The Preferred Group of Mutual Funds
1-800-662-4769
P.O. Box 8320
Boston, MA 02266-8320
Supplement dated November 30, 1999 to
Prospectus Dated November 1, 1999
1. Small Cap Fund Subadvisory Agreement
Subject to shareholder approval, it is expected that effective on or
about January 1, 2000, Turner Investment Partners, Inc. ("Turner"), 1235
Westlakes Drive, Suite 350, Berwyn, PA 19312, will assume subadvisory
responsibility for the Preferred Small Cap Fund ("Fund").
Robert E. Turner is the Chairman and controlling shareholder of
Turner. The portfolio managers of the Fund, each of whom can be considered to
have primary responsibility for the day-to-day management of the Fund, will be:
Bill McVail, Chris McHugh and Frank Susteric. Mr. McVail, Senior Equity
Portfolio Manager at Turner, is the lead manager of the Fund. Mr. McVail joined
Turner in 1998. Prior to 1998, he was Portfolio Manager at PNC Equity Advisers.
He has 11 years of investment experience. Mr. McHugh, Senior Equity Portfolio
Manager at Turner, is the co-manager of the Fund. Mr. McHugh joined Turner in
1990. Prior to 1990, he was a Performance Specialist with Provident Capital
Management. He has 11 years of investment experience. Mr. Sustersic, a Senior
Equity Portfolio Manager at Turner, is also co-manager of the Fund. Mr.
Sustersic joined Turner in 1994. Mr. Sustersic has 8 years of investment
experience.
In selecting investments for the Fund, Turner seeks to invest primarily
(and, under normal conditions, at least 65% of the Fund's total assets) in a
diversified portfolio of common stocks of issuers with market capitalizations of
not more than $3 billion that Turner believes to have strong earnings growth
potential. Under normal market conditions, the Fund will maintain a weighted
average market capitalization of less than $2 billion. The Fund seeks to
purchase securities that are well diversified across economic sectors and to
maintain sector concentrations that approximate the economic sector weightings
comprising the Russell 2000 Growth Index (or such other appropriate index
selected by Turner). The Fund may invest up to 10% of its total assets in ADRs.
Caterpillar Investment Management Ltd. will pay Turner a fee based on
the Fund assets managed or advised by Turner (the "Fund Assets") together with
any other assets managed or advised by Turner relating to Caterpillar Inc. or
any of its affiliates. (The Fund Assets together with such other assets are
collectively referred to as the "Combined Assets.") It is expected that the
subadvisory fee will be calculated based on the average quarterly net asset
value, determined as of the last business day of each month in the calendar
quarter, of the
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Combined Assets at the annual rate of 0.75% of Combined Assets. This amount is
then allocated based upon the ratio of Fund Assets to Combined Assets.
American Depositary Receipts, or "ADRs," are securities issued by a
U.S. depositary (usually a bank) and represent a specified quantity of
underlying non-U.S. securities on deposit with a custodian bank as collateral. A
foreign issuer of the security underlying an ADR is generally not subject to the
same reporting requirements in the United States as a domestic issuer.
Accordingly, the information available to a U.S. investor will be limited to the
information the foreign issuer is required to disclose in its own country and
the market value of an ADR may not reflect undisclosed material information
concerning the issuer or the underlying security. ADRs may also be subject to
exchange rate risks if the underlying securities are denominated in foreign
currency. For purposes of its investment policies, the Fund will treat ADRs and
similar instruments as equivalent to investment in the underlying securities.
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2. Amendment to Small Cap Fund Management Contract
Subject to shareholder approval, it is expected that effective on or
about January 1, 2000, the management fee paid by the Fund under the management
contract dated October 26, 1995 (the "Management Contract," and as amended, the
"Amended Agreement") to Caterpillar Investment Management Ltd. will be
increased.
COMPARATIVE EXPENSE INFORMATION. The following table summarizes the
current and pro forma expenses borne by the Fund assuming each of the Management
Contract and Amended Agreement had been in effect during the fiscal year ended
June 30, 1999.
<TABLE>
<CAPTION>
Management Fees Other Expenses Total Fund
Operating Expenses
<S> <C> <C> <C>
Management Contract .75% .17% .92%
Amended Agreement 1.00% .17% 1.17%
</TABLE>
The example below is intended to help you compare the cost of investing
in the Fund under the Management Contract and the Amended Agreement. This
example assumes that you invest $10,000 in the Fund for the time period
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Management Contract $94 $293 $509 $1,131
Amended Agreement $119 $372 $644 $1,420
</TABLE>
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