursuant to each Fund's Class B Distribution Plan. Of these
amounts, the following were paid as compensation to the Distributor: $359 for
the Money Market Fund, $360 for the Intermediate Fund, $8,076 for the Large Cap
Equity Fund, $652 for the Mid Cap Equity Fund and $216 for the Small Cap Equity
Fund. The remaining amounts were paid to broker/dealers as service fees.
For the fiscal year ended May 31, 2000, the Class A Shares 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 respectively,
pursuant to each Fund's Distribution Plan. Of the Class A Distribution Plan
expenses paid in fiscal year 2000, almost entirely all of the expenses were used
for broker/dealer compensation, except the following amounts were retained by
the Distributor: for the Money Market Fund, for the Intermediate Fund, $1,866
for the Large Cap Equity Fund and for the Mid Cap Equity Fund. No Class B
Distribution Plan expenses were paid in fiscal year 2000 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.
28
<PAGE> 135
The Glass-Steagall Act and other applicable laws provide that, among
other things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. In addition, state
securities law on this issue may differ from interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
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. No payments were made to
Service Organizations for the recent fiscal year end May 31, 1999.
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, 2000, the seven day yield
of each of the Class A Shares, Class B Shares and Institutional Class Shares of
the Money Market was 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:
29
<PAGE> 136
n
P (1+T) = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of the maximum sales charge and a
proportional share of Fund expenses (net of certain reimbursed expenses) on an
annual basis, and will assume that all dividends and distributions are
reinvested when paid.
As indicated in the Prospectus, the Funds may advertise certain yield
information.
Yield for the Government Income Funds will be calculated based on a
30-day (or one month) period, computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
a-b
YIELD = -----------------------------
2[(cd+1) to the 6th power -1]
(where a = hypothetical dividends and interest earned during the 30-day period;
b = expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the net asset value per share on the last day of the
period. The net investment income of each of such Funds includes actual interest
income, plus or minus amortized purchase discount (which may include original
issue discount) or premium, less accrued expenses. Realized and unrealized gains
and losses on portfolio securities are not included in such Funds' net
investment income for this purpose. For purposes of sales literature, such
Funds' yield also may be calculated on the basis of the net asset value per
share rather than the public offering price, provided that the yield data
derived pursuant to the calculation described above also are presented.
Based on the thirty day period ended May 31, 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
MONEY MARKET FUND CLASS A CLASS B INSTITUTIONAL
----------------- ------- ------- -------------
<S> <C> <C> <C>
One year ended May 31, 2000
5 year
Inception (9/30/93) to May 31, 2000
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN
SHORT TERM GOVERNMENT INCOME FUND CLASS A CLASS B INSTITUTIONAL
--------------------------------- ------- ------- -------------
<S> <C> <C> <C>
One year ended May 31, 2000 NA
5 year NA
Inception (6/1/92) to May 31, 2000 NA
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN
INTERMEDIATE TERM GOVERNMENT INCOME FUND CLASS A CLASS B INSTITUTIONAL
---------------------------------------- ------- ------- -------------
<S> <C> <C> <C>
</TABLE>
30
<PAGE> 137
<TABLE>
<S> <C> <C> <C>
One year ended May 31, 2000
5-year
Inception (6/1/92) to May 31, 2000
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN
LARGE CAP EQUITY FUND CLASS A CLASS B INSTITUTIONAL
--------------------- ------- ------- -------------
<S> <C> <C> <C>
One year ended May 31, 2000
5-year
Inception (6/1/92) to May 31, 2000
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN
MID CAP EQUITY FUND CLASS A CLASS B INSTITUTIONAL
------------------- ------- ------- -------------
<S> <C> <C> <C>
One year ended May 31, 2000
5 year
Inception (6/1/92) to May 31, 2000
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN
SMALL CAP EQUITY FUND CLASS A CLASS B INSTITUTIONAL
--------------------- ------- ------- -------------
<S> <C> <C> <C>
One year ended May 31, 2000
Inception (10/1/97) to May 31, 2000
</TABLE>
The yield or total return for each Fund will fluctuate from time to
time, unlike bank deposits or other investments that pay a fixed yield for a
stated period of time, and does not provide a basis for determining future yield
or total return since it is based on historical data. Yield and total return are
functions of portfolio quality, composition, maturity and market conditions as
well as the expenses allocated to a Fund.
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
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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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each of the classes of shares of the Trust's Funds is sold on a
continuous basis by the Trust's distributor, Performance Funds Distributor (the
"Distributor"), and the Distributor has agreed to use appropriate efforts to
solicit all purchase orders. The Funds offer one or more of the following
classes of shares: Class A Shares, Class B Shares and Institutional Class
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. 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. This SAI contains additional information which may be of
interest to investors.
CLASS A SHARES
As stated in the Prospectus, the public offering price of Class A
Shares of the Money Market Fund is their net asset value per share which they
will seek to maintain at $1.00. The public offering price of Class A Shares of
each of the other Funds is their net asset value per share next computed after
the sale plus a sales charge which varies based upon the quantity purchased. The
public offering price of such Class A Shares of each Fund is calculated by
dividing net asset value by the difference (expressed as a decimal) between 100%
and the sales charge percentage of offering price applicable to the purchase.
The prospectus contains a table of applicable sales charges. Certain
purchases of Class A shares may be exempt from a sales charge.
The offering price is rounded to two decimal places each time a
computation is made. The sales charge scale and dealer concessions table set
forth below applies to purchases of Class A Shares of a Fund.
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF THE DEALER
AMOUNT OF SALE OFFERING PRICE CONCESSION
-------------- -------------- ----------
<S> <C> <C> <C>
(All Funds except Money
Market Fund and Short $0-$50,000 5.25% 5.00%
Term Fund) $50,001-$100,000 4.75% 4.50%
$100,001-$250,000 3.75% 3.50%
$250,001-$500,000 2.75% 2.50%
$500,001-$1,000,000 1.75% 1.50%
Over $1,000,000 0%* 0.25%
(Short Term Fund Only) $0-$50,000 3.00% 2.75%
$50,001-$100,000 2.50% 2.25%
$100,001-$250,000 2.00% 1.75%
$250,001-$500,000 1.50% 1.25%
$500,001-$1,000,000 1.00% 0.75%
Over $1,000,000 0%* 0.25%
</TABLE>
*Although there is no initial sales charge on purchases of Class A shares of
$1,000,000 or more, the Distributor pays broker-dealers out of its own assets, a
fee of up to 1% of the offering price of such shares. If these shares are
redeemed within 12 months, the redemption proceeds will be reduced by 1.00%. The
staff of the Securities and Exchange Commission has indicated that dealers who
receive more than 90% of the sales charge may be considered underwriters.
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CLASS B SHARES
The public offering price of Class B Shares of each Fund is their net
asset value per share. Class B shares redeemed prior to seven years from the
date of purchase may be subject to a contingent deferred sales charge of 1.00%
to 5.00%. Class B Shares are not offered by Short Term Fund. 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.
Proceeds from the Contingent Deferred Sales Charge and the distribution
and shareholder service fees under the Distribution Plan are payable to the
Distributor to defray the expenses of advance brokerage commissions and expenses
related to providing distribution-related and shareholder services to the Fund
in connection with the sale of the Class B shares, such as the payment of
compensation to dealers and agents selling Class B shares. A dealer commission
of 4.00% of the original purchase price of the Class B shares of the Fund will
be paid to financial institutions and intermediaries. However, the Distributor
may, in its sole discretion, pay a higher dealer commission at its sole
discretion.
SALES WITHOUT SALES CHARGE OR CONTINGENT DEFERRED SALES CHARGES. The
Funds may sell shares without a sales charge or CDSC pursuant to several
different Special Purchase Plans.
LETTER OF INTENT. The Funds may waive the sales charge on Class A
Shares pursuant to a signed Letter of Intent. The Letter of Intent ("LOI") will
be made at the public offering price applicable at the time of such purchase to
a single transaction of the total dollar amount indicated in the LOI. A LOI may
include purchase of shares made not more than 90 days prior to the date that an
investor signs the LOI; however, the 13-month period during which the LOI is in
effect will begin on the date of the earliest purchase to be included. A LOI is
not a binding obligation upon the investor to purchase the full amount
indicated. If the investor desires to redeem shares before the full amount has
been purchased, the shares will be released from escrow only if the investor
pays the sales charge that, without regard to the LOI, would apply to the total
investment made to date. LOI forms may be obtained from Performance Funds Trust
or from investment dealers. Interested investors should read the LOI carefully.
COMBINATION PRIVILEGE 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;
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<PAGE> 140
(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 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.
The Trust may suspend the right of redemption or postpone the date of
payment for shares during any period when: (a) trading on the NYSE is restricted
by applicable rules and regulations of the SEC; (b) the NYSE is closed for other
than customary weekend and holiday closings; (c) the SEC has by order permitted
such suspension; or (d) an emergency exists as a result of which: (i) disposal
by the Trust of securities owned by it is not reasonably practicable, or (ii) it
is not reasonably practicable for the Company to determine the fair market value
of its net assets.
Each Fund may redeem shares involuntarily if redemption appears
appropriate in light of the Trust's responsibilities under the 1940 Act.
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
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<PAGE> 141
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
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.
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<PAGE> 142
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 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. The amounts of transactions involving such
commissions for research services and the services provided by such
broker-dealers are periodically reviewed by the Board of Trustees.
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For the fiscal year ended May 31, 1999, the Funds paid brokerage
commissions as follows: $4,830 for the Short Term Fund, $86,633 for the Large
Cap Equity Fund, $270,467 for the Mid Cap Equity Fund, and $112,793 for the
Small Cap Equity Fund (no payments were made by the Money Market Fund or
Intermediate Fund). 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 Funds 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 Intermediate
Fund, the Large Cap Equity Fund, the Mid Cap Equity Fund, and 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 Large Cap Equity Fund the Mid Cap Equity Fund
and the Small Cap Equity Fund were 49.19%, 74.03%, 7.20%, 33.27% and 34.52%,
respectively.
FEDERAL INCOME TAXES
The Prospectus describes generally the tax treatment of dividends and
distributions made by the Trust. This section of the SAI includes additional
information concerning federal income taxes.
Qualification by a Fund as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended, (the "Code") requires, among other
things, that (a) at least 90% of a Fund's annual gross income be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of stock or securities, options, futures, forward
contracts, foreign currencies, and other income derived with respect to its
business of investing in stock or securities; and (b) a Fund diversifies its
holdings so that, at the end of each quarter of the taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash and cash
items (including receivables), U.S. government securities, securities of other
regulated investment companies and other securities (except that such other
securities must be limited in respect of any one issuer to an amount not greater
than 5% of the value of the Fund's assets and 10% of the outstanding voting
securities of such issuer), and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
Government securities and the securities of other regulated investment
companies), or of two or more issuers which the taxpayer controls and which are
determined to be engaged in the same or similar trades or businesses or related
trades or businesses. The Fund will not be subject to federal income tax on its
net investment income and net capital gains which are distributed to its
shareholders, provided that it distributes to its stockholders at least 90% of
its net investment income and tax-exempt income earned in each year. If the Fund
does not meet all of these Code requirements, it will be taxed as an ordinary
corporation and its distributions will be taxed to shareholders as ordinary
income.
Under the Code, a nondeductible excise tax of 4%, is imposed on the
excess of a regulated investment company's "required distribution" for the
calendar year ending within the regulated investment company's taxable year over
the "distributed amount" for such calendar year. The term "required
distribution" means the sum of (i) 98% of ordinary income for the calendar year,
(ii) 98% of capital gain net income for the one year period ending on October 31
and (iii) the sum of any untaxed, undistributed net investment income and net
capital gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually distributed
by the regulated investment company from its current year's ordinary income and
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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.
Some Funds may invest in stocks of foreign companies that are classified under
the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC under the Code if at least one-half of
its assets constitutes investment-type assets or 75% or more of its gross income
is investment-type income. Under the PFIC rules, an "excess distribution"
received with respect to PFIC stock is treated as having been realized ratably
over the period during which the Fund held the PFIC stock. A Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding income
to shareholders. Excess distributions include any gain from the sale of PFIC
stock as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
A Fund may be able to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently may be available, a Fund generally
would be required to include in its gross income its share of the earnings of a
PFIC on a current basis, regardless of whether any distributions are received
from the PFIC. If this election is made, the special rules, discussed above,
relating to the taxation of excess distributions, would not apply. In addition,
a Fund may make a mark-to-market election with respect to certain PFIC stocks.
If it does so, the special rules relating to the taxation of excess
distributions will not apply. The result of such an election would be to
accelerate the Fund's recognition of gains or losses due to changes in the
prices of such stocks. Each Fund's intention to qualify annually as a regulated
investment company may limit its elections with respect to PFIC stock.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject a Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to shareholders and that will be taxed to shareholders as ordinary
income or long-term capital gain may be increased or decreased substantially as
compared to a Fund that did not invest in PFIC stock. Investors should consult
their own tax advisors in this regard.
Distributions of investment company taxable income generally are
taxable to shareholders as ordinary income. Distributions from certain of the
Funds may be eligible for the dividends-received deduction available to
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corporations. To the extent dividends received by a Fund are attributable to
foreign corporations, a corporation that owns shares will not be
entitled to the dividends-received deduction with respect to its pro rata
portion of such dividends, since the dividends-received deduction is generally
available only with respect to dividends paid by domestic corporations.
It is anticipated that a portion of the dividends paid by the Equity
Funds will qualify for the dividends-received deduction available to
corporations. The Equity Funds are required to notify shareholders of the amount
of dividends which will qualify for the deduction within 60 days of the close of
each Fund's taxable year. The dividends paid by the other Funds are not expected
to qualify. Tax law proposals introduced from time to time, may also affect the
dividends received deduction.
If a shareholder exchanges or otherwise disposes of shares of a Fund
within 90 days of having acquired such shares, and if, as a result of having
acquired those shares the shareholder subsequently pays a reduced sales load for
shares of a Fund, the sales load previously incurred acquiring the Fund's shares
shall not be taken into account (to the Extent such previous sales loads so not
exceed the reduction in sales loads) for the purpose of determining the amount
of gain or loss on the exchange, but will be treated as having been incurred in
the acquisition of such other shares.
Any loss realized on a redemption or exchange of shares of a Fund will
be disallowed to the extent shares are reacquired within the 60-day period
beginning 30 days before and ending 30 days after the day the shares are
disposed.
If an option written by a Fund lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund will realize a short-term capital gain or loss, depending on
whether the premium income is greater or less than the amount paid by the Fund
in the closing transaction. If securities are sold by a Fund pursuant to the
exercise of a call option written by it, such Fund will add the premium received
to the sale price of the securities delivered in determining the amount of gain
or loss on the sale. If securities are purchased by a Fund pursuant to the
exercise of a put option written by it, such Fund will subtract the premium
received from its cost basis in the securities purchased.
The amount of any realized gain or loss on closing out a forward
contract will generally result in a realized capital gain or loss for tax
purposes. Under Code Section 1256, forward currency contracts held by a Fund at
the end of a fiscal year will be required to be "marked to market" for federal
income tax purposes, that is, deemed to have been sold at market value. Any gain
or loss recognized with respect to forward currency contracts is considered to
be 60% long term capital gain or loss and 40% short term capital gain or loss,
without regard to the holding period of the contract. Code Section 988 may also
apply to forward contracts. Under Section 988, each foreign currency gain or
loss is generally computed separately and treated as ordinary income or loss. In
the case of overlap between Section 1256 and 988, special provisions determine
the character and timing of any income, gain or loss. The Funds will attempt to
monitor Section 988 transactions to avoid an adverse tax impact.
Income received by a Fund from sources within foreign countries may be subject
to withholding and other similar income taxes imposed by the foreign country. If
more than 50% of the value of a Fund's total assets at the close of its taxable
year consists of securities of foreign corporations, the Fund will be eligible
and intends to elect to "pass-through" to its shareholders the amount of such
foreign taxes paid by the Fund. Pursuant to this election, a shareholder would
be required to include in gross income (in addition to taxable dividends
actually received) his pro rata share of the foreign taxes paid by a Fund and
would be entitled either to deduct his pro rata share of foreign taxes in
computing his taxable income or, to the extent the Fund satisfies certain
holding period and other requirements with respect to securities which have
given rise to such foreign taxes, to use his pro rate share of the foreign taxes
as a foreign tax credit against his U.S. Federal income tax liability, subject
to limitations. No deduction for foreign taxes may be claimed by a shareholder
39
<PAGE> 146
who does not itemize deductions, but such a shareholder may be eligible to claim
the foreign tax credit (see below). Each shareholder will be notified within 60
days after the close of a Fund's taxable year whether the foreign taxes paid by
a Fund will "pass-through" for that year and, if so, such notification will
designate (a) the shareholder's portion of the foreign taxes paid to each such
country, and (b) the portion of the dividend which represents income derived
from foreign sources.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his total foreign
source taxable income. For this purpose, if a Fund makes the election described
in the preceding paragraph, the source of the Fund's income flows through to its
shareholders. With respect to a Fund, gains from the sale of securities will be
treated as derived from U.S. sources and certain currency fluctuations gains,
including fluctuation gains from foreign currency-denominated debt securities,
receivables and payables, will be treated as ordinary income derived from U.S.
sources. The limitation on the foreign tax credit is applied separately to
foreign source passive income (as defined for purposes of the foreign tax
credit) including foreign source passive income of a Fund. The foreign tax
credit may offset only 90% of the alternative minimum tax imposed on
corporations and individuals, and foreign taxes generally may not be deducted in
computing alternative minimum taxable income.
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
40
<PAGE> 147
exception that the Class A shares are subject to a front end sales charge and
Class B shares may be subject to a contingent deferred sales charge and Class A
and B shares may be subject to Rule 12b-1 fees to which the Institutional Class
shares are not subject. Purchases may be made through an authorized broker or
financial institution, including the Fund, by mail or by wire. Call
1-800-737-3676, or contact your sales representative, broker-dealer or bank to
obtain more information about the Fund's classes of shares.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of each series of the Trust and requires that
notice of the disclaimer be given in each contract or obligation entered into or
executed by the Trust or the Trustees. The risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations and should be
considered remote and is limited to the amount of the shareholder's investment
in the Fund. 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.
As of, the following were five percent or greater shareholders of the
Funds:
SHORT TERM FUND
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<PAGE> 148
INSTITUTIONAL CLASS SHARE BALANCE PERCENTAGE
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
BISYS Brokerage Service
P.O. Box 4054
Concord, CA 94524
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
*Beneficial ownership disclaimed.
CLASS B SHARES
None.
INTERMEDIATE TERM GOVERNMENT
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
BISYS Brokerage Service
P.O. Box 4054
Concord, CA 94524
42
<PAGE> 149
CLASS B SHARES
Trustmark National Bank
James D. Kersh
P.O. Box 168
Laurel, MS 39441
43
<PAGE> 150
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
*Beneficial ownership disclaimed.
MID CAP EQUITY 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
BISYS Brokerage Service
P.O. Box 4054
Concord, CA 94524
CLASS A SHARES
BISYS Brokerage Service
P.O. Box 4054
Concord, CA 94524
CLASS B SHARES
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Kay H. Piarce Hannafan
57 Foxwood Ln.
Barrington, IL 60010
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<PAGE> 151
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
LARGE CAP EQUITY FUND
INSTITUTIONAL CLASS
Harman & Co.
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
*Beneficial ownership disclaimed.
Harman & Co.
c/o Trustmark National Bank
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
First American Trust Company
Managed Omnibus Reinvest
421 North Main Street
Santa Ana, CA 92701-4617
BISYS Brokerage Service
P.O. Box 4054
Concord, CA 94524
First American Trust Company
Managed Omnibus Reinvest
421 North Main Street
Santa Ana, CA 92701-4617
CLASS A SHARES
BISYS Brokerage Service
P.O. Box 4054
Concord, CA 94524
CLASS B SHARES
None.
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<PAGE> 152
SMALL CAP EQUITY 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
*Beneficial ownership disclaimed.
BISYS Brokerage Service
P.O. Box 4054
Concord, CA 94524
CLASS A SHARES
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
BISYS Brokerage Service
P.O. Box 4054
Concord, CA 94524
St. Dominic Health Services
Retirement Plan
969 Lakeland Dr.
Jackson, MS 39216-4699
CLASS B 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
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<PAGE> 153
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
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
MONEY MARKET FUND
INSTITUTIONAL CLASS
Harman & Co.
c/o Trustmark National Bank
*Beneficial ownership disclaimed.
Trust Department
P.O. Box 291
Jackson, MS 39205-0291
CLASS A SHARES
BISYS Brokerage Service
P.O. Box 4054
Concord, CA 94524
Meredith W. Creekmore
4658 Old Canton Rd.
Jackson, MS 39211-5517
W.G. Yates & Sons Construction Co.
Attn Marvin Blanks
P.O. Box 456
Philadelphia, MS 39350-0456
St. Dominic Jackson Memorial Hospital
969 Lakeland Drive
Jackson, MS 39216-4602
CLASS B SHARES
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
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<PAGE> 154
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
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
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
*Beneficial ownership disclaimed.
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<PAGE> 155
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 $193,413, $48,834, $53,866, $63,330,
$128,660 and $24,301, 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.
EXPERTS
__________ LLP serves as the independent accountants for the Trust.
__________ LLP provides audit services, tax return preparation and assistance
and consultation in connection with certain SEC filings. __________ LLP's
address is 100 East Broad Street, Columbus, Ohio 43215.
FINANCIAL STATEMENTS
Financial Statements for the Funds as of May 31, 2000 and for the
period then ended including the Report of __________ LLP, independent
accountants, as contained in the Annual Report to Shareholders are incorporated
by reference.
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<PAGE> 156
APPENDIX
The following is a description of the ratings by Moody's and Standard &
Poor's.
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
CA: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
UNRATED: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are
not rated as a matter of policy.
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.
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<PAGE> 157
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> 158
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)
(d) (3) Form of Investment Advisory Contract Supplement for each of
the International Equity Fund and the Focus Equity Fund -- to
be filed by post-effective amendment.
(d) (4) Form of Sub-Advisory Agreement for the International Equity
Fund -- to be filed by post-effective amendment.
(d) (5) Form of Assumption Agreement between the Registrant and
Trustmark National Bank -- filed herewith.
(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> 159
(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 (10)
(m) (9) Form of Service Organization Agreement--Class B Shares(10)
(m) (10) Form of Service Organization Agreement--Institutional Class
Shares(10)
(m) (11) Form of Revised Dealer and Selling Group Agreement (10)
(n) Financial Data Schedule - to be filed
(o) Amended and Restated Rule 18f-3 Plan to incorporate Class A
and B Shares--(10)
(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 10 on July 31, 1998.
(10) Filed with Post-Effective Amendment No. 11 on September 30, 1998
(11) Filed with Post-effective Amendment No 12 on July 30, 1999
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
<PAGE> 160
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> 161
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
Walter B. Grimm Trustee and
President President
Kevin J. Dell None
Vice President/Secretary
Dennis Sheehan None
Executive Vice President/
Director
William J. Tomko None
Sr. Vice President
(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> 162
(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> 163
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. 14 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 June 1, 2000.
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
June 1, 2000
John J. Pileggi
JAMES H. JOHNSTON, III* Trustee
June 1, 2000
James H. Johnston, III
JAMES T. MALLETTE* Trustee
June 1, 2000
James T. Mallette
WALTER P. NEELY* Trustee
June 1, 2000
Walter P. Neely
CHARLES M. CARR** Trustee
June 1, 2000
Charles M. Carr
/s/ WALTER B. GRIMM Trustee
June 1, 2000
Walter B. Grimm
/s/ NADEEM YOUSAF Treasurer
June 1, 2000
Nadeem Yousaf
*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.
