<PAGE>
MARQUIS FUNDS (R)
Investment Adviser:
FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS
TREASURY SECURITIES MONEY MARKET FUND
MARQUIS FUNDS (R) (the "Trust") is a mutual fund that offers a convenient and
economical means of investing in one or more professionally managed portfolios
of securities. This Prospectus offers the Trust Class shares of the TREASURY
SECURITIES MONEY MARKET FUND (the "Fund"), a separate series of the Trust.
This Prospectus sets forth concisely the information about the Fund and the
Trust that a prospective investor should know before investing in the Fund.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated January 29, 1996 has
been filed with the Securities and Exchange Commission (the "SEC") and is
available without charge by calling 1-800-471-1144. The Statement of
Additional Information is incorporated into this Prospectus by reference.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, INCLUDING FIRST NATIONAL BANK OF COMMERCE IN NEW
ORLEANS OR ANY OF ITS AFFILIATES OR CORRESPONDENTS, INCLUDING FIRST COMMERCE
CORPORATION. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
JANUARY 29, 1996
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2
SUMMARY
MARQUIS FUNDS (R) (the "Trust") is an open-end management investment company
providing a convenient way to invest in professionally managed portfolios of
securities. This Summary provides basic information about the Trust Class
shares of the Trust's Treasury Securities Money Market Fund (the "Fund"). The
Fund is a separate series of the Trust.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUND? The Fund seeks to
preserve principal value and maintain a high degree of liquidity while
providing current income by investing exclusively in obligations issued by the
U.S. Treasury and in repurchase agreements involving such obligations. There
can be no assurance that the Fund will achieve its investment objective.
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUND? The investment
policies of the Fund entail certain risks and considerations of which an
investor should be aware. While the Fund seeks to maintain a net asset value of
$1.00 per share, there can be no assurance that the Fund will be able to do
this on a continuous basis. There may be other risks involved in the ownership
of money market mutual funds.
ARE MY INVESTMENTS INSURED? Any guaranty by the U.S. Government, its agencies
or instrumentalities of the securities in which the Fund invests guarantees
only the payment of principal and interest on the guaranteed security and does
not guarantee the yield or value of that security or the yield or value of
shares of the Fund. The Trust's shares are not federally insured by the FDIC or
any other government agency.
For more information about the Fund, see "Investment Objective and Policies"
and "Description of Permitted Investments and Risk Factors."
HOW DO I PURCHASE SHARES? Trust Class shares of the Fund are offered at net
asset value per share.
WHO IS THE ADVISER? The Trust Group of First National Bank of Commerce in New
Orleans serves as the investment adviser of the Fund. See "Expense Summary" and
"The Adviser".
WHO IS THE ADMINISTRATOR? SEI Financial Management Corporation serves as the
administrator of the Trust. See "Expense Summary" and "The Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as shareholder servicing
agent, transfer agent and dividend disbursing agent for the Trust. See "The
Shareholder Servicing Agent and Transfer Agent."
WHO IS THE DISTRIBUTOR? SEI Financial Services Company serves as distributor of
the Trust's shares. See "The Distributor."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is distributed in the form of monthly
dividends. Any capital gain is distributed at least annually. Dividends are
paid in additional shares unless the shareholder elects to take payment in cash
on the first Business Day of each month. See "Dividends."
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3
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES TREASURY SECURITIES MONEY MARKET FUND
TRUST CLASS
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) None
Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Wire Redemption Fee None
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES TREASURY SECURITIES MONEY MARKET FUND
(as a percentage of average net assets) TRUST CLASS
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Advisory Fees (after fee waivers) (1) .23%
Administration Fees .20%
12b-1 Fees .00%
Other Expenses .07%
- --------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers) (2) .50%
================================================================================
</TABLE>
(1)The Adviser has voluntarily agreed to waive its advisory fee to the extent
necessary to keep "Total Operating Expenses" for the Trust Class shares of
the Fund from exceeding .50%. The Adviser reserves the right to terminate
its waiver at any time in its sole discretion. Absent such waiver, the
advisory fee for the Fund would be .30%.
(2)Absent the Adviser's voluntary fee waiver, Total Operating Expenses for
Trust Class shares of the Fund would be .57%.
EXAMPLE
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- --------------------------------------------------------------------------------
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment in Trust Class shares
of the Fund assuming: (1) 5% annual return and
(2) redemption at the end of each time period: $ 5 $16 $28 $63
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by
investors in Trust Class shares of the Fund. The information set forth in the
foregoing table and example relates only to Trust Class shares. The Trust also
offers Retail Class shares and Cash Sweep Class shares of the Fund, which are
subject to the same expenses plus certain additional distribution costs.
Shareholders purchasing shares through a financial institution may be charged
additional account fees by that institution. Additional information may be
found under "The Adviser," "The Administrator," and "The Distributor."
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4
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout the
year, insofar as they relate to the fiscal year ended September 30, 1995, have
been audited by Arthur Andersen LLP, independent public accountants, whose
report thereon was unqualified. This information should be read in conjunction
with the Trust's financial statements and notes thereto which are included in
the Statement of Additional Information under the heading "Financial
Information." Additional performance information is set forth in the Trust's
1995 Annual Report to Shareholders and is available upon request and without
charge by calling 1-800-471-1144.
For a Trust Class Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
REALIZED RATIO OF RATIO OF
AND EXPENSES NET INCOME
NET ASSET UNREALIZED DISTRIBUTIONS NET ASSET NET ASSETS RATIO OF RATIO OF TO AVERAGE TO AVERAGE
VALUE NET GAINS OR FROM NET VALUE END OF EXPENSES NET INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT END OF TOTAL PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INVESTMENTS INCOME PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ----------- ------------- --------- ------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TREASURY SECURITIES MONEY MARKET FUND TRUST CLASS
1995 $1.00 $0.05 -- $(0.05) $1.00 5.33 % $521,270 0.50% 5.23% 0.57% 5.16%
1994 1.00 0.03 -- (0.03) 1.00 3.22 403,778 0.50 3.15 0.60 3.05
<CAPTION>
PORTFOLIO
TURNOVER
RATE
---------
<S> <C>
TREASURY SECURITIES MONEY MARKET FUND TRUST CLASS
1995 --
1994 --
</TABLE>
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5
THE TRUST
MARQUIS FUNDS (R) (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in its Treasury Securities
Money Market Fund (the "Fund"), a diversified mutual fund, through three
separate classes: Trust Class, Retail Class and Cash Sweep Class, which provide
for variations in distribution costs, voting rights and dividends. Except for
these differences between classes, each share of the Fund represents an
undivided, proportionate interest in the Fund. This Prospectus relates to the
Trust Class shares of the Fund. Information regarding the Retail Class and Cash
Sweep Class shares of the Fund and the Trust's other funds is contained in
separate prospectuses that may be obtained by calling 1-800-471-1144.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives are to preserve principal value and maintain a
high degree of liquidity while providing current income. There can be no
assurance that the Fund will be able to achieve its investment objectives.
The Fund complies with regulations of the Securities and Exchange Commission
applicable to money market funds. These regulations impose certain quality,
maturity and diversification restraints on investments by the Fund. Under these
regulations, the Fund will maintain a dollar-weighted average portfolio
maturity of 90 days or less, and will acquire only obligations maturing in 397
days or less. The Fund will attempt to maintain a net asset value of $1.00 per
share, although there can be no assurance that it will be able to do so.
The Fund invests exclusively in obligations issued by the U.S. Treasury
("Treasury Obligations") and backed by its full faith and credit and in
repurchase agreements involving such obligations. The Fund may purchase
Treasury Obligations on a when-issued or delayed delivery basis.
For additional information regarding permitted investments, investment
practices and risks, see "Description of Permitted Investments and Risk
Factors."
INVESTMENT LIMITATIONS
The following investment limitations are fundamental policies of the Fund.
Fundamental policies cannot be changed with respect to the Fund without the
consent of the holders of a majority of the Fund's outstanding shares.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if, as a result, more than 5% of the total assets of
the Fund would be invested in the securities of such issuer.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to (i) investments in the obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities, and
repurchase agreements involving such securities
3. Make loans except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objectives and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information. The Board of
Trustees has adopted a policy that the Fund will not engage in securities
lending.
Additional investment limitations are set forth in the Statement of Additional
Information.
PURCHASE OF SHARES
Investors may purchase Trust Class shares of the Fund directly from the Trust's
shareholder servicing and transfer agent, DST Systems, Inc. ("DST"), by wire.
Trust Class shares of the Fund are sold on a continuous basis.
To open an account, an investor must first return a completed and signed
Account Application to DST, 210 West 10th Street, Kansas City, MO 64105.
Account Application forms are available by calling 1-800-471-1144.
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6
WIRE
A shareholder whose Account Application has been received by DST may purchase
Trust Class shares of the Fund by wiring Federal funds. The shareholder must
wire funds to DST and the wire instructions must include the shareholder's
account number. The shareholder must call 1-800-471-1144 before wiring any
funds. An order to purchase shares by Federal funds wire will be deemed to have
been received by the Fund on the Business Day of the wire, provided that the
shareholder notifies DST prior to 12:00 noon, Central time. If DST does not
receive notice by 12:00 noon, Central time, on the Business Day of the wire,
the order will be executed on the next Business Day.
GENERAL INFORMATION REGARDING PURCHASES
Purchases of Trust Class shares of the Fund may be made on any day the New York
Stock Exchange and Federal Reserve wire system are open for business ("Business
Days"). The minimum initial investment in Trust Class shares of the Fund is
$1,000,000; however, the Trust's distributor, SEI Financial Services Company
(the "Distributor"), may waive the minimum investment at its discretion.
A purchase order for shares will be effective, and eligible to receive
dividends declared that same day, on the Business Day received by DST, if DST
receives the order and payment before 12:00 noon, Central time. A purchase
order received (with payment) after this time will be effective on the next
Business Day. The purchase price of Trust Class shares of the Fund is the net
asset value per share next computed after the order is received and accepted by
the Trust. The Fund expects to maintain its net asset value per share constant
at $1.00. The net asset value per share of the Fund is determined by dividing
the total value of its investments and other assets, less any liabilities, by
its total outstanding shares. The Fund's net asset value per share is
calculated as of 3:00 p.m., Central time, each Business Day and is based on the
amortized cost method described in the Statement of Additional Information.
The Trust reserves the right to reject a purchase order for shares when the
Distributor determines that it is not in the best interest of the Trust and/or
its shareholders to accept such order.
Shareholders who desire to transfer the registration of their shares should
call 1-800-471-1144.
Certain financial institutions through which shares may be purchased may be
required under state law to register as broker dealers.
EXCHANGES
Shares of the Fund may be exchanged for Class A shares of other funds of the
Trust. Investors exchanging shares of the Fund acquired for cash for Class A
shares of another fund of the Trust will be subject to the applicable sales
charge. Shares of the Fund acquired through an exchange of Class A shares of
another fund of the Trust may be exchanged back, with no sales charge, into
Class A shares of any other fund of the Trust.
An investor must have received a current prospectus of the Trust's other fund
into which the exchange is to be made (the "new" fund) before the exchange will
be effected. Exchanges will be made only after instructions in writing or by
telephone (an "Exchange Request ") are received by DST. If an Exchange Request
in good order is received by DST by 3:00 p.m. Central time, on any Business
Day, the exchange will occur on that day. The exchange privilege may be
exercised only in those states where the class or shares of the new fund may
legally be sold.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
Shareholders may redeem their shares without charge on any Business Day. Shares
may be redeemed by mail or by telephone. Shares of the Funds cannot be redeemed
by Federal Reserve wire on Federal holidays restricting wire transfers.
BY MAIL
A written request for redemption must be received by DST in order to constitute
a valid redemption request.
<PAGE>
7
If the redemption request exceeds $5,000 or if the request directs the proceeds
to be sent or wired to a shareholder or an address different from that on
record, DST may require that the signature on the written redemption request be
guaranteed. Signature guarantees can be obtained from banks, brokers, dealers,
credit unions, securities exchanges or associations, clearing agencies or
savings associations. Notaries public cannot guarantee signatures.
BY TELEPHONE
Shares may be redeemed by telephone if the shareholder has elected that option
on the Account Application. Under most circumstances, payments will be
transmitted on the next Business Day following receipt of a valid request for
redemption. The shareholder may have the proceeds mailed to his or her address
of record or wired to a commercial bank account previously designated on the
Account Application. Shareholders may request a wire redemption for redemptions
in excess of $500 by calling 1-800-471-1144.
Neither the Trust nor DST will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon telephone instructions that
it reasonably believes to be genuine. The Trust and DST will each employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, including requiring a form of personal identification prior to
acting upon instructions received by telephone and recording telephone
instructions.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. A redemption order
received before 11:00 a.m., Central time, on any Business Day will be effective
that day and will receive that day's redemption price. Net asset value per
share is determined as of 3:00 p.m., Central time, on each Business Day.
Redeemed shares are not entitled to dividends declared on the day the
redemption order is effective.
Payment to shareholders for shares redeemed will be made within seven days
after DST receives the valid redemption request.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
THE ADVISER
First National Bank of Commerce in New Orleans (the "Adviser"), 210 Baronne
Street, New Orleans, Louisiana 70112, serves the Fund's investment adviser
under an advisory agreement (the "Advisory Agreement") with the Trust. The
Adviser, through its Trust Group, makes the investment decisions for the assets
of the Fund and continuously reviews, supervises and administers the investment
programs of the Fund, subject to the supervision of, and policies established
by, the Trustees of the Trust.
As of September 30, 1995, the Adviser's Trust Group managed approximately $2.0
billion in discretionary investment management accounts for individuals,
corporations and institutions with widely varying investment needs and
objectives. The Trust Group has managed client accounts since 1933 and has
managed money market portfolios for the past seven years. The Adviser is a
wholly-owned subsidiary of First Commerce Corporation.
The Glass-Steagall Act restricts the securities activities of national banks
such as First National Bank of Commerce in New Orleans but the Comptroller of
the Currency permits national banks to provide investment advisory and other
services to mutual funds. Should the Comptroller's position be challenged
successfully in court or reversed by legislation, the Trust might have to make
other investment advisory arrangements.
The Trust's shares are not sponsored, endorsed or guaranteed by, and do not
constitute obligations or deposits of, the Adviser or First Commerce
Corporation and are not insured by the Federal Deposit Insurance Corporation or
issued or guaranteed by the U.S. Government or any of its agencies.
<PAGE>
8
The Adviser is entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of .30% of the Fund's average daily net assets. The Adviser
may voluntarily waive a portion of its fee in order to limit the total
operating expenses of Trust Class shares of the Fund. The Adviser reserves the
right, in its sole discretion, to terminate this voluntary fee waiver at any
time. For the fiscal year ended September 30, 1995, the Adviser was paid an
advisory fee of .23% of the Fund's average net assets.
Gerald S. Dugal is an Assistant Vice President and the Investment Manager for
the Marquis Treasury Securities Money Market Fund, Institutional Money Market
Fund, and the Tax-Exempt Money Market Fund. Mr. Dugal has 10 years of
experience in investment trading, brokerage and research. He is licensed as a
series 7 securities principal and a series 53 municipal securities principal.
THE ADMINISTRATOR
SEI Financial Management Corporation (the "Administrator"), 680 East Swedesford
Road, Wayne, PA 19087, a wholly-owned subsidiary of SEI Corporation ("SEI"),
and the Trust are parties to an Administration Agreement (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
provides the Trust with administrative services, other than investment advisory
services, including all regulatory reporting, necessary office space,
equipment, personnel, and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the Fund's average daily net assets.
THE SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
DST Systems, Inc., 210 West 10th Street, Kansas City, MO 64105, serves as the
dividend disbursing agent and shareholder servicing agent for the Trust. DST
also acts as transfer agent for the Trust under a Transfer Agent Agreement.
THE DISTRIBUTOR
The Trust Class shares of the Funds are offered without distribution fees.
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, PA 19087, a wholly-owned subsidiary of SEI, and the Trust are parties to
a distribution agreement ("Distribution Agreement").
The Fund may execute brokerage or other agency transactions through an
affiliate of the Adviser or through the Distributor, for which the affiliate or
the Distributor may receive "usual and customary" compensation. For further
information, see the Statement of Additional Information.
PERFORMANCE
From time to time, the Trust may advertise the Fund's "current yield" and
"effective compound yield." These figures will fluctuate, as they are based on
historical earnings; they are not intended to indicate future performance and
the Trust makes no representation concerning actual future yields. The "current
yield" of the Fund refers to the income generated by an investment over a
seven-day period which is then "annualized". That is, the amount of income
generated by an investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment is assumed to be reinvested. The "effective yield" will
be slightly higher than the "current yield" because of the compounding effect
of this assumed reinvestment.
In addition, the Trust may from time to time compare performance of the Fund to
that of other mutual funds tracked by mutual fund rating services, financial
and business publications and periodicals, broad groups of comparable mutual
funds or unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs or
to other investment alternatives.
The performance of Trust Class shares will be higher than that of Cash Sweep
Class and Retail Class shares because of the distribution fees charged to Cash
Sweep Class and Retail Class shares.
<PAGE>
9
TAXES
The following summary of federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial, or
administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of the Fund or its shareholders. In
addition, state and local tax consequences of an investment in the Fund may
differ from the federal income tax consequences described below. Accordingly,
shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state, and local income taxes. Additional information
concerning taxes is set forth in the Statement of Additional Information.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify for the
special tax treatment afforded regulated investment companies as defined under
Subchapter M of the Internal Revenue Code of 1986, as amended, so as to be
relieved of federal income tax net investment company taxable income and net
capital gain (the excess of net long-term capital gains over net short-term
capital losses) distributed to shareholders.
TAX STATUS OF DISTRIBUTIONS
The Fund will distribute all of its net investment income (including net short-
term capital gain) to shareholders. Dividends from net investment company
taxable income are taxable to shareholders as ordinary income (whether received
in cash or in additional shares) to the extent of the Fund's earnings and
profits. Any net realized capital gain will be distributed at least annually
and will be taxed to shareholders as long-term capital gain, regardless of how
long the shareholders have held their shares and regardless of whether the
distributions are received in cash or additional shares. Dividends and
distributions of capital gains paid by the Fund do not qualify for the
dividends received deduction for corporate shareholders. The Fund will provide
annual reports to shareholders of the federal income tax status of all
distributions.
Dividends declared by the Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of the year declared, if paid by the Fund at any time during the
following January.
With respect to investments in U.S. Treasury STRIPS, which are sold with
original issue discount and do not make periodic cash interest payments, the
Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
all of its net investment income to its shareholders, the Fund may have to sell
portfolio securities to distribute such imputed income, which may occur at a
time when the Adviser would not have chosen to sell such securities and which
may result in a taxable gain or loss.
Investment income received directly by the Fund on Treasury Obligations is
exempt from income tax at the state level and may be exempt, depending on the
state, when received by a shareholder as income dividends from the Fund
provided certain state-specific conditions are satisfied. Interest received on
repurchase agreements collateralized by Treasury Obligations normally is not
exempt from state taxation. The Fund will inform shareholders annually of the
percentage of income and distributions derived from Treasury Obligations.
Shareholders should consult their tax advisers to determine whether any portion
of the income dividends received from the Fund is considered tax exempt in
their particular states.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax applicable to regulated
investment companies.
<PAGE>
10
Each sale, exchange or redemption of a Fund's shares generally is a taxable
transaction to the shareholder.
GENERAL INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under a Declaration
of Trust dated June 29, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares or "funds" and different classes of each fund.
In addition to the Fund, the Trust offers the following funds: Government
Securities Fund, Louisiana Tax-Free Income Fund, Balanced Fund, Growth Equity
Fund, Institutional Money Market Fund, Tax Exempt Money Market Fund and the
Value Equity Fund. All consideration received by the Trust for shares of any
fund and all assets of such fund belong to that fund and would be subject to
liabilities related thereto. The Trust reserves the right to create and issue
shares of additional funds.
The Trust pays its operating expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy
solicitation material and reports to shareholders, costs of custodial services
and registering the shares under Federal and state securities laws, pricing and
insurance expenses, and pays additional expenses including litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under
the laws of the Commonwealth of Massachusetts. The Trustees have approved
contracts under which, as described above, certain companies provide essential
management, administrative and shareholder services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to that fund or class. As
a Massachusetts business trust, the Trust is not required to hold annual
meetings of shareholders but meetings of shareholders will be held from time to
time to seek approval for certain changes in the operation of the Trust and for
the election of Trustees under certain circumstances. In addition, a Trustee
may be removed by the remaining Trustees or by shareholders at a special
meeting called upon written request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a meeting is requested,
the Trust will provide appropriate assistance and information to the
shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes periodic reports to
shareholders of record, and, as necessary, proxy statements for shareholder
meetings.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to DST Systems, Inc., P.O. Box 419240,
Kansas City, MO 64141-6240 or by calling 1-800-471-1144.
DIVIDENDS
The net investment income (not including capital gains) of the Fund is
determined and declared on each Business Day as a dividend for shareholders of
record as of the close of business on that day. Shareholders who own shares at
the close of business on the record date will be entitled to receive the
dividend. Currently, capital gains of the Fund, if any, will be distributed at
least annually. Dividends are paid by the Fund in Federal funds or in
additional shares at the discretion of the shareholder on the first business
day of each month.
The amount of dividends payable on Trust Class shares will be more than the
dividends payable on Retail Class and Cash Sweep shares because of the
distribution fees paid by Retail Class and Cash Sweep shares.
<PAGE>
11
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
CUSTODIAN
First National Bank of Commerce in New Orleans acts as Custodian of the Trust.
The Custodian holds cash, securities and other assets of the Trust as required
by the Investment Company Act of 1940, as amended (the "1940 Act").
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments and investment
practices for the Fund and associated risk factors. Further discussion is
contained in the Statement of Additional Information.
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury, and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS"). The Fund does not expect to trade STRIPS
actively.
Any guaranty by the U.S. Treasury of the securities in which the Fund invests
guarantees only the payment of principal and interest on the guaranteed
security and does not guarantee the yield or value of that security or the
yield or value of shares of the Fund.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which the Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. Repurchase
agreements must be fully collateralized at all times. The Fund bears a risk of
loss in the event the other party defaults on its obligations and the Fund is
delayed or prevented from its right to dispose of the collateral. The Fund will
enter into repurchase agreements only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
established guidelines. Repurchase agreements are considered loans under the
1940 Act.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES--When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
To the extent required by the 1940 Act, the Fund will maintain with the
custodian a separate account with liquid high grade debt securities or cash in
an amount at least equal to these commitments. The interest rate realized on
these securities is fixed as of the purchase date and no interest accrues to
the Fund before settlement. These securities are subject to market fluctuation
due to changes in market interest rates and it is possible that the market
value at the time of settlement could be higher or lower than the purchase
price if the general level of interest rates has changed. Although a Fund
generally purchases securities on a when-issued or forward commitment basis
with the intention of actually acquiring securities for its portfolio, a Fund
may dispose of a when-issued security or forward commitment prior to settlement
if it deems appropriate.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Summary..................................................................... 2
Expense Summary............................................................. 3
Financial Highlights........................................................ 4
The Trust................................................................... 5
Investment Objectives and Policies.......................................... 5
Investment Limitations...................................................... 5
Purchase of Shares.......................................................... 5
Exchanges................................................................... 6
Redemption of Shares........................................................ 6
The Adviser................................................................. 7
The Administrator........................................................... 8
The Shareholder Servicing Agent and Transfer Agent.......................... 8
The Distributor............................................................. 8
Performance................................................................. 8
Taxes....................................................................... 9
General Information......................................................... 10
Description of Permitted Investments and Risk Factors....................... 11
</TABLE>
<PAGE>
MARQUIS FUNDS (R)
Investment Adviser:
FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS
TREASURY SECURITIES MONEY MARKET FUND
MARQUIS FUNDS (R) (the "Trust") is a mutual fund that offers a convenient and
economical means of investing in one or more professionally managed portfolios
of securities. This Prospectus offers the Retail Class shares of the TREASURY
SECURITIES MONEY MARKET FUND (the "Fund"), a separate series of the Trust.
This Prospectus sets forth concisely the information about the Fund and the
Trust that a prospective investor should know before investing in the Fund.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated January 29, 1996 has
been filed with the Securities and Exchange Commission (the "SEC") and is
available without charge by calling 1-800-471-1144. The Statement of
Additional Information is incorporated into this Prospectus by reference.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, INCLUDING FIRST NATIONAL BANK OF COMMERCE IN NEW
ORLEANS OR ANY OF ITS AFFILIATES OR CORRESPONDENTS, INCLUDING FIRST COMMERCE
CORPORATION. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
JANUARY 29, 1996
<PAGE>
2
SUMMARY
MARQUIS FUNDS (R) (the "Trust") is an open-end management investment company
providing a convenient way to invest in professionally managed portfolios of
securities. This Summary provides basic information about the Retail Class
shares of the Trust's Treasury Securities Money Market Fund (the "Fund"). The
Fund is a separate series of the Trust.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUND? The Fund seeks to
preserve principal value and maintain a high degree of liquidity while
providing current income by investing exclusively in obligations issued by the
U.S. Treasury and in repurchase agreements involving such obligations. There
can be no assurance that the Fund will achieve its investment objective.
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUND? The investment
policies of the Fund entail certain risks and considerations of which an
investor should be aware. While the Fund seeks to maintain a net asset value
of $1.00 per share, there can be no assurance that the Fund will be able to do
this on a continuous basis. There may be other risks involved in the ownership
of money market mutual funds.
ARE MY INVESTMENTS INSURED? Any guaranty by the U.S. Government, its agencies
or instrumentalities of the securities in which the Fund invests guarantees
only the payment of principal and interest on the guaranteed security and does
not guarantee the yield or value of that security or the yield or value of
shares of the Fund. The Trust's shares are not federally insured by the FDIC
or any other government agency.
For more information about the Fund, see "Investment Objective and Policies"
and "Description of Permitted Investments and Risk Factors."
HOW DO I PURCHASE SHARES? Retail Class shares of the Fund are offered at net
asset value per share. Retail Class shares are subject to annual distribution
fees of .25% of the average daily net assets.
WHO IS THE ADVISER? The Trust Group of First National Bank of Commerce in New
Orleans serves as the investment adviser of the Fund. See "Expense Summary"
and "The Adviser."
WHO IS THE ADMINISTRATOR? SEI Financial Management Corporation serves as the
administrator of the Trust. See "Expense Summary" and "The Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as shareholder servicing
agent, transfer agent and dividend disbursing agent for the Trust. See "The
Shareholder Servicing Agent and Transfer Agent."
WHO IS THE DISTRIBUTOR? SEI Financial Services Company serves as distributor
of the Trust's shares. See "The Distributor."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is distributed in the form of monthly
dividends. Any capital gain is distributed at least annually. Dividends are
paid additional shares unless the shareholder elects to take payment in cash
on the first Business Day of each month. See "Dividends."
<PAGE>
3
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES TREASURY SECURITIES MONEY MARKET FUND
RETAIL CLASS
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) None
Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Wire Redemption Fee $25
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES TREASURY SECURITIES MONEY MARKET FUND
(as a percentage of average net assets) RETAIL CLASS
<TABLE>
- ----------------------------------------------------------
<S> <C>
Advisory Fees (after fee waivers) (1) .23%
Administration Fees .20%
12b-1 Fees .20%
Other Expenses .07%
- ----------------------------------------------------------
Total Operating Expenses (after fee waivers) (2) (3) .70%
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
(1) The Adviser and the Distributor have voluntarily agreed to waive their
advisory and 12b-1 fees to the extent necessary to keep "Total Operating
Expenses" for the Retail Class shares of the Fund from exceeding .70%. The
Adviser and the Distributor reserve the right to terminate their waiver at
any time in their sole discretion. Absent such waiver, the advisory fee
for the Fund would be .30%, and the 12b-1 fee for the Retail Class shares
of the Fund would be .25%.
(2) Absent the Adviser's and the Distributor's voluntary fee waivers, Total
Operating Expenses for Retail Class shares of the Fund would be .82%.
(3) Total Operating Expenses have been restated to reflect current fees.
EXAMPLE
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment in Retail Class shares of
the Fund assuming (1) 5% annual return and (2)
redemption at the end of each time period: $7 $22 $39 $87
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by
investors in Retail Class shares of the Fund. The information set forth in the
foregoing table and example relates only to Retail Class shares. The Trust
also offers Trust Class shares and Cash Sweep Class shares of the Fund which
are subject to the same expenses except that Trust Class shares are not
charged distribution expenses and Cash Sweep Class shares are charged higher
distribution expenses than Retail Class shares. Shareholders purchasing shares
through a financial institution may be charged additional account fees by that
institution. Additional information may be found under "The Adviser," "The
Administrator," and "The Distributor."
<PAGE>
4
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout the
year, insofar as they relate to the fiscal year ended September 30, 1995, have
been audited by Arthur Andersen LLP, independent public accountants, whose
report thereon was unqualified. This information should be read in conjunction
with the Trust's financial statements and notes thereto which are included in
the Statement of Additional Information under the heading "Financial
Information." Additional performance information is set forth in the Trust's
1995 Annual Report to Shareholders and is available upon request and without
charge by calling 1-800-471-1144.
For a Retail Class Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
REALIZED RATIO OF RATIO OF
AND EXPENSES NET INCOME
NET ASSET UNREALIZED DISTRIBUTIONS NET ASSET NET ASSETS RATIO OF RATIO OF TO AVERAGE TO AVERAGE
VALUE NET GAINS OR FROM NET VALUE END OF EXPENSES NET INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT END OF TOTAL PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INVESTMENTS INCOME PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ----------- ------------- --------- ------ ---------- ---------- ---------- ---------- ----------
TREASURY SECURITIES MONEY MARKET FUND RETAIL CLASS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $1.00 $0.05 -- $(0.05) $1.00 5.16% $282,747 0.68% 5.12% 0.82% 4.98%
1994(1) $1.00 0.03 -- (0.03) 1.00 3.15* 86,848 0.59* 3.27* 0.83* 3.03*
<CAPTION>
PORTFOLIO
TURNOVER
RATE
---------
TREASURY SECURITIES MONEY MARKET FUND RETAIL CLASS
<S> <C>
1995 --
1994(1) --
</TABLE>
- --------
* Annualized.
(1) Commenced operations on October 19, 1993.
<PAGE>
5
THE TRUST
MARQUIS FUNDS(R) (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in its Treasury Securities
Money Market Fund (the "Fund"), a diversified mutual fund, through three
separate classes: Trust Class, Retail Class and Cash Sweep Class which provide
for variations in distribution costs, voting rights and dividends. Except for
these differences between classes, each share of the Fund represents an
undivided, proportionate interest in the Fund. This Prospectus relates to the
Retail Class shares of the Fund. Information regarding the Trust Class and Cash
Sweep Class shares of the Fund and the Trust's other funds is contained in
separate prospectuses that may be obtained by calling 1-800-471-1144.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives are to preserve principal value and maintain a
high degree of liquidity while providing current income. There can be no
assurance that the Fund will be able to achieve its investment objectives.
The Fund complies with regulations of the Securities and Exchange Commission
applicable to money market funds. These regulations impose certain quality,
maturity and diversification restraints on investments by a Fund. Under these
regulations, the Fund will maintain a dollar-weighted average portfolio
maturity of 90 days or less, and will acquire only obligations maturing in 397
days or less. The Fund will attempt to maintain a net asset value of $1.00 per
share, although there can be no assurance that it will be able to do so.
The Fund invests exclusively in obligations issued by the U.S. Treasury
("Treasury Obligations") and backed by its full faith and credit and in
repurchase agreements involving such obligations. The Fund may purchase
Treasury Obligations on a when-issued or delayed delivery basis.
For additional information regarding permitted investments, investment
practices and risks, see "Description of Permitted Investments and Risk
Factors."
INVESTMENT LIMITATIONS
The following investment limitations are fundamental policies of the Fund.
Fundamental policies cannot be changed with respect to the Fund without the
consent of the holders of a majority of the Fund's outstanding shares.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if, as a result, more than 5% of the total assets of
the Fund would be invested in the securities of such issuer.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to (i) investments in the obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities, and
repurchase agreements involving such securities.
3. Make loans, except that the Fund may (i) purchase or hold debt instruments
in accordance with its investment objectives and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information. The Board of
Trustees has adopted a policy that the Fund will not engage in securities
lending.
Additional investment limitations are set forth in the Statement of Additional
Information.
PURCHASE OF SHARES
Investors may purchase Retail Class shares of the Fund directly from the
Trust's shareholder servicing and transfer agent DST Systems, Inc. ("DST") by
mail, by wire, or through an automatic investment plan. Shares may also be
purchased through broker-dealers, including Marquis Investments, Inc., that
have established a dealer agreement with SEI Financial Services Company, the
Trust's distributor (the "Distributor"). Retail Class shares of the Fund are
sold on a continuous basis.
<PAGE>
6
BY MAIL
You may purchase Retail Class shares of the Fund by completing and signing an
Account Application form and mailing it, along with a check (or other
negotiable bank instrument or money order) payable to "Marquis Funds (Treasury
Securities Money Market Fund)," to DST at 210 West 10th Street, Kansas City, MO
64105. You may purchase additional shares at any time by mailing payment to
DST. Orders placed by mail will be executed on receipt of your payment. If your
check does not clear, your purchase will be cancelled and you could be liable
for any losses or fees incurred.
You may obtain Account Application forms by calling 1-800-471-1144.
BY WIRE
You may purchase Retail Class shares of the Fund by wiring Federal funds,
provided that your Account Application has been previously received. You must
wire funds to DST and the wire instructions must include your account number.
You must call 1-800-471-1144 before wiring any funds. An order to purchase
shares by Federal funds wire will be deemed to have been received by the Fund
on the Business Day (defined below) of the wire, provided that the shareholder
notifies DST prior to 12:00 noon, Central time. If DST does not receive notice
by 12:00 noon, Central time, on the Business Day of the wire, the order will be
executed on the next Business Day.
AUTOMATIC INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Fund through
automatic deductions by Automated Clearing House ("ACH") from a checking
account by completing an AIP Application Form. The minimum pre-authorized
investment amount is $50 per month. An AIP Application Form may be obtained by
calling 1-800-471-1144. The AIP is available only for additional investments
for an existing account.
GENERAL INFORMATION REGARDING PURCHASES
You may purchase Retail Class shares of the Fund on any day the New York Stock
Exchange and the Federal Reserve wire system are open for business ("Business
Days").
The minimum initial investment in Retail Class shares of the Fund is $2,500
($500 minimum for individual retirement accounts and employees of First
National Bank of Commerce in New Orleans, the Fund's investment adviser (the
"Adviser") or its affiliates); however, the Distributor may waive the minimum
investment at its discretion. Subsequent purchases of shares must be at least
$100, except for purchases through the AIP and payroll deductions, which must
be at least $50.
A purchase order for shares will be effective, and eligible to receive
dividends declared that same day, on the Business Day the order is received by
DST if DST receives the order and payment before 12:00 noon, Central time. A
purchase order received (with payment) after this time will be effective on the
next Business Day. The purchase price of Retail Class shares of the Fund is the
net asset value per share next computed after the order is received and
accepted by the Trust. The Fund expects to maintain its net asset value per
share constant at $1.00. The net asset value per share of the Fund is
determined by dividing the total value of its investments and other assets,
less any liabilities, by its total outstanding shares. The Fund's net asset
value per share is calculated as of 3:00 p.m., Central time, each Business Day
and is based on the amortized cost method described in the Statement of
Additional Information.
The Trust reserves the right to reject a purchase order for shares when the
Distributor determines that it is not in the best interest of the Trust and/or
its shareholders to accept such order.
Shareholders of record who desire to transfer registration of their shares
should call 1-800-471-1144.
PURCHASES THROUGH FINANCIAL INSTITUTIONS
Shares may also be purchased through financial institutions, including the
Adviser, that provide distribution assistance or shareholder services to the
Trust. Shares purchased by persons ("Customers") through financial institutions
may be held of record by the financial institution. Financial institutions may
impose an earlier cut-off time for receipt of purchase orders directed through
them to allow for processing and transmittal of these
<PAGE>
7
orders to the Distributor for effectiveness the same day. Customers should
contact their financial institution for information as to that institution's
procedures for transmitting purchase, exchange or redemption orders to the
Trust.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change. Certain financial institutions may be
required under state law to register as broker/dealers.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
EXCHANGES
You may exchange your shares for Class A or Class B shares of other funds of
the Trust. You will be subject to the applicable sales charge on exchange
unless you qualify for a sales load waiver.
You must have received a current prospectus of the Trust's other fund into
which you wish to move your investment (the "new" fund) before the exchange
will be effected. Exchanges will be made only after instructions in writing or
by telephone (an "Exchange Request") are received by DST. If an Exchange
Request in good order is received by DST by 3:00 p.m. Central time, on any
Business Day, the exchange will occur on that day. The exchange privilege may
be exercised only in those states where the class or shares of the new fund may
legally be sold.
Customers who beneficially own shares held of record by a financial institution
should contact that institution if they wish to exchange shares. The
institution will contact DST and effect the exchange on behalf of the Customer.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $25 charge for wiring redemption proceeds. Shares may be redeemed by
mail, by telephone or through a systematic withdrawal plan. Investors who own
shares held of record by a financial institution should contact that financial
institution for information on how to redeem shares. Shares cannot be redeemed
by Federal Reserve wire on Federal holidays restricting wire transfers.
BY MAIL
A written request for redemption must be received by DST in order to constitute
a valid redemption request.
If the redemption request exceeds $5,000 or if the request directs the proceeds
to be sent or wired to a shareholder or an address different from that on
record, DST may require that the signature on the written redemption request be
guaranteed. You should be able to obtain a signature guarantee from a bank,
broker, dealer, credit union, securities exchange or association, clearing
agency or savings association. Notaries public cannot guarantee signatures.
BY TELEPHONE
You may redeem your shares by telephone if you have elected that option on your
Account Application. Under most circumstances, payments will be transmitted on
the next Business Day following receipt of a valid request for redemption. You
may have the proceeds mailed to your address of record or wired to a commercial
bank account previously designated on your Account Application. There is no
charge for having redemption proceeds mailed to you or to a designated bank
account, but there is a charge for wiring redemption proceeds.
You may request a wire redemption for redemptions in excess of $500 by calling
1-800-471-1144, however a wire charge of $25 will be deducted from the amount
of the wire redemption.
Neither the Trust nor DST will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon telephone instructions
<PAGE>
8
that it reasonably believes to be genuine. The Trust and DST will each employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, including requiring a form of personal identification prior to
acting upon instructions received by telephone and recording telephone
instructions. When market conditions are extremely busy, it is possible that
you may experience difficulties placing redemption orders by telephone, and may
wish to place them by mail.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Fund offers a Systematic Withdrawal Plan which you may use to receive
regular distributions from your account. Upon commencement of the SWP, your
account must have a current value of $5,000 or more. You may elect to receive
automatic payments via check or ACH of $100 or more on a monthly, quarterly,
semi-annual or annual basis. You may obtain a SWP Application Form by calling
1-800-471-1144.
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could
be exhausted entirely. You may change or cancel the SWP at any time on written
notice to DST.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. A redemption order
received before 11:00 a.m., Central time, on any Business Day will be effective
that day and will receive that day's redemption price. Net asset value per
share is determined as of 3:00 p.m., Central time, on each Business Day.
Redeemed shares are not entitled to dividends declared on the day the
redemption order is effective.
Payment to shareholders for shares redeemed will be made within seven days
after DST receives the valid redemption request. At various times, however, the
Fund may be requested to redeem shares for which it has not yet received good
payment; collection of payment may take 10 or more days. In such circumstances,
redemption proceeds will be held pending clearance of the check.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem your shares at their net asset value if, because
of redemptions, your account in the Fund has a value of less than the minimum
initial purchase amount (normally $2,500; $500 for individual retirement
accounts and for employees of the Adviser or its affiliates). Accordingly, if
you purchase shares of the Fund in only the minimum investment amount, you may
be subject to involuntary redemption if you redeem any shares. Before the Fund
exercises its right to redeem your shares, you will be given notice that the
value of the shares in your account is less than the minimum amount and will be
allowed 60 days to make an additional investment in the Fund in an amount which
will increase the value of the account to at least the minimum amount.
THE ADVISER
First National Bank of Commerce in New Orleans (the "Adviser"), 210 Baronne
Street, New Orleans, Louisiana 70112, acts as the Fund's investment adviser
under an advisory agreement (the "Advisory Agreement") with the Trust. The
Adviser, through its Trust Group, makes the investment decisions for the assets
of the Fund and continuously reviews, supervises and administers the investment
programs of the Fund, subject to the supervision of, and policies established
by, the Trustees of the Trust.
As of September 30, 1995, the Adviser's Trust Group managed approximately $2.0
billion in discretionary investment management accounts for individuals,
corporations and institutions with widely varying investment needs and
objectives. The Trust Group has managed client accounts since 1933 and has
managed money market portfolios for the past seven years. The Adviser is a
wholly-owned subsidiary of First Commerce Corporation.
<PAGE>
9
The Glass-Steagall Act restricts the securities activities of national banks
such as First National Bank of Commerce in New Orleans but the Comptroller of
the Currency permits national banks to provide investment advisory and other
services to mutual funds. Should the Comptroller's position be challenged
successfully in court or reversed by legislation, the Trust might have to make
other investment advisory arrangements.
The Trust's shares are not sponsored, endorsed or guaranteed by, and do not
constitute obligations or deposits of, the Adviser or First Commerce
Corporation and are not insured by the Federal Deposit Insurance Corporation or
issued or guaranteed by the U.S. Government or any of its agencies.
The Adviser is entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of .30% of the Fund's average daily net assets. The Adviser
may voluntarily waive a portion of its fee in order to limit the total
operating expenses of Retail class shares of the Fund. The Adviser reserves the
right, in its sole discretion, to terminate this voluntary fee waiver at any
time. For the fiscal year ended September 30, 1995, the Adviser was paid an
advisory fee of .23% of the Fund's average net assets.
Gerald S. Dugal is an Assistant Vice President and the Investment Manager for
the Marquis Treasury Securities Money Market Fund, Institutional Money Market
Fund, and the Tax Exempt Money Market Fund. Mr. Dugal has 10 years of
experience in investment trading, brokerage and research. He is licensed as a
series 7 securities principal and a series 53 municipal securities principal.
THE ADMINISTRATOR
SEI Financial Management Corporation (the "Administrator"), 680 East Swedesford
Road, Wayne, PA 19087, a wholly-owned subsidiary of SEI Corporation ("SEI"),
and the Trust are parties to an Administration Agreement (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
provides the Trust with administrative services, other than investment advisory
services, including all regulatory reporting, necessary office space,
equipment, personnel, and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the Fund's average daily net assets.
THE SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
DST Systems, Inc., 210 West 10th Street, Kansas City, MO 64105, serves as the
dividend disbursing agent and shareholder servicing agent for the Trust. DST
also acts as transfer agent for the Trust under a Transfer Agent Agreement.
THE DISTRIBUTOR
The Retail Class shares of the Fund have a Rule 12b-1 distribution plan (the
"Retail Class Plan"), and the Trust and SEI Financial Services Company (the
"Distributor"), 680 East Swedesford Road, Wayne, PA 19087, a wholly-owned
subsidiary of SEI, have entered into a distribution agreement (the
"Distribution Agreement").
As provided in the Distribution Agreement and the Retail Class Plan, the Trust
pays the Distributor a fee at the annual rate of .25% of the average daily net
assets of the Retail Class shares of the Fund. This fee will be calculated and
paid each month based on average daily net assets for that month. The
Distributor from time to time may waive a portion of this distribution fee in
order to limit the distribution fee for Retail Class shares of the Fund. The
Distributor reserves the right in its sole discretion to terminate this
voluntary waiver at any time. The Trust Class shares of the Fund are offered
without a similar fee.
The Distributor may use such fees to make payments to financial institutions
and intermediaries such as banks (including the Adviser and its affiliates),
savings and loan associations, insurance companies, and investment counselors,
broker-dealers, and the Distributor's affiliates (collectively, "financial
intermediaries") as compensation for shareholder services or as compensation to
the Distributor for its services. The Retail Class Plan is characterized
<PAGE>
10
as a compensation plan since this fee will be paid to the Distributor without
regard to the shareholder service expenses incurred by the Distributor or the
amount of payments made to financial intermediaries. If the Distributor's
expenses are less than its fees, the Trust will still pay the full fee and the
Distributor will realize a profit, but the Trust will not be obligated to pay
in excess of the full fee, even if the Distributor's actual expenses are
higher. The Distributor has agreed, however, to pay the entire amount of the
fee to financial intermediaries for shareholder services.
The Fund may also execute brokerage or other agency transactions through an
affiliate of the Adviser or through the Distributor, for which the affiliate or
the Distributor may receive "usual and customary" compensation. For further
information, see the Statement of Additional Information.
PERFORMANCE
From time to time, the Trust may advertise the Fund's "current yield" and
"effective compound yield." These figures will fluctuate, as they are based on
historical earnings; they are not intended to indicate future performance and
the Trust makes no representation concerning actual future yields. The "current
yield" of the Fund refers to the income generated by an investment over a
seven-day period which is then "annualized". That is, the amount of income
generated by an investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment is assumed to be reinvested. The "effective yield" will
be slightly higher than the "current yield" because of the compounding effect
of this assumed reinvestment.
In addition, the Trust may from time to time compare performance of the Fund to
that of other mutual funds tracked by mutual fund rating services, financial
and business publications and periodicals, broad groups of comparable mutual
funds or unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs or
to other investment alternatives.
The performance of Trust Class shares will be higher than that of Cash Sweep
Class and Retail Class shares because of the distribution fees charged to Cash
Sweep Class and Retail Class shares.
TAXES
The following summary of federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial, or
administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of the Fund or its shareholders. In
addition, state and local tax consequences of an investment in the Fund may
differ from the federal income tax consequences described below. Accordingly,
shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state, and local income taxes. Additional information
concerning taxes is set forth in the Statement of Additional Information.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify for the
special tax treatment afforded regulated investment companies as defined under
Subchapter M of the Internal Revenue Code of 1986, as amended, so as to be
relieved of federal income tax net investment company taxable income and net
capital gain (the excess of net long-term capital gains over net short-term
capital losses) distributed to shareholders.
TAX STATUS OF DISTRIBUTIONS
The Fund will distribute all of its net investment income (including net short-
term capital gain) to shareholders. Dividends from net investment company
taxable income are taxable to shareholders as ordinary income (whether received
in cash or in additional shares) to the extent of the Fund's earnings and
profits. Any net realized capital gain will be distributed at least annually
<PAGE>
11
and will be taxed to shareholders as long-term capital gain, regardless of how
long the shareholders have held their shares and regardless of whether the
distributions are received in cash or in additional shares. Dividends and
distribution of capital gains paid by the Fund do not qualify for the dividends
received deduction for corporate shareholders. The Fund will make annual
reports to shareholders of the federal income tax status of all distributions.
Dividends declared by the Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of the year declared paid by the Fund at any time during the
following January.
With respect to investments in U.S. Treasury STRIPS, which are sold with
original issue discount and do not make periodic cash interest payments, the
Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
all of its net investment income to its shareholders, the Fund may have to sell
portfolio securities to distribute such imputed income, which may occur at a
time when the Adviser would not have chosen to sell such securities and which
may result in a taxable gain or loss.
Investment income received directly by the Fund on Treasury Obligations is
exempt from income tax at the state level when received directly and may be
exempt, depending on the state, when received by a shareholder as income
dividends from the Fund provided certain state specific conditions are
satisfied. Interest received on repurchase agreements collateralized by
Treasury Obligations normally is not exempt from state taxation. The Fund will
inform shareholders annually of the percentage of income and distributions
derived from Treasury Obligations. Shareholders should consult their tax
advisers to determine whether any portion of the income dividends received from
the Fund is considered tax exempt in their particular states.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax applicable to regulated
investment companies.
Each sale, exchange or redemption of a Fund's shares generally is a taxable
transaction to the shareholder.
GENERAL INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under a Declaration
of Trust dated June 29, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares or "funds" and different classes of each fund.
In addition to the Fund, the Trust offers the following funds: Government
Securities Fund, Louisiana Tax-Free Income Fund, Balanced Fund, Tax Exempt
Money Market Fund, Institutional Money Market Fund, Growth Equity Fund and the
Value Equity Fund. All consideration received by the Trust for shares of any
fund and all assets of such fund belong to that fund and would be subject to
liabilities related thereto. The Trust reserves the right to create and issue
shares of additional funds.
The Trust pays its operating expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy
solicitation material and reports to shareholders, costs of custodial services
and registering the shares under Federal and state securities laws, pricing and
insurance expenses, and pays additional expenses including litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under
the laws of the Commonwealth of Massachusetts. The Trustees have approved
contracts under which, as described above, certain companies provide essential
management, administrative and shareholder services to the Trust.
<PAGE>
12
VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to that fund or class. As
a Massachusetts business trust, the Trust is not required to hold annual
meetings of shareholders but meetings of shareholders will be held from time to
time to seek approval for certain changes in the operation of the Trust and for
the election of Trustees under certain circumstances. In addition, a Trustee
may be removed by the remaining Trustees or by shareholders at a special
meeting called upon written request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a meeting is requested,
the Trust will provide appropriate assistance and information to the
shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes periodic reports to
shareholders of record, and, as necessary, proxy statements for shareholder
meetings.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to DST Systems, Inc., P.O. Box 419240,
Kansas City, MO 64141-6240 or by calling 1-800-471-1144.
DIVIDENDS
The net investment income (not including capital gains) of the Fund is
determined and declared on each Business Day as a dividend for shareholders of
record as of the close of business on that day. Shareholders who own shares at
the close of business on the record date will be entitled to receive the
dividend. Currently, capital gains of the Fund, if any, will be distributed at
least annually. Dividends are paid by the Fund in Federal funds or in
additional shares at the discretion of the shareholder on the first business
day of each month.
The amount of dividends payable on Trust Class shares will be more than the
dividends payable on Retail Class and Cash Sweep shares because of the
distribution fees paid by Retail Class and Cash Sweep shares.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
CUSTODIAN
First National Bank of Commerce in New Orleans acts as Custodian of the Trust.
The Custodian holds cash, securities and other assets of the Trust as required
by the Investment Company Act of 1940, as amended (the "1940 Act").
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments and investment
practices for the Fund and associated risk factors. Further discussion is
contained in the Statement of Additional Information.
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury, and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS"). The Fund does not expect to trade STRIPS
actively.
Any guaranty by the U.S. Treasury of the securities in which the Fund invests
guarantees only the payment of principal and interest on the guaranteed
security and does not guarantee the yield or value of that security or the
yield or value of shares of the Fund.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which the Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. Repurchase
agreements
<PAGE>
13
must be fully collateralized at all times. The Fund bears a risk of loss in the
event the other party defaults on its obligations and the Fund is delayed or
prevented from its right to dispose of the collateral. The Fund will enter into
repurchase agreements only with financial institutions deemed to present
minimal risk of bankruptcy during the term of the agreement based on
established guidelines. Repurchase agreements are considered loans under the
1940 Act.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES--When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
To the extent required by the 1940 Act, the Fund will maintain with the
custodian a separate account with liquid high grade debt securities or cash in
an amount at least equal to these commitments. The interest rate realized on
these securities is fixed as of the purchase date and no interest accrues to
the Fund before settlement. These securities are subject to market fluctuation
due to changes in market interest rates and it is possible that the market
value at the time of settlement could be higher or lower than the purchase
price if the general level of interest rates has changed. Although a Fund
generally purchases securities on a when-issued or forward commitment basis
with the intention of actually acquiring securities for its portfolio, a Fund
may dispose of a when-issued security or forward commitment prior to settlement
if it deems appropriate.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Summary............................... 2
Expense Summary....................... 3
Financial Highlights.................. 4
The Trust............................. 5
Investment Objectives and Policies.... 5
Investment Limitations................ 5
Purchase of Shares.................... 5
Exchanges............................. 7
Redemption of Shares.................. 7
</TABLE>
<TABLE>
<S> <C>
The Adviser........................... 8
The Administrator..................... 9
The Shareholder Servicing Agent and
Transfer Agent....................... 9
The Distributor....................... 9
Performance........................... 10
Taxes................................. 10
General Information................... 11
Description of Permitted Investments
and Risk Factors..................... 12
</TABLE>
<PAGE>
MARQUIS FUNDS (R)
Investment Adviser:
FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS
TREASURY SECURITIES MONEY MARKET FUND
MARQUIS FUNDS (R) (the "Trust") is a mutual fund that offers a convenient and
economical means of investing in one or more professionally managed portfolios
of securities. This Prospectus offers the Cash Sweep Class shares of the
TREASURY SECURITIES MONEY MARKET FUND (the "Fund"), a separate series of the
Trust.
This Prospectus sets forth concisely the information about the Fund and the
Trust that a prospective investor should know before investing in the Fund.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated January 29, 1996 has
been filed with the Securities and Exchange Commission (the "SEC") and is
available without charge by calling 1-800-471-1144. The Statement of
Additional Information is incorporated into this Prospectus by reference.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, INCLUDING FIRST NATIONAL BANK OF COMMERCE IN NEW
ORLEANS OR ANY OF ITS AFFILIATES OR CORRESPONDENTS, INCLUDING FIRST COMMERCE
CORPORATION. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
JANUARY 29, 1996
<PAGE>
2
SUMMARY
MARQUIS FUNDS (R) (the "Trust") is an open-end management investment company
providing a convenient way to invest in professionally managed portfolios of
securities. This Summary provides basic information about the Cash Sweep Class
shares of the Trust's Treasury Securities Money Market Fund (the "Fund"). The
Fund is a separate series of the Trust.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUND? The Fund seeks to
preserve principal value and maintain a high degree of liquidity while
providing current income by investing exclusively in obligations issued by the
U.S. Treasury and in repurchase agreements involving such obligations. There
can be no assurance that the Fund will achieve its investment objective.
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUND? The investment
policies of the Fund entail certain risks and considerations of which an
investor should be aware. While the Fund seeks to maintain a net asset value of
$1.00 per share, there can be no assurance that the Fund will be able to do
this on a continuous basis. There may be other risks involved in the ownership
of money market mutual funds.
ARE MY INVESTMENTS INSURED? Any guaranty by the U.S. Government, its agencies
or instrumentalities of the securities in which the Fund invests guarantees
only the payment of principal and interest on the guaranteed security and does
not guarantee the yield or value of that security or the yield or value of
shares of the Fund. The Trust's shares are not federally insured by the FDIC or
any other government agency.
For more information about the Fund, see "Investment Objective and Policies"
and "Description of Permitted Investments and Risk Factors."
HOW DO I PURCHASE SHARES? Cash Sweep Class shares of the Fund are offered at
net asset value per share. Cash Sweep Class shares are subject to annual
distribution and service fees of .60% of the average daily net assets.
WHO IS THE ADVISER? The Trust Group of First National Bank of Commerce in New
Orleans serves as the investment adviser of the Fund. See "Expense Summary" and
"The Adviser."
WHO IS THE ADMINISTRATOR? SEI Financial Management Corporation serves as the
administrator of the Trust. See "Expense Summary" and "The Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as shareholder servicing
agent, transfer agent and dividend disbursing agent for the Trust. See "The
Shareholder Servicing Agent and Transfer Agent."
WHO IS THE DISTRIBUTOR? SEI Financial Services Company serves as distributor of
the Trust's shares. See "The Distributor."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is distributed in the form of monthly
dividends. Any capital gain is distributed at least annually. Dividends are
paid in additional shares unless the shareholder elects to take payment in cash
on the first Business Day of each month. See "Dividends."
<PAGE>
3
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES TREASURY SECURITIES MONEY MARKET FUND
CASH SWEEP CLASS
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) None
Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Wire Redemption Fee $25
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES TREASURY SECURITIES MONEY MARKET FUND
(as a percentage of average net assets) CASH SWEEP CLASS
<TABLE>
- -------------------------------------------------------
<S> <C>
Advisory Fees (after fee waivers) (1) .23%
Administration Fees .20%
12b-1 Fees (after fee waivers) (1) .60%
Other Expenses .07%
- -------------------------------------------------------
Total Operating Expenses (after fee waivers) (2) 1.10%
=======================================================
</TABLE>
(1) The Adviser has voluntarily agreed to waive its advisory fee and the
Distributor has voluntarily agreed to waive the 12b-1 fee, to the extent
necessary to keep "Total Operating Expenses" for the Cash Sweep Class
shares of the Fund from exceeding 1.10%. The Adviser and the Distributor
reserve the right to terminate a waiver at any time in its sole
discretion. Absent such waivers, the advisory fee for the Fund would be
.30%, and the 12b-1 fee for the Cash Sweep Class shares of the Fund would
be .75%.
(2) Absent the Adviser's and the Distributor's voluntary fee waivers, Total
Operating Expenses for Cash Sweep Class shares of the Fund would be 1.32%.
EXAMPLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment in Cash Sweep Class shares
of the Fund assuming (1) 5% annual return and
(2) redemption at the end of each time period: $11 $35 $61 $134
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by
investors in Cash Sweep Class shares of the Fund. Shareholders purchasing
shares through a financial institution may be charged additional account fees
by that institution. The information set forth in the foregoing table and
example relates only to Cash Sweep Class shares. The Trust also offers Trust
Class shares and Retail Class shares of the Fund which are subject to the same
expenses except that Trust Class shares are not charged distribution expenses
and Retail Class shares are charged lower distribution expenses than the Cash
Sweep Class shares. Additional information may be found under "The Adviser,"
"The Administrator," and "The Distributor."
<PAGE>
4
THE TRUST
MARQUIS FUNDS(R) (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in its Treasury Securities
Money Market Fund (the "Fund"), a diversified mutual fund, through three
separate classes: Trust Class, Retail Class, and Cash Sweep Class, which
provide for variations in distribution costs, voting rights and dividends.
Except for differences between classes, each share of the Fund represents an
undivided, proportionate interest in the Fund. This Prospectus relates to the
Cash Sweep Class shares of the Fund. Information regarding the Trust Class and
Retail Class shares of the Fund and the Trust's other funds is contained in
separate prospectuses that may be obtained by calling 1-800-471-1144.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives are to preserve principal value and maintain a
high degree of liquidity while providing current income. There can be no
assurance that the Fund will be able to achieve its investment objectives.
The Fund complies with regulations of the Securities and Exchange Commission
applicable to money market funds. These regulations impose certain quality,
maturity and diversification restraints on investments by a Fund. Under these
regulations, the Fund will maintain a dollar-weighted average portfolio
maturity of 90 days or less, and will acquire only obligations maturing in 397
days or less. The Fund will attempt to maintain a net asset value of $1.00 per
share, although there can be no assurance that it will be able to do so.
The Fund invests exclusively in obligations issued by the U.S. Treasury
("Treasury Obligations") and backed by its full faith and credit and in
repurchase agreements involving such obligations. The Fund may purchase
Treasury Obligations on a when-issued or delayed delivery basis.
For additional information regarding risks and permitted investments,
investment practices and risks, see "Description of Permitted Investments and
Risk Factors."
INVESTMENT LIMITATIONS
The following investment limitations are fundamental policies of the Fund.
Fundamental policies cannot be changed with respect to the Fund without the
consent of the holders of a majority of the Fund's outstanding shares.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if, as a result, more than 5% of the total assets of
the Fund would be invested in the securities of such issuer.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to (i) investments in the obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities, and
repurchase agreements involving such securities.
3. Make loans, except that the Fund may (i) purchase or hold debt instruments
in accordance with its investment objectives and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information. The Board of
Trustees has adopted a policy that the Fund will not engage in securities
lending.
Additional investment limitations are set forth in the Statement of Additional
Information.
PURCHASE OF SHARES
Investors may purchase Cash Sweep Class shares of the Fund directly from the
Trust's shareholder servicing and transfer agent DST Systems, Inc. ("DST") by
mail, by wire, or through an automatic investment plan. Shares may also be
purchased through broker-dealers, including Marquis Investments, Inc., that
have established a dealer
<PAGE>
5
agreement with SEI Financial Services Company, the Trust's distributor (the
"Distributor"). Cash Sweep Class shares of the Fund are sold on a continuous
basis.
BY MAIL
You may purchase Cash Sweep Class shares of the Fund by completing and signing
an Account Application form and mailing it, along with a check (or other
negotiable bank instrument or money order) payable to "Marquis Funds (Treasury
Securities Money Market Fund)," to DST at 210 West 10th Street, Kansas City, MO
64105. You may purchase additional shares at any time by mailing payment to
DST. Orders placed by mail will be executed on receipt of your payment. If your
check does not clear, your purchase will be cancelled and you could be liable
for any losses or fees incurred.
You may obtain Account Application forms by calling 1-800-471-1144.
BY WIRE
You may purchase Cash Sweep Class shares of the Fund by wiring Federal funds,
provided that your Account Application has been previously received. You must
wire funds to DST and the wire instructions must include your account number.
You must call 1-800-471-1144 before wiring any funds. An order to purchase
shares by Federal funds wire will be deemed to have been received by the Fund
on the Business Day (defined below) of the wire, provided that the shareholder
notifies DST prior to 12:00 noon, Central time. If DST does not receive notice
by 12:00 noon, Central time, on the Business Day of the wire, the order will be
executed on the next Business Day.
AUTOMATIC INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Fund through
automatic deductions by Automated Clearing House ("ACH") from a checking
account by completing an AIP Application Form. The minimum pre-authorized
investment amount is $50 per month. An AIP Application Form may be obtained by
calling 1-800-471-1144. The AIP is available only for additional investments
for an existing account.
GENERAL INFORMATION REGARDING PURCHASES
You may purchase Cash Sweep Class shares of the Fund on any day the New York
Stock Exchange and the Federal Reserve wire system are open for business
("Business Days"). The minimum initial investment in Cash Sweep Class shares of
the Fund is $2,500 ($500 minimum for individual retirement accounts and
employees of First National Bank of Commerce in New Orleans, the Fund's
investment adviser (the "Adviser") or its affiliates); however, the Distributor
may waive the minimum investment at its discretion. Subsequent purchases of
shares must be at least $100, except for purchases through the AIP and payroll
deductions, which must be at least $50.
A purchase order for shares will be effective, and eligible to receive
dividends declared that same day, on the Business Day the order is received by
DST if DST receives the order and payment before 12:00 noon, Central time. A
purchase order received (with payment) after this time will be effective on the
next Business Day. The purchase price of Cash Sweep Class shares of the Fund is
the net asset value per share next computed after the order is received and
accepted by the Trust. The Fund expects to maintain its net asset value per
share constant at $1.00. The net asset value per share of the Fund is
determined by dividing the total value of its investments and other assets,
less any liabilities, by its total outstanding shares. The Fund's net asset
value per share is calculated as of 3:00 p.m., Central time, each Business Day
and is based on the amortized cost method described in the Statement of
Additional Information.
The Trust reserves the right to reject a purchase order for shares when the
Distributor determines that it is not in the best interest of the Trust and/or
its shareholders to accept such order.
Shareholders of record who desire to transfer registration of their shares
should call 1-800-471-1144.
<PAGE>
6
PURCHASES THROUGH FINANCIAL INSTITUTIONS
Shares may also be purchased through financial institutions, including the
Adviser, that provide distribution assistance or shareholder services to the
Trust. Shares purchased by persons ("Customers") through financial institutions
may be held of record by the financial institution. Financial institutions may
impose an earlier cut-off time for receipt of purchase orders directed through
them to allow for processing and transmittal of these orders to the Distributor
for effectiveness the same day. Customers should contact their financial
institution for information as to that institution's procedures for
transmitting purchase, exchange or redemption orders to the Trust.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change. Certain financial institutions may be
required under state law to register as broker/dealers.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
EXCHANGES
You may exchange your shares for Trust Class or Retail Class shares of the Fund
or Class A or Class B shares of any other fund of the Trust. You will be
subject to the applicable sales charge on exchange unless you qualify for a
sales load waiver.
You must have received a current prospectus of the class of shares of the fund
into which you wish to move your investment (the "new" fund) before the
exchange will be effected. Exchanges will be made only after instructions in
writing or by telephone (an "Exchange Request") are received by DST. If an
Exchange Request in good order is received by DST by 3:00 p.m. Central time, on
any Business Day, the exchange will occur on that day. The exchange privilege
may be exercised only in those states where the class or shares of the new fund
may legally be sold.
Customers who beneficially own shares held of record by a financial institution
should contact that institution if they wish to exchange shares. The
institution will contact DST and effect the exchange on behalf of the Customer.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $25 charge for wiring redemption proceeds. Shares may be redeemed by
mail, by telephone or through a systematic withdrawal plan. Investors who own
shares held of record by a financial institution should contact that financial
institution for information on how to redeem shares. Shares cannot be redeemed
by Federal Reserve wire on Federal holidays restricting wire transfers.
BY MAIL
A written request for redemption must be received by DST in order to constitute
a valid redemption request.
If the redemption request exceeds $5,000 or if the request directs the proceeds
to be sent or wired to a shareholder or an address different from that on
record, DST may require that the signature on the written redemption request be
guaranteed. You should be able to obtain a signature guarantee from a bank,
broker, dealer, credit union, securities exchange or association, clearing
agency or savings association. Notaries public cannot guarantee signatures.
BY TELEPHONE
You may redeem your shares by telephone if you have elected that option on your
Account Application. Under most circumstances, payments will be transmitted on
the next Business Day following receipt of a valid request for redemption.
<PAGE>
7
You may have the proceeds mailed to your address of record or wired to a
commercial bank account previously designated on your Account Application.
There is no charge for having redemption proceeds mailed to you or to a
designated bank account, but there is a charge for wiring redemption proceeds.
You may request a wire redemption for redemptions in excess of $500 by calling
1-800-471-1144, however a wire charge will be deducted of $25 from the amount
of the wire redemption.
Neither the Trust nor DST will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon telephone instructions that
it reasonably believes to be genuine. The Trust and DST will each employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, including requiring a form of personal identification prior to
acting upon instructions received by telephone and recording telephone
instructions. When market conditions are extremely busy, it is possible that
you may experience difficulties placing redemption orders by telephone, and may
wish to place them by mail.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Fund offers a Systematic Withdrawal Plan which you may use to receive
regular distributions from your account. Upon commencement of the SWP, your
account must have a current value of $5,000 or more. You may elect to receive
automatic payments via check or ACH of $100 or more on a monthly, quarterly,
semi-annual or annual basis. You may obtain a SWP Application Form by calling
1-800-471-1144.
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could
be exhausted entirely. You may change or cancel the SWP at any time on written
notice to DST.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. A redemption order
received before 11:00 a.m., Central time, on any Business Day will be effective
that day and will receive that day's redemption price. Net asset value per
share is determined as of 3:00 p.m., Central time, on each Business Day.
Redeemed shares are not entitled to dividends declared on the day the
redemption order is effective.
Payment to shareholders for shares redeemed will be made within seven days
after DST receives the valid redemption request. At various times, however, the
Fund may be requested to redeem shares for which it has not yet received good
payment; collection of payment may take 10 or more days. In such circumstances,
redemption proceeds will be held pending clearance of the check.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem your shares at their net asset value if, because
of redemptions, your account in the Fund has a value of less than the minimum
initial purchase amount (normally $2,500; $500 for individual retirement
accounts and for employees of the Adviser or its affiliates). Accordingly, if
you purchase shares of the Fund in only the minimum investment amount, you may
be subject to involuntary redemption if you redeem any shares. Before the Fund
exercises its right to redeem your shares, you will be given notice that the
value of the shares in your account is less than the minimum amount and will be
allowed 60 days to make an additional investment in the Fund in an amount which
will increase the value of the account to at least the minimum amount.
THE ADVISER
First National Bank of Commerce in New Orleans (the "Adviser"), serves as the
Fund's investment adviser. The Adviser, through its Trust Group, makes the
investment decisions for the assets of the Fund and continuously reviews,
supervises and administers the investment programs of the Fund,
<PAGE>
8
subject to the supervision of, and policies established by, the Trustees of the
Trust.
As of September 30, 1995, the Adviser's Trust Group managed approximately $2.0
billion in discretionary investment management accounts for individuals,
corporations and institutions with widely varying investment needs and
objectives. The Trust Group has managed client accounts since 1933 and has
managed money market portfolios for the past seven years. The Adviser is a
wholly-owned subsidiary of First Commerce Corporation.
The Glass-Steagall Act restricts the securities activities of national banks
such as First National Bank of Commerce in New Orleans but the Comptroller of
the Currency permits national banks to provide investment advisory and other
services to mutual funds. Should the Comptroller's position be challenged
successfully in court or reversed by legislation, the Trust might have to make
other investment advisory arrangements.
The Trust's shares are not sponsored, endorsed or guaranteed by, and do not
constitute obligations or deposits of, the Adviser or First Commerce
Corporation and are not insured by the Federal Deposit Insurance Corporation or
issued or guaranteed by the U.S. Government or any of its agencies.
The Adviser is entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of .30% of the Fund's average daily net assets. The Adviser
may voluntarily waive a portion of its fee in order to limit the total
operating expenses of the Cash Sweep Class shares of the Fund. The Adviser
reserves the right, in its sole discretion, to terminate this voluntary fee
waiver at any time. For the fiscal year ended September 30, 1995, the Adviser
was paid an advisory fee of .23% of the Fund's average net assets.
Gerald S. Dugal is an Assistant Vice President and the Investment Manager for
the Marquis Treasury Securities Money Market Fund, Institutional Money Market
Fund, and the Tax Exempt Money Market Fund. Mr. Dugal has 10 years of
experience in investment trading, brokerage and research. He is licensed as a
series 7 securities principal and a series 53 municipal securities principal.
THE ADMINISTRATOR
SEI Financial Management Corporation (the "Administrator"), 680 East Swedesford
Road, Wayne, PA 19087 a wholly-owned subsidiary of SEI Corporation ("SEI")
provides the Trust with administrative services, including fund accounting,
regulatory reporting, necessary office space, equipment, personnel, and
facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the Fund's average daily net assets.
THE SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
DST Systems, Inc., 210 West 10th Street, Kansas City, MO 64105, serves as the
transfer agent, dividend disbursing agent and shareholder servicing agent for
the Trust.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary
of SEI, serves as distributor. The Cash Sweep Class shares of the Fund have a
Rule 12b-1 distribution plan (the "Cash Sweep Class Plan").
As provided in the Distribution Agreement and the Cash Sweep Class Plan, the
Trust will pay the Distributor a fee at the annual rate of .75% of the average
daily net assets of the Cash Sweep Class shares of the Fund. This fee will be
calculated and paid each month based on average daily net assets for that
month. The Distributor from time to time may waive a portion of this
distribution fee in order to limit the distribution fee for Cash Sweep Class
shares of the Fund. The Distributor reserves the right in its sole discretion
to terminate this voluntary waiver at any time. The Retail Class and Cash Sweep
Class shares of the Fund are offered with different fees.
The Distributor may use such fees to make payments to financial institutions
and
<PAGE>
9
intermediaries such as banks (including the Adviser and its affiliates),
savings and loan associations, insurance companies, and investment counselors,
broker-dealers, and the Distributor's affiliates (collectively, "financial
intermediaries") as compensation for shareholder services or as compensation to
the Distributor for its services. The Cash Sweep Class Plan is characterized as
a compensation plan since this fee will be paid to the Distributor without
regard to the distribution assistance or shareholder service expenses incurred
by the Distributor or the amount of payments made to financial intermediaries.
If the Distributor's expenses are less than its fees, the Trust will still pay
the full fee and the Distributor will realize a profit, but the Trust will not
be obligated to pay in excess of the full fee, even if the Distributor's actual
expenses are higher. The Distributor has agreed, however, to pay the entire
amount of the fee to financial intermediaries for shareholder services.
The Fund may also execute brokerage or other agency transactions through an
affiliate of the Adviser or through the Distributor, for which the affiliate or
the Distributor may receive "usual and customary" compensation. For further
information, see the Statement of Additional Information.
PERFORMANCE
From time to time, the Trust may advertise the Fund's "current yield" and
"effective compound yield." These figures will fluctuate, as they are based on
historical earnings; they are not intended to indicate future performance and
the Trust makes no representation concerning actual future yields. The "current
yield" of the Fund refers to the income generated by an investment over a
seven-day period which is then "annualized". That is, the amount of income
generated by an investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment is assumed to be reinvested. The "effective yield" will
be slightly higher than the "current yield" because of the compounding effect
of this assumed reinvestment.
In addition, the Trust may from time to time compare performance of the Fund to
that of other mutual funds tracked by mutual fund rating services, financial
and business publications and periodicals, broad groups of comparable mutual
funds or unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs or
to other investment alternatives.
The performance of Trust Class and Retail Class shares will be higher than that
of Cash Sweep Class shares because of the additional distribution fees charged
to Cash Sweep Class shares.
TAXES
The following summary of federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial, or
administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of the Fund or its shareholders. In
addition, state and local tax consequences of an investment in the Fund may
differ from the federal income tax consequences described below. Accordingly,
shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state, and local income taxes. Additional information
concerning taxes is set forth in the Statement of Additional Information.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify for the
special tax treatment afforded regulated investment companies as defined under
Subchapter M of the Internal Revenue Code of 1986, as amended, so as to be
relieved of federal income tax on that part of its net investment company
taxable income and net capital gain (the excess of net long-term capital gains
over net short-term capital losses) distributed to shareholders.
<PAGE>
10
TAX STATUS OF DISTRIBUTIONS
The Fund will distribute all of its net investment income (including net short-
term capital gain) to shareholders. Dividends from net investment company
taxable income are taxable to shareholders as ordinary income (whether received
in cash or in additional shares) to the extent of the Fund's earnings and
profits. Any net realized capital gain will be distributed at least annually
and will be taxed to shareholders as long-term capital gain, regardless of how
long the shareholders have held their shares and regardless of whether the
distributions are received in cash or in additional shares. Dividends and
distribution of capital gains paid by the fund do not qualify for the dividends
received deduction for corporate shareholders. The Fund will provide annual
reports to shareholders of the federal income tax status of all distributions.
Dividends declared by the Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of the year declared, if paid by the Fund at any time during the
following January.
With respect to investments in U.S. Treasury STRIPS, which are sold with
original issue discount and do not make periodic cash interest payments, the
Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
all of its net investment income to its shareholders, the Fund may have to sell
portfolio securities to distribute such imputed income, which may occur at a
time when the Adviser would not have chosen to sell such securities and which
may result in a taxable gain or loss.
Investment income received directly by the Fund on Treasury Obligations is
exempt from income tax at the state level and may be exempt, depending on the
state, when received by a shareholder as income dividends from the Fund
provided certain state specific conditions are satisfied. Interest received on
repurchase agreements collateralized by Treasury Obligations normally is not
exempt from state taxation. The Fund will inform shareholders annually of the
percentage of income and distributions derived from Treasury Obligations.
Shareholders should consult their tax advisers to determine whether any portion
of the income dividends received from the Fund is considered tax exempt in
their particular states.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax applicable to regulated
investment companies.
Each sale, exchange or redemption of a Fund's shares generally is a taxable
transaction to the shareholder.
GENERAL INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under a Declaration
of Trust dated June 29, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares or "funds" and different classes of each fund.
In addition to the Fund, the Trust offers the following funds: Government
Securities Fund, Louisiana Tax-Free Income Fund, Balanced Fund, Institutional
Money Market Fund, Tax Exempt Money Market Fund, Growth Equity Fund and the
Value Equity Fund. All consideration received by the Trust for shares of any
fund and all assets of such fund belong to that fund and would be subject to
liabilities related thereto. The Trust reserves the right to create and issue
shares of additional funds.
The Trust pays its operating expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy
solicitation material and reports to shareholders, costs of custodial services
and registering the shares under Federal and state securities laws, pricing and
insurance expenses, and pays additional expenses including litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
<PAGE>
11
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under
the laws of the Commonwealth of Massachusetts. The Trustees have approved
contracts under which, as described above, certain companies provide essential
management, administrative and shareholder services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to that fund or class. As
a Massachusetts business trust, the Trust is not required to hold annual
meetings of shareholders but meetings of shareholders will be held from time to
time to seek approval for certain changes in the operation of the Trust and for
the election of Trustees under certain circumstances. In addition, a Trustee
may be removed by the remaining Trustees or by shareholders at a special
meeting called upon written request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a meeting is requested,
the Trust will provide appropriate assistance and information to the
shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes periodic reports to
shareholders of record, and, as necessary, proxy statements for shareholder
meetings.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to DST Systems, Inc., P.O. Box 419240,
Kansas City, MO 64141-6240 or by calling 1-800-471-1144.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
the Fund is determined and declared on each Business Day as a dividend for
shareholders of record as of the close of business on that day. Shareholders
who own shares at the close of business on the record date will be entitled to
receive the dividend. Currently, capital gains of the Fund, if any, will be
distributed at least annually. Dividends are paid by the Fund in Federal funds
or in additional shares at the discretion of the shareholder on the first
business day of each month.
The amount of dividends payable on Trust Class and Retail Class shares will be
more than the dividends payable on Cash Sweep Class shares because of the
additional distribution fees paid by Cash Sweep Class shares.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
CUSTODIAN
First National Bank of Commerce in New Orleans acts as Custodian of the Trust.
The Custodian holds cash, securities and other assets of the Trust as required
by the Investment Company Act of 1940, as amended (the "1940 Act").
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments and investment
practices for the Fund and associated risk factors. Further discussion is
contained in the Statement of Additional Information.
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury, and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS"). The Fund does not expect to trade STRIPS
actively.
Any guaranty by the U.S. Treasury of the securities in which the Fund invests
guarantees only the payment of principal and interest on the
<PAGE>
12
guaranteed security and does not guarantee the yield or value of that security
or the yield or value of shares of the Fund.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which the Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. Repurchase
agreements must be fully collateralized at all times. The Fund bears a risk of
loss in the event the other party defaults on its obligations and the Fund is
delayed or prevented from its right to dispose of the collateral. The Fund will
enter into repurchase agreements only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
established guidelines. Repurchase agreements are considered loans under the
1940 Act.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES--When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
To the extent required by the 1940 Act, the Fund will maintain with the
custodian a separate account with liquid high grade debt securities or cash in
an amount at least equal to these commitments. The interest rate realized on
these securities is fixed as of the purchase date and no interest accrues to
the Fund before settlement. These securities are subject to market fluctuation
due to changes in market interest rates and it is possible that the market
value at the time of settlement could be higher or lower than the purchase
price if the general level of interest rates has changed. Although a Fund
generally purchases securities on a when-issued or forward commitment basis
with the intention of actually acquiring securities for its portfolio, a Fund
may dispose of a when-issued security or forward commitment prior to settlement
if it deems appropriate.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Summary............................... 2
Expense Summary....................... 3
The Trust............................. 4
Investment Objectives and Policies.... 4
Investment Limitations................ 4
Purchase of Shares.................... 4
Exchanges............................. 6
Redemption of Shares.................. 6
The Adviser........................... 7
</TABLE>
<TABLE>
<S> <C>
The Administrator..................... 8
The Shareholder Servicing Agent and
Transfer Agent....................... 8
The Distributor....................... 8
Performance........................... 9
Taxes................................. 9
General Information................... 10
Description of Permitted Investments
and Risk Factors..................... 11
</TABLE>
<PAGE>
MARQUIS FUNDS (R)
Investment Adviser:
FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS
. GOVERNMENT SECURITIES FUND
. LOUISIANA TAX-FREE INCOME FUND
. BALANCED FUND
. VALUE EQUITY FUND
. GROWTH EQUITY FUND
MARQUIS FUNDS (R) (the "Trust") is a mutual fund that offers a convenient and
economical means of investing in one or more professionally managed portfolios
of securities. This Prospectus offers Class A and Class B shares of the above
funds (the "Funds" and each a "Fund"), each of which is a separate series of
the Trust.
Class A shares are sold with a front-end sales load that will be reduced or
waived in certain circumstances. Class B shares are sold subject to annual
distribution and service fees and a contingent deferred sales charge that is
eliminated five years after purchase, at which point the Class B shares
automatically convert into Class A shares.
This Prospectus sets forth concisely the information about the Funds and the
Trust that a prospective investor should know before investing in any of the
Funds. Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated January 29, 1996 has
been filed with the Securities and Exchange Commission (the "SEC") and is
available without charge by calling 1-800-471-1144. The Statement of
Additional Information is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, INCLUDING FIRST NATIONAL BANK OF COMMERCE IN NEW
ORLEANS OR ANY OF ITS AFFILIATES OR CORRESPONDENTS, INCLUDING FIRST COMMERCE
CORPORATION. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
JANUARY 29, 1996
<PAGE>
SUMMARY
MARQUIS FUNDS (R) (the "Trust") is an open-end, management investment
company providing a convenient way to invest in professionally managed
portfolios of securities. This summary provides basic information about the
Class A and the Class B shares of the Trust's Government Securities Fund,
Louisiana Tax-Free Income Fund (these two, collectively, the "Fixed Income
Funds"), Balanced Fund (formerly the Growth and Income Fund), Value Equity
Fund, and Growth Equity Fund (these three, collectively, the "Equity Funds")
(each of these five a "Fund"). Each Fund is a separate series of the Trust.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF EACH FUND? The GOVERNMENT
SECURITIES FUND seeks to provide current income consistent with relative
stability of capital by investing primarily in U.S. Government securities. The
LOUISIANA TAX-FREE INCOME FUND seeks to provide a level of current income
consistent with relative stability of capital by investing primarily in
investment grade securities the interest on which is exempt from federal
income tax and Louisiana personal income taxes and is not a preference item
for purposes of the alternative minimum tax. The BALANCED FUND seeks to
provide capital appreciation and current income through the regular payment of
dividends and interest by investing in a combination of equity, fixed income
and money market instruments. The VALUE EQUITY FUND seeks to provide long-term
capital appreciation by investing primarily in equity securities of
established companies that have a market capitalization in excess of $500
million and have the potential for capital appreciation. The GROWTH EQUITY
FUND seeks to provide long-term capital appreciation by investing primarily in
equity securities of established companies with market capitalization in
excess of $300 million that have the potential for long-term capital
appreciation and growth potential. There can be no assurance that any Fund
will achieve its investment objective.
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUNDS? The investment
policies of each Fund entail certain risks and considerations of which an
investor should be aware. Values of fixed income securities and,
correspondingly, share prices of Funds invested in such securities, tend to
vary inversely with interest rates and may be affected by other market and
economic factors as well. The Louisiana Tax-Free Income Fund, which is a non-
diversified fund, will invest primarily in Louisiana municipal securities.
Both Fixed Income Funds and the Balanced Fund may also invest in securities
that have speculative characteristics. The Balanced, Value Equity and Growth
Equity Funds may purchase equity securities that are volatile and may
fluctuate in value more than other types of investments.
ARE MY INVESTMENTS INSURED? Any guaranty by the U.S. Government, its
agencies or instrumentalities of the securities in which any Fund invests
guarantees only the payment of principal and interest on the guaranteed
security and does not guarantee the yield or value of the security or the
yield or value of shares of that Fund. The Trust's shares are not federally
insured by the FDIC or any other government agency.
For more information about each Fund, see "Investment Objectives and
Policies," "General Investment Policies," and "Description of Permitted
Investments and Risk Factors."
HOW DO I PURCHASE SHARES? The Funds offer two classes of shares to the
general public: Class A shares and Class B shares.
Class A shares are offered at net asset value per share plus a maximum
initial sales charge of 3.50%. Certain purchases of Class A shares qualify for
waived or reduced initial sales charges. Class A shares of the Funds are not
subject to sales charges at the time of redemption and are not assessed any
annual distribution fees.
Class B shares are offered at net asset value per share and are subject to a
maximum contingent deferred sales charge of 3.50% of redemption proceeds
during the first year, declining each year thereafter to 0% after the fifth
year. Class B shares of the Funds pay annual distribution and service fees of
.75% of their average daily net assets. Class B shares convert automatically
to Class A shares five years after the beginning of the calendar month in
which the shareholder's purchase order was accepted. For more information on
Class A and Class B shares, see "How to Purchase Shares," "Alternative Sales
Charge Options" and "The Distributor."
WHO IS THE ADVISER? The Trust Group of First National Bank of Commerce in
New Orleans (the "Adviser") serves as the Adviser to each Fund. See "Expense
Summary" and "The Adviser."
WHO IS THE ADMINISTRATOR? SEI Financial Management Corporation serves as the
Administrator of the Trust. See "Expense Summary" and "The Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as transfer agent,
dividend disbursing agent and shareholder servicing agent for the Trust. See
"The Shareholder Servicing Agent and Transfer Agent".
WHO IS THE DISTRIBUTOR? SEI Financial Services Company serves as distributor
of the Trust's shares. See "The Distributor."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of each Fund is distributed in the form of
periodic dividends. Any net realized capital gain is distributed at least
annually. Distributions are paid in additional shares unless the shareholder
elects to take the payment in cash. See "Dividends."
2
<PAGE>
EXPENSE SUMMARY
<TABLE>
<CAPTION>
ALL FUNDS
SHAREHOLDER TRANSACTION EXPENSES CLASS A
- ---------------------------------------------------------------------------------
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) 3.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage
of offering price) None
*Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as applicable) None
Wire Redemption Fee $25
Exchange Fee None
</TABLE>
* Effective March 1, 1996, a redemption charge of 1.00% will be assessed
against the proceeds of any redemption request relating to Class A shares
of the Funds that were purchased without a sales charge in reliance upon
the waiver accorded to purchases in the amount of $1 million or more, but
only where such redemption request is made within 1 year of the date the
shares were purchased. See "Alternative Sales Charge Options--Class A
Shares."
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
LOUISIANA
GOVERNMENT TAX-FREE
SECURITIES INCOME BALANCED VALUE EQUITY GROWTH EQUITY
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisory Fees (after fee
waivers) (1) .41% .17% .60% .67% .59%
Administration Fees .20% .20% .20% .20% .20%
12b-1 Fees .00% .00% .00% .00% .00%
Other Expenses .09% .28% .10% .13% .21%(2)
- ----------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers)
(3)(4) .70% .65% .90% 1.00% 1.00%
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
(1) The Adviser has voluntarily agreed to waive its fee to the extent
necessary to keep "Total Operating Expenses" from exceeding .70% for the
Government Securities Fund, .65% for the Louisiana Tax-Free Income Fund,
.90% for the Balanced Fund, 1.00% for the Value Equity Fund and 1.00% for
the Growth Equity Fund. The Adviser reserves the right to terminate its
waiver at any time in its sole discretion. Absent such waivers, advisory
fees would be as follows: Government Securities Fund--.55%; Louisiana Tax-
Free Income Fund--.35%; Balanced Fund--.74%, Value Equity Fund--.74% and
Growth Equity Fund--.74%.
(2) Other Expenses for the Growth Equity Fund are based on estimated amounts
for the current fiscal year.
(3) Absent the Adviser's voluntary fee waiver, Total Operating Expenses for
Class A shares would be as follows: Government Securities Fund--.84%;
Louisiana Tax-Free Income Fund--.83%; Balanced Fund--1.04%, Value Equity
Fund--1.07% and Growth Equity Fund--1.15%.
(4) Total Operating Expenses for the Balanced Fund and Value Equity Fund have
been restated to reflect current fees.
EXAMPLE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment in Class A shares
assuming (1) imposition of the maximum
sales load; (2) 5% annual return and
(3) redemption at the end of each time
period:
Government Securities Fund $42 $57 $73 $119
Louisiana Tax-Free Income Fund $41 $55 $70 $113
Balanced Fund $44 $63 $83 $142
Value Equity Fund $45 $66 $88 $153
Growth Equity Fund $45 $66
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the foregoing table and example is to assist the investor in
understanding the various costs and expenses that may be directly or
indirectly borne by investors in Class A shares of the Funds. Shareholders
purchasing shares through a financial institution may be charged additional
account fees by that institution. The information set forth in the foregoing
table and example relates only to Class A shares. Additional information may
be found under "The Adviser," "The Administrator," and "The Distributor."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Alternative Sales Charge Options-Class
A Shares."
3
<PAGE>
<TABLE>
<CAPTION>
ALL FUNDS
SHAREHOLDER TRANSACTION EXPENSES CLASS B
- -------------------------------------------------------------------------------
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds,
as applicable) 3.50%
Wire Redemption Fee $25
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
LOUISIANA
GOVERNMENT TAX-FREE
SECURITIES INCOME BALANCED VALUE EQUITY GROWTH EQUITY
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisory Fees (after fee
waivers) (1) .41% .17% .60% .67% .59%
Administration Fees .20% .20% .20% .20% .20%
12b-1 Fees .75% .75% .75% .75% .75%
Other Expenses .09% .28% .10% .13% .21%(2)
- ----------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers)
(3)(4) 1.45% 1.40% 1.65% 1.75% 1.75%
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
(1) The Adviser has voluntarily agreed to waive its fee to the extent
necessary to keep "Total Operating Expenses" from exceeding 1.45% for the
Government Securities Fund, 1.40% for the Louisiana Tax-Free Income Fund,
1.65% for the Balanced Fund, 1.75% for the Value Equity Fund, and 1.75%
for the Growth Equity Fund. The Adviser reserves the right to terminate
its waiver at any time in its sole discretion. Absent such waivers,
advisory fees would be as follows: Government Securities Fund--.55%;
Louisiana Tax-Free Income Fund--.35%; Balanced Fund--.74%, Value Equity
Fund--.74% and Growth Equity Fund--.74%.
(2) Other Expenses for the Growth Equity Fund are based on estimated amounts
for the current fiscal year.
(3) Absent the Adviser's and, with respect to the Louisiana Tax-Free Income
Fund Administrator's, voluntary fee waiver, Total Operating Expenses for
Class B shares would be as follows: Government Securities Fund--1.59%;
Louisiana Tax-Free Income Fund--1.58%; Balanced Fund--1.79%; Value Equity
Fund--1.82%; and Growth Equity Fund--1.90%.
(4) Total Operating Expenses for the Balanced Fund and Value Equity Fund have
been restated to reflect current fees.
EXAMPLE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment in Class B shares assuming
(1) deduction of the maximum contingent
deferred sales charge applicable and (2) 5%
annual return:
Government Securities Fund
Assuming a complete redemption at end
of period $50 $66 $ 84 $174
Assuming no redemptions $15 $46 $ 79 $174
Louisiana Tax-Free Income Fund
Assuming a complete redemption at end
of period $49 $64 $ 82 $168
Assuming no redemptions $14 $44 $ 77 $168
Balanced Fund
Assuming a complete redemption at end
of period $52 $72 $ 95 $195
Assuming no redemptions $17 $52 $ 90 $195
Value Equity Fund
Assuming a complete redemption at end
of period $53 $75 $100 $206
Assuming no redemptions $18 $55 $ 95 $206
Growth Equity Fund
Assuming a complete redemption at end
of period $53 $75
Assuming no redemptions $18 $55
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the foregoing table and example is to assist the investor in
understanding the various costs and expenses that may be directly or
indirectly borne by investors in Class B shares of the Funds. The information
set forth in the foregoing table and example relates only to Class B shares.
Additional information may be found under "The Adviser," "The Administrator,"
and "The Distributor."
Long-term Class B shareholders may eventually pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by
National Association of Securities Dealers, Inc.'s Rules of Fair Practice.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout the year,
insofar as they relate to the fiscal year ended September 30, 1995, have been
audited by Arthur Andersen LLP, independent public accountants, whose report
thereon was unqualified. This information should be read in conjunction with
the Trust's financial statements and notes thereto which are included in the
Statement of Additional Information under the heading "Financial Information."
Additional performance information is set forth in the Trust's 1995 Annual
Report to Shareholders and is available upon request and without charge by
calling 1-800-471-1144. The Growth Equity Fund had not commenced operations at
September 30, 1995.
For a Class A Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
REALIZED RATIO OF RATIO OF
AND EXPENSES NET INCOME
NET ASSET UNREALIZED DISTRIBUTIONS NET ASSET NET ASSETS RATIO OF RATIO OF TO AVERAGE TO AVERAGE
VALUE NET GAINS OR FROM NET VALUE END OF EXPENSES NET INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT END OF TOTAL PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INVESTMENTS INCOME PERIOD RETURN+ (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ----------- ------------- --------- ------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT SECURITIES FUND CLASS A
1995 $ 9.41 $0.54 $ 0.46 $(0.54) $ 9.87 10.84 % $124,404 0.70% 5.63% 0.84% 5.49%
1994 10.00 0.43 (0.59) (0.43) 9.41 (1.66) 97,562 0.70 4.43 0.90 4.23
LOUISIANA TAX-FREE INCOME FUND CLASS A
1995 $ 9.38 $0.42 $ 0.41 $(0.42) $ 9.79 9.01 % $ 11,705 0.65% 4.51% 0.95% 4.21%
1994 10.00 0.36 (0.62) (0.36) 9.38 (2.68) 6,971 0.65 4.10 1.72 3.03
BALANCED FUND CLASS A
1995 $ 9.59 $0.37 $ 1.28 $(0.37) $10.87 17.58 % $ 87,076 0.85% 3.70% 1.04% 3.51%
1994 10.00 0.31 (0.41) (0.31) 9.59 (1.02) 71,379 0.85 3.18 1.14 2.89
VALUE EQUITY FUND CLASS A
1995 $ 9.65 $0.24 $ 2.16 $(0.24) $11.81 25.13 % $ 58,854 0.90% 2.40% 1.07% 2.23%
1994 10.00 0.18 (0.35) (0.18) 9.65 (1.64) 41,922 0.90 1.95 1.17 1.68
<CAPTION>
PORTFOLIO
TURNOVER
RATE
---------
<S> <C>
GOVERNMENT SECURITIES FUND CLASS A
1995 18.33%
1994 37.80
LOUISIANA TAX-FREE INCOME FUND CLASS A
1995 2.31%
1994 30.31
BALANCED FUND CLASS A
1995 55.06%
1994 64.09
VALUE EQUITY FUND CLASS A
1995 97.88%
1994 161.42
</TABLE>
- --------
+ Total Return does not reflect sales load on Class A shares.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout the year,
insofar as they relate to the fiscal year ended September 30, 1995, have been
audited by Arthur Andersen LLP, independent public accountants, whose report
thereon was unqualified. This information should be read in conjunction with
the Trust's financial statements and notes thereto which are included in the
Statement of Additional Information under the heading "Financial Information."
Additional performance information is set forth in the Trust's 1995 Annual
Report to Shareholders and is available upon request and without charge by
calling 1-800-471-1144. The Growth Equity Fund had not commenced operations at
September 30, 1995.
For a Class B Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
REALIZED RATIO OF
AND EXPENSES
NET ASSET UNREALIZED DISTRIBUTIONS NET ASSET NET ASSETS RATIO OF RATIO OF TO AVERAGE
VALUE NET GAINS OR FROM NET VALUE END OF EXPENSES NET INCOME NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT END OF TOTAL PERIOD TO AVERAGE TO AVERAGE (EXCLUDING
OF PERIOD INCOME INVESTMENTS INCOME PERIOD RETURN+ (000) NET ASSETS NET ASSETS WAIVERS)
--------- ---------- ----------- ------------- --------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT SECURITIES FUND CLASS B
1995 $ 9.46 $0.46 $ 0.47 $(0.47) $ 9.92 10.10% $ 244 1.45% 4.86% 1.59%
1994(1) 10.04 0.31 (0.58) (0.31) 9.46 (2.84)* 147 1.45* 3.88* 1.69*
LOUISIANA TAX-FREE INCOME FUND CLASS B
1995 $ 9.39 $0.35 $ 0.40 $(0.35) $ 9.79 8.21% $ 567 1.40%* 3.77% 1.70%
1994(2) 9.87 0.27 (0.48) (0.27) 9.39 (2.58)* 601 1.40* 3.35* 2.47*
BALANCED FUND CLASS B
1995 $ 9.64 $0.30 $ 1.29 $(0.30) $10.93 16.75% $1,137 1.60%* 2.95% 1.79%
1994(1) 10.03 0.18 (0.39) (0.18) 9.64 (2.24)* 868 1.60* 2.55* 1.94*
VALUE EQUITY FUND CLASS B
1995 $ 9.70 $0.15 $ 2.17 $(0.16) $11.86 24.17% $1,288 1.65% 1.62% 1.82%
1994(1) 9.95 0.08 (0.25) (0.08) 9.70 (1.82)* 389 1.65* 1.30* 1.93*
<CAPTION>
RATIO OF
NET INCOME
TO AVERAGE
NET ASSETS PORTFOLIO
(EXCLUDING TURNOVER
WAIVERS) RATE
---------- ---------
<S> <C> <C>
GOVERNMENT SECURITIES FUND CLASS B
1995 4.72% 18.33%
1994(1) 3.64* 37.80
LOUISIANA TAX-FREE INCOME FUND CLASS B
1995 3.47% 2.31%
1994(2) 2.28* 30.31
BALANCED FUND CLASS B
1995 2.76% 55.06%
1994(1) 2.21* 64.09
VALUE EQUITY FUND CLASS B
1995 1.45% 97.88%
1994(1) 1.02* 161.42
</TABLE>
- --------
+ Total return does not reflect contingent deferred sales charge on Class B
shares.
* Annualized.
(1) Commenced operations on October 22, 1993.
(2) Commenced operations on November 22, 1993.
6
<PAGE>
THE TRUST
MARQUIS FUNDS(R) (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in the Funds through two
separate classes, Class A and Class B, which provide for variations in sales
charges, distribution costs, voting rights and dividends. Except for these
differences between classes, each share of each Fund represents an undivided,
proportionate interest in that Fund. Each Fund is a diversified mutual fund,
except for the Louisiana Tax-Free Income Fund, which is non-diversified.
Information regarding shares of the Trust's Treasury Securities Money Market
Fund, Institutional Money Market Fund and Tax Exempt Money Market Fund (the
"Money Market Funds") is contained in separate prospectuses that may be
obtained by calling 1-800-471-1144.
INVESTMENT OBJECTIVES AND POLICIES
THE GOVERNMENT SECURITIES FUND seeks to provide current income consistent with
relative stability of capital.
Under normal conditions, the Fund will invest at least 65% of its total assets
in obligations issued or guaranteed as to principal and interest by the U.S.
Government or its agencies and instrumentalities ("U.S. Government
securities"). The Fund may also invest in the following securities if, at the
time of purchase, the security either has the requisite rating from a
nationally recognized statistical rating organization ("NRSRO") or is of
comparable quality as determined by First National Bank of Commerce in New
Orleans (the "Adviser"): (i) corporate bonds and debentures rated in one of the
four highest rating categories by an NRSRO; (ii) privately issued mortgage-
backed securities rated in the highest rating category by an NRSRO; (iii)
asset-backed securities rated in the highest rating category by an NRSRO; (iv)
repurchase agreements involving any of the foregoing securities (including U.S.
Government securities); and (v) Money Market Securities (as defined in the
"Description of Permitted Investments and Risk Factors"). For a description of
ratings, see "Appendix."
Normally, the Fund will maintain a dollar-weighted average portfolio maturity
of three to ten years; however, under certain circumstances this average
weighted maturity may fall below three years. In determining the maturity of
mortgage-backed securities, the Adviser will use the estimated average life of
such securities. There are no restrictions on the maturity of any single
instrument.
THE LOUISIANA TAX-FREE INCOME FUND (the "Louisiana Fund") seeks to provide a
level of current income consistent with relative stability of capital.
The Fund will invest at least 80% of its net assets in fixed income securities
the interest on which, in the opinion of bond counsel for the issuer, is exempt
from federal income tax ("Municipal Securities") and is not a preference item
for purposes of the alternative minimum tax. Under normal conditions, at least
65% of the Louisiana's Fund's total assets will be invested in Municipal
Securities the interest on which is exempt from personal income taxes imposed
by the State of Louisiana ("Louisiana Municipal Securities"). The Fund may
invest up to 20% of its net assets in (i) Municipal Securities the interest on
which is a preference item for purposes of the alternative minimum tax and (ii)
taxable investments, including Money Market Securities.
The Louisiana Fund may purchase the following types of Municipal Securities
(including Louisiana Municipal Securities) only if such securities, at the time
of purchase, either have the requisite rating from a NRSRO or are of comparable
quality as determined by the Adviser: (i) bonds and debentures rated in one of
the four highest rating categories by an NRSRO; (ii) notes and certificates of
participation rated in one of the three highest rating categories; and (iii)
commercial paper rated in one of the two highest rating categories.
Normally, the Fund will maintain a dollar-weighted average portfolio maturity
of seven to fifteen years; however, under certain circumstances this average
weighted maturity may fall below seven years. There are no restrictions on the
maturity of any single instrument.
7
<PAGE>
LOUISIANA RISK FACTORS--The Louisiana Fund is more susceptible to factors
adversely affecting issuers of Louisiana Municipal Securities than is a
comparable municipal bond fund that does not focus its investments in Louisiana
Municipal Securities. Although its economy has improved somewhat in recent
years, Louisiana experienced severe financial difficulties in the late 1980s
and continues to face the risks associated with a non-diversified economy. In
particular, the significance of the oil and gas industry in Louisiana's economy
has resulted in financial difficulties during unfavorable markets for oil and
gas products and in financial benefits during favorable markets. Further
difficulties may result from the uncertain state of the land-based casino in
New Orleans.
Louisiana is working to expand economic development activities that will take
advantage of its replenishable natural resources such as timber, water for
aquaculture, fish and seafood related products and related industrial uses of
such resources. The state is also pursuing further development of its
transportation capabilities by expanding port-related activities and improving
its highways and airports.
General obligations of Louisiana are currently rated A- and Baa1, by S&P and
Moody's, respectively. There can be no assurance that the economic conditions
on which these ratings are based will continue or that particular bond issues
may not be adversely affected by changes in economic, political or other
conditions. If either Louisiana or any of its local governmental entities is
unable to meet its financial obligations, the income derived by the Fund, the
Fund's net asset value, the ability to preserve or realize appreciation of the
Fund's capital or the Fund's liquidity could be adversely affected.
NON-DIVERSIFICATION--Investment in the Louisiana Fund, a non-diversified mutual
fund, may entail greater risk than would investment in a diversified mutual
fund. The Fund's ability to focus its investments on a fewer number of issuers
means that any economic, political, or regulatory developments affecting the
value of the securities in the Fund's portfolio could have a greater impact on
the total value of the portfolio than would be the case if the portfolio were
diversified among more issuers.
The Fund intends to comply with the diversification requirements of Subchapter
M of the Internal Revenue Code of 1986, as amended.
THE BALANCED FUND (formerly the "Growth and Income Fund") seeks to provide
capital appreciation and current income through regular payments of dividends
and interest.
Under normal conditions, the Fund will invest between 30% and 75% of its total
assets in common stocks, warrants, rights to purchase common stocks, debt
securities convertible into common stocks and preferred stocks of established
companies with market capitalizations in excess of $500 million (together,
"equity securities"). The Fund may also invest in equity securities of foreign
issuers traded in the United States, including American Depositary Receipts
("ADRs"). The Fund will purchase only those common stocks that are traded on
registered exchanges or actively traded in the over-the-counter market.
Under normal conditions, the Fund will invest between 25% and 70% of its total
assets in fixed income securities (other than Money Market Securities)
consisting of the following, but only if, at the time of purchase, such
securities either have the requisite rating from an NRSRO or are of comparable
quality as determined by the Adviser: (i) U.S. Government securities; (ii)
privately issued mortgage-backed securities rated in the highest rating
category; (iii) asset-backed securities rated in the highest rating category;
or (iv) corporate bonds and notes and bank obligations rated in one of the four
highest rating categories. The Fund will maintain at least 25% of its assets in
fixed income senior securities. The Fund is not subject to any maturity
restrictions on its investments in non-Money Market securities.
The Fund may also invest in Money Market Securities.
8
<PAGE>
In making allocation decisions, the Adviser will evaluate projections of risk,
market and economic conditions, volatility, yields and expected return. Because
the Fund in part seeks capital appreciation, the Adviser does not intend to
make frequent changes in asset allocation.
THE VALUE EQUITY FUND seeks to provide long-term capital appreciation.
The Fund will be as fully invested as practicable (at least 65% of its total
assets under normal conditions) in common stocks, warrants, rights to purchase
common stocks, debt securities convertible to common stocks and preferred
stocks (together, "equity securities"). The Fund will invest primarily in
equity securities of established companies with equity-market capitalizations
in excess of $500 million that the Adviser believes to have potential for
capital appreciation based on the soundness of the issuer and the company's
relative value based on an analysis of various fundamental financial
characteristics, including earnings yield, book value, cash flow, anticipated
future growth of dividends and earnings estimates. Although capital
appreciation is the primary purpose for investing in a security, the Fund will
focus on companies that pay current dividends. The Fund may invest in equity
securities of foreign issuers traded in the United States, including ADRs. The
Fund may also invest in Money Market Securities for cash management purposes.
THE GROWTH EQUITY FUND seeks to provide long-term capital appreciation.
The Fund will be as fully invested as practicable (at least 65% of its total
assets under normal conditions) in common stocks, warrants, rights to purchase
common stocks, debt securities convertible to common stocks and preferred
stocks (together, "equity securities"). The Fund will primarily invest in
equity securities of established companies with equity market capitalizations
in excess of $300 million that the Adviser believes to have potential for
capital appreciation. The Adviser initiates purchase and sale decisions based
on such growth and profitability measures as return on equity, earnings growth,
sales growth and expected return. Capital appreciation is the primary purpose
of the Fund. Current dividend income is a secondary consideration. The Fund may
invest in equity securities of foreign issuers traded in the United States,
including ADRs. The Fund may also invest in Money Market Securities for cash
management purposes.
For additional information regarding risks and permitted investments,
investment practices and risks, see "Description of Permitted Investments and
Risk Factors."
GENERAL INVESTMENT POLICIES
For temporary defensive purposes when the Adviser determines that market
conditions warrant, each Fund may invest up to 100% of its assets in Money
Market Securities and cash. To the extent a Fund is investing for temporary
defensive purposes, the Fund will not be pursuing its investment objective.
Each Fund, except the Value Equity Fund and Growth Equity Fund, may purchase
securities on a when-issued or delayed delivery basis.
Debt rated in the fourth highest ratings category such as BBB by Standard &
Poor's Corporation ("S&P") or Baa by Moody's Investor Services ("Moody's") is
regarded as having an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics.
INVESTMENT LIMITATIONS
The following investment limitations are fundamental policies of the Funds.
Fundamental policies cannot be changed with respect to the Funds without the
consent of the holders of a majority of the Fund's outstanding shares.
A Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if, as a result, more than 5% of the total assets of
the Fund would be invested in the securities of such issuer or more than 10% of
the outstanding voting securities of such issuer would be owned by
9
<PAGE>
the Fund. This restriction applies to 75% of the Fund's assets. This
restriction does not apply to the Louisiana Fund.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to (i) investments in the obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities, and
repurchase agreements involving such securities; and (ii) tax-exempt securities
issued by governments or political subdivisions of governments. For purposes of
this limitation (i) utility companies will be divided according to their
services, for example, gas, gas transmission, electric and telephone will each
be considered a separate industry; (ii) financial service companies will be
classified according to the end users of their services, for example,
automobile finance, bank finance and diversified finance will each be
considered a separate industry; (iii) supranational entities will be considered
to be a separate industry; and (iv) asset-backed securities secured by distinct
types of assets, such as truck and auto loan leases, credit card receivables
and home equity loans, will each be considered a separate industry.
3. Make loans except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objectives and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
HOW TO PURCHASE SHARES
Class A shares and Class B shares of the Funds may be purchased directly from
the shareholder servicing and transfer agent, DST Systems, Inc. ("DST") by
mail, by wire or through an automatic investment plan ("AIP"). Shares may also
be purchased through broker-dealers, including Marquis Investments, Inc., that
have established a dealer agreement with SEI Financial Services Company, the
Trust's distributor ("the Distributor"). Shares of the Fund are sold on a
continuous basis.
HOW TO PURCHASE BY MAIL
You may purchase Class A or Class B shares of a Fund by completing and signing
an Account Application form and mailing it, along with a check (or other
negotiable bank instrument or money order) payable to "Marquis Funds (Fund
Name)," to DST at 210 West 10th Street, Kansas City, MO 64105. You may purchase
additional shares at any time by mailing payment to DST. Orders placed by mail
will be executed on receipt of your payment. If your check does not clear, your
purchase will be cancelled and you could be liable for any losses or fees
incurred.
You may obtain Account Application forms by calling 1-800-471-1144.
HOW TO PURCHASE BY WIRE
You may purchase shares by wiring Federal funds, provided that your Account
Application has been previously received. You must wire funds to DST and the
wire instructions must include your account number. You must call 1-800-471-
1144 before wiring any funds. An order to purchase shares by Federal funds wire
will be deemed to have been received by the Fund on the Business Day (defined
below) of the wire; provided that the shareholder notifies DST prior to 3:00
p.m., Central time. If DST does not receive notice by 3:00 p.m., Central time,
on the Business Day of the wire, the order will be executed on the next
Business Day.
HOW TO PURCHASE THROUGH AN AUTOMATIC INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Funds through
automatic deductions by Automated Clearing House ("ACH") from a checking
account by completing an AIP Application Form. The minimum pre-authorized
investment amount is $50 per month. An AIP Application Form may be obtained by
calling
10
<PAGE>
1-800-471-1144. The AIP is available only for additional investments for an
existing account.
GENERAL INFORMATION
You may purchase Class A shares and Class B shares of the Funds on any day the
New York Stock Exchange is open for business ("Business Days"). However, shares
of the Funds cannot be purchased by Federal Reserve wire on Federal holidays
restricting wire transfers. The minimum initial investment in either class of
any Fund is $2,500 ($500 minimum for individual retirement accounts and
employees of First National Bank of Commerce in New Orleans, the Funds'
investment adviser (the "Adviser") or its affiliates); however, the Distributor
may waive the minimum investment at its discretion. Subsequent purchases of
shares must be at least $100 except for purchases through the AIP and payroll
deductions, which must be at least $50.
A purchase order for shares will be effective as of the Business Day received
by the Distributor if the Distributor receives the order and payment before
3:00 p.m., Central time. The purchase price of Class A shares of a Fund is the
net asset value next determined after the purchase order is effective plus the
applicable sales load, if any. The purchase price of Class B shares is the net
asset value next determined after the purchase order is effective.
The net asset value per share of any Fund is determined as of the close of
trading on the New York Stock Exchange (currently, 3:00 p.m., Central time) on
each Business Day by dividing the total market value of that Fund's investments
and other assets, less any liabilities, by the total outstanding shares of the
Fund. Purchases will be made in full and fractional shares calculated to three
decimal places. Pursuant to guidelines adopted and monitored by the Trustees of
the Trust, each Fund may use a pricing service to provide market quotations or
fair market valuations. A pricing service may derive such valuations through
the use of a matrix system to value fixed income securities which considers
factors such as securities prices, yield features, ratings, and developments
related to a specific security. Although the methodology and procedures for
determining net asset value are identical for both classes of a Fund, the net
asset value per share of such classes may differ because of the distribution
expenses charged to Class B shares.
The Trust reserves the right to reject a purchase order for shares when the
Distributor determines that it is not in the best interest of the Trust and/or
its shareholders to accept such order.
Shareholders who own their shares of record and who desire to transfer
registration of their shares should call 1-800-471-1144.
HOW TO PURCHASE THROUGH FINANCIAL INSTITUTIONS
Shares may also be purchased through financial institutions, including the
Adviser, that provide distribution assistance or shareholder services to the
Trust. Shares purchased by persons ("Customers") through financial institutions
may be held of record by the financial institution. Financial institutions may
impose an earlier cut-off time for receipt of purchase orders directed through
them to allow for processing and transmittal of these orders to the Distributor
for effectiveness the same day. Customers should contact their financial
institution for information as to that institution's procedures for
transmitting purchase, exchange or redemption orders to the Trust.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution. Certain of these financial institutions may be required under
state law to register as broker/dealers.
ALTERNATIVE SALES CHARGE OPTIONS
THE TWO ALTERNATIVES: OVERVIEW
You may purchase shares of the Funds at a price equal to their net asset value
per share plus a
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sales charge which, at your election, may be imposed either (i) at the time of
the purchase (Class A "initial sales charge alternative"), or (ii) on a
contingent deferred basis (the Class B "deferred sales charge alternative").
Each class represents a Fund's interest in the portfolio of investments. The
classes have the same rights and are identical in all respects except that (i)
Class B shares bear the expenses of the deferred sales arrangement and
distribution and service fees resulting from such sales arrangement, (ii) each
class has exclusive voting rights with respect to approvals of any Rule 12b-1
distribution plan related to that specific class (although Class B shareholders
may vote on any distribution fees imposed on Class A shares so long as Class B
shares convert into Class A shares) and (iii) only Class B shares carry a
conversion feature. Each class has different exchange privileges. See
"Exchanges." Sales personnel of broker-dealers distributing the Funds' shares,
and other persons entitled to receive compensation for selling such shares, may
receive differing compensation for selling Class A or Class B shares.
The alternative purchase arrangement permits you to choose the method of
purchasing shares that is more beneficial to you. The amount of your purchase,
the length of time you expect to hold the shares, and whether you wish to
receive dividends in cash or in additional shares will all be factors in
determining which sales charge option is best for you. You should consider
whether, over the time you expect to maintain your investment, the accumulated
distribution and service fees and contingent deferred sales charges on Class B
shares prior to conversion would be less than the initial sales charge on Class
A shares, and to what extent such differential would be offset by the expected
higher yield of Class A shares. Class A shares will normally be more beneficial
to you if you qualify for reduced sales charges as described below.
The Trustees of the Trust have determined that currently no conflict of
interest exists between the Class A and Class B shares. On an ongoing basis,
the Trustees of the Trust, pursuant to their fiduciary duties under the
Investment Company Act of 1940, as amended (the "1940 Act") and state laws,
will seek to ensure that no such conflict arises.
CLASS A SHARES
Sales Load The following table shows the regular sales charge on Class A shares
to a "single purchaser" (defined below) together with the sales charge that is
reallowed to certain financial intermediaries (the "reallowance").
<TABLE>
<CAPTION>
SALES SALES REALLOWANCE
CHARGE AS CHARGE AS AS
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF OFFERING OF NET OF OFFERING
OF PRICE PER AMOUNT PRICE PER
PURCHASE SHARE INVESTED SHARE
-------- ----------- ---------- -----------
<S> <C> <C> <C>
Less than $100,000 3.50% 3.63% 3.15%
$100,000 but less than $250,000 2.50% 2.56% 2.25%
$250,000 but less than $500,000 2.00% 2.04% 1.80%
$500,000 but less than $1,000,000 1.50% 1.52% 1.35%
*$1,000,000 and above none none none
</TABLE>
* Effective March 1, 1996, a redemption charge of 1.00% will be assessed
against the proceeds of any redemption request relating to Class A shares of
the Funds that were purchased without a sales charge in reliance upon the
waiver accorded to purchases in the amount of $1 million or more, but only
where such redemption request is made within 1 year of the date the shares
were purchased. The charge will be based on the lesser of: (i) the net asset
value of your redeemed Class A shares at the time of redemption, or (ii) the
net asset value of your redeemed shares at the time of purchase. The
redemption charge does not apply to shares acquired through the reinvestment
of dividends. This charge is payable to the Distributor.
The sales charge shown in the table is the maximum sales charge that applies to
sales through financial intermediaries. With respect to purchases of Class A
shares of $1,000,000 or more, payment equal to as much as 1.00% of the purchase
price may be paid to financial intermediaries through which sales are made. The
Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs, which will be paid by the Distributor from
the sales charge it receives or from any other source available to it. Under
any
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such program, the Distributor will provide promotional incentives, in the form
of cash or other compensation, including merchandise, airline vouchers, trips
and vacation packages, to all dealers selling shares of the Funds. Such
promotional incentives will be offered uniformly to all dealers and predicated
upon the amount of shares of the Funds sold by the dealer. Under certain
circumstances, reallowances of up to the amount of the entire sales charge may
be paid to certain financial institutions, who might then be deemed to be
"underwriters" under the Securities Act of 1933. Commission rates may vary
among the Funds.
Reduced Sales Charge:
Rights of Accumulation
In calculating the sales charge rates applicable to current purchases of Class
A shares, a "single purchaser" is entitled to cumulate current purchases with
the current market value of previously purchased Class A shares of the Funds
sold subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Funds for their own account or for trust or
custodial accounts for their minor children, and (iii) a fiduciary purchasing
for any one trust, estate or fiduciary account, including employee benefit
plans created under Sections 401 or 457 of the Internal Revenue Code of 1986,
as amended (the "Code") including related plans of the same employer.
To exercise your right of accumulation based upon shares you already own, you
must ask the Distributor for this reduced sales charge at the time of your
additional purchase and provide the account number(s) of the investor, as
applicable, the investor and spouse, and their minor children. The Funds may
amend or terminate this right of accumulation at any time as to subsequent
purchases.
Reduced Sales Charge: Letter of Intent
By submitting a Letter of Intent (the "Letter") to the Distributor, a "single
purchaser" may purchase shares of the Funds during a 13-month period at the
reduced sales charge rates applying to the aggregate amount of the intended
purchases stated in the Letter. The Letter may apply to purchases made up to 90
days before the date of the Letter. To receive credit for such prior purchases
and later purchases benefitting from the Letter, you must notify the Transfer
Agent at the time the Letter is submitted that there are prior purchases that
may apply, and notify the Transfer Agent again at the time of later purchases
that such purchases are applicable under the Letter.
Waiver of Sales Load
No sales charge is imposed on shares of the Funds: (i) issued as dividends and
capital gain distributions; (ii) acquired through the exercise of exchange
privileges described below; (iii) sold to officers, directors or trustees,
employees and retirees (and their spouses and immediate family members) of the
Trust, First Commerce Corporation and its subsidiaries, affiliates, and
correspondents, and the Distributor and its subsidiaries and affiliates; (iv)
sold to certain accounts for which the Adviser or subsidiaries, affiliates and
correspondents of First Commerce Corporation serve in a fiduciary, agency or
custodial capacity; (v) issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Trust is a party; (vi)
purchased with the proceeds of employee benefit plan distributions for which
the Adviser and its affiliates act in a fiduciary capacity; (vii) purchased
within thirty days of a redemption of Class A shares of such Funds (only to the
amount of such redemption); (viii) sold to purchasers of Class A shares of the
Value Equity Fund that are sponsors of other investment companies which are
unit investment trusts for deposit by such sponsors into such unit investment
trusts, and purchasers of Class A shares of the Value Equity Fund that are
holders of such unit investment trusts that invest distributions from such unit
investment trusts in Class A shares of the Value Equity Fund; (ix) purchased
within thirty days of a redemption of Class B shares of such Funds for which
the contingent deferred sales charge was paid (only to the amount of such
redemption); or (x) sold to clients who have enrolled in asset allocation
programs sponsored or operated by the Adviser or
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<PAGE>
subsidiaries, affiliates and correspondents of First Commerce Corporation. In
addition, if you acquire Class A shares of a Fund through an exchange of shares
of a Money Market Fund, you will not be charged a sales load on any portion of
your investment on which you were previously subject to the Funds' sales
charges. You must notify the Distributor at the time of your purchase if you
are eligible for a waiver of the sales load.
CLASS B SHARES
Contingent Deferred Sales Charge
If you redeem your Class B shares within five years of purchase, you will pay a
contingent deferred sales charge at the rates set forth below. You will not be
required to pay the contingent deferred sales charge on exchange of your Class
B shares of any Fund for Class B shares of any other Fund. See "Exchanges." The
charge is assessed on an amount equal to the lesser of the then-current market
value or the cost of the shares being redeemed. Accordingly, no sales charge is
imposed on increases in net asset value above the initial purchase price. In
addition, no charge is assessed on shares derived from reinvestment of
dividends or capital gain distributions.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEAR SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
---------- -------------------------
<S> <C>
First 3.50%
Second 2.75%
Third 2.00%
Fourth 1.25%
Fifth 0.50%
Sixth None
</TABLE>
In determining whether a particular redemption is subject to a contingent
deferred sales charge, it is assumed that the redemption is first of any Class
A shares in the shareholder's Fund account, second of shares held for over five
years or shares acquired pursuant to reinvestment of dividends or other
distributions and third of shares held longest during the five-year period.
This method should result in the lowest possible sales charge.
The contingent deferred sales charge is waived on redemption of shares (i)
following the death or disability (as defined in the Code) of a shareholder, or
(ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to
a shareholder who has attained the age of 70 1/2. A shareholder, or his or her
representative, must notify the Transfer Agent prior to the time of redemption
if such circumstances exist and the shareholder is eligible for this waiver.
CONVERSION FEATURE. At the end of the period ending five years after the
beginning of the month in which the shares were issued, Class B shares will
automatically convert to Class A shares and will no longer be subject to the
distribution and service fees. Such conversion will be on the basis of the
relative net asset values of the two classes.
EXCHANGES
Exchanges are generally made at net asset value. You may exchange Class A or
Class B shares of any Fund for Class A or Class B shares, respectively, of any
other Fund without paying any additional sales charge. You may exchange an
investment in Class A shares of any Fund for shares of the Money Market Fund,
and move your investment back into Class A shares of any Fund, without paying
any additional sales charge.
For purposes of calculating the Class B shares' five year conversion period or
contingent deferred sales charge payable upon redemption, the holding period of
Class B shares of the "old" Fund and the holding period for Class B shares of
the "new" Fund are aggregated.
You must have received a current prospectus of the Fund into which you wish to
move your investment before the exchange will be effected. Exchanges will be
made only after instructions in writing or by telephone (an "Exchange Request")
are received by DST. If an Exchange Request in good order is received by DST by
3:00 p.m. Central time, on any Business Day, the exchange will occur on that
day. The exchange privilege may be exercised only in those states where the
class or shares of the "new" fund may legally be sold.
Customers who beneficially own shares held of record by a financial institution
should contact that
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<PAGE>
institution if they wish to exchange shares. The institution will contact DST
and effect the exchange on behalf of the Customer.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $25 charge for wiring redemption proceeds. Shares may be redeemed by
mail, by telephone or through a systematic withdrawal plan. Investors who own
shares held of record by a financial institution should contact that
institution for information on how to redeem shares.
BY MAIL
A written request for redemption must be received by DST in order to constitute
a valid redemption request.
If the redemption request exceeds $5,000, or if the request directs the
proceeds to be sent or wired to a shareholder or an address different from that
on record, DST may require that the signature on the written redemption request
be guaranteed. You should be able to obtain a signature guarantee from a bank,
broker, dealer, credit union, securities exchange or association, clearing
agency or savings association. Notaries public cannot guarantee signatures.
BY TELEPHONE
You may redeem your shares by telephone if you have elected that option on the
Account Application. Under most circumstances, payments will be transmitted on
the next Business Day following receipt of a valid request for redemption. You
may have the proceeds mailed to your address or wired to a commercial bank
account previously designated on your Account Application. There is no charge
for having redemption proceeds mailed to you, but there is a $25 charge for
wiring redemption proceeds.
You may request a wire redemption for redemptions in excess of $500 by calling
1-800-471-1144, however a wire charge of $25 will be deducted from the amount
of the wire redemption. Shares cannot be redeemed by Federal Reserve wire on
Federal holidays restricting wire transfers.
Neither DST nor the Trust will be responsible for any loss, liability, cost or
expense for acting upon wire or telephone instructions that it reasonably
believes to be genuine. The Trust and DST will each employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
including requiring a form of personal identification prior to acting upon
instructions received by telephone and recording telephone instructions. When
market conditions are extremely busy, it is possible that you may experience
difficulties placing redemption orders by telephone, and may wish to place them
by mail.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Funds offer a Systematic Withdrawal Plan ("SWP"), which you may use to
receive regular distributions from your account. Upon commencement of the SWP,
your account must have a current value of $5,000 or more. You may elect to
receive automatic payments via check or ACH of $100 or more on a monthly,
quarterly, semi-annual or annual basis. You may obtain an SWP Application Form
by calling 1-800-471-1144.
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could
be exhausted entirely. You may change or cancel the SWP at any time on written
notice to DST.
It is generally not in your best interest to be participating in the SWP at the
same time that you are purchasing additional shares if you have to pay a sales
load in connection with such purchases. Because automatic withdrawals of Class
B shares will be subject to the contingent deferred sales charge, it may not be
in the best interest of Class B shareholders to participate in the SWP.
15
<PAGE>
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption, reduced by any
applicable contingent deferred sales charge for Class B shares. Net asset value
per share is determined as of 3:00 p.m., Central time, on each Business Day.
Payment to shareholders for shares redeemed will be made within seven days
after DST receives the valid redemption request. At various times, however, a
Fund may be requested to redeem shares for which it has not yet received good
payment; collection of payment may take ten or more days. In such
circumstances, redemption proceeds will be held pending clearance of the check.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem your shares at net asset value, less any
applicable contingent deferred sales charge, if, because of redemptions, your
account in any Fund has a value of less than the minimum initial purchase
amount (normally $2,500; $500 for individual retirement accounts and employees
of the Adviser or its affiliates). Accordingly, if you purchase shares of any
Fund in only the minimum investment amount, you may be subject to involuntary
redemption if you redeem any shares. Before any Fund exercises its right to
redeem such shares, you will be given notice that the value of the shares in
your account is less than the minimum amount and will be allowed 60 days to
make an additional investment in such Fund in an amount which will increase the
value of the account to at least the minimum amount.
THE ADVISER
First National Bank of Commerce in New Orleans (the "Adviser"), 210 Baronne
Street, New Orleans, Louisiana 70112, serves as each Fund's investment adviser
under an advisory agreement (the "Advisory Agreement") with the Trust. The
Adviser, through its Trust Group, makes the investment decisions for the assets
of the Funds and continuously reviews, supervises and administers the
investment programs of the Funds, subject to the supervision of, and policies
established by, the Trustees of the Trust.
As of September 30, 1995, the Adviser's Trust Group managed approximately $2.0
billion in discretionary investment management accounts for individuals,
corporations and institutions with widely varying investment needs and
objectives. The Trust Group has managed assets with similar investment
objectives and policies to those of the Funds for the past seven years. The
Adviser has provided investment management services since 1933. The Adviser is
a wholly-owned subsidiary of First Commerce Corporation.
The Glass-Steagall Act restricts the securities activities of national banks
such as First National Bank of Commerce in New Orleans but the Comptroller of
the Currency permits national banks to provide investment advisory and other
services to mutual funds. Should the Comptroller's position be challenged
successfully in court or reversed by legislation, the Trust might have to make
other investment advisory arrangements.
The Trust's shares are not sponsored, endorsed or guaranteed by, and do not
constitute obligations or deposits of, the Adviser or First Commerce
Corporation and are not insured by the FDIC or issued or guaranteed by the U.S.
Government or any of its agencies.
The Adviser is entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of .55% of the average daily net assets of the Government
Securities Fund, .74% of the average daily net assets of each of the Balanced
Fund and Value Equity Fund and .35% of the average daily net assets of the
Louisiana Fund and .74% for the Growth Equity Fund. The Adviser may voluntarily
waive a portion of its fees in order to limit the total operating expenses of
the Funds. The Adviser reserves the right, in its sole discretion, to terminate
these voluntary fee waivers at any time. For the fiscal year ended September
30, 1995, the Adviser was paid an advisory fee of .41% of the Government
Securities Fund, .06% of the Louisiana Tax-Free Income Fund, .55% of the
Balanced Fund, and .57% of the Value Equity Fund, based on each Fund's average
net assets. The Growth
16
<PAGE>
Equity Fund had not commenced operations as of September 30, 1995.
John C. Portwood, CFA, Senior Vice President of the Adviser, has had oversight
responsibility of the portfolio managers of all the Funds since the Funds'
inception and effective January, 1996, serves as portfolio manager of the Value
Equity Fund and co-manager of the Balance Fund. With over 27 years of
investment management experience, Mr. Portwood has been the manager of the
Adviser's Trust Group for the past seven years.
Kevin P. Reed, Vice President of the Adviser and Director of Fixed Income, is
the portfolio manager for the Government Securities Fund, the Louisiana Tax-
Free Income Fund, and co-manager of the Balanced Fund since inception. For the
past eleven years, Mr. Reed has been a portfolio manager with the Adviser's
Trust Investment Division.
Mr. Dean S. Mailhes, CFA, Vice President and Trust Investment Officer for the
Advisor is the portfolio manager for the Growth Equity Fund. Mr. Mailhes has
more than 14 years of portfolio manager experience, and joined the Advisor in
October 1995. He is an officer of the Adviser and has been a portfolio manager
at the Adviser's affiliate bank, Central Bank of Monroe for the past 10 years.
THE ADMINISTRATOR
SEI Financial Management Corporation (the "Administrator"), 680 East Swedesford
Road, Wayne, PA 19087, a wholly-owned subsidiary of SEI Corporation ("SEI"),
and the Trust are parties to an Administration Agreement (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
provides the Trust with administrative services, other than investment advisory
services, including all regulatory reporting, necessary office space,
equipment, personnel, and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily net assets of the
Funds.
THE SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
DST Systems, Inc., 210 West 10th Street, Kansas City, MO 64105, serves as the
dividend disbursing agent and shareholder servicing agent for the Trust. DST
also acts as transfer agent for the Trust under a Transfer Agent Agreement.
THE DISTRIBUTOR
Class A shares of the Funds are sold with a front-end sales load. Class B
shares of the Funds have a Rule 12b-1 distribution plan (the "Class B Plan").
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, PA 19087, a wholly-owned subsidiary of SEI, and the Trust are parties to
a distribution agreement ("Distribution Agreement"). As provided in the
Distribution Agreement and the Class B Plan, the Trust pays the Distributor a
fee at an annual rate of up to .75% of the average daily net assets of the
Class B shares of the Funds. This fee will be calculated and paid each month
based on average daily net assets for that month. Out of this fee, the
Distributor pays .25% of the average daily net assets of the Class B shares to
financial institutions and intermediaries such as banks (including the Adviser
and its affiliates), savings and loan associations, insurance companies, and
investment counselors, broker-dealers, and the Distributor's affiliates
(collectively, "financial intermediaries") as compensation for providing
shareholder services. The Distributor may use the balance of the fee received
from the Funds to make payments to financial intermediaries as compensation for
services or as reimbursement of distribution assistance or shareholder service
expenses incurred by the Distributor. The Class B Plan is characterized as a
compensation plan since the distribution fee is paid to the Distributor without
regard to the distribution assistance or shareholder service expenses incurred
by the Distributor or the amount of payments made to financial intermediaries.
If the Distributor's expenses are less than its fees, the Trust will still pay
the full fee and the Distributor will realize a profit, but the Trust will not
be obligated to pay in excess of the full fee, even if the Distributor's actual
expenses are higher.
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<PAGE>
The Funds may also execute brokerage or other agency transactions through an
affiliate of the Adviser or through the Distributor for which the affiliate or
the Distributor may receive "usual and customary" compensation. For further
information, see the Statement of Additional Information.
PERFORMANCE
From time to time, the Funds may advertise yield and total return. These
figures will be based on historical earnings and are not intended to indicate
future performance. The yield of a Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The
yield is calculated by assuming that the same amount of income generated by
the investment during that period is generated in each 30-day period over one
year and is shown as a percentage of the investment. The Louisiana Fund may
also advertise a "tax-equivalent yield," which is calculated by determining
the rate of return that would have to be achieved on a fully taxable
investment to produce the after-tax equivalent of this Fund's yield, assuming
certain tax brackets for the shareholder.
The total return of a Fund refers to the average compounded rate of return to
a hypothetical investment, net of any sales charge imposed on Class A shares
or including the contingent deferred sales charge imposed on Class B shares
redeemed at the end of the specified period covered by the total return
figure, for designated time periods (including but not limited to, the period
from which the Fund commenced operations through the specified date), assuming
that the entire investment is redeemed at the end of each period and assuming
the reinvestment of all dividend and capital gain distributions. The total
return of a Fund may also be quoted as a dollar amount or on an aggregate
basis, an actual basis, without inclusion of any front-end or contingent sales
charges, or with a reduced sales charge in advertisements distributed to
investors entitled to a reduced sales charge.
A Fund may periodically compare its performance to that of other mutual funds
tracked by mutual fund rating services (such as Lipper Analytical), financial
and business publications and periodicals, of broad groups of comparable
mutual funds, unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs or
to other investment alternatives. The Fund may quote Morningstar, Inc., a
service that ranks mutual funds on the basis of risk-adjusted performance. The
Fund may quote Ibbotson Associates of Chicago, Illinois, which provides
historical returns of the capital markets in the U.S. The Fund may use long
term performance of these capital markets to demonstrate general long-term
risk versus reward scenarios and could include the value of a hypothetical
investment in any of the capital markets. The Fund may also quote financial
and business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques.
The Fund may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures
of volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
The performance of Class A and Class B shares of a Fund will differ because of
the different sales charge structures of the classes and because of the
distribution fees charged to Class B shares.
TAXES
The following summary of federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial, or
administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of a Fund or its shareholders.
Accordingly, shareholders are urged to consult their tax advisers regarding
specific questions as to federal, state, and local income taxes. State and
local tax consequences on an investment in a Fund may differ from the federal
income tax
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<PAGE>
consequences described below. Additional information concerning taxes is set
forth in the Statement of Additional Information.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for federal income tax purposes and
is not combined with the Trust's other Funds. Each Fund intends to qualify for
the special tax treatment afforded regulated investment companies as defined
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), so as to be relieved of federal income tax on investment company
taxable income and net capital gain (the excess of net long-term capital gains
over net short-term capital losses) distributed to shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute all of its net investment income (including net
short-term capital gain) to shareholders. Dividends from a Fund's net
investment company taxable income will be taxable to shareholders as ordinary
income whether received in cash or in additional shares, to the extent of the
Fund's earnings and profits. Dividends paid by a Fund to corporate shareholders
will qualify for the dividends-received deduction to the extent attributable to
dividends received by the Fund from domestic corporations, it can be expected
that only certain dividends of the Equity Funds, and none of the Fixed Income
Funds, will qualify for that deduction. A portion of such dividends received
may be subject to the alternative minimum tax. Capital gains will be
distributed at least annually and will be taxed to shareholders as long-term
capital gains, regardless of how long the shareholder has held shares and
regardless of whether the distributions are received in cash or in additional
shares. Distributions from net capital gains do not qualify for the dividends-
received deduction. Each Fund will provide annual reports to shareholders of
the federal income tax status of all distributions, including the amount of
dividends eligible for the dividends-received deduction.
Certain securities purchased by a Fund (such as STRIPS, TRs, TIGRs and CATS,
defined in "Description of Permitted Investments and Risk Factors") are sold
with original issue discount and thus do not make periodic cash interest
payments. Each Fund will be required to include as part of its current income
the imputed interest on such obligations even though the Fund has not received
any interest payments on such obligations during that period. Because each Fund
distributes all of its net investment income to its shareholders, a Fund may
have to sell portfolio securities to distribute such imputed income, which may
occur at a time when the Adviser would not have chosen to sell such securities
and which may result in a taxable gain or loss.
Dividends declared by a Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of the year declared, if paid by the Fund at any time during the
following January.
Investment income received directly by a Fund on direct U.S. government
obligations is exempt from income tax at the state level and may be exempt,
depending on the state, when received by a shareholder as income dividends
provided certain state-specific conditions are satisfied. Each Fund will inform
shareholders annually of the percentage of income and distributions derived
from direct U.S. obligations. Shareholders should consult their tax advisers to
determine whether any portion of the income dividends received from a Fund is
considered tax exempt in their particular state.
Each Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for the federal excise tax applicable to
regulated investment companies.
A sale, exchange, or redemption of a Fund's shares is a taxable event to the
shareholder.
The Louisiana Tax-Free Income Fund will distribute all of its net investment
income (including net short-term capital gain) to shareholders. If, at the
close of each quarter of its taxable year, at least 50% of the value of the
Fund's assets consist of obligations the interest on which is excludable from
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gross income for federal tax purposes, the Fund may pay "exempt-interest
dividends" to its shareholders. Those dividends constitute the portion of the
aggregate dividends as designated by the fund equal to the excess of the
excludable interest over certain amounts disallowed as deductions. Exempt-
interest dividends are excludable from a shareholder's gross income for regular
federal income tax purposes, but may have certain collateral federal income tax
consequences, including alternative minimum tax. See the Statement of
Additional Information.
Current federal law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Louisiana Tax-Free Income Fund to purchase sufficient amounts of
tax-exempt securities to satisfy the Code's requirements for the payment of
"exempt-interest dividends."
STATE TAXES
The Trust has obtained a ruling from the Louisiana Department of Revenue and
Taxation to the effect the distributions to shareholders of the Louisiana Fund
who are Louisiana residents, which are derived from interest on tax-exempt
obligations of the State of Louisiana or its political subdivisions and certain
obligations of the United States or its territories, will not be subject to
Louisiana income tax. Distributions derived from long-term or short-term
capital gains on such obligations, or from dividends on capital gains on other
types of obligations will be subject to Louisiana individual and corporate
income taxes. A Louisiana resident will also be required to take into account
for Louisiana individual and corporate income tax purposes capital gains or
losses realized from a redemption, sale or exchange of shares of the Louisiana
Fund. To the extent distributions from the Louisiana Fund are included in the
capital of corporate shareholders otherwise subject to the Louisiana corporate
franchise tax, such investments or distributions will be subject to Louisiana
franchise tax. Shareholders should consult their own tax advisers with respect
to the state, local and foreign tax consequences of investing in the Funds.
GENERAL INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under a Declaration
of Trust dated June 29, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares or "funds" and different classes of each fund.
In addition to the Funds, the Trust offers a Treasury Securities Money Market
Fund, Institutional Money Market Fund, and a Tax Exempt Money Market Fund. All
consideration received by the Trust for shares of any fund and all assets of
such fund belong to that fund and would be subject to liabilities related
thereto. The Trust reserves the right to create and issue shares of additional
funds.
The Trust pays its operating expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy
solicitation material and reports to shareholders, costs of custodial services
and registering the shares under Federal and state securities laws, pricing and
insurance expenses, and pays additional expenses including litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under
the laws of the Commonwealth of Massachusetts. The Trustees have approved
contracts under which, as described above, certain companies provide essential
management, administrative and shareholder services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to that fund or class
(although Class B shareholders may vote on any distribution fees imposed on
Class A shares so long as Class B shares convert into Class A shares). As a
Massachusetts business trust, the Trust is not required to hold annual meetings
of shareholders but meetings of shareholders will be held from time to time to
seek approval for certain
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changes in the operation of the Trust and for the election of Trustees under
certain circumstances. In addition, a Trustee may be removed by the remaining
Trustees or by shareholders at a special meeting called upon written request of
shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes periodic reports to
shareholders of record, and, as necessary, proxy statements for shareholder
meetings.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to DST Systems, Inc., P.O. Box 419240,
Kansas City, MO 64141-6240, or by calling 1-800-471-1144.
DIVIDENDS
Substantially all net investment income (not including capital gains) is
declared and paid monthly for each Fixed Income Fund and declared and paid
quarterly for each Equity Fund and the Balanced Fund. Shareholders who own
shares at the close of business on the record date will be entitled to receive
the dividend. Each Fund intends to pay such dividends on the first business day
of the month following the month the dividend was declared. Currently, capital
gains of the Funds, if any, will be distributed at least annually.
Shareholders automatically receive all income dividends and capital gain
distributions in additional shares at the net asset value next determined
following the record date, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by providing written
notice to the Administrator at least 15 days prior to the distribution.
Dividends and other distributions of the Funds are paid on a per-share basis.
The value of each share will be reduced by the amount of the payment. If shares
are purchased shortly before the record date for a dividend or the distribution
of capital gains, a shareholder will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or other
distribution. The amount of dividends payable on Class A shares will be more
than the dividends payable on the Class B shares because of the distribution
and service fees paid by Class B shares.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
CUSTODIAN
First National Bank of Commerce in New Orleans acts as Custodian of the Trust.
The Custodian holds cash, securities and other assets of the Trust as required
by the 1940 Act.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments and investment
practices for the various Funds, and associated risk factors. Further
discussion is contained in the Statement of Additional Information.
AMERICAN DEPOSITARY RECEIPTS--American Depository Receipts ("ADRs") are
securities typically issued by a U.S. financial institution. ADRs evidence
ownership interests in a pool of securities issued by a foreign issuer and
deposited with the depositary. ADRs may be available through "sponsored" and
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the security underlying the receipt and a depositary, whereas an
unsponsored facility may be established by a depositary without participation
by the issuer of the underlying security. Holders of unsponsored depositary
receipts generally bear all the costs of the unsponsored facility. The
depositary of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
security or to pass through, to the holders of the receipts, voting rights with
respect to the deposited securities. Foreign investments
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involve risks that are different from investments in securities of U.S.
issuers. These risks may include future unfavorable political and economic
developments, possible withholding taxes, seizure of foreign deposits, currency
controls, interest limitations or other governmental restrictions which might
affect payment of principal or interest. Additionally, there may be less public
information available about foreign issuers. The Equity Funds may invest in
sponsored and unsponsored ADRs.
ASSET-BACKED SECURITIES--Asset-backed securities are securities secured by non-
mortgage assets such as company receivables, truck and auto loans, leases, and
credit card receivables. Such securities are generally issued as pass-through
certificates, which represent undivided fractional ownership interests in the
underlying pools of assets. Such securities also may be debt instruments, which
are also known as collateralized obligations and are generally issued as the
debt of a special purpose entity, such as a trust, organized solely for purpose
of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government or
its agencies or instrumentalities; however, the payment of principal and
interest on such obligations may be guaranteed up to certain amounts and for a
certain period by a letter of credit issued by a financial institution (such as
a bank or insurance company) unaffiliated with the issuers of such securities.
The purchase of asset-backed securities raises risk considerations peculiar to
the financing of the instruments underlying such securities. For example, there
is a risk that another party could acquire an interest in the obligations
superior to that of the holders of the asset-backed securities. There also is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on those securities. Asset-backed
securities entail prepayment risk, which may vary depending on the type of
asset, but is generally less than the prepayment risk associated with mortgage-
backed securities. In addition, credit card receivables are unsecured
obligations of the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities. The Government Securities Fund and the Balanced Fund may invest in
these and in other asset-backed securities that may be created in the future if
the Adviser determines they are suitable.
BANKERS' ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods and to furnish dollar
exchange. Maturities are generally six months or less. All Funds are permitted
to invest in bankers' acceptances.
CERTIFICATES OF DEPOSIT--Certificates of deposit are interest bearing
instruments with a specific short-term maturity. They are issued by banks and
savings and loan institutions in exchange for the deposit of funds and normally
can be traded in the secondary market prior to maturity. Certificates of
deposit with penalties for early withdrawal will be considered illiquid. All
Funds are permitted to invest in certificates of deposit.
COMMERCIAL PAPER--Commercial paper is a term used to describe unsecured short-
term promissory notes issued by corporations and other entities. Maturities on
these issues vary from a few to 270 days. All Funds are permitted to invest in
commercial paper.
CONVERTIBLE SECURITIES--Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move together with the market value of
the underlying stock. The value of convertible securities is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions. The Equity Funds are permitted to invest in convertible securities.
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EQUITY SECURITIES--Equity securities include common stocks, preferred stocks,
warrants to acquire common stock, and securities convertible into common stock.
Investments in equity securities are subject to market risks that may cause
their prices to fluctuate over time. Changes in the value of portfolio
securities will not necessarily affect cash income derived from these
securities but will affect a Fund's net asset value.
FIXED INCOME SECURITIES--Fixed income securities include bonds, notes,
debentures and other interest-bearing securities that represent indebtedness.
The market value of the fixed income investments in which the Funds invest will
change in response to interest rate changes and other factors. During periods
of falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods of rising interest rates, the values
of such securities generally decline. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the rating of any
fixed income security and in the ability of an issuer to make payments of
interest and principal also affect the value of these investments. Changes in
the value of these securities will not necessarily affect cash income derived
from these securities but will affect a Fund's net asset value.
FUTURES AND OPTIONS ON FUTURES--Each of the Funds may invest in futures and
options on futures to a limited extent. Specifically, a Fund may enter into
futures contracts and options on futures contracts traded on an exchange
regulated by the Commodities Futures Trading Commission ("CFTC") if, to the
extent that such futures and options are not for "bona fide hedging purposes"
(as defined by the CFTC), the aggregate initial margin and premiums on such
positions (excluding the amount by which options are in the money) do not
exceed 5% of that Fund's net assets. In addition, a Fund may enter into futures
contracts and options on futures only to the extent that obligations under such
contracts or transactions, together with options on securities, represent not
more than 25% of the Fund's assets.
The Funds may buy and sell futures contracts and related options to manage
their exposure to changing interest rates and security prices. Some futures
strategies, including selling futures, buying puts and writing calls, reduce a
Fund's exposure to price fluctuations. Other strategies, including buying
futures, writing puts and buying calls, tend to increase market exposure.
Futures and options may be combined with each other in order to adjust the risk
and return characteristics of the overall portfolio. The Funds may invest in
futures and related options based on any type of security or index traded on
U.S. or foreign exchanges or over-the-counter, as long as the underlying
security, or securities represented by an index, are permitted investments of
the Funds.
Options and futures can be volatile instruments, and involve certain risks. If
the Adviser applies a hedge at an inappropriate time or judges interest rates
incorrectly, options and futures strategies may lower a Fund's return. A Fund
could also experience losses if the prices of its options and futures positions
were poorly correlated with its other instruments, or if it could not close out
its positions because of an illiquid secondary market.
In order to cover any obligations it may have under options or futures
contracts, the Fund will either own the underlying asset, have a contract to
acquire such an asset without additional cost or set aside, in a segregated
account, high quality liquid assets in an amount at least equal in value to
such obligations.
ILLIQUID SECURITIES--Illiquid securities are securities which cannot be
disposed of within seven business days at approximately the price at which they
are being carried on a Fund's books. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, if there is no
secondary market for such security and repurchase agreements of over 7 days in
length. Each Fund will not invest more than 15% of its net assets in such
instruments.
MONEY MARKET SECURITIES--Money market securities are high-quality, dollar-
denominated, short-term debt instruments. They consist of: (i) bankers'
acceptances, certificates of deposits,
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notes and time deposits of highly-rated U.S. banks and U.S. branches of foreign
banks; (ii) U.S. Treasury obligations and obligations issued or guaranteed by
the agencies and instrumentalities of the U.S. Government; (iii) high quality
commercial paper issued by U.S. and foreign corporations; (iv) debt obligations
with a maturity of one year or less issued by corporations with outstanding
high-quality commercial paper; and (v) repurchase agreements involving any of
the foregoing obligations entered into with highly-rated banks and broker-
dealers.
MORTGAGE-BACKED SECURITIES--Mortgage-backed securities are instruments which
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
Government Pass-Through Securities: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and FHLMC. FNMA and FHLMC obligations are not backed
by the full faith and credit of the U.S. Government as GNMA certificates are,
but FNMA and FHLMC securities are supported by the instrumentalities' right to
borrow from the United States Treasury. Each of GNMA, FNMA and FHLMC guarantees
timely distributions of interest to certificate holders. Each of GNMA and FNMA
also guarantees timely distributions of scheduled principal. FHLMC has in the
past guaranteed only the ultimate collection of principal of the underlying
mortgage loan; however, FHLMC now issues Mortgage-Backed Securities (FHLMC Gold
PCs) which also guarantees timely payment of monthly principal reduction.
Government and private guarantees do not extend to the securities' value, which
is likely to vary inversely with fluctuations in interest rates.
Private Pass-Through Securities: These are mortgage-backed securities issued by
a non-governmental entity such as a trust, which securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conditions ("REMICs"), that are rated in one of the top two rating
categories. While they are generally structured with one or more types of
credit enhancement, Private Pass-Through Securities typically lack a guarantee
by an entity having the credit status of a governmental agency or
instrumentality.
CMOs: CMOs are debt obligations or multiclass pass-through certificates issued
by agencies or instrumentalities of the U.S. Government or by private
originators or investors in mortgage loans. In a CMO, series of bonds or
certificates are annually issued in multiple classes. Principal and interest
paid on the underlying mortgage assets may be allocated among the several
classes of a series of a CMO in a variety of ways. Each class of a CMO, often
referred to as a "tranche" is issued with a specific fixed or floating coupon
rate and has a stated maturity or final distribution date. Principal payments
on the underlying mortgage assets may cause CMOs to be retired substantially
earlier than their stated maturities or final distribution dates, resulting in
a loss of all or part of any premium paid.
REMICs: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by
FNMA or FHLMC represent beneficial ownership interests in a REMIC trust
consisting principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed
mortgage pass-through certificates. For FHLMC REMIC Certificates,
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FHLMC guarantees the timely payment of interest, and also guarantees the
payment of principal as payments are required to be made on the underlying
mortgage participation certificates. FNMA REMIC Certificates are issued and
guaranteed as to timely distribution of principal and interest by FNMA.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive
all of the interest payments and is thus termed an interest-only class ("IO"),
while the other class may receive all of the principal payments and is thus
termed the principal-only class ("PO"). The value of IOs tends to increase as
rates rise and decrease as rates fall; the opposite is true of POs. SMBs are
extremely sensitive to changes in interest rates because of the impact thereon
of prepayment of principal on the underlying mortgage securities. The market
for SMBs is not as fully developed as other markets; SMBs therefore may be
illiquid.
Risk Factors: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known maturity.
In the absence of a known maturity, market participants generally refer to an
estimated average life. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants
can produce different average life estimates with regard to the same security.
There can be no assurance that estimated average life will be a security's
actual average life.
MUNICIPAL SECURITIES--Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair, or improvement of privately operated
facilities. General obligation bonds are backed by the taxing power of the
issuing municipality. Revenue bonds are backed by the revenues of a project or
facility; tolls from a toll bridge for example. Certificates of participation
represent an interest in an underlying obligation or commitment such as an
obligation issued in connection with a leasing arrangement. The payment of
principal and interest on private activity and industrial development bonds
generally is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Municipal securities include general obligation notes, tax anticipation notes,
revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes, and construction loan notes. Municipal bonds
include general obligation bonds, revenue or special obligation bonds, private
activity and industrial development bonds.
The Louisiana Fund currently contemplates that it will not invest more than 25%
of its total assets (at market value at the time of purchase) in: (a)
securities, the interest of which is paid from revenues of projects with
similar characteristics; or (b) industrial development bonds.
OPTIONS--Put and call options for various securities and indices are traded on
national securities exchanges. Options may be used by a Fund from time to time
as the Adviser deems to be appropriate. Options will generally be used for
hedging purposes.
A put option gives the purchase of the option the right to sell, and the writer
the obligation to buy, the underlying security at any time during the option
period. A call option gives the purchaser of the option the right to buy, and
the writer of the option the obligation to sell, the underlying security at any
time during the option period. The premium paid to the writer is the
consideration for undertaking the obligations under the option
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contract. The initial purchase (sale) of an option contract is an "opening
transaction." In order to close out an option position, a Fund may enter into a
"closing transaction"--the sale (purchase) of an option contract on the same
security with the same exercise price and expiration date as the option
contract originally opened.
Although a Fund will engage in option transactions as hedging transactions,
there are risks associated with such investments including the following: (i)
the success of a hedging strategy may depend on the ability of the Adviser to
predict movements in the prices of the individual securities, fluctuations in
markets and movements in interest rates; (ii) there may be an imperfect or no
correlation between the changes in market value of the securities held by a
Fund and the prices of options; (iii) there may not be a liquid secondary
market for options; and (iv) while a Fund will receive a premium when it writes
covered call options, it may not participate fully in a rise in the market
value of the underlying security. Each Fund is permitted to engage in option
transactions with respect to securities that are permitted investments and
related indices. Any Fund that writes call options will write only covered call
options.
The aggregate value of option positions may not exceed 10% of a Fund's net
assets as of the time such options are entered into by a Fund.
RECEIPTS--TRs, TIGRs and CATS--interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury obligations into
a special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
"Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts" ("TIGRs"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). Each Fund other
than the Louisiana Fund is permitted to invest in receipts.
STRIPS, TRs, TIGRs and CATS are sold as zero coupon securities which means that
they are sold at a substantial discount and redeemed at face value at their
maturity date without interim cash payments of interest or principal. The
amount of this discount is accrued over the life of the security and
constitutes the income earned on the security for both accounting and tax
purposes. Because of these features, receipts may be subject to greater price
volatility than interest paying U.S. Treasury Obligations. See also "Taxes".
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. Repurchase agreements must be fully collateralized
at all times. A Fund bears a risk of loss in the event the other party defaults
on its obligations and the Fund is delayed or prevented from its right to
dispose of the collateral. A Fund will enter into repurchase agreements only
with financial institutions deemed to present minimal risk of bankruptcy during
the term of the agreement based on established guidelines. Repurchase
agreements are considered loans under the 1940 Act. All Funds may invest in
repurchase agreements.
SECURITIES LENDING--In order to generate additional income, each Fund may lend
the securities in which it owns pursuant to agreements requiring that the loan
be continuously secured by collateral consisting of cash, securities of the
U.S. Government equal to at least 100% of the market value of the securities
lent. A Fund will continue to receive interest on the securities lent while
simultaneously earning interest on the investment of cash collateral.
Collateral is marked to market daily to provide a level of collateral at least
equal to the value of the securities lent. There may be risks of delay in
recovery of the securities or even loss of rights in the collateral should the
borrower of the securities fail financially or become insolvent. All Funds are
permitted to engage in securities lending.
TIME DEPOSITS--Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a
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definite period of time; however, it cannot be traded in the secondary market.
Time deposits are considered to be illiquid securities. All Funds are permitted
to invest in time deposits.
U.S. GOVERNMENT AGENCY OBLIGATIONS--Obligations issued or guaranteed by
agencies of the United States Government, including, among others, the Federal
Farm Credit Bank, the Federal Housing Administration and the Small Business
Administration, and obligations issued or guaranteed by instrumentalities of
the United States Government, including, among others, the Federal Home Loan
Mortgage Corporation, the Federal Land Banks and the United States Postal
Service. Some of these securities are supported by the full faith and credit of
the United States Treasury (e.g., Government National Mortgage Association),
others are supported by the right of the issuer to borrow from the Treasury
(e.g., Federal Farm Credit Bank), while still others are supported only by the
credit of the instrumentality (e.g., Federal National Mortgage Association).
Guarantees of principal by agencies or instrumentalities of the United States
Government may be a guarantee of payment at the maturity of the obligation so
that in the event of a default prior to maturity there might not be a market
and thus no means of realizing on the obligation prior to maturity. Guarantees
as to the timely payment of principal and interest do not extend to the value
or yield of these securities nor to the value of the Fund's shares.
U.S. GOVERNMENT SECURITIES--Any guaranty by the U.S. Government of the
securities in which any Fund invests guarantees only the payment of principal
and interest on the guaranteed security and does not guarantee the yield or
value of that security or the yield or value of shares of that Fund.
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS"). All Funds are permitted to invest in U.S.
Treasury Obligations.
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain of the obligations purchased by
the Funds may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices. The
interest rates on these securities may be reset daily, weekly, quarterly or
some other reset period, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates. A demand instrument with
a demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such securities. All Funds are permitted to invest in
variable and floating rate instruments.
WARRANTS--instruments giving holders the right, but not the obligation, to buy
shares of a company at a given price during a specified period. The Equity
Funds are permitted to invest in warrants.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES--When-issued or delayed delivery
basis transactions involve the purchase of instrument with payment and delivery
taking place in the future. Delivery of and payment for these securities may
occur a month or more after the date of the purchase commitment. To the extent
required by the 1940 Act, a Fund will maintain with the custodian a separate
account with liquid high grade debt securities or cash in an amount at least
equal to these commitments. The interest rate realized on these securities is
fixed as of the purchase date and no interest accrues to the Fund before
settlement. These securities are subject to market fluctuation due to changes
in market interest rates and it is possible that the market value at the time
of settlement could be higher or lower than the purchase price if the general
level of interest rates has changed. Although a Fund generally purchases
securities on a when-issued or forward commitment basis with the intention of
actually acquiring securities for its portfolio, a Fund may dispose of a when-
issued security or forward commitment prior to settlement if deems it
appropriate.
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
Summary..................................................................... 2
Expense Summary............................................................. 3
Financial Highlights........................................................ 5
The Trust................................................................... 7
Investment Objectives and Policies.......................................... 7
General Investment Policies................................................. 9
Investment Limitations...................................................... 9
How to Purchase Shares...................................................... 10
Alternative Sales Charge Options............................................ 11
Exchanges................................................................... 14
Redemption of Shares........................................................ 15
The Adviser................................................................. 16
The Administrator........................................................... 17
The Shareholder Servicing Agent and Transfer Agent.......................... 17
The Distributor............................................................. 17
Performance................................................................. 18
Taxes....................................................................... 18
General Information......................................................... 20
Description of Permitted Investments and Risk Factors....................... 21
</TABLE>
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MARQUIS FUNDS (R)
Investment Adviser:
FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS
INSTITUTIONAL MONEY MARKET FUND
MARQUIS FUNDS (R) (the "Trust") is a mutual fund that offers a convenient and
economical means of investing in one or more professionally managed portfolios
of securities. This Prospectus offers shares of the INSTITUTIONAL MONEY MARKET
FUND (the "Fund"), a separate series of the Trust.
This Prospectus sets forth concisely the information about the Fund and the
Trust that a prospective investor should know before investing in the Fund.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated January 29, 1996 has
been filed with the Securities and Exchange Commission (the "SEC") and is
available without charge by calling 1-800-471-1144. The Statement of
Additional Information is incorporated into this Prospectus by reference.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, INCLUDING FIRST NATIONAL BANK OF COMMERCE IN NEW
ORLEANS OR ANY OF ITS AFFILIATES OR CORRESPONDENTS, INCLUDING FIRST COMMERCE
CORPORATION. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
JANUARY 29, 1996
MRQ-F-008-01
<PAGE>
2
SUMMARY
MARQUIS FUNDS (R) (the "Trust") is an open-end management investment company
providing a convenient way to invest in professionally managed portfolios of
securities. This Summary provides basic information about the Trust's
Institutional Money Market Fund (the "Fund"). The Fund is a separate series of
the Trust.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUND? The Fund seeks to
preserve principal value and maintain a high degree of liquidity while
providing current income by investing exclusively in obligations issued by the
U.S. Treasury and in repurchase agreements involving such obligations. There
can be no assurance that the Fund will achieve its investment objective.
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUND? The investment
policies of the Fund entail certain risks and considerations of which an
investor should be aware. While the Fund seeks to maintain a net asset value of
$1.00 per share, there can be no assurance that the Fund will be able to do
this on a continuous basis. There may be other risks involved in the ownership
of money market mutual funds.
ARE MY INVESTMENTS INSURED? Any guaranty by the U.S. Government, its agencies
or instrumentalities of the securities in which the Fund invests guarantees
only the payment of principal and interest on the guaranteed security and does
not guarantee the yield or value of that security or the yield or value of
shares of the Fund. The Trust's shares are not federally insured by the FDIC or
any other government agency.
For more information about the Fund, see "Investment Objective and Policies"
and "Description of Permitted Investments and Risk Factors."
HOW DO I PURCHASE SHARES? Shares of the Fund are offered at net asset value per
share.
WHO IS THE ADVISER? The Trust Group of First National Bank of Commerce in New
Orleans serves as the investment adviser of the Fund. See "Expense Summary" and
"The Adviser".
WHO IS THE ADMINISTRATOR? SEI Financial Management Corporation serves as the
administrator of the Trust. See "Expense Summary" and "The Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as shareholder servicing
agent, transfer agent, and dividend disbursing agent for the Trust. See "The
Shareholder Servicing Agent and Transfer Agent."
WHO IS THE DISTRIBUTOR? SEI Financial Services Company serves as distributor of
the Trust's shares. See "The Distributor."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is distributed in the form of monthly
dividends. Any capital gain is distributed at least annually. Dividends are
paid in additional shares unless the shareholder elects to take payment in cash
on the first Business Day of each month. See "Dividends."
<PAGE>
3
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES INSTITUTIONAL MONEY MARKET FUND
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) None
Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Wire Redemption Fee None
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES INSTITUTIONAL MONEY MARKET FUND
(as a percentage of average net assets)
<TABLE>
- ------------------------------------------------------
<S> <C>
Advisory Fees (after fee waivers) (1) .05%
Administration Fees .10%
12b-1 Fees 0%
Other Expenses (2) .10%
- ------------------------------------------------------
Total Operating Expenses (after fee waivers) (3) .25%
- ------------------------------------------------------
- ------------------------------------------------------
</TABLE>
(1) The Adviser has voluntarily agreed to waive its advisory fee or reimburse
expenses to the extent necessary to keep "Total Operating Expenses" for
the Fund from exceeding .25%. The Adviser reserves the right to terminate
its waiver at any time in its sole discretion. Absent such waiver, the
advisory fee for the Fund would be .15%
(2) Other Expenses are based on estimates for the current fiscal year.
(3) Absent the Adviser's voluntary fee waiver, Total Operating Expenses for
the Fund would be .35%.
EXAMPLE
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment in shares of the Fund
assuming: (1) 5% annual return and (2)
redemption at the end of each time period: $3 $8 $14 $32
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by
investors in the Fund. The information set forth in the foregoing table and
example relates only to shares of the Institutional Money Market Fund.
Shareholders purchasing shares through a financial institution may be charged
additional account fees by that institution. Additional information may be
found under "The Adviser," "The Administrator," and "The Distributor."
<PAGE>
4
FINANCIAL HIGHLIGHTS
The following financial highlights for a share outstanding throughout the
year, insofar as they relate to the fiscal year ended September 30, 1995, have
been audited by Arthur Andersen LLP, independent public accountants, whose
report thereon was unqualified. This information should be read in conjunction
with the Trust's financial statements and notes thereto which are included in
the Statement of Additional Information under the heading "Financial
Information." Additional performance information is set forth in the Trust's
1995 Annual Report to Shareholders and is available upon request and without
charge by calling 1-800-471-1144.
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
REALIZED RATIO OF RATIO OF
AND EXPENSES NET INCOME
NET ASSET UNREALIZED DISTRIBUTIONS NET ASSET NET ASSETS RATIO OF RATIO OF TO AVERAGE TO AVERAGE
VALUE NET GAINS OR FROM NET VALUE END OF EXPENSES NET INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT END OF TOTAL PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INVESTMENTS INCOME PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ----------- ------------- --------- ------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL MONEY MARKET FUND
1995(1) $1.00 0.01 -- $(0.01) $1.00 5.55%* $31,314 0.25%* 5.56%* 0.60%* 5.21%*
<CAPTION>
PORTFOLIO
TURNOVER
RATE
---------
<S> <C>
INSTITUTIONAL MONEY MARKET FUND
1995(1) --
</TABLE>
- --------
* Annualized.
(1) Commenced operations on August 10, 1995.
<PAGE>
5
THE TRUST
MARQUIS FUNDS (R) (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares").This prospectus relates to
the Institutional Money Market Fund (the "Fund"), a diversified mutual fund.
Each share of the Fund represents an undivided, proportionate interest in the
Fund. Information regarding the Trust's other funds is contained in separate
prospectuses that may be obtained by calling 1-800-471-1144.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives are to preserve principal value and maintain a
high degree of liquidity while providing current income. There can be no
assurance that the Fund will be able to achieve its investment objectives.
The Fund complies with regulations of the Securities and Exchange Commission
applicable to money market funds. These regulations impose certain quality,
maturity and diversification restraints on investments by the Fund. Under these
regulations, the Fund will maintain a dollar-weighted average portfolio
maturity of 90 days or less, and will acquire only obligations maturing in 397
days or less. The Fund will attempt to maintain a net asset value of $1.00 per
share, although there can be no assurance that it will be able to do so.
The Fund invests exclusively in obligations issued by the U.S. Treasury
("Treasury Obligations") and backed by its full faith and credit and in
repurchase agreements involving such obligations. The Fund may purchase
Treasury Obligations on a when-issued or delayed delivery basis. The Fund may
also engage in securities lending.
For additional information regarding permitted investments, investment
practices and risks, see "Description of Permitted Investments and Risk
Factors."
INVESTMENT LIMITATIONS
The following investment limitation is a fundamental policy of the Fund.
Fundamental policies cannot be changed with respect to the Fund without the
consent of the holders of a majority of the Fund's outstanding shares.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if, as a result, more than 5% of the total assets of
the Fund would be invested in the securities of such issuer.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to (i) investments in the obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities, and
repurchase agreements involving such securities.
3. Make loans except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objectives and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
Additional investment limitations are set forth in the Statement of Additional
Information.
PURCHASE OF SHARES
Investors may purchase shares of the Fund directly from the Trust's shareholder
servicing and transfer agent, DST Systems, Inc. ("DST"), by wire. Shares of the
Fund are sold to investors on a continuous basis.
To open an account, an investor must first return a completed and signed
Account Application to
<PAGE>
6
DST, 210 West 10th Street, Kansas City, MO 64105. Account Application forms are
available by calling 1-800-471-1144.
WIRE
A shareholder whose Account Application has been received by DST may purchase
shares of the Fund by wiring Federal funds. The shareholder must wire funds to
DST and the wire instructions must include the shareholder's account number.
The shareholder must call 1-800-471-1144 before wiring any funds. An order to
purchase shares by Federal funds wire will be deemed to have been received by
the Fund on the Business Day of the wire, provided that the shareholder
notifies DST prior to 12:00 noon, Central time. If DST does not receive notice
by 12:00 noon, Central time, on the Business Day of the wire, the order will be
executed on the next Business Day.
GENERAL INFORMATION REGARDING PURCHASES
Purchases of shares of the Fund may be made on any day the New York Stock
Exchange and the Federal Reserve wire system are open for business ("Business
Days"). The minimum initial investment in the Fund is $10,000,000; however, the
Trust's distributor, SEI Financial Services Company (the "Distributor"), may
waive the minimum investment at its discretion.
A purchase order for shares will be effective, and eligible to receive
dividends declared that same day, on the Business Day received by DST, if DST
receives the order and payment before 12:00 noon, Central time. A purchase
order received (with payment) after this time will be effective on the next
Business Day. The purchase price of shares of the Fund is the net asset value
per share next computed after the order is received and accepted by the Trust.
The Fund expects to maintain its net asset value per share constant at $1.00.
The net asset value per share of the Fund is determined by dividing the total
value of its investments and other assets, less any liabilities, by its total
outstanding shares. The Fund's net asset value per share is calculated as of
3:00 p.m., Central time, each Business Day and is based on the amortized cost
method described in the Statement of Additional Information.
The Trust reserves the right to reject a purchase order for shares when the
Distributor determines that it is not in the best interest of the Trust and/or
its shareholders to accept such order.
Shareholders who desire to transfer the registration of their shares should
call 1-800-471-1144.
Certain financial institutions through which shares may be purchased may be
required under state law to register as broker dealers.
EXCHANGES
Shares of the Fund may be exchanged for Class A shares of other funds of the
Trust. Investors exchanging shares of the Fund acquired for cash for Class A
shares of another fund of the Trust will be subject to the applicable sales
charge. Shares of the Fund acquired through an exchange of Class A shares of
another fund of the Trust may be exchanged back, with no sales charge, into
Class A shares of any other fund of the Trust.
An investor must have received a current prospectus of the Trust's other fund
into which the exchange is to be made (the "new" fund) before the exchange will
be effected. Exchanges will be made only after instructions in writing or by
telephone (an "Exchange Request ") are received by DST. If an Exchange Request
in good order is received by DST by 3:00 p.m. Central time, on any Business
Day, the exchange will occur on that day. The exchange privilege may be
exercised only in those states where the class or shares of the new fund may
legally be sold.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
Shareholders may redeem their shares without charge on any Business Day. Shares
may be
<PAGE>
7
redeemed by mail or by telephone. Shares of the Funds cannot be redeemed by
Federal Reserve wire on Federal holidays restricting wire transfers.
BY MAIL
A written request for redemption must be received by DST in order to constitute
a valid redemption request.
If the redemption request exceeds $5,000 or if the request directs the proceeds
to be sent or wired to a shareholder or an address different from that on
record, DST may require that the signature on the written redemption request be
guaranteed. Signature guarantees can be obtained from banks, brokers, dealers,
credit unions, securities exchanges or associations, clearing agencies or
savings associations. Notaries public cannot guarantee signatures.
BY TELEPHONE
Shares may be redeemed by telephone if the shareholder has elected that option
on the Account Application. Under most circumstances, payments will be
transmitted on the next Business Day following receipt of a valid request for
redemption. The shareholder may have the proceeds mailed to his or her address
of record or wired to a commercial bank account previously designated on the
Account Application. Shareholders may request a wire redemption for redemptions
in excess of $500 by calling 1-800-471-1144.
Neither the Trust nor DST will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon telephone instructions that
it reasonably believes to be genuine. The Trust and DST will each employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, including requiring a form of personal identification prior to
acting upon instructions received by telephone and recording telephone
instructions.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. A redemption order
received before 11:00 a.m., Central time, on any Business Day will be effective
that day and will receive that day's redemption price. Net asset value per
share is determined as of 3:00 p.m., Central time, on each Business Day.
Redeemed shares are not entitled to dividends declared on the day the
redemption order is effective.
Payment to shareholders for shares redeemed will be made within seven days
after DST receives the valid redemption request.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
THE ADVISER
First National Bank of Commerce in New Orleans (the "Adviser"), 210 Baronne
Street, New Orleans, Louisiana 70112, serves as the Fund's investment adviser
under an advisory agreement (the "Advisory Agreement") with the Trust. The
Adviser, through its Trust Group, makes the investment decisions for the assets
of the Fund and continuously reviews, supervises, and administers the
investment programs of the Fund, subject to the supervision of, and policies
established by, the Trustees of the Trust.
As of September 30, 1995, the Adviser's Trust Group managed approximately $2.0
billion in discretionary investment management accounts for individuals,
corporations and institutions with widely varying investment needs and
objectives. The Trust Group has managed client accounts since 1933 and has
managed money market portfolios for the past seven years. The Adviser is a
wholly-owned subsidiary of First Commerce Corporation.
The Glass-Steagall Act restricts the securities activities of national banks
such as First National Bank of Commerce in New Orleans but the
<PAGE>
8
Comptroller of the Currency permits national banks to provide investment
advisory and other services to mutual funds. Should the Comptroller's position
be challenged successfully in court or reversed by legislation, the Trust might
have to make other investment advisory arrangements.
The Trust's shares are not sponsored, endorsed or guaranteed by, and do not
constitute obligations or deposits of, the Adviser or First Commerce
Corporation and are not insured by the Federal Deposit Insurance Corporation or
issued or guaranteed by the U.S. Government or any of its agencies.
The Adviser is entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of .15% of the Fund's average daily net assets. The Adviser
may voluntarily waive a portion of its fee in order to limit the total
operating expenses of the Fund. The Adviser reserves the right, in its sole
discretion, to terminate this voluntary fee waiver at any time. For the fiscal
year ended September 30, 1995, the Adviser was paid an advisory fee of .00% of
the Fund's average net assets.
Gerald S. Dugal is an Assistant Vice President and the Investment Manager for
the Marquis Institutional Money Market Fund, Treasury Securities Money Market
Fund, and the Tax Exempt Money Market Fund. Mr. Dugal has 10 years of
experience in investment trading, brokerage, and research. He is licensed as a
series 7 securities principal and a series 53 municipal securities principal.
THE ADMINISTRATOR
SEI Financial Management Corporation (the "Administrator"), 680 East Swedesford
Road, Wayne, PA 19087-1658, a wholly-owned subsidiary of SEI Corporation
("SEI"), and the Trust are parties to an Administration Agreement (the
"Administration Agreement"). Under the terms of the Administration Agreement,
the Administrator provides the Trust with administrative services, other than
investment advisory services, including all regulatory reporting, necessary
office space, equipment, personnel, and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .10% of the Fund's average daily net assets.
THE SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
DST Systems, Inc., 210 West 10th Street, Kansas City, MO 64105, serves as the
dividend disbursing agent and shareholder servicing agent for the Trust. DST
also acts as transfer agent for the Trust under a Transfer Agent Agreement.
THE DISTRIBUTOR
Shares of the Fund are offered without distribution fees.
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, PA 19087-1658, a wholly-owned subsidiary of SEI, and the Trust are
parties to a distribution agreement ("Distribution Agreement").
The Fund may execute brokerage or other agency transactions through an
affiliate of the Adviser or through the Distributor, for which the affiliate or
the Distributor may receive "usual and customary" compensation. For further
information, see the Statement of Additional Information.
PERFORMANCE
From time to time, the Trust may advertise the Fund's "current yield" and
"effective compound yield." These figures will fluctuate, as they are based on
historical earnings; they are not intended to indicate future performance and
the Trust makes no representation concerning actual future yields. The "current
yield" of the Fund refers to the income generated by an investment over a
seven-day period which is then "annualized." That is, the amount of income
generated by an investment during that week is assumed to be generated each
<PAGE>
9
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment is assumed to be reinvested. The "effective yield" will
be slightly higher than the "current yield" because of the compounding effect
of this assumed reinvestment.
In addition, the Trust may from time to time compare performance of the Fund to
that of other mutual funds tracked by mutual fund rating services, financial
and business publications and periodicals, broad groups of comparable mutual
funds or unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs or
to other investment alternatives.
TAXES
The following summary of federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial, or
administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of the Fund or its shareholders. In
addition, state and local tax consequences of an investment in the Fund may
differ from the federal income tax consequences described below. Accordingly,
shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state, and local income taxes. Additional information
concerning taxes is set forth in the Statement of Additional Information.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify for the
special tax treatment afforded regulated investment companies as defined under
Subchapter M of the Internal Revenue Code of 1986, as amended, so as to be
relieved of federal income tax net investment company taxable income and net
capital gain (the excess of net long-term capital gains over net short-term
capital losses) distributed to shareholders.
TAX STATUS OF DISTRIBUTIONS
The Fund will distribute all of its net investment income (including net short-
term capital gain) to shareholders. Dividends from net investment company
taxable income are taxable to shareholders as ordinary income (whether received
in cash or in additional shares) to the extent of the Fund's earnings and
profits. Any net realized capital gain will be distributed at least annually
and will be taxed to shareholders as long-term capital gain, regardless of how
long the shareholders have held their shares and regardless of whether the
distributions are received in cash or in additional shares. Dividends and
distribution of capital gains paid by the fund do not qualify for the dividends
received deduction for corporate shareholders. The Fund will provide annual
reports to shareholders of the federal income tax status of all distributions.
Dividends declared by the Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of the year declared, if paid by the Fund at any time during the
following January.
With respect to investments in U.S. Treasury STRIPS, which are sold with
original issue discount and do not make periodic cash interest payments. The
Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
all of its net investment income to its shareholders, the Fund may have to sell
portfolio securities to distribute such imputed income, which may occur at a
time when the Adviser would not have chosen to sell such securities and which
may result in a taxable gain or loss.
Investment income received directly by the Fund on Treasury Obligations is
exempt from income tax at the state level and may be exempt, depending on the
state, when received by a shareholder as
<PAGE>
10
income dividends from the Fund provided certain state specific conditions are
satisfied. Interest received on repurchase agreements collateralized by
Treasury Obligations normally is not exempt from state taxation. The Fund will
inform shareholders annually of the percentage of income and distributions
derived from Treasury Obligations. Shareholders should consult their tax
advisers to determine whether any portion of the income dividends received from
the Fund is considered tax exempt in their particular states.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax applicable to regulated
investment companies.
Each sale, exchange or redemption of a Fund's shares generally is a taxable
transaction to the shareholder.
GENERAL INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under a Declaration
of Trust dated June 29, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares or "funds" and different classes of each fund.
In addition to the Fund, the Trust offers the following funds: Treasury
Securities Money Market Fund, Tax Exempt Money Market Fund, Government
Securities Fund, Louisiana Tax-Free Income Fund, Balanced Fund, Growth Equity
Fund and the Value Equity Fund. All consideration received by the Trust for
shares of any fund and all assets of such fund belong to that fund and would be
subject to liabilities related thereto. The Trust reserves the right to create
and issue shares of additional funds.
The Trust pays its operating expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy
solicitation material and reports to shareholders, costs of custodial services
and registering the shares under Federal and state securities laws, pricing and
insurance expenses, and pays additional expenses including litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under
the laws of the Commonwealth of Massachusetts. The Trustees have approved
contracts under which, as described above, certain companies provide essential
management, administrative, and shareholder services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to that fund or class. As
a Massachusetts business trust, the Trust is not required to hold annual
meetings of shareholders but meetings of shareholders will be held from time to
time to seek approval for certain changes in the operation of the Trust and for
the election of Trustees under certain circumstances. In addition, a Trustee
may be removed by the remaining Trustees or by shareholders at a special
meeting called upon written request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a meeting is requested,
the Trust will provide appropriate assistance and information to the
shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes periodic reports to
shareholders of record, and, as necessary, proxy statements for shareholder
meetings.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to DST Systems, Inc., P.O. Box 419240,
Kansas City, MO 64141-6240 or by calling 1-800-471-1144.
<PAGE>
11
DIVIDENDS
The net investment income (not including capital gains) of the Fund is
determined and declared on each Business Day as a dividend for shareholders of
record as of the close of business on that day. Shareholders who own shares at
the close of business on the record date will be entitled to receive the
dividend. Currently, capital gains of the Fund, if any, will be distributed at
least annually. Dividends are paid by the Fund in Federal funds or in
additional shares at the discretion of the shareholder on the first business
day of each month.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
CUSTODIAN
First National Bank of Commerce in New Orleans acts as Custodian of the Trust.
The Custodian holds cash, securities and other assets of the Trust as required
by the Investment Company Act of 1940, as amended (the "1940 Act").
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments and investment
practices for the Fund and associated risk factors. Further discussion is
contained in the Statement of Additional Information.
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes,
and bonds issued by the U.S. Treasury, and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS"). The Fund does not expect to trade STRIPS
actively.
Any guaranty by the U.S. Treasury of the securities in which the Fund invests
guarantees only the payment of principal and interest on the guaranteed
security and does not guarantee the yield or value of that security or the
yield or value of shares of the Fund.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which the Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. Repurchase
agreements must be fully collateralized at all times. The Fund bears a risk of
loss in the event the other party defaults on its obligations and the Fund is
delayed or prevented from its right to dispose of the collateral. The Fund will
enter into repurchase agreements only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
established guidelines. Repurchase agreements are considered loans under the
1940 Act.
SECURITIES LENDING--In order to generate additional income, the Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash or securities of the U.S.
Government equal to at least 100% of the market value of the securities lent.
The Fund continues to receive interest on the securities lent while
simultaneously earning a portion of the return generated from the collateral
(or a portion of the return on the investment of cash collateral). Collateral
is marked to market daily. There may be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially or become insolvent.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES--When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
To the extent required by the 1940 Act, the Fund will maintain with the
custodian a separate account with liquid high grade debt securities or cash in
an amount at least equal to these commitments. The interest rate
<PAGE>
12
realized on these securities is fixed as of the purchase date and no interest
accrues to the Fund before settlement. These securities are subject to market
fluctuation due to changes in market interest rates and it is possible that the
market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed. Although a
Fund generally purchases securities on a when-issued or forward commitment
basis with the intention of actually acquiring securities for its portfolio, a
Fund may dispose of a when-issued security or forward commitment prior to
settlement if it deems appropriate.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Summary..................................................................... 2
Expense Summary............................................................. 3
Financial Highlights........................................................ 4
The Trust................................................................... 5
Investment Objectives and Policies.......................................... 5
Investment Limitations...................................................... 5
Purchase of Shares.......................................................... 5
Exchanges................................................................... 6
Redemption of Shares........................................................ 6
The Adviser................................................................. 7
The Administrator........................................................... 8
The Shareholder Servicing Agent and Transfer Agent.......................... 8
The Distributor............................................................. 8
Performance................................................................. 8
Taxes....................................................................... 9
General Information......................................................... 10
Description of Permitted Investments and Risk Factors....................... 11
</TABLE>
<PAGE>
MARQUIS FUNDS (R)
Investment Adviser:
FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS
TAX EXEMPT MONEY MARKET FUND
MARQUIS FUNDS (R) (the "Trust") is a mutual fund that offers a convenient and
economical means of investing in one or more professionally managed portfolios
of securities. This Prospectus offers shares of the TAX EXEMPT MONEY MARKET
FUND (the "Fund"), a separate series of the Trust.
This Prospectus sets forth concisely the information about the Fund and the
Trust that a prospective investor should know before investing in the Fund.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated January 29, 1996 as
amended, has been filed with the Securities and Exchange Commission (the
"SEC") and is available without charge by calling 1-800-471-1144. The
Statement of Additional Information is incorporated into this Prospectus by
reference.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, INCLUDING FIRST NATIONAL BANK OF COMMERCE IN NEW
ORLEANS OR ANY OF ITS AFFILIATES OR CORRESPONDENTS, INCLUDING FIRST COMMERCE
CORPORATION. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
JANUARY 29, 1996
<PAGE>
2
SUMMARY
MARQUIS FUNDS (R) (the "Trust") is an open-end management investment company
providing a convenient way to invest in professionally managed portfolios of
securities. This Summary provides basic information about the Trust's Tax
Exempt Money Market Fund (the "Fund"). The Fund is a separate series of the
Trust.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUND? The Fund seeks to
preserve principal value and maintain a high degree of liquidity while
providing current income exempt from Federal income taxes by investing, under
normal market conditions, at least 80% of its net assets in eligible securities
issued by or on behalf of the states, territories, and possessions of the
United States and the District of Columbia and their political subdivisions,
agencies, and instrumentalities, the interest on which is exempt from Federal
income tax. There can be no assurance that the Fund will achieve its investment
objective.
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUND? The investment
policies of the Fund entail certain risks and considerations of which an
investor should be aware. While the Fund seeks to maintain a net asset value of
$1.00 per share, there can be no assurance that the Fund will be able to do
this on a continuous basis. There may be other risks involved in the ownership
of money market mutual funds.
ARE MY INVESTMENTS INSURED? Any guaranty by the U.S. Government, its agencies
or instrumentalities of the securities in which the Fund invests guarantees
only the payment of principal and interest on the guaranteed security and does
not guarantee the yield or value of that security or the yield or value of
shares of the Fund. The Trust's shares are not federally insured by the FDIC or
any other government agency.
For more information about the Fund, see "Investment Objective and Policies"
and "Description of Permitted Investments and Risk Factors."
HOW DO I PURCHASE SHARES? Shares of the Fund are offered at net asset value per
share.
WHO IS THE ADVISER? The Trust Group of First National Bank of Commerce in New
Orleans serves as the investment adviser of the Fund. See "Expense Summary" and
"The Adviser".
WHO IS THE ADMINISTRATOR? SEI Financial Management Corporation serves as the
administrator of the Trust. See "Expense Summary" and "The Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as shareholder servicing
agent, transfer agent, and dividend disbursing agent for the Trust. See "The
Shareholder Servicing Agent and Transfer Agent."
WHO IS THE DISTRIBUTOR? SEI Financial Services Company serves as distributor of
the Trust's shares. See "The Distributor."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is distributed in the form of monthly
dividends. Any capital gain is distributed at least annually. Dividends are
paid in additional shares unless the shareholder elects to take payment in cash
on the first Business Day of each month. See "Dividends."
<PAGE>
3
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES TAX EXEMPT MONEY MARKET FUND
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) None
Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Wire Redemption Fee $25
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES TAX EXEMPT MONEY MARKET FUND
(as a percentage of average net assets)
<TABLE>
- ------------------------------------------------------
<S> <C>
Advisory Fees (after fee waivers) (1) .35%
Administration Fees .20%
12b-1 Fees (after fee waivers) (1) .00%
Other Expenses (2) .10%
- ------------------------------------------------------
Total Operating Expenses (after fee waivers) (3) .65%
- ------------------------------------------------------
- ------------------------------------------------------
</TABLE>
(1)The Adviser has voluntarily agreed to waive its advisory fee and the
Distributor has voluntarily agreed to waive the 12b-1 fee to the extent
necessary to keep "Total Operating Expenses" for the Tax Exempt Money
Market Fund from exceeding .65%. The Adviser and the Distributor reserve
the right to terminate its waiver at any time in its sole discretion.
Absent such waivers, the advisory fee for the Fund would be .45% and the
12b-1 fee would be .25%.
(2)Other Expenses are based on estimates for the current fiscal year.
(3)Absent the Adviser's and the Distributor's voluntary fee waivers, Total
Operating Expenses for the Fund would be 1.00%.
EXAMPLE
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment in shares of the Fund
assuming: (1) 5% annual return and (2)
redemption at the end of each time period: $7 $21 $36 $81
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by
investors in the Fund. The information set forth in the foregoing table and
example relates only to shares of the Tax Exempt Money Market Fund.
Shareholders purchasing shares through a financial institution may be charged
additional account fees by that institution. Additional information may be
found under "The Adviser," "The Administrator," and "The Distributor."
<PAGE>
4
THE TRUST
MARQUIS FUNDS (R) (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares").This prospectus relates to
the Tax Exempt Money Market Fund (the "Fund"), a diversified mutual fund. Each
share of the Fund represents an undivided, proportionate interest in the Fund.
Information regarding the Trust's other funds is contained in separate
prospectuses that may be obtained by calling 1-800-471-1144.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives are to preserve principal value and maintain a
high degree of liquidity while providing current income exempt from Federal
income taxes. There can be no assurance that the Fund will be able to achieve
its investment objectives.
The Fund complies with regulations of the Securities and Exchange Commission
applicable to money market funds. These regulations impose certain quality,
maturity and diversification restraints on investments by the Fund. Under these
regulations, the Fund will maintain a dollar-weighted average portfolio
maturity of 90 days or less, and will acquire only obligations maturing in 397
days or less. The Fund will attempt to maintain a net asset value of $1.00 per
share, although there can be no assurance that it will be able to do so.
Under normal market conditions, the Fund will invest at least 80% of its net
assets in eligible securities issued by or on behalf of the states, territories
and possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest on which
is exempt from Federal income tax (collectively, "Municipal Securities"). The
Fund will invest at least 80% of its assets in Municipal Securities the
interest on which is not treated as a preference item for purposes of the
federal alternative minimum tax. This investment policy is a fundamental policy
of the Fund. The Fund will purchase municipal bonds, municipal notes, municipal
lease obligations, tax-exempt money market mutual funds, and tax-exempt
commercial paper rated in the two highest short-term rating categories by a
nationally recognized statistical rating organization ("NRSRO") in accordance
with Securities and Exchange Commission ("SEC") regulations at the time of
investment or, if not rated, determined by the Adviser to be of comparable
quality.
The Adviser will not invest more than 25% of Fund assets in Municipal
Securities (a) whose issuers are located in the same state or (b) the interest
on which is derived from revenues of similar type projects. This restriction
does not apply to Municipal Securities in any of the following categories:
public housing authorities; general obligations of states and localities; state
and local housing finance authorities; or municipal utilities systems.
The Fund may purchase municipal obligations with demand features, including
variable and floating rate obligations. In addition, the Fund may invest in
commitments to purchase securities on a "when issued" basis and purchase
securities subject to a standby commitment.
The Fund may invest up to 20% of the Fund's net assets in the aggregate in
taxable money market instruments, taxable money market mutual funds, and
securities subject to the alternative minimum tax. Taxable money market
instruments in which the Fund may invest consist of (i) bankers' acceptances,
certificates of deposits, notes and time deposits of highly-rated U.S. banks
and U.S. branches of foreign banks, (ii) U.S. Treasury obligations and
obligations issued or guaranteed by the agencies and instrumentalities of the
U.S. Government, including STRIPs; (iii) high quality commercial paper issued
by U.S. and foreign corporations; (iv) debt obligations with a maturity of one
year or less issued by corporations with outstanding high-quality commercial
paper; (v) receipts and (vi) repurchase agreements involving any of the
foregoing obligations entered into with highly-rated banks and broker-dealers.
The Fund may engage in securities lending and may also borrow money in amounts
up to 33 1/3% of its net assets.
<PAGE>
5
For additional information regarding permitted investments, investment
practices and risks, see "Description of Permitted Investments and Risk
Factors."
INVESTMENT LIMITATIONS
The following investment limitations are fundamental policies of the Fund.
Fundamental policies cannot be changed with respect to the Fund without the
consent of the holders of a majority of the Fund's outstanding shares.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if, as a result, more than 5% of the total assets of
the Fund would be invested in the securities of such issuer. This restriction
applies to 75% of the Fund's assets.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to (i) investments in the obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities, and
repurchase agreements involving such securities; and (ii) tax-exempt securities
issued by governments or political subdivisions of governments.
3. Make loans except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objectives and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
Additional investment limitations are set forth in the Statement of Additional
Information.
PURCHASE OF SHARES
Investors may purchase shares of the Fund directly from the Trust's shareholder
servicing and transfer agent DST Systems, Inc. ("DST") by mail, by wire, or
through an automatic investment plan. Shares may also be purchased through
broker-dealers, including Marquis Investments, Inc., that have established a
dealer agreement with SEI Financial Services Company, the Trust's distributor
(the "Distributor"). Shares of the Fund are sold on a continuous basis.
BY MAIL
You may purchase shares of the Fund by completing and signing an Account
Application form and mailing it, along with a check (or other negotiable bank
instrument or money order) payable to "Marquis Funds (Tax Exempt Money Market
Fund)," to DST at 210 West 10th Street, Kansas City, MO 64105. You may purchase
additional shares at any time by mailing payment to DST. Orders placed by mail
will be executed on receipt of your payment. If your check does not clear, your
purchase will be cancelled and you could be liable for any losses or fees
incurred.
You may obtain Account Application forms by calling 1-800-471-1144.
BY WIRE
You may purchase shares of the Fund by wiring Federal funds, provided that your
Account Application has been previously received. You must wire funds to DST
and the wire instructions must include your account number. You must call 1-
800-471-1144 before wiring any funds. An order to purchase shares by Federal
funds wire will be deemed to have been received by the Fund on the Business Day
(defined below) of the wire, provided that the shareholder notifies DST prior
to 11:00 a.m., Central time. If DST does not receive notice by 11:00 a.m.,
Central time, on the Business Day of the wire, the order will be executed on
the next Business Day.
AUTOMATIC INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Fund through
automatic deductions by Automated Clearing House ("ACH") from a checking
account by completing an AIP Application Form. The minimum pre-authorized
<PAGE>
6
investment amount is $50 per month. An AIP Application Form may be obtained by
calling 1-800-471-1144. The AIP is available only for additional investments
for an existing account.
GENERAL INFORMATION REGARDING PURCHASES
You may purchase shares of the Fund on any day the New York Stock Exchange and
the Federal Reserve wire system are open for business ("Business Days"). The
minimum initial investment in shares of the Fund is $2,500 ($500 minimum for
individual retirement accounts and employees of First National Bank of Commerce
in New Orleans, the Fund's investment adviser (the "Adviser") or its
affiliates); however, the Distributor may waive the minimum investment at its
discretion. Subsequent purchases of shares must be at least $100, except for
purchases through the AIP and payroll deductions, which must be at least $50.
A purchase order for shares will be effective, and eligible to receive
dividends declared that same day, on the Business Day the order is received by
DST if DST receives the order and payment before 11:00 a.m., Central time. A
purchase order received (with payment) after this time will be effective on the
next Business Day. The purchase price of shares of the Fund is the net asset
value per share next computed after the order is received and accepted by the
Trust. The Fund expects to maintain its net asset value per share constant at
$1.00. The net asset value per share of the Fund is determined by dividing the
total value of its investments and other assets, less any liabilities, by its
total outstanding shares. The Fund's net asset value per share is calculated as
of 3:00 p.m., Central time, each Business Day and is based on the amortized
cost method described in the Statement of Additional Information.
The Trust reserves the right to reject a purchase order for shares when the
Distributor determines that it is not in the best interest of the Trust and/or
its shareholders to accept such order.
Shareholders of record who desire to transfer registration of their shares
should call 1-800-471-1144.
PURCHASES THROUGH FINANCIAL INSTITUTIONS
Shares may also be purchased through financial institutions, including the
Adviser, that provide distribution assistance or shareholder services to the
Trust. Shares purchased by persons ("Customers") through financial institutions
may be held of record by the financial institution. Financial institutions may
impose an earlier cut-off time for receipt of purchase orders directed through
them to allow for processing and transmittal of these orders to the Distributor
for effectiveness the same day. Customers should contact their financial
institution for information as to that institution's procedures for
transmitting purchase, exchange or redemption orders to the Trust.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change. Certain financial institutions may be
required under state law to register as broker/dealers.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
EXCHANGES
You may exchange your shares for Class A or Class B shares of other funds of
the Trust. You will be subject to the applicable sales charge on exchange
unless you qualify for a sales load waiver.
You must have received a current prospectus of the Trust's other fund into
which you wish to move your investment (the "new" fund) before the exchange
will be effected. Exchanges will be made only after instructions in writing or
by telephone (an "Exchange Request") are received by DST. If an Exchange
Request in good order is received by DST by 3:00 p.m. Central time, on any
Business Day, the exchange will occur on that day. The exchange privilege may
be exercised only in those states where the class or shares of the new fund may
legally be sold.
<PAGE>
7
Customers who beneficially own shares held of record by a financial institution
should contact that institution if they wish to exchange shares. The
institution will contact DST and effect the exchange on behalf of the Customer.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $25 charge for wiring redemption proceeds. Shares may be redeemed by
mail, by telephone or through a systematic withdrawal plan. Investors who own
shares held of record by a financial institution should contact that financial
institution for information on how to redeem shares. Shares cannot be redeemed
by Federal Reserve wire on Federal holidays restricting wire transfers.
BY MAIL
A written request for redemption must be received by DST in order to constitute
a valid redemption request.
If the redemption request exceeds $5,000 or if the request directs the proceeds
to be sent or wired to a shareholder or an address different from that on
record, DST may require that the signature on the written redemption request be
guaranteed. You should be able to obtain a signature guarantee from a bank,
broker, dealer, credit union, securities exchange or association, clearing
agency or savings association. Notaries public cannot guarantee signatures.
BY TELEPHONE
You may redeem your shares by telephone if you have elected that option on your
Account Application. Under most circumstances, payments will be transmitted on
the next Business Day following receipt of a valid request for redemption. You
may have the proceeds mailed to your address of record or wired to a commercial
bank account previously designated on your Account Application. There is no
charge for having redemption proceeds mailed to you or to a designated bank
account, but there is a charge for wiring redemption proceeds.
You may request a wire redemption for redemptions in excess of $500 by calling
1-800-471-1144, however a wire charge of $25 will be deducted from the amount
of the wire redemption.
Neither the Trust nor DST will be responsible for any loss, liability, cost or
expense for acting upon wire instructions or upon telephone instructions that
it reasonably believes to be genuine. The Trust and DST will each employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, including requiring a form of personal identification prior to
acting upon instructions received by telephone and recording telephone
instructions. When market conditions are extremely busy, it is possible that
you may experience difficulties placing redemption orders by telephone, and may
wish to place them by mail.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Fund offers a Systematic Withdrawal Plan which you may use to receive
regular distributions from your account. Upon commencement of the SWP, your
account must have a current value of $5,000 or more. You may elect to receive
automatic payments via check or ACH of $100 or more on a monthly, quarterly,
semi-annual or annual basis. You may obtain a SWP Application Form by calling
1-800-471-1144.
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could
be exhausted entirely. You may change or cancel the SWP at any time on written
notice to DST.
<PAGE>
8
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. A redemption order
received before 11:00 a.m., Central time, on any Business Day will be effective
that day and will receive that day's redemption price. Net asset value per
share is determined as of 3:00 p.m., Central time, on each Business Day.
Redeemed shares are not entitled to dividends declared on the day the
redemption order is effective.
Payment to shareholders for shares redeemed will be made within seven days
after DST receives the valid redemption request. At various times, however, the
Fund may be requested to redeem shares for which it has not yet received good
payment; collection of payment may take 10 or more days. In such circumstances,
redemption proceeds will be held pending clearance of the check.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem your shares at their net asset value if, because
of redemptions, your account in the Fund has a value of less than the minimum
initial purchase amount (normally $2,500; $500 for individual retirement
accounts and for employees of the Adviser or its affiliates). Accordingly, if
you purchase shares of the Fund in only the minimum investment amount, you may
be subject to involuntary redemption if you redeem any shares. Before the Fund
exercises its right to redeem your shares, you will be given notice that the
value of the shares in your account is less than the minimum amount and will be
allowed 60 days to make an additional investment in the Fund in an amount which
will increase the value of the account to at least the minimum amount.
THE ADVISER
First National Bank of Commerce in New Orleans (the "Adviser"), 210 Baronne
Street, New Orleans, Louisiana 70112, serves as the Fund's investment adviser
under an advisory agreement (the "Advisory Agreement") with the Trust. The
Adviser, through its Trust Group, makes the investment decisions for the assets
of the Fund and continuously reviews, supervises, and administers the
investment programs of the Fund, subject to the supervision of, and policies
established by, the Trustees of the Trust.
As of September 30, 1995, the Adviser's Trust Group managed approximately $2.0
billion in discretionary investment management accounts for individuals,
corporations and institutions with widely varying investment needs and
objectives. The Trust Group has managed client accounts since 1933 and has
managed money market portfolios for the past seven years. The Adviser is a
wholly-owned subsidiary of First Commerce Corporation.
The Glass-Steagall Act restricts the securities activities of national banks
such as First National Bank of Commerce in New Orleans but the Comptroller of
the Currency permits national banks to provide investment advisory and other
services to mutual funds. Should the Comptroller's position be challenged
successfully in court or reversed by legislation, the Trust might have to make
other investment advisory arrangements.
The Trust's shares are not sponsored, endorsed or guaranteed by, and do not
constitute obligations or deposits of, the Adviser or First Commerce
Corporation and are not insured by the Federal Deposit Insurance Corporation or
issued or guaranteed by the U.S. Government or any of its agencies.
The Adviser is entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of .45% of the Fund's average daily net assets. The Adviser
may voluntarily waive a portion of its fee in order to limit the total
operating expenses of the Fund. The Adviser reserves the right, in its sole
discretion, to terminate this voluntary fee waiver at any time.
Gerald S. Dugal is an Assistant Vice President and the Investment Manager for
the Marquis Tax Exempt Money Market Fund, Institutional Money Market Fund, and
the Treasury Securities Money
<PAGE>
9
Market Fund. Mr. Dugal has 10 years of experience in investment trading,
brokerage, and research. He is licensed as a series 7 securities principal and
a series 53 municipal securities principal.
THE ADMINISTRATOR
SEI Financial Management Corporation (the "Administrator"), 680 East Swedesford
Road, Wayne, PA 19087-1658, a wholly-owned subsidiary of SEI Corporation
("SEI"), and the Trust are parties to an Administration Agreement (the
"Administration Agreement"). Under the terms of the Administration Agreement,
the Administrator provides the Trust with administrative services, other than
investment advisory services, including all regulatory reporting, necessary
office space, equipment, personnel, and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the Fund's average daily net assets.
THE SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
DST Systems, Inc., 210 West 10th Street, Kansas City, MO 64105, serves as the
dividend disbursing agent and shareholder servicing agent for the Trust. DST
also acts as transfer agent for the Trust under a Transfer Agent Agreement.
THE DISTRIBUTOR
Shares of the Fund have a Rule 12b-1 distribution plan (the "Plan"), and the
Trust and SEI Financial Services Company (the "Distributor"), 680 East
Swedesford Road, Wayne, PA 19087, a wholly-owned subsidiary of SEI, have
entered into a distribution agreement (the "Distribution Agreement").
As provided in the Distribution Agreement and the Plan, the Trust pays the
Distributor a fee at the annual rate of .25% of the average daily net assets of
the shares of the Fund. This fee will be calculated and paid each month based
on average daily net assets for that month. The Distributor from time to time
may waive a portion of this distribution fee in order to limit the distribution
fee for shares of the Fund. The Distributor reserves the right in its sole
discretion to terminate this voluntary waiver at any time.
The Distributor may use such fees to make payments to financial institutions
and intermediaries such as banks (including the Adviser and its affiliates),
savings and loan associations, insurance companies, and investment counselors,
broker-dealers, and the Distributor's affiliates (collectively, "financial
intermediaries") as compensation for shareholder services or as compensation to
the Distributor for its services. The Plan is characterized as a compensation
plan since this fee will be paid to the Distributor without regard to the
shareholder service expenses incurred by the Distributor or the amount of
payments made to financial intermediaries. If the Distributor's expenses are
less than its fees, the Trust will still pay the full fee and the Distributor
will realize a profit, but the Trust will not be obligated to pay in excess of
the full fee, even if the Distributor's actual expenses are higher. The
Distributor has agreed, however, to pay the entire amount of the fee to
financial intermediaries for shareholder services.
The Fund may also execute brokerage or other agency transactions through an
affiliate of the Adviser or through the Distributor, for which the affiliate or
the Distributor may receive "usual and customary" compensation. For further
information, see the Statement of Additional Information.
PERFORMANCE
From time to time, the Trust may advertise the Fund's "current yield,"
"effective compound yield" and "tax-equivalent yield." These figures will
fluctuate, as they are based on historical earnings; they are not intended to
indicate future performance and the Trust makes no representation concerning
actual future yields. The "current yield" of the Fund refers to the income
generated by an investment over a seven-day period which is then "annualized."
That is, the amount of income generated by an investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
<PAGE>
10
percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by an investment is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment. Tax-
equivalent yield is calculated by determining the rate of return that would
have been achieved on a fully taxable investment to produce the after-tax
equivalent of the Fund's yield, assuming certain tax brackets for a
shareholder.
In addition, the Trust may from time to time compare performance of the Fund to
that of other mutual funds tracked by mutual fund rating services, financial
and business publications and periodicals, broad groups of comparable mutual
funds or unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs or
to other investment alternatives.
TAXES
The following summary of federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial, or
administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of the Fund or its shareholders. In
addition, state and local tax consequences of an investment in the Fund may
differ from the federal income tax consequences described below. Accordingly,
shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state, and local income taxes. Additional information
concerning taxes is set forth in the Statement of Additional Information.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify for the
special tax treatment afforded regulated investment companies as defined under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") so
as to be relieved of federal income tax on that part of its net investment
company taxable income (including, for this purpose, net short-term capital
gain) and net capital gain (the excess of net long-term capital gains over net
short-term capital losses) distributed to shareholders.
TAX STATUS OF DISTRIBUTIONS
The Fund will distribute all of its net investment income (including net short-
term capital gain) to shareholders. If, at the close of each quarter of its
taxable year, at least 50% of the value of the Fund's assets consist of
obligations the interest on which is excludable from gross income for federal
tax purposes, the Fund may pay "exempt-interest dividends" to its shareholders.
Those dividends constitute the portion of the aggregate dividends as designated
by the fund equal to the excess of the excludable interest over certain amounts
disallowed as deductions. Exempt-interest dividends are excludable from a
shareholder's gross income for regular federal income tax purposes, but may
have certain collateral federal income tax consequences, including alternative
minimum tax. See the Statement of Additional Information.
Current federal law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the fund to purchase sufficient amounts of tax-exempt securities to
satisfy the Code's requirements for the payment of "exempt-interest dividends."
Dividends from the Fund's net investment company taxable income will be taxable
to shareholders as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Any net realized
capital gain will be distributed at least annually and will be taxed to
shareholders as long-term capital gain, regardless of how long the shareholders
have held their shares and regardless of whether the distributions are received
in cash or in additional shares. Dividends and distributions of capital gains
paid by the Fund do not qualify for the dividends received deduction for
corporate shareholders. The Fund will provide annual reports to
<PAGE>
11
shareholders of the federal income tax status of all distributions.
Income received on Treasury Obligations is exempt from income tax at the state
level when received directly and may be exempt, depending on the state, when
received by a shareholder from the Fund provided certain conditions are
satisfied. Interest received on repurchase agreements collateralized by
Treasury Obligations normally is not exempt from state taxation. The Fund will
inform shareholders annually of the percentage of income and distributions
derived from Treasury Obligations. Shareholders should consult their tax
advisers to determine whether any portion of the income dividends received from
the Fund is considered tax exempt in their particular states.
Dividends declared by the Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of the year declared, if paid by the Fund at any time during the
following January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for the federal excise tax.
A sale exchange or redemption of Fund shares is a taxable transaction to the
shareholders.
GENERAL INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under a Declaration
of Trust dated June 29, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares or "funds" and different classes of each fund.
In addition to the Fund, the Trust offers the following funds: Treasury
Securities Money Market Fund, Institutional Money Market Fund, Government
Securities Fund, Louisiana Tax-Free Income Fund, Balanced Fund, Growth Equity
Fund and the Value Equity Fund. All consideration received by the Trust for
shares of any fund and all assets of such fund belong to that fund and would be
subject to liabilities related thereto. The Trust reserves the right to create
and issue shares of additional funds.
The Trust pays its operating expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy
solicitation material and reports to shareholders, costs of custodial services
and registering the shares under Federal and state securities laws, pricing and
insurance expenses, and pays additional expenses including litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under
the laws of the Commonwealth of Massachusetts. The Trustees have approved
contracts under which, as described above, certain companies provide essential
management, administrative, and shareholder services to the Trust.
VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to that fund or class. As
a Massachusetts business trust, the Trust is not required to hold annual
meetings of shareholders but meetings of shareholders will be held from time to
time to seek approval for certain changes in the operation of the Trust and for
the election of Trustees under certain circumstances. In addition, a Trustee
may be removed by the remaining Trustees or by shareholders at a special
meeting called upon written request of shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a meeting is requested,
the Trust will provide appropriate assistance and information to the
shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements
<PAGE>
12
annually. The Trust furnishes periodic reports to shareholders of record, and,
as necessary, proxy statements for shareholder meetings.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to DST Systems, Inc., P.O. Box 419240,
Kansas City, MO 64141-6240 or by calling 1-800-471-1144.
DIVIDENDS
The net investment income (not including capital gains) of the Fund is
determined and declared on each Business Day as a dividend for shareholders of
record as of the close of business on that day. Shareholders who own shares at
the close of business on the record date will be entitled to receive the
dividend. Currently, capital gains of the Fund, if any, will be distributed at
least annually. Dividends are paid by the Fund in Federal funds or in
additional shares at the discretion of the shareholder on the first business
day of each month.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.
CUSTODIAN
First National Bank of Commerce in New Orleans acts as Custodian of the Trust.
The Custodian holds cash, securities and other assets of the Trust as required
by the Investment Company Act of 1940, as amended (the "1940 Act").
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments and investment
practices for the Fund and associated risk factors. Further discussion is
contained in the Statement of Additional Information.
BANKERS' ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods and to furnish dollar
exchange. Maturities are generally six months or less.
CERTIFICATES OF DEPOSIT--Certificates of deposit are interest bearing
instruments with a specific short-term maturity. They are issued by banks and
savings and loan institutions in exchange for the deposit of funds and normally
can be traded in the secondary market prior to maturity. Certificates of
deposit with penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER--Commercial paper is a term used to describe unsecured short-
term promissory notes issued by corporations and other entities. Maturities on
these issues vary from a few to 270 days.
FIXED INCOME SECURITIES--Fixed income securities include bonds, notes,
debentures and other interest-bearing securities that represent indebtedness.
The market value of the fixed income investments in which the Fund invest will
change in response to interest rate changes and other factors. During periods
of falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods of rising interest rates, the values
of such securities generally decline. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the rating of any
fixed income security and in the ability of an issuer to make payments of
interest and principal also affect the value of these investments. Changes in
the value of these securities will not necessarily affect cash income derived
from these securities but will affect the Fund's net asset value.
MUNICIPAL LEASES--Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales
<PAGE>
13
contract, or a participation certificate in any of the above.
Municipal lease obligations typically are not backed by the municipality's
credit, and their interest may become taxable if the lease is assigned. If
funds are not appropriated for the following year's lease payments, a lease may
terminate, with a possibility of default on the lease obligation and
significant loss to the Fund. Under guidelines established by the Board of
Directors, the credit quality of municipal leases will be determined on an
ongoing basis, including an assessment of the likelihood that a lease will be
canceled.
MUNICIPAL SECURITIES--Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair, or improvement of privately operated
facilities. General obligation bonds are backed by the taxing power of the
issuing municipality. Revenue bonds are backed by the revenues of a project or
facility; tolls from a toll bridge for example. Certificates of participation
represent an interest in an underlying obligation or commitment such as an
obligation issued in connection with a leasing arrangement. The payment of
principal and interest on private activity and industrial development bonds
generally is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Municipal securities include general obligation notes, tax anticipation notes,
revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes, and construction loan notes. Municipal bonds
include general obligation bonds, revenue or special obligation bonds, private
activity and industrial development bonds.
PARTICIPATION INTERESTS--Participation interests are interests in Municipal
Securities from financial institutions such as commercial and investment banks,
savings and loan associations and insurance companies. These interests may take
the form of participations, beneficial interests in a trust, partnership
interests or any other form of indirect ownership that allows the Fund to treat
the income from the investment as exempt from federal income tax. The Fund
invests in these participation interests in order to obtain credit enhancement
or demand features that would not be available through direct ownership of the
underlying Municipal Securities.
RECEIPTS--TRs, TIGRs and CATS--interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury obligations into
a special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
"Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts" ("TIGRs"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). Each Fund other
than the Louisiana Fund is permitted to invest in receipts.
STRIPS, TRs, TIGRs and CATS are sold as zero coupon securities which means that
they are sold at a substantial discount and redeemed at face value at their
maturity date without interim cash payments of interest or principal. The
amount of this discount is accrued over the life of the security and
constitutes the income earned on the security for both accounting and tax
purposes. Because of these features, receipts may be subject to greater price
volatility than interest paying U.S. Treasury Obligations. See also "Taxes".
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which the Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from
<PAGE>
14
the date of purchase. Repurchase agreements must be fully collateralized at all
times. The Fund bears a risk of loss in the event the other party defaults on
its obligations and the Fund is delayed or prevented from its right to dispose
of the collateral. The Fund will enter into repurchase agreements only with
financial institutions deemed to present minimal risk of bankruptcy during the
term of the agreement based on established guidelines. Repurchase agreements
are considered loans under the 1940 Act, as amended.
SECURITIES LENDING--In order to generate additional income, the Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash or securities of the U.S.
Government or its agencies equal to at least 100% of the market value of the
securities lent. The Fund continues to receive interest on the securities lent
while simultaneously earning a portion of the return generated from the
collateral (or a portion of the return on the investment of cash collateral).
Collateral is marked to market daily. There may be risks of delay in recovery
of the securities or even loss of rights in the collateral should the borrower
of the securities fail financially or become insolvent.
STANDBY COMMITMENTS--Some securities dealers are willing to sell Municipal
Securities to the Fund accompanied by their commitments to repurchase the
Municipal Securities prior to maturity, at the Fund's option, for the amortized
cost of the Municipal Securities at the time of repurchase. These arrangements
are not used to protect against changes in the market value of Municipal
Securities. They permit the Fund, however, to remain fully invested and still
provide liquidity to satisfy redemptions. The cost of Municipal Securities
accompanied by these "standby" commitments could be greater than the cost of
Municipal Securities without such commitments. Standby commitments are not
marketable or otherwise assignable and have value only to the Fund. The default
or bankruptcy of a securities dealer giving such a commitment would not affect
the quality of the Municipal Securities purchased. However, without a standby
commitment, these securities could be more difficult to sell. The Fund enters
into standby commitments only with those dealers whose credit the investment
adviser believes to be of high quality.
TIME DEPOSITS--Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market. Time deposits are considered to be illiquid
securities.
Any guaranty by the U.S. Treasury of the securities in which the Fund invests
guarantees only the payment of principal and interest on the guaranteed
security and does not guarantee the yield or value of that security or the
yield or value of shares of the Fund.
U.S. GOVERNMENT AGENCY OBLIGATIONS--Obligations issued or guaranteed by
agencies of the United States Government, including, among others, the Federal
Farm Credit Bank, the Federal Housing Administration and the Small Business
Administration, and obligations issued or guaranteed by instrumentalities of
the United States Government, including, among others, the Federal Home Loan
Mortgage Corporation, the Federal Land Banks and the United States Postal
Service. Some of these securities are supported by the full faith and credit of
the United States Treasury (e.g., Government National Mortgage Association),
others are supported by the right of the issuer to borrow from the Treasury
(e.g., Federal Farm Credit Bank), while still others are supported only by the
credit of the instrumentality (e.g., Federal National Mortgage Association).
Guarantees of principal by agencies or instrumentalities of the United States
Government may be a guarantee of payment at the maturity of the obligation so
that in the event of a default prior to maturity there might not be a market
and thus no means of realizing on the obligation prior to maturity. Guarantees
as to the timely payment of principal and interest do not extend to the value
or yield of these securities nor to the value of the Fund's shares.
<PAGE>
15
U.S. GOVERNMENT SECURITIES--Any guaranty by the U.S. Government of the
securities in which the Fund invests guarantees only the payment of principal
and interest on the guaranteed security and does not guarantee the yield or
value of that security or the yield or value of shares of the Fund.
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes,
and bonds issued by the U.S. Treasury, and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS"). The Fund does not expect to trade STRIPS
actively.
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain of the obligations purchased by
the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices. The
interest rates on these securities may be reset daily, weekly, quarterly or
some other reset period, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates. A demand instrument with
a demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES--When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
To the extent required by the 1940 Act, the Fund will maintain with the
custodian a separate account with liquid high grade debt securities or cash in
an amount at least equal to these commitments. The interest rate realized on
these securities is fixed as of the purchase date and no interest accrues to
the Fund before settlement. These securities are subject to market fluctuation
due to changes in market interest rates and it is possible that the market
value at the time of settlement could be higher or lower than the purchase
price if the general level of interest rates has changed. Although the Fund
generally purchases securities on a when-issued or forward commitment basis
with the intention of actually acquiring securities for its portfolio, the Fund
may dispose of a when-issued security or forward commitment prior to settlement
if it deems appropriate.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Summary..................................................................... 2
Expense Summary............................................................. 3
The Trust................................................................... 4
Investment Objectives and Policies.......................................... 4
Investment Limitations...................................................... 5
Purchase of Shares.......................................................... 5
Exchanges................................................................... 6
Redemption of Shares........................................................ 7
The Adviser................................................................. 8
The Administrator........................................................... 9
The Shareholder Servicing Agent and Transfer Agent.......................... 9
The Distributor............................................................. 9
Performance................................................................. 9
Taxes....................................................................... 10
General Information......................................................... 11
Description of Permitted Investments and Risk Factors....................... 12
</TABLE>
<PAGE>
MARQUIS FUNDS(R): STATEMENT OF ADDITIONAL INFORMATION
INVESTMENT ADVISER: FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS
This Statement of Additional Information is not a prospectus. It provides
information about the activities and operations of Marquis Funds (the "Trust")
in addition to the information provided in the Trust's prospectuses dated
January 29, 1996 (the "Prospectuses") and should be read in conjunction with a
Prospectus. Prospectuses may be obtained through the Trust's shareholder
servicing and transfer agent, DST Systems, Inc., 210 West 10th Street, Kansas
City, Missouri 64105 (1-800-471-1144).
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
The Trust........................................ 2
Additional Description of Permitted Investments.. 2
Investment Limitations........................... 21
Non-Fundamental Policies......................... 22
The Adviser...................................... 23
The Administrator................................ 24
The Distributor.................................. 26
Trustees and Officers of the Trust............... 28
Computation of Yield............................. 31
Calculation of Total Return...................... 33
Purchase and Redemption of Shares................ 35
Conversion Feature............................... 35
Letter of Intent................................. 36
Determination of Net Asset Value................. 36
Taxes............................................ 37
Fund Transactions................................ 43
Trading Practices and Brokerage.................. 43
Description of Shares............................ 47
Shareholder Liability............................ 48
Limitation of Trustees' Liability................ 48
5% Shareholders.................................. 49
Experts.......................................... 51
Financial Information............................ -
</TABLE>
January 29, 1996
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THE TRUST
Marquis Funds(R) is an open-end management investment company established under
Massachusetts law as a "Massachusetts business trust" under an Agreement and
Declaration of Trust dated as of June 29, 1993 (the "Declaration of Trust").
The Declaration of Trust permits the Trust to offer separate series of units of
beneficial interest ("shares") and different classes of shares of each series.
The Trust consists of eight series: the Government Securities Fund, the
Louisiana Tax-Free Income Fund (the "Louisiana Fund"), the Balanced Fund
(formerly the "Growth and Income Fund"), the Value Equity Fund, the Growth
Equity Fund, and the Treasury Securities Money Market Fund, the Institutional
Money Market Fund, and the Tax Exempt Money Market Fund (the "Money Market
Funds") (collectively, the "Funds"). Each Fund is a diversified mutual fund,
except the Louisiana Fund, which is non-diversified. Except for differences
between the Class A and Class B shares of the Government Securities Fund, the
Louisiana Fund (together, the "Fixed Income Funds"), Balanced Fund, Value Equity
Fund and Growth Equity Fund (together, the "Equity Funds") pertaining to sales
loads, service fees, dividends, voting rights and distribution plans, and
differences between the Trust Class, Retail Class and Cash Sweep Class shares of
the Treasury Securities Money Market Fund pertaining to distribution costs,
distribution plans, dividends and voting rights, each share of each Fund
represents an equal proportionate interest in that Fund. See "Description of
Shares." Capitalized terms not defined herein are defined in the Prospectuses.
No investment in shares of a Fund should be made without first reading that
Fund's Prospectus.
ADDITIONAL DESCRIPTION OF PERMITTED INVESTMENTS
VARIABLE AND FLOATING RATE NOTES
All Funds may invest in variable rate notes and floating rate notes (together,
"adjustable interest rate notes"). The Fixed Income Funds may invest in
adjustable interest rate notes issued by or on behalf of states (including the
District of Columbia), territories and possessions of the United States and
their respective authorities, agencies, instrumentalities and political
subdivisions; such notes constitute a form of Municipal Securities. A variable
rate note is a note whose terms provide for the adjustment of its interest rate
on set dates and which, upon such adjustment, can reasonably be expected to have
a market value that approximates its par value; the degree to which a variable
rate note's market value approximates its par value will depend on the frequency
of the readjustment of the note's interest rate and the length of time that must
elapse before the next readjustment. A floating rate note is a note whose terms
provide for the adjustment of its interest rate whenever a specified interest
rate changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by a Fund, the Fund may seek to resell the note at any time to a
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third party. The absence of an active secondary market, however, could make it
difficult for the Fund to dispose of a variable or floating rate note in the
event the issuer of the note defaulted on its payment obligations, and the Fund
could, as a result or for other reasons, suffer a loss to the extent of the
default. In addition, a variable or floating rate demand note with a demand
notice exceeding seven days may be considered illiquid if there is no secondary
market for such securities. Variable or floating rate notes may be secured by
bank letters of credit.
For the Money Market Funds only, variable and floating rate notes will be deemed
to have maturities as follows:
1. A variable rate note, the principal amount of which is scheduled on the
face of the instrument to be paid in thirteen months or less, will be deemed by
a Fund to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
2. A variable rate note that is subject to a demand feature will be deemed
by a Fund to have a maturity equal to the longer of the period remaining until
the next readjustment of the interest rate or the period remaining until the
principal amount can be recovered through demand.
3. A floating rate note that is subject to a demand feature will be deemed
by a Fund to have a maturity equal to the period remaining until the principal
amount can be recovered through demand.
As used above, a note is "subject to a demand feature" where the Fund is
entitled to receive the principal amount of the note either at any time on no
more than thirty days' notice or at specified intervals not exceeding thirteen
months and upon no more than thirty days' notice.
The Fixed Income Funds and the Equity Funds may invest in variable amount master
demand notes, which may or may not be backed by bank letters of credit. These
variable rate notes permit the investment of fluctuating amounts at varying
market rates of interest pursuant to direct arrangements between the Trust, as
lender, and the borrower. Such notes provide that the interest rate on the
amount outstanding varies on a daily, weekly or monthly basis depending upon a
stated short-term interest rate index. Both the lender and the borrower have
the right to reduce the amount of outstanding indebtedness at any time. There
is no secondary market for the notes. It is not generally contemplated that
such instruments will be traded.
BANK OBLIGATIONS
The Funds are not prohibited from investing in obligations of banks that are
clients of SEI Corporation ("SEI"). However, the purchase of shares of the
Funds by such banks or by their customers will not be a consideration in
determining which bank obligations the
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Funds will purchase. The Funds will not purchase obligations of the Adviser.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") CERTIFICATES
The Fixed Income Funds and the Equity Funds may invest in securities issued by
GNMA, a wholly-owned U.S. Government corporation which guarantees the timely
payment of principal and interest. The market value and interest yield of these
instruments can vary due to market interest rate fluctuations and early
prepayments of underlying mortgages. These securities represent ownership in a
pool of federally insured mortgage loans. GNMA certificates consist of
underlying mortgages with a maximum maturity of 30 years. However, due to
scheduled and unscheduled principal payments, GNMA certificates have a shorter
average maturity and, therefore, less principal volatility than a comparable 30-
year bond. Since prepayment rates vary widely, it is not possible to predict
accurately the average maturity of a particular GNMA pool. The scheduled
monthly interest and principal payments relating to mortgages in the pool will
be "passed through" to investors. GNMA securities differ from conventional
bonds in that principal is paid back to the certificate holders over the life of
the loan rather than at maturity. As a result, there will be monthly scheduled
payments of principal and interest. In addition, there may be unscheduled
principal payments representing prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available from
other types of U.S. Government securities, GNMA certificates may be less
effective than other types of securities as a means of "locking in" attractive
long-term rates because of the prepayment feature. For instance, when interest
rates decline, the value of a GNMA certificate likely will not rise as much as
comparable debt securities due to the prepayment feature. In addition, these
prepayments can cause the price of a GNMA certificate originally purchased at a
premium to decline in price to its par value, which may result in a loss.
MORTGAGE-BACKED SECURITIES
The Government Securities Fund and the Balanced Fund may, in addition to
investing in GNMA securities, invest in other mortgage-backed securities,
principally collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs"). CMOs are securities collateralized by
mortgages, mortgage pass-throughs, mortgage pay-through bonds (bonds
representing an interest in a pool of mortgages where the cash flow generated
from the mortgage collateral pool is dedicated to bond repayment), and mortgage-
backed bonds (general obligations of the issuers payable out of the issuers'
general funds and additionally secured by a first lien on a pool of single-
family detached properties).
Many CMOs are issued with a number of classes or series that have different
maturities and are retired in sequence. Investors purchasing such CMOs in the
shortest maturities receive or are credited with their pro rata portion of the
scheduled payments of interest and principal on the underlying mortgages plus
all unscheduled prepayments of principal
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<PAGE>
up to a predetermined portion of the total CMO obligation. Until that portion
of such CMO obligation is repaid, investors in the longer maturities receive
interest only. Accordingly, the CMOs in the longer maturity series are less
likely than other mortgage pass-throughs to be prepaid prior to their stated
maturity. Although some of the mortgages underlying CMOs may be supported by
various types of insurance, and some CMOs may be backed by GNMA certificates or
other mortgage pass-throughs issued or guaranteed by U.S. Government agencies or
instrumentalities, the CMOs themselves generally are not guaranteed.
REMICs, which were authorized under the Internal Revenue Code of 1986, as
amended (the "Code"), are private entities formed for the purpose of holding a
fixed pool of mortgages secured by an interest in real property. REMICs are a
form of CMO, and issue multiple classes of securities.
ASSET-BACKED SECURITIES
The Government Securities and Balanced Funds may invest in asset-backed
securities including company receivables, truck and auto loans, leases, and
credit card receivables. Asset-backed securities, like mortgage-backed
securities, represent ownership of a pool of obligations. The payment of
principal and interest on non-mortgage asset-backed securities may be guaranteed
up to certain amounts and for a certain time period by a letter of credit issued
by a financial institution (such as a bank or insurance company) unaffiliated
with the issuers of such securities. In addition, these issues typically have a
short-intermediate maturity structure depending on the paydown characteristics
of the underlying financial assets which are passed through to the security
holder. The purchase of non-mortgage asset-backed securities raises risk
considerations peculiar to the financing of the instruments underlying such
securities. For example, due to the manner in which the issuing organizations
may perfect their interests in their respective obligations, there is a risk
that another party could acquire an interest in the obligations superior to that
of the holders of the asset-backed securities. Also, in most states the
security interest in a motor vehicle must be noted on the certificate of title
to perfect a security interest against competing claims of other parties. Due
to the large number of vehicles involved, however, the certificate of title to
each vehicle financed, pursuant to the obligations underlying the asset-backed
securities, usually is not amended to reflect the assignment of the seller's
security interest for the benefit of the holders of the asset-backed securities.
Therefore, the possibility exists that recoveries on repossessed collateral may
not, in some cases, be available to support payments on those securities. In
addition, various state and Federal laws give the motor vehicle owner the right
to assert against the holder of the owner's obligation certain defenses such
owner would have against the seller of the motor vehicle. The assertion of such
defenses could reduce payments on the related asset-backed securities. Insofar
as credit card receivables are concerned, credit card holders are entitled to
the protection of a number of state and Federal consumer credit laws, many of
which give such holders the right to set off certain amounts against balances
owed on the credit card, thereby reducing the amounts paid
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on such receivables. In addition, unlike most other asset-backed securities,
credit card receivables are unsecured obligations of the card holder. Asset-
backed securities entail prepayment risk, which may vary depending on the type
of asset but is generally less than the prepayment risk associated with
mortgage-backed securities.
The development of non-mortgage asset-backed securities is at an early stage
compared to mortgage-backed securities. While the market for asset-backed
securities is becoming increasingly liquid, the market for non-mortgage asset-
backed securities is not as well developed as that for mortgage-backed
securities guaranteed by government agencies or instrumentalities. The Adviser
intends to limit its purchases of non-mortgage asset-backed securities to
securities that are readily marketable at the time of purchase.
SEPARATELY TRADED INTEREST AND PRINCIPAL SECURITIES ("STRIPS")
Each Fund may invest in STRIPS which are component parts of U.S. Treasury
Securities traded through the Federal Book-Entry System. The Adviser will only
purchase STRIPS that it determines are liquid or, if illiquid, do not violate
the Fund's investment policy concerning investments in illiquid securities.
Consistent with Rule 2a-7 of the Investment Company Act of 1940 (the "1940
Act"), the Adviser will purchase for the Money Market Funds only those STRIPS
that have a remaining maturity of 397 days or less; therefore, the Money Market
Funds currently may only purchase interest component parts of U.S. Treasury
Securities. While there is no limitation on the percentage of a Fund's assets
that may be comprised of STRIPS, the Adviser will monitor the level of such
holdings to avoid the risk of impairing shareholders' redemption rights and of
deviations in the value of shares of the Money Market Funds.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with primary securities dealers
recognized by the Federal Reserve Bank of New York or with national member banks
as defined in Section 3(d)(1) of the Federal Deposit Insurance Act, as amended.
The repurchase agreement will have an agreed-upon price (including principal and
interest) and an agreed-upon repurchase date within a number of days (usually
not more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which is unrelated to
the coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
The repurchase agreements entered into by the Funds will provide that the
underlying security at all times shall have a value at least equal to 100% of
the resale price stated in the agreement; the Adviser monitors compliance with
this requirement. Under all repurchase agreements entered into by a Fund, the
Custodian or its agent must take possession of the underlying collateral.
However, if the seller defaults, the Fund could
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realize a loss on the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less than the resale price
provided in the agreement including interest. In addition, even though the
Federal Bankruptcy Code provides protection for proceedings, the Fund may incur
delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the Fund is treated as an unsecured creditor and
required to return the underlying security to the seller's estate.
MUNICIPAL SECURITIES
MUNICIPAL SECURITIES -- The two principal classifications of Municipal
Securities are "general obligation" and "revenue" issues. General obligation
issues are issues involving the credit of an issuer possessing taxing power and
are payable from the issuer's general unrestricted revenues, although the
characteristics and method of enforcement of general obligation issues may vary
according to the law applicable to the particular issuer. Revenue issues are
payable only from the revenues derived from a particular facility or class of
facilities or other specific revenue source. The Louisiana Fund may also invest
in "moral obligation" issues, which are normally issued by special purpose
authorities. Moral obligation issues are not backed by the full faith and
credit of the state and are generally backed by the agreement of the issuing
authority to request appropriations from the state legislative body. Municipal
Securities include debt obligations issued by governmental entities to obtain
funds for various public purposes, such as the construction of a wide range of
public facilities, the refunding of outstanding obligations, the payment of
general operating expenses, and the extension of loans to other public
institutions and facilities. Certain private activity bonds that are issued by
or on behalf of public authorities to finance various privately-owned or
operated facilities are included within the term "Municipal Securities."
Private activity bonds and industrial development bonds are generally revenue
bonds, the credit and quality of which are directly related to the credit of the
private user of the facilities.
Municipal Securities may also include general obligation notes, tax anticipation
notes, bond anticipation notes, revenue anticipation notes, project notes,
certificates of indebtedness, demand notes, tax-exempt commercial paper,
construction loan notes and other forms of short-term, tax-exempt loans. Such
instruments are issued with a short-term maturity in anticipation of the receipt
of tax funds, the proceeds of bond placements or other revenues. Project notes
are issued by a state or local housing agency and are sold by the Department of
Housing and Urban Development. While the issuing agency has the primary
obligation with respect to its project notes, they are also secured by the full
faith and credit of the United States through agreements with the issuing
authority which provide that, if required, the Federal government will lend the
issuer an amount equal to the principal of and interest on the project notes.
The quality of Municipal Securities, both within a particular classification and
between classifications, will vary, and the yields on Municipal Securities
depend upon a variety of factors, including general money market conditions, the
financial condition of the issuer
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(or other entity whose financial resources are supporting the securities),
general conditions of the municipal bond market, the size of a particular
offering, the maturity of the obligation and the rating(s) of the issue. In
this regard, it should be emphasized that the ratings of any NRSRO are general
and are not absolute standards of quality. Municipal Securities with the same
maturity, interest rate and rating(s) may have different yields, while Municipal
Securities of the same maturity and interest rate with different rating(s) may
have the same yield.
An issuer's obligations under its Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
MUNICIPAL LEASES -- The Louisiana Fund and Tax Exempt Money Market Fund may
invest in instruments, or participations in instruments, issued in connection
with lease obligations or installment purchase contract obligations of
municipalities ("municipal lease obligations"). Although municipal lease
obligations do not constitute general obligations of the issuing municipality, a
lease obligation is ordinarily backed by the municipality's covenant to budget
for, appropriate funds for, and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses, which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose in the relevant years. Municipal lease obligations are a
relatively new form of financing, and the market for such obligations is still
developing. Municipal leases will be treated as liquid only if they satisfy
criteria set forth in guidelines established by the Board of Trustees, and there
can be no assurance that a market will exist or continue to exist for any
municipal lease obligation.
PUTS ON MUNICIPAL SECURITIES -- The Louisiana Fund and Tax Exempt Money Market
Fund may acquire "puts" with respect to its acquisition of Municipal Securities.
A put is a right to sell a specified security (or securities) within a specified
period of time at a specified exercise price. The Fund may sell, transfer, or
assign the put only in conjunction with the sale, transfer, or assignment of the
underlying security or securities.
The amount payable upon the exercise of a put is normally (i) the Fund's
acquisition cost of the Municipal Securities (excluding any accrued interest
which the Fund paid on the acquisition), less any amortized market premium or
plus any amortized market or original issue discount during the period the Fund
owned the securities, plus (ii) all interest accrued on the securities since the
last interest payment date during that period.
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Puts on Municipal Securities may be acquired to facilitate the liquidity of
portfolio assets and the reinvestment of assets at a rate of return more
favorable than that of the underlying security. A Fund will generally acquire
puts only where the puts are available without the payment of any direct or
indirect consideration. However, if necessary or advisable, the Fund may pay
for puts either separately in cash or by paying a higher price for portfolio
securities which are acquired subject to the puts (thus reducing the yield to
maturity otherwise available for the same securities).
TAXABLE MUNICIPAL SECURITIES -- The Louisiana Fund and Tax Exempt Money Market
Fund may invest up to 20% of their net assets in Municipal Securities, such as
certain private activity or industrial revenue bonds, the interest on which is
not tax-exempt for Federal income tax purposes but which otherwise meet the
Fund's investment criteria.
SPECIAL CONSIDERATIONS REGARDING LOUISIANA MUNICIPAL SECURITIES -- The
concentration of investments in Louisiana Municipal Securities by the Louisiana
Fund raises special investment considerations. In particular, changes in the
economic condition and governmental policies of the State of Louisiana or its
municipalities could adversely affect the value of the Louisiana Fund and the
portfolio securities held by it. This section briefly describes current
economic trends in Louisiana.
Louisiana's economy, traditionally dependent on energy, remains mired in slow
growth as domestic oil production has slowed in recent years. As the State's
energy sector has shrunk, services have replaced energy as the leading
employment sector since the mid-1980's, with employment increasing 20% from 1988
to July 1992. Some manufacturing growth continues to take place, with jobs up
13% over the same period. Manufacturing remains concentrated in chemicals,
transportation equipment, and food products, reflecting the petrochemical
industry, shipbuilding at the Port of New Orleans, and the State's seafood
industry. Louisiana population reached its peak of 4.5 million in 1986, after
which it began to decline, reaching 4.2 million only four years later. While
the labor force experienced a similar decline, it grew at a 2.1% rate in 1991
and is projected to continue to grow slowly through the rest of the decade.
Tourism also remains a major sector of economic activity, with the New Orleans
Convention Center a major attraction. The unemployment rate for Louisiana was
7.6% as of November 1992 (versus 6.7% for November 1991), while the U.S.
experienced an unemployment rate of 7.2% for the same period.
Louisiana is the twenty-first largest state in terms of population. It is rich
in natural resources. Overall, Louisiana is the nation's third largest producer
of chemical products. It ranks second in the production of the industrial
inorganic chemicals and the manufacture of agricultural chemicals. Oil and gas
extraction, petroleum refining, chemicals and allied products combined employ
approximately 92,800 people, or 6% of the total non-agricultural employment in
Louisiana. These industries provide approximately 12% of the net wages paid to
non-agricultural employees in the State.
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Louisiana has five major deepwater ports: New Orleans, Baton Rouge, Lake
Charles, the Port of South Louisiana and the Port of Plaquemine. The Port of
South Louisiana is a conglomerate of public and private facilities, handling
more waterbottom annual tonnage than any other port in the country. The Port of
New Orleans is the world's largest grain exporter and generates more than $3
billion a year in wages and taxes. The Port of Baton Rouge ranks fifth in the
nation, handling over 78 million tons per year. The Port of Baton Rouge's
largest commodity is petroleum coke, and the port is one of the nation's largest
rice exporters. The Port of Lake Charles ranks 16th in the nation in total
tonnage handled. In addition to these three major ports, there are numerous
inland ports located within the State which service barge and boat traffic. The
nation's first offshore oil port (commonly referred to as the "Superport")
started full-time operations on January 1, 1982. The State, involved in the
development of the Superport since 1972, was instrumental in promoting and
financing private industry's efforts to construct deepwater port facilities.
Approximately $764 million of revenue bonds have been issued for construction of
the port complex. The Superport consists of three major elements: (i) a marine
terminal; (ii) an underground storage facility; and (iii) a large diameter
pipeline for transporting oil between the offshore and onshore facilities. The
Superport allows deep draft tankers that are unable to navigate the Mississippi
River to dock and unload crude oil for distribution to the United States.
The agricultural sector of Louisiana's economy is comprised of the agricultural
producers and the agribusinesses which support the production, storage,
transportation, processing and marketing of agricultural products. In 1991,
13,400 identifiable Louisiana agribusiness firms employed 230,500 workers with a
total annual payroll of approximately $3.0 billion. The agricultural sector
accounted for over 19% of employment in the State and over 13% of payrolls.
Total investment in forestry and farm capital and lands is approximately $16
billion and exceeds the total asset value of the manufacturing sector.
During the period from the Fiscal Year 1981 through Fiscal Year 1987, the State
experienced operating budget deficits in six of the seven fiscal years.
Exacerbating the operating deficit problem was the highly dependent nature of
the State's budget on mineral revenues and in particular, the dramatic
fluctuations in oil prices over the past decade. At the height of the oil boom
in the early 1980's, the State derived more than 40% of its operating revenues
directly from sources related to the mineral extraction process. Today, the
percentage has dropped to about 13%, or almost a 70% reduction.
Fiscal Year 1987 ended with a deficit in the General Fund of $512 million
accumulated during the previous three fiscal years. This deficit was eliminated
through the creation of the Louisiana Recovery District in 1988 and its issuance
of $979,125,000 of bonds secured by a statewide 1% sales tax levied by the
District. Most of the bond issue proceeds were transferred to the General Fund
for the purposes of eliminating the accumulated deficit ($512 million) and
assisting the State's cash flow ($271 million).
Since 1988, the gap between General Fund expenditures and revenues has widened
for
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a variety of reasons: (i) new expenditures have been phased in; (ii) new tax
exemptions have been implemented; (iii) the Federal government has issued costly
mandates, most significantly in the Medicaid program; and (iv) revenues once
available to the General Fund have in recent years been dedicated for specific
purposes. Furthermore, the State's tax base -- which is comprised in part of
mineral revenues and volume-based taxes, such as those on tobacco, beer, and
liquor -- is inherently inelastic; i.e., its growth rate does not match or
exceed the growth rate of the economy.
The State began Fiscal Year 1988 with a balance of $271 million and ended the
year with an operating surplus which, when combined with prior year adjustments
of $384 million, provided the State with an ending General Fund balance of $655
million. In Fiscal Year 1989, the State budget anticipated the use of $126
million of the surplus for the operating budget. Revenues, however, were
greater than anticipated and none of the surplus was used. In fact, Fiscal Year
1989 ended with a small operating surplus of $47 million which included $13
million of adjustments. This $47 million, when added to the $655 million
balance from the prior fiscal year, brought the accumulated surplus to $702
million as of June 30, 1990.
Approximately $284 million of the Fiscal Year 1989 surplus was used to fund the
Fiscal Year 1990 budget. As a result, the State ended Fiscal Year 1990 with an
accumulated General Fund surplus of $418 million.
The 1992 budget depleted remaining reserves and required two mid-year
expenditure adjustments totalling $115 million. A potential deficit for Fiscal
Year 1992 has been addressed by additional revenue enhancements totaling $1.159
billion. A majority of these enhancements are one time items totaling $489
million and will not be available for future years. The Office of Fiscal
Affairs and Policy Development has projected a budget gap of approximately $600
million for Fiscal Year 1994. The State is operating at a deficit and in order
for it to continue providing for current services, additional and dependable
revenues streams must be developed.
In August 1992, a state constitutional convention was convened which made
numerous proposals to limit state indebtedness and resolve other revenue and
finance issues. However, all the proposals were voted down by a statewide
referendum held on November 3, 1992.
Currently, the State is working to expand economic development activities that
will take advantage of Louisiana's replenishable resources such as timber, water
for aquaculture, fish and seafood related products and related industrial uses
of such resources. The State is also pursuing further development of its
transportation capabilities by expanding port related activities and improving
its highways and airports.
Positive results have been achieved by establishing research programs with
considerable job creation potential. The $26 million Pennington Biomedical
Research Center at
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Louisiana State University, in Baton Rouge, concentrates on nutrition and
preventative medicine. Since opening, the center has received a $9.4 million
grant from the United States Department of Agriculture, a $3.5 million Army
contract to study nutrition and a $1.5 million donation from the National Heart,
Lung and Blood Institute. Louisiana State University is constructing the Center
for Advanced Microstructures and Devices that will provide hands-on experience
for young scientists and engineers and improve research capabilities in
materials science by furnishing the most advanced scientific instrumentation
available. In addition, the University of Southwestern Louisiana has devised a
"factory of the future" where a product can be developed, industry can obtain
applied research for a product, existing technology can be transferred to
Louisiana industry and university students can gain practical experience with
state-of-the-art technology.
In 1990, the Louisiana Constitution was amended by the electorate to provide for
the creation and operation of a State lottery. The net proceeds from the
lottery are deposited in a special fund in the State Treasury entitled the
Lottery Proceeds Fund (the "Lottery Fund"). Although the Legislature may make
appropriations from the Lottery Fund for any purpose, amounts deposited in the
Lottery Fund cannot be appropriated for expenditure in the same calendar year in
which they are received.
The lottery began with scratch card game operations in September, 1991 and full
lottery operation on January 22, 1992. The State Lottery Commission estimated
$286 million of lottery proceeds would be raised during the 1992 calendar year.
State law provides that, after the first year of operations, the lottery
proceeds will be divided as follows: 50% to lottery winners, 35% to the State,
10% to the Commission and 5% to vendors of lottery tickets. As of December 31,
1992, for the 1992 calendar year, the State received $166,500,000 as its share
of the lottery proceeds. The Revenue Estimating Conference estimates that the
State will receive as its share of lottery proceeds $140,000,000 in the 1993
calendar year.
In 1991, the Louisiana Legislature enacted the Video Draw Poker Devices Control
Law (the "Act") for the purpose of regulating and licensing the use and
operation of video draw poker devices through the video gaming division (the
"Video Division") of the gaming enforcement section of the office of the State
police. The Act imposes annual license fees on manufacturers, distributors,
service entities, device operation device owners and licensed establishments.
In addition, each device owner must remit to the Video Division a franchise
payment equal to 22-1/2% of the net device revenue derived from the operation of
each device. All franchise payments, license fees, fines and penalties received
by the Video Division must be forwarded to the State Treasurer for immediate
deposit. The funds are first credited to the Bond Security and Redemption Fund
and then credited to the Video Draw Poker Device Fund. Monies in the Video Draw
Poker Device Fund may only be withdrawn pursuant to appropriation by the
Legislature and distributed as follows: (a) 25% to be distributed in the
following priority: (i) not exceeding $5,400,000 for district attorneys and
assistant district attorneys; (ii) remainder to municipalities and parishes in
which devices are operated to pay for enforcement of Act 1062; (b) A
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legislative allocation to the Department of Public Safety & Corrections to pay
for enforcement of Act 1062; (c) Any funds remaining after payments pursuant to
(a) and (b) are deposited in the State general fund.
As of January 4, 1993, the Treasurer's office reports that total revenues since
July 1, 1992 were $13,897,084 of which $6,632,166 is available for general fund
purposes.
In 1991, the Louisiana Legislature also enacted the Louisiana Riverboat Economic
Development and Gaming Control Act ("Act 753") to assist the growth of tourism
by the development of a riverboat industry in the State authorized to operate
regulated gaming activities. Act 753 designates certain rivers and waterways in
the State upon which riverboat gaming may be conducted and provides for the
creation within the Department of Public Safety and Corrections, a gaming
commission known as the Riverboat Gaming Commission (the "Riverboat
Commission"). The Riverboat Commission has the responsibility of licensing,
regulating and inspecting riverboat gaming facilities and enforcing Act 753 and
regulations promulgated thereunder. Act 753 allows the issuance of up to
fifteen licenses to conduct gaming activities on riverboats of new construction
(built after January 1, 1992); provided that, no more than six licenses may be
granted for the operation of riverboat gaming from any one parish.
The Louisiana Economic Development and Gaming Corporation (the "Gaming
Corporation") was created by the Louisiana Legislature in the 1992 Regular
Session ("Act 384") for the purpose of contracting with a casino operator to
provide for or furnish an official gaming establishment and to conduct casino
gaming operations at the official gaming establishment (casino). Act 384
directs that the casino be located on the site of the Rivergate Convention
Center in New Orleans. The Gaming Corporation has recently been formed, its
members confirmed by the State Senate and the Gaming Corporation is proceeding
with its organizational plans and structure. Under the casino contract, the
operator must pay a minimum of 18-1/2% of gross revenues, or $100 million
annually, whichever is higher, to the Gaming Corporation. Each quarter, the
Gaming Corporation must transfer to the State Treasury for deposit in the Casino
Gaming Proceeds Fund net revenues which are surplus to its needs. Such revenues
will be first credited to the Bond Security and Redemption Fund before credit to
the Casino Gaming Proceeds Fund. Monies in the Casino Gaming Proceeds Fund may
be allotted or expended only pursuant to legislative appropriation. Full
operation of a permanent casino is not expected to commence until the 1995-96
Fiscal Year; however, it is anticipated that a temporary casino can be
operational in the 1993-94 Fiscal Year and that a portion of the annual minimum
gaming revenues would be received on or after July 1, 1993.
In June 1992 the State also approved a five-year capital improvement plan
totalling $1.9 billion. The State also approved two bills that would establish
major new debt-issuing authorities in the State. One bill would set up the
Louisiana Airport Authority, giving it the power to sell bonds for a proposed
international airport between Baton Rouge and New Orleans. The other would
permit establishment of the Louisiana Maritime Development
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Authority to fund shipyard improvements in Louisiana's cities.
The foregoing information as to certain Louisiana risk factors has been provided
in view of the Louisiana Fund's policy of investing in Louisiana Municipal
Securities. This information constitutes only a brief summary, does not purport
to be a complete description of Louisiana risk factors and is principally drawn
from official statements related to securities offerings of the State of
Louisiana that have come to the Fund's attention and were available as of the
date of this Statement of Additional Information.
OPTIONS ON SECURITIES AND INDICES
OPTIONS -- The Fixed Income Funds and the Equity Funds may trade put and call
options on permitted investments and related indices to a limited extent. Among
the strategies the Adviser may use for a Fund are: buying protective puts on
securities owned by the Fund, buying fiduciary calls on securities the Fund is
attempting to buy, and writing covered calls on securities the Fund owns.
A Fund may buy protective put options. The Fund may benefit from buying the
protective put if the price of the security already held by the Fund falls
during the option period, because the Fund may exercise the put and receive the
higher exercise price for its security. However, if the security rises in
value, the Fund will have paid a premium for the put which will expire
unexercised.
A Fund may buy fiduciary call options on securities that the Fund is trying to
buy. The Fund may benefit from buying the fiduciary call if the price of the
underlying security rises during the option period, because the Fund may
exercise the call and buy the security for the lower exercise price. If,
however, the security falls in value, the Fund will have paid a premium for the
call which will expire worthless, but will be able to buy the security at a
lower price.
A Fund may write covered call options. The advantage to the Fund of writing
covered call options is that the Fund receives additional income in the form of
the premium. However, if the security rises in value, the Fund may not fully
participate in that market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing
transaction. A closing transaction cannot be effected with respect to an option
once the option writer has received an exercise notice for such option.
The market value of an option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the pricing volatility of the underlying
security and the time remaining until
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the expiration date.
RISK FACTORS IN OPTIONS TRANSACTIONS -- The successful use of a Fund's options
strategies depends on, among other things, the Adviser's ability to forecast
interest rate and market movements correctly.
When it purchases an option, a Fund runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the Fund
exercises the option or enters into a closing transaction with respect to the
option during the life of the option. If the price of the underlying security
does not rise (in the case of a call) or fall (in the case of a put) to an
extent sufficient to cover the option premium and transaction costs, a Fund will
lose part or all of its investment in the option. This risk differs from the
risk involved with an investment by a Fund in the underlying securities, since
the Fund may continue to hold its investment in those securities notwithstanding
the lack of a change in price of those securities.
The effective use of options also depends on a Fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so.
Although a Fund will take an option position only if the Adviser believes a
liquid secondary market exists for the option, there is no assurance that such a
market does or will continue to exist. If a secondary trading market in options
were to become unavailable, a Fund could no longer engage in closing
transactions; even when a liquid secondary market does generally exist, there
can be no assurance that a Fund will be able to effect a closing transactions on
a given option at any particular time or at an acceptable price. Lack of
investor interest might adversely affect the liquidity of the market for
particular options or series of options. A marketplace may discontinue trading
of a particular option or options generally. In addition, a market could become
temporarily unavailable if unusual events, such as volume in excess of trading
or clearing capability, were to interrupt normal market operations. A
marketplace may at times find it necessary to impose restrictions on particular
types of options transactions, which may limit a Fund's ability to realize its
profits or limit its losses.
Disruptions in the markets for the securities underlying options purchased or
sold by a Fund could result in losses on the options. If trading is interrupted
in an underlying security, the trading of options on that security is normally
halted as well. As a result, a Fund as purchaser or writer of an option will be
unable to close out its position until options trading resumes, and it may be
faced with losses if trading in the security reopens at a substantially
different price. In addition, the Options Clearing Corporation (OCC) or other
options markets may impose exercise restrictions. If a prohibition on exercise
is imposed at the time when trading in the option has also been halted, a Fund
as purchaser or writer of an option will be locked into its position until one
of the two restrictions has been lifted. If a prohibition on exercise remains
in effect until an option owned by a Fund has expired, the Fund could lose the
entire value of its option.
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Special risks are presented by internationally-traded options. Because of time
differences between the United States and the various foreign countries, and
because different holidays are observed in different countries, foreign options
markets may be open for trading during hours or on days when U.S. markets are
closed. As a result, option premiums may not reflect the current prices of the
underlying interest in the United States.
FUTURES CONTRACTS ON SECURITIES; OPTIONS ON FUTURES
SECURITIES FUTURES CONTRACTS -- Each Fixed Income Fund and Equity Fund may enter
into futures contracts on securities. A futures contract sale creates an
obligation by the seller to deliver the type of instrument called for in the
contract in a specified delivery month for a stated price. A futures contract
purchase creates an obligation by the purchaser to take delivery of the type of
instrument called for in the contract in a specified delivery month at a stated
price. Futures contracts are traded in the United States only on commodities
exchanges or boards of trade, known as "contract markets," approved for such
trading by the Commodity Futures Trading Commission, and must be executed
through a futures commission merchant, or brokerage firm, that is a member of
the relevant contract market.
Although futures contracts by their terms call for actual delivery or acceptance
of securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. A Fund may elect to close some or all
of its futures positions at any time prior to their expiration. The purpose of
making such a move would be to reduce or eliminate the hedge position then
currently held by the Fund. Closing out a futures contract sale (purchase) is
effected by purchasing (selling) a futures contract for the same aggregate
amount of the specific type of financial instrument with the same delivery date.
If the price of the initial sale of the futures contract exceeds the price of
the offsetting purchase, the seller is paid the difference and realizes a gain;
if the offsetting purchase price exceeds the initial sale price, the seller
realizes a loss. If the offsetting sale price exceeds the purchase price, the
purchaser realizes a gain; if the purchase price exceeds the offsetting sale
price, the purchaser realizes a loss.
When a Fund purchases or sells a futures contract, it does not pay or receive
the purchase price; instead, the Fund is required to deposit an "initial margin"
in the form of cash and/or U.S. Government securities with its custodian in a
segregated account in the name of the futures broker. The nature of initial
margin in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the Fund to finance the transactions. Rather, initial margin is in the
nature of a performance bond or good faith deposit on the contract that is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Futures contracts also involve
brokerage costs, and closing transactions involve additional commission costs.
B-16
<PAGE>
Subsequent payments, called "variation margin," to and from the broker are made
on a daily basis as the price of the underlying security fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as "marking to market." Final determinations of variation margin
are made when a Fund enters into a closing transaction.
OPTIONS ON SECURITIES FUTURES CONTRACTS -- Each Fixed Income Fund and Equity
Fund may enter into written options on securities futures contracts. A Fund may
purchase and write call and put options on the futures contracts it may buy or
sell, and may enter into closing transactions with respect to such options to
terminate existing positions. A Fund may use such options on futures contracts
in lieu of writing options directly on the underlying securities or purchasing
and selling the underlying futures contracts. Such options generally operate in
the same manner as options purchased or written directly on the underlying
investments. See the section titled "Options on Securities," above.
The Fund holding or writing an option on futures may terminate its position by
selling or purchasing an offsetting option. There can be no guarantee that such
closing transactions will be available.
A Fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts pursuant to brokers'
requirements similar to those described above.
COVER FOR OPTIONS AND FUTURES CONTRACT POSITIONS -- Transactions using futures
contracts and options (other than options that a Fund has purchased) expose a
Fund to an obligation to another party. A Fund will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities or other options or futures contracts or (2) cash, receivables and
short-term debt securities with a value sufficient at all times to cover its
potential obligations not covered as provided in (1) above. Each Fund will
comply with Securities and Exchange Commission guidelines regarding cover for
these instruments and, if the guidelines so require, set aside cash, U.S.
Government securities or other liquid, high-grade debt securities in a
segregated account with its Custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding futures contract or option is open, unless they
are replaced with similar assets. As a result, the commitment of a large
portion of a Fund's assets to cover or to segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
RISKS OF FUTURES CONTRACTS AND OPTIONS TRANSACTIONS -- Successful use of
securities futures contracts by a Fund is subject to the Adviser's ability to
correctly predict movements in the direction of interest rates and other
factors affecting securities markets.
B-17
<PAGE>
The purchase of options on futures contracts involves less risk to a Fund than
does the purchase or sale of futures contracts, because the maximum amount at
risk is the premium paid for the options (plus transaction costs). However,
there may be circumstances when the purchase of an option on a futures contract
would result in a loss to a Fund when the purchase or sale of the futures
contract would not, such as when there is no movement in the price of the hedged
investments. The writing of an option on a futures contract involves risks
similar to the risks, described above under "Options on Securities," involved in
the writing of options on securities.
There can be no assurance that higher-than-anticipated trading activity or other
unforeseen events will not, at times, render certain market clearing facilities
inadequate, and thereby result in the institution by exchanges of special
procedures which may interfere with the timely execution of customer orders.
Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a future contract or option thereon can vary from the
previous day's settlement price; once that limit is reached, no trades may be
made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing the liquidation
of unfavorable positions.
If a Fund were unable to liquidate a futures contract or option thereon due to
the absence of a liquid secondary market or the imposition of price limits, it
could incur substantial losses. The Fund would continue to be subject to market
risk with respect to the position. In addition, except in the case of purchased
options, the Fund would be required to make daily variation margin payments and
might be required to maintain the position being hedged by the futures contract
or option or to maintain cash or securities in a segregated account.
To reduce or eliminate a hedge position it holds, a Fund may seek to close out
that position. The ability to establish and close out positions will be subject
to the development and maintenance of a liquid secondary market. There can be
no assurance that such a market does or will continue to exist for a particular
futures contract or option. Reasons for the absence of a liquid secondary
market on an exchange include the following: (i) there may be insufficient
trading interest in certain contracts or options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of contracts or options, or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current trading volume;
or (vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of contracts or options
(or a particular class or series of contracts or options), in which event the
secondary market on that exchange (or in the class or
B-18
<PAGE>
series of contracts or options) would cease to exist, although outstanding
contracts or options on the exchange that had been issued by a clearing
corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
FOREIGN SECURITIES
The Equity Funds may invest in U.S. dollar denominated obligations or securities
of foreign issuers. Permissible investments may consist of obligations of
foreign branches of U.S. banks and of foreign banks, including European
certificates of deposit, European time deposits, Canadian time deposits and
Yankee certificates of deposit, and investments in Canadian commercial paper,
foreign securities and Europaper.
In addition, the Equity Funds may invest in the securities of foreign issuers in
the form of American Depositary Receipts ("ADRs"). ADRs are receipts, typically
issued by a U.S. bank or trust company, that evidence ownership of underlying
securities issued by a foreign corporation. ADRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs may be available for investment through sponsored or
unsponsored facilities. A sponsored facility is established jointly by the
issuer of the ADR and the issuer of the security underlying the ADR, whereas a
depository may establish an unsponsored facility without the participation of
the issuer of the underlying security. Depositaries establishing unsponsored
facilities may not be obliged to pass on to ADR holders either voting rights on
the underlying securities or shareholder communications received from the issuer
of the underlying securities, and holders of unsponsored ADRs generally bear all
costs of the unsponsored facility.
Foreign securities may subject a Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
the possible imposition of withholding taxes on interest or other income,
possible seizure, nationalization, or expropriation of foreign deposits, the
possible establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. banks.
WHEN-ISSUED SECURITIES
Each Fund except the Treasury Securities Money Market Fund may purchase debt
obligations on a when-issued basis, in which case delivery and payment normally
take place on a future date. The Funds will make commitments to purchase
obligations on a
B-19
<PAGE>
when-issued basis only with the intention of actually acquiring the securities,
but may sell them before the settlement date. During the period prior to the
settlement date, the securities are subject to market fluctuation, and no
interest accrues on the securities to the purchaser. The payment obligation and
the interest rate that will be received on the securities at settlement are each
fixed at the time the purchaser enters into the commitment. Purchasing
obligations on a when-issued basis may be used as a form of leveraging because
the purchaser may accept the market risk prior to payment for the securities.
The Funds, however, will not use such purchases for leveraging; instead, as
disclosed in the Prospectus, a Fund will set aside assets to cover its
commitments. If the value of these assets declines, the Fund will place
additional liquid assets aside on a daily basis so that the value of the assets
set aside is equal to the amount of the commitment.
SECURITIES LENDING
Each Fund may lend securities pursuant to agreements requiring that the loans be
continuously secured by cash, U.S. Government securities, or any combination of
cash and such securities, as collateral equal to 100% of the market value at all
times of the securities lent. Such loans will not be made if, as a result, the
aggregate amount of all outstanding securities loans for the Fund exceed one-
third of the value of a Fund's total assets taken at fair market value. A Fund
will continue to receive interest on the securities lent while simultaneously
earning interest on the investment of the cash collateral in U.S. Government
securities. However, a Fund will normally pay lending fees to such broker-
dealers and related expenses from the interest earned on invested collateral.
Investments made with this collateral are considered to be assets of the Fund
and must comply with the Fund's investment limitations. There may be risks of
delay in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans are made only to borrowers deemed
by the Adviser to be of good standing and when, in the judgment of the Adviser,
the consideration which can be earned currently from such securities loans
justifies the attendant risk. Any loan may be terminated by either party upon
reasonable notice to the other party. The Funds may use the Distributor or a
broker-dealer affiliate of the Adviser as a broker in these transactions.
INVESTMENT COMPANY SHARES
Each Fund may invest in shares of other investment companies, to the extent
permitted by applicable law and subject to certain restrictions. These
investment companies typically incur fees that are separate from those fees
incurred directly by the Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees, in addition to paying Fund
expenses. Under applicable regulations, a Fund is prohibited from acquiring the
securities of another investment company if, as a result of such acquisition:
(1) the Fund owns more than 3% of the total voting stock of the other company;
(2)
B-20
<PAGE>
securities issued by any one investment company represent more than 5% of the
Fund's total assets; or (3) securities (other than treasury stock) issued by all
investment companies represent more than 10% of the total assets of the Fund.
See also "Investment Limitations."
INVESTMENT LIMITATIONS
Each Fund is subject to a number of fundamental investment restrictions that may
be changed only by a vote of a majority of the outstanding shares of that Fund.
A "majority of the outstanding shares" of the Trust or a particular Fund means
the affirmative vote, at a meeting of shareholders duly called, of the lesser of
(a) 67% or more of the votes of shareholders of the Trust or such Fund present
at a meeting at which the holders of more than 50% of the votes attributable to
shareholders of record of the Trust or such Fund are represented in person or by
proxy, or (b) the holders of more than 50% of the outstanding votes of
shareholders of the Trust or such Fund.
Pursuant to these investment restrictions, no Fund will:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities
and repurchase agreements involving such securities, if, immediately
after such purchase, more than 5% of the value of its total assets would
be invested in any one issuer, or more than 10% of the outstanding voting
securities of such issuer; provided that (1) this restriction does not
apply to the Louisiana Fund, (2) for the Government Securities Fund and
the Equity Funds, this restriction applies to only 75% of such Fund's
assets, and (3) the Money Market Funds may invest up to 25% of its total
assets without regard to this restriction only as permitted by applicable
laws and regulations. For purposes of this limitation, a security is
considered to be issued by the government entity (or entities) whose
assets and revenues back the security; with respect to a private activity
bond that is backed only by the assets and revenues of a non-governmental
user, a security is considered to be issued by such non-governmental
user. For purposes of this limitation, all debt securities are each
considered as one class.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in
an amount not exceeding one-third of the value of total assets. Any
borrowing will be done from a bank and to the extent that such borrowing
exceeds 5% of the value of the Fund's assets, asset coverage of at least
300% is required. In the event that such asset coverage shall at any
time fall below 300%, the Fund shall, within three days thereafter or
such longer period as the Securities and Exchange Commission may
prescribe by rules and regulations, reduce the amount of its borrowings
to such an extent that the asset coverage of such
B-21
<PAGE>
borrowings shall be at least 300%. This borrowing provision is included
solely to facilitate the orderly sale of portfolio securities to
accommodate heavy redemption requests if they should occur and is not for
investment purposes. All borrowings will be repaid before making
additional investments and any interest paid on such borrowings will
reduce income.
4. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (3) above in aggregate amounts not to exceed 10%
of total assets taken at current value at the time of the incurrence of
such loan, except as permitted with respect to securities lending.
5. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts (except that the Fixed Income and
Equity Funds may invest in futures contracts and options on futures
contracts as disclosed in the Prospectuses) and interests in a pool of
securities that are secured by interests in real estate (except that the
Fixed Income Funds may invest in mortgage-backed securities, including
collateralized mortgage obligations, as disclosed in the Prospectus).
However, subject to their permitted investments, any Fund may invest in
companies which invest in real estate commodities or commodities
contracts.
6. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits
as necessary for the clearance of security transactions; this limitation
shall not prohibit short sales "against the box."
7. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter under Federal securities laws in selling a Fund
security.
8. Purchase securities of other investment companies except as permitted by
the 1940 Act, and the rules and regulations thereunder.
9. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the Securities and Exchange Commission.
NON-FUNDAMENTAL POLICIES
No Fund may invest in warrants, except that the Equity Funds may invest in
warrants in an amount not exceeding 5% of the Fund's net assets as valued at the
lower of cost or market value. Included in that amount, but not to exceed 2% of
the Fund's net assets, may be warrants not listed on the New York Stock Exchange
or the American Stock Exchange.
B-22
<PAGE>
No Fixed Income Fund or Equity Fund may invest in illiquid securities in an
amount exceeding, in the aggregate, 15% of that Fund's net assets, and the Money
Market Funds may not invest in illiquid securities in an amount exceeding, in
the aggregate, 10% of each Funds' net assets. An illiquid security is a security
which cannot be disposed of promptly (within seven days) and in the usual course
of business without a loss, and includes repurchase agreements maturing in
excess of seven days, time deposits with a withdrawal penalty, non-negotiable
instruments and instruments for which no market exists.
No Fund may purchase or retain securities of an issuer if, to the knowledge of
the Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of 1% of the
shares or securities of such issuer and all such officers, trustees, partners
and directors owning more than 1/2 of 1% of such shares or securities together
own more than 5% of such shares or securities.
No Fund may invest in interests in oil, gas or other mineral exploration or
development programs or oil, gas or mineral leases.
No Fund may purchase securities of any company which has (with its predecessors)
a record of less than three years continuing operations if, as a result more
than 5% of total assets (taken at fair market value) of the Fund would be
invested in such securities, except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or municipal securities which are
rated by at least two nationally recognized bond rating services. This
restriction shall not apply to investments a Fund may make in asset-backed
securities and in other investment companies, as described in the appropriate
Prospectus.
With the exception of the limitations that apply to illiquid securities, the
foregoing percentages will apply at the time of the purchase of a security and
shall not be considered violated unless an excess occurs or exists immediately
after and as a result of a purchase of such security.
THE ADVISER
The Trust and First National Bank of Commerce in New Orleans (the "Adviser")
have entered into an advisory agreement (the "Advisory Agreement") dated as of
August 17, 1993. The Advisory Agreement provides that the Adviser shall not be
protected against any liability to the Trust or its shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Adviser but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by any State, the Adviser will bear the amount
of such excess.
B-23
<PAGE>
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to the
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Funds by a majority of the outstanding shares of the Funds, on
not less than 30 days' nor more than 60 days' written notice to the Adviser, or
by the Adviser on 90 days' written notice to the Trust.
For the fiscal years ended September 30, 1994 and 1995, the Funds paid the
following advisory fees:
<TABLE>
<CAPTION>
Advisory Fees Paid Advisory Fees Waived
---------------------- ---------------------
FUND 1994 1995 1994 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury Securities Money $1,039,361 $1,460,920 N/A $478,529
Market Fund
Government Securities Fund $ 359,239 $ 433,013 N/A $148,818
Balanced Fund $ 298,645 $ 428,912 N/A $143,749
Louisiana Tax-Free Income $ 0.00 $ 6,316 $28,959 $ 27,116
Fund
Value Equity Fund $ 185,658 $ 284,586 N/A $ 83,575
Growth Equity Fund * * * *
Institutional Money Market * $0.00 N/A $ 5,924
Fund/1/
Tax Exempt Money Market * * * *
Fund
==========================================================================
</TABLE>
* Not in operation during the period.
/1/ In addition to waiving the full advisory fee for 1995, the Adviser
contributed $7,691.02.
THE ADMINISTRATOR
SEI Financial Management Corporation serves as administrator (the
"Administrator") to the Trust pursuant to an Administration Agreement dated as
of August 17, 1993 (the "Administration Agreement"). The Administration
Agreement provides that the Administrator shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which the Administration Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross
B-24
<PAGE>
negligence on the part of the Administrator in the performance of its duties or
from reckless disregard by it of its duties and obligations thereunder.
For the fiscal years ended September 30, 1994 and 1995, the Funds paid the
following administrative fees:
<TABLE>
<CAPTION>
Administrative Fees Paid Administrative Fees Waived
------------------------ --------------------------
FUND 1994 1995 1994 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury Securities Money $1,041,063 $1,293,016 N/A N/A
Market Fund
Government Securities Fund $ 204,922 $ 211,577 N/A N/A
Balanced Fund $ 132,490 $ 154,774 N/A N/A
Louisiana Tax-Free Income $ 0.00 $ 17,558 $11,151 $1,546
Fund
Value Equity Fund $ 79,890 $ 99,501 N/A N/A
Growth Equity Fund * * * *
Institutional Money Market * $ 3,949 N/A N/A
Fund
Tax Exempt Money Market * * * *
Fund
==================================================================================
</TABLE>
* Not in operation during the period.
The Administrator, a wholly owned subsidiary of SEI Corporation ("SEI"), was
organized as a Delaware corporation in 1969 and has its principal business
offices at 680 East Swedesford Road, Wayne, PA 19087-1658. Alfred P. West,
Jr., Henry H. Greer and Carmen V. Romeo constitute the Board of Directors of the
Administrator. Mr. West is the Chairman of the Board and Chief Executive
Officer of the Administrator and of SEI. Mr. Greer is the President and Chief
Operating Officer of the Administrator and of SEI. SEI and its subsidiaries are
leading providers of funds evaluation services, trust accounting systems, and
brokerage and information services to financial institutions, institutional
investors and money managers. The Administrator also serves as administrator to
the following other mutual funds: The Achievement Funds Trust, The Advisors'
Inner Circle Fund, The Arbor Fund, ARK Funds, Bishop Street Funds, The Compass
Capital Group, Conestoga Family of Funds, CoreFunds, Inc., CrestFunds, Inc.,
CUFUND, FFB Lexicon Funds, First American Investment Funds, Inc., First American
Funds, Inc., Insurance Investment Products Trust, Inventor Funds, Inc., Morgan
Grenfell Investment Trust, The PBHG Funds, Inc., The Pillar Funds, Rembrandt
Funds(R), 1784 Funds, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
Managed Trust, SEI International Trust, SEI Liquid Asset Trust, SEI Tax Exempt
Trust, Stepstone Funds, STI Classic Funds and STI Classic
B-25
<PAGE>
Variable Trust.
THE DISTRIBUTOR
THE DISTRIBUTOR -- SEI Financial Services Company serves as distributor (the
"Distributor") to the Trust pursuant to a Distribution Agreement dated as of
August 17, 1993, as amended and restated as of August 8, 1994, (the
"Distribution Agreement"), which will continue for successive one-year periods.
Notwithstanding the foregoing, the Distribution Agreement shall be reviewed and
ratified at least annually (i) by the Trust's Trustees or by the vote of a
majority of the outstanding shares of the Trust, and (ii) by the vote of a
majority of the Trustees of the Trust who are not parties to the Distribution
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement will automatically
terminate in the event of any assignment, as defined in the 1940 Act, and is
terminable with respect to a particular Fund on not less than sixty days' notice
by the (i) Trust's Trustees, (ii) vote of a majority of the outstanding shares
of such Fund or (iii) the Distributor.
DISTRIBUTION -- As described in the Prospectuses, shares of the Trust's Funds
are sold on a continuous basis by the Distributor. Each of the Class A shares
and the Trust Class shares are offered without distribution fees, although the
Class A shares are sold with a front-end sales load. However, neither the Class
A shares nor the Trust Class shares are subject to ongoing distribution or
service fees, or are subject to a sales charge when they are redeemed.
The Trust has adopted a distribution plan dated August 17, 1993 for the Class B
shares of each Fixed Income and Equity Fund (the "Class B Plan"), a distribution
plan dated August 17, 1993 for the Retail Class shares of the Treasury
Securities Money Market Fund (the "Retail Class Plan") and a distribution plan
dated as of August 8, 1994 for Cash Sweep Class shares of the Treasury
Securities Money Market Fund (the "Cash Sweep Class Plan"), in each case in
accordance with the provisions of Rule 12b-1 under the 1940 Act, which regulates
circumstances under which an investment company may directly or indirectly bear
expenses relating to the distribution of its shares. Each of the Class B,
Retail Class and Cash Sweep Class Plans was approved by a majority of the
Trustees, including a majority of the Trustees who are not "interested persons"
of the Trust or SEI Financial Services, as that term is defined in the 1940 Act
("Disinterested Trustees"). Continuance of each of the Class B, Retail Class
and Cash Sweep Class Plans must be approved annually by a majority of the
Trustees of the Trust and by a majority of the Disinterested Trustees. Each of
the Class B, Retail Class and Cash Sweep Class Plans requires that quarterly
written reports of amounts spent under that Plan and the purposes of such
expenditures be furnished to and reviewed by the Trustees. In accordance with
Rule 12b-1 under the 1940 Act, the Class B Plan, the Retail Class Plan or Cash
Sweep Class Plan, as applicable, may be terminated with respect to any Fund by a
vote of a majority of the Disinterested Trustees, or by a vote of a majority of
the outstanding shares
B-26
<PAGE>
of that Fund. Any of the Class B, Retail Class or Cash Sweep Class Plans may be
amended by vote of the Trust's Board of Trustees, including a majority of the
Disinterested Trustees, cast in person at a meeting called for such purpose,
except that any change that would effect a material increase in any distribution
fee with respect to a Fund requires the approval of that Fund's shareholders.
None of the Class B, Retail Class or Cash Sweep Class shares incur a sales
charge when they are purchased, but Class B shares are subject to a sales charge
if they are redeemed within five years of purchase. Pursuant to the
Distribution Agreement and the Class B Plan, Class B shares are subject to an
ongoing distribution and service fee calculated on each Fixed Income and Equity
Fund's aggregate average daily net assets attributable to its Class B shares.
Pursuant to the Distribution Agreement and the Retail Class Plan and Cash Sweep
Class Plans, shares of each class are subject to ongoing distribution and
service fees calculated on the Treasury Securities Money Market Fund's aggregate
average daily net assets attributable to shares of each such class,
respectively.
Class A shares are not subject to distribution or service fees and pay
correspondingly higher dividends per share. There can, of course, be no
guarantee that any Fund will have net income and pay dividends. However,
because initial sales charges are deducted at the time of purchase, investors in
Class A shares would not have all their funds invested initially and, therefore,
would initially own fewer shares. If you do not qualify for reduced initial
sales charges and you expect to maintain your investment for an extended period
of time, you should weigh the fact that accumulated distribution and service
fees on Class B shares may exceed the initial sales charge on Class A shares
during the life of your investment against the fact that, because of Class A's
initial sales charges, less of your initial purchase price is actually invested
in the Funds if you purchase Class A shares.
The distribution expenses incurred by the Distributor and other financial
intermediaries in connection with the sale of the shares will be paid, in the
case of Class A shares, from the proceeds of the initial sales charge and, in
the case of Class B shares, from the proceeds of the ongoing distribution and
service fees and the contingent deferred sales charge paid upon redemptions of
shares within five years of purchase.
For the fiscal year ended September 30, 1995, the Class B Government Securities,
Louisiana Tax-Free Income, Balanced, and Value Equity Funds paid $1,331.48,
$4,092.35, $7,096.91, and $5,042.52 in distribution fees, respectively. For the
fiscal year ended September 30, 1995, the Retail Class Treasury Securities Money
Market fund paid $462,751.65 in distribution fees. Excluding the fees paid for
the Retail Class Treasury Securities Money Market Fund, all of the distribution
fees paid relate exclusively to sales expenses. As of September 30, 1995, the
Growth Equity and Tax Exempt Money Market Funds had not commenced operations.
B-27
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees and executive officers of the Trust and their principal occupations for
the last five years are set forth below. Each may have held other positions
with the named companies during that period. Unless otherwise noted, the
business address of each Trustee and executive officer is SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne, PA 19087-1658. Certain
officers of the Fund also serve as Trustees and/or officers of the Achievement
Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Bishop
Street Funds, The Compass Capital Group, Conestoga Family of Funds, CoreFunds,
Inc., CrestFunds, Inc., CUFUND, FFB Lexicon Funds, First American Investment
Funds, Inc., First American Funds, Inc., Insurance Investment Products Trust,
Inventor Funds, Inc., Morgan Grenfell Investment Trust, The PBHG Funds, Inc.,
The Pillar Funds, Rembrandt Funds(R), 1784 Funds, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional Managed Trust, SEI International Trust, SEI
Liquid Asset Trust, SEI Tax Exempt Trust, Stepstone Funds, STI Classic Funds and
STI Classic Variable Trust, all of which are open-end management investment
companies.
ROBERT A. NESHER - Chairman of the Board of Trustees* - 8 South Street,
Kennebunkport, ME 04046. Retired since 1994. Executive Vice President of SEI,
1986-1994. Director and Executive Vice President of the Administration and the
Distributor September, 1981 - 1994.
JOHN T. COONEY - Trustee** - 573 N. Post Oak Lane, Houston, TX 77024. Retired
since 1992. Formerly Vice Chairman of Ameritrust Texas N.A. (1989-1992), and
MTrust Corp. (1985-1989).
WILLIAM M. DORAN - Director* - 2000 One Logan Square, Philadelphia, PA 19103.
Partner of Morgan, Lewis & Bockius LLP (law firm). Counsel to the Trust,
Administrator and Distributor for the past five years. Director and Secretary
of SEI.
FRANK E. MORRIS - Trustee** - 105 Walpole Street, Dover, MA 02030. Retired
since 1990. Peter Drucker Professor of Management, Boston College (1989-1990).
President, Federal Reserve Bank of Boston (1968-1988).
BARRY M. MULROY - Trustee* - First Commerce Corporation, 210 Barrone Street, New
Orleans, LA 70160. Marketing and Human Resources Director of First Commerce
Service Corporation from 1993 to present. Marketing Director, First Commerce
Service Corporation (1988-1992).
ROBERT A. PATTERSON - Trustee** - 408 Old Main, University Park, PA 16802.
Pennsylvania State University Senior Vice President, Treasurer (Emeritus).
Financial and
B-28
<PAGE>
Investment Consultant, Professor of Transportation (1984-present). Vice
President-Investments, Treasurer, Senior Vice President (Emeritus) (1982-1984).
Director, Pennsylvania Research Corp. Member and Treasurer, Board of Trustees
of Grove City College.
GENE PETERS - Trustee** - 943 Oblong Road, Williamstown, MA 01267. Private
investor from 1987 to present. Vice President and Chief Financial Officer,
Western Company of North America (petroleum service company) (1980-1986).
President of Gene Peters and Associates (import company) (1978-1980). President
and Chief Executive Officer of Jos. Schlitz Brewing Company before 1978.
JAMES M. STOREY - Trustee** - Ten Post Office Square South, Boston, MA 02109.
Retired since 1993. Formerly Partner of Dechert Price & Rhoads (law firm).
DAVID G. LEE - President and Chief Executive Officer - Senior Vice President of
the Administrator and Distributor since 1993. Vice President of the
Administrator and Distributor (1991-1993). President, GW Sierra Trust Funds
before 1991.
KEVIN P. ROBINS - Vice President, Assistant Secretary - Senior Vice President
and General Counsel of SEI, the Administrator and the Distributor since 1994.
Vice President of SEI, the Administrator and the Distributor since 1992.
SANDRA K. ORLOW - Vice President, Assistant Secretary - Vice President and
Assistant Secretary of SEI, the Administrator and the Distributor since 1983.
KATHRYN L. STANTON - Vice President, Assistant Secretary - Vice President,
Assistant Secretary of SEI, the Administrator and Distributor since 1994.
Associate, Morgan, Lewis & Bockius LLP (law firm) 1989-1994.
ROBERT B. CARROLL - Vice President, Assistant Secretary - Vice President and
Assistant Secretary of SEI, the Administrator and Distributor since 1994.
United States Securities and Exchange Commission, Division of Investment
Management 1990-1994. Associate, McGuire, Woods, Battle and Booth (law firm)
prior to 1990.
TODD CIPPERMAN - Vice President, Assistant Secretary - Vice President, Assistant
Secretary of SEI, the Administrator and Distributor since May, 1995, Associate,
Dewey Ballantine (law firm) 1994-1995, Associate, Winston & Strawn (law firm)
1991-1994.
JOSEPH LYDON - Vice President, Assistant Secretary - Director of Business
Administration, SEI Corporation since April, 1995; Vice President of Fund Group,
Vice President of the Advisor - Dreman Value Management, LP, President of Dreman
Financial Services, Inc. from 1989 to 1995. B.S. Accounting, St. Joseph's
University.
JEFFREY A. COHEN - Controller, Chief Financial Officer - CPA, Vice President,
B-29
<PAGE>
International and Domestic Funds Accounting, SEI Corporation since 1991. Audit
Manager, Price Waterhouse prior to 1991.
RICHARD W. GRANT - Secretary - 2000 One Logan Square, Philadelphia, PA 19103,
Partner of Morgan, Lewis & Bockius LLP (law firm), Counsel to the Trust, Manager
and Distributor.
MICHAEL T. ZELINSKY - Assistant Secretary - Blue Sky Supervisor, Legal; SEI
Corporation, October 1995 -present; Legal Assistant, Clark, Ladner, Fortenbaugh
& Young (law firm), 1994-1995; Legal Assistant, Seward & Kissel (law firm) 1993-
1994; prior to 1993 Michael was employed in the information and computer
industries. B.A. The American University, 1984.
JOHN H. GRADY, JR. - Assistant Secretary - 1800 M Street, N.W., Washington,
D.C., 20036, Partner, since 1995 and Associate, 1993-1995, Morgan, Lewis &
Bockius LLP (law firm), counsel to the Trust, Manager and Distributor;
Associate, Ropes & Gray (law firm), 1988 to 1993.
_______________
*Messrs. Nesher, Doran and Mulroy are Trustees who may be deemed to be
"interested" persons of the Trust as the term is defined in the 1940 Act.
**Messrs. Cooney, Morris, Patterson, Storey and Peters serve on the Audit
Committee of the Trust.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
Compensation of officers and affiliated Trustees of the Trust is paid by the
Administrator.
B-30
<PAGE>
As of September 30, 1995, the Trustees and officers of the Trust received the
following compensation:
<TABLE>
<CAPTION>
Total
Compensation
Pension or from Registrant
Aggregate Retirement and Fund
Compensation Benefits Estimated Complex Paid to
From Registrant Accrued as Part Annual Directors for
Name of Person, for Fiscal Year of Fund Benefits Upon Fiscal Year Ended
Position Ended 9/30/95 Expenses Retirement 9/30/95
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert A. Nesher, 0 0 0 $0 for service on
Trustee 1 board
John T. Cooney, $3,387.62 0 0 $3,387.62 for
Trustee service on 1
board
Frank E. Morris, $3,387.62 0 0 $3,387.62 for
Trustee service on 1
board
Barry M. Mulroy, 0 0 0 $0 for service on
Trustee 1 board
Robert A. $3,387.62 0 0 $3,387.62 for
Patterson, Trustee service on 1
board
Gene Peters, $3,387.62 0 0 $3,387.62 for
Trustee service on 1
board
James M. Storey, $3,387.62 0 0 $3,387.62 for
Trustee service on 1
board
William M. Doran, 0 $0 for service on
Trustee 1 board
=============================================================================================
</TABLE>
COMPUTATION OF YIELD
MONEY MARKET FUNDS -- From time to time the Money Market Funds may advertise
"current yield" and "effective compound yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of a Fund refers to the income generated by an investment in a Fund over
a stated seven-day period. This income is then "annualized," that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in the Fund is
B-31
<PAGE>
assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment.
The current yield of the Money Market Funds will be calculated daily based upon
the seven days ending on the date of calculation ("base period"). The yield is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing shareholder account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change by
the value of the account at the beginning of the some period to obtain the base
period return and multiplying the result by (365/7). Realized and unrealized
gains and losses are not included in the calculation of the yield. The
effective compound yield of the Funds is determined by computing the net change,
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, according to the following formula:
Effective Yield = [(Base Period Return + 1)/365/7/] - 1. The current and the
effective yields reflect the reinvestment of net income earned daily on
portfolio assets.
For the 7-day period ended September 30, 1995, the Treasury Securities Money
Market Fund's 7-day yield and 7-day effective yields were 5.13% and 5.26%,
respectively, for the Retail Class shares and, 5.33% and 5.47%, respectively,
for the Trust Class shares.
The yields of the Money Market Funds fluctuate, and the annualization of a
week's dividend is not a representation by the Trust as to what an investment in
each Fund will actually yield in the future. Actual yields will depend on such
variables as asset quality, average asset maturity, the type of instruments each
Fund invests in, changes in interest rates on money market instruments, changes
in the expenses of each Fund and other factors.
Yields are one basis upon which investors may compare the Money Market Funds
with other money market funds; however, yields of other money market funds and
other investment vehicles may not be comparable because of the factors set forth
above and differences in the methods used in valuing portfolio instruments.
FIXED INCOME AND EQUITY FUNDS -- The Fixed Income Funds and the Equity Funds may
advertise a 30-day yield. These figures will be based on historical earnings
and are not intended to indicate future performance. The yield of these Funds
refers to the annualized income generated by an investment in the Funds over a
specified 30-day period. The yield is calculated by assuming that the income
generated by the investment during that 30-day period is generated over one year
and is shown as a percentage of the investment. In particular, yield will be
calculated according to the following formula:
B-32
<PAGE>
Yield = 2([(a-b)/(cd) + 1]/6/ - 1) where a = dividends and interest earned
during the period; b = expenses accrued for the period (net of reimbursement); c
= the current daily number of shares outstanding during the period that were
entitled to receive dividends; and d = the maximum offering price per share on
the last day of the period.
The Louisiana Fund may also advertise a "tax-equivalent yield," which is
calculated by determining the rate of return that would have to be achieved on a
fully taxable investment to produce the after-tax equivalent of the Fund's
yield, assuming certain tax brackets for a shareholder. The tax-equivalent
yield of the Fund will be calculated by adding (a) the portion of the Fund's
yield that is not tax-exempt and (b) the result obtained by dividing the portion
of the Fund's yield that is tax-exempt by the difference of one minus a stated
income tax rate.
For the 30-day period ended September 30, 1995, the 30 day and 30 day tax-
equivalent yields on the Funds other than the Money Market Funds were as
follows:
<TABLE>
<CAPTION>
FUND 30 DAY YIELD 30 DAY TAX EQUIVALENT YIELD
- ----------------------------------------------------------------------------
<S> <C> <C>
Government Securities Fund
Class A 5.74%
Class B 5.19%
Balanced Fund
Class A 3.65%
Class B 3.02%
Value Equity Fund
Class A 2.15%
Class B 1.44%
Louisiana Tax-Free Income Fund
Class A 4.32%
Class B 3.72%
============================================================================
</TABLE>
*The Growth Equity Fund had not commenced operations as of September 30, 1995.
The 30 day tax-equivalent yield for the Louisiana Tax-Free Income Fund for the
fiscal year ended September 30, 1995 was 6.79% for Class A and 5.85% for Class
B.
CALCULATION OF TOTAL RETURN
From time to time, the Fixed Income Funds and the Equity Funds may advertise
total return. The total return of the Fund refers to the average compounded
rate of return to a hypothetical investment for designated time periods
(including but not limited to, the
B-33
<PAGE>
period from which the Funds commenced operations through the specified date),
assuming that the entire investment is redeemed at the end of each period. In
particular, total return will be calculated according to the following formula:
P (1 + T)/n/ = ERV, where P = a hypothetical initial payment of $1,000; T =
average annual total return: n number of years; and ERV = ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the designated
time period as of the end of such period.
Based on the foregoing, the average annual total returns for the Funds from
inception through September 30, 1995 and for the one year period ended September
30, 1995 were as follows:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
------------------------------
CLASS/WITH LOAD SINCE
FUND WITHOUT LOAD ONE YEAR INCEPTION*
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Securities Class A with Load/1/ 6.98 2.58
Government Securities Class A without Load 10.84 4.42
Louisiana Tax-Free Income Class A with Load/1/ 5.20 1.20
Louisiana Tax-Free Income Class A without Load 9.01 3.01
Balanced Class A with Load/1/ 13.44 6.00
Balanced Class A without Load 17.58 7.90
Value Equity Class A with Load/1/ 20.75 9.01
Value Equity Class A without Load 25.13 10.96
Government Securities Class B with CDSC/2/ 7.35 2.27
Government Securities Class B without CDSC 10.10 3.63
Louisiana Tax-Free Income Class B with CDSC/3/ 5.46 1.66
Louisiana Tax-Free Income Class B without CDSC 8.21 3.10
Balanced Class B with CDSC/2/ 14.00 5.79
Balanced Class B without CDSC 16.75 7.13
Value Equity Class B with CDSC/2/ 21.42 9.52
Value Equity Class B without CDSC 24.17 10.82
=================================================================================================
</TABLE>
The Growth Equity Fund had not commenced operations as of September 30, 1995.
*Returns have been annualized.
_______________
/1/ Commenced operations on October 1, 1993.
/2/ Commenced operations on October 22, 1993.
/3/ Commenced operations on November 22, 1993.
B-34
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
Each Fund intends to pay cash for all shares redeemed, but under abnormal
conditions which make payment in cash unwise, payment may be made wholly or
partly in portfolio securities with a market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
It is currently the Trust's policy to pay for all redemptions in cash. The
Trust retains the right, however, to alter this policy to provide for
redemptions in whole or in part by a distribution in-kind of securities held by
the Funds in lieu of cash. Shareholders may incur brokerage charges on the sale
of any such securities so received in payment of redemptions. However, a
shareholder will at all times be entitled to aggregate cash redemptions from all
Funds of the Trust during any 90-day period of up to the lesser of $250,000 or
1% of the Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the Securities and Exchange Commission by rule or
regulation) as a result of disposal or valuation of the Fund's securities is not
reasonably practicable, or for such other periods as the Securities and Exchange
Commission has by order permitted. The Trust also reserves the right to suspend
sales of shares of the Fund for any period during which the New York Stock
Exchange, the Adviser, the Administrator and/or the Custodian are not open for
business. The New York Stock Exchange will not open in observance of the
following holidays: New Year's Day; President's Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving; and Christmas. In addition, as it
relates to the Money Market Funds, the Federal Reserve observes the following
holidays: Martin Luther King, Jr., Day, Columbus Day and Veterans Day.
CONVERSION FEATURE
As described in the Prospectuses, Class B shares of the Fixed Income and Equity
Funds will automatically convert to Class A shares and will no longer be subject
to the distribution and service fees or the contingent deferred sales charge
after five years after the beginning of the month in which the shares were
issued. Such conversion will be on the basis of the relative net asset values
of the two classes, without the imposition of a sales load, fee or other charge.
Because the per share net asset value of the Class A shares may be higher than
that of the Class B shares at the time of conversion, a shareholder may receive
fewer Class A shares than the number of Class B shares converted, although the
dollar value will be the same.
B-35
<PAGE>
LETTER OF INTENT
Reduced sales charges are applicable to the aggregate amount of purchases made
by any such purchaser previously enumerated within a 13-month period pursuant to
a written Letter of Intent (the "Letter") provided by the Distributor, which is
not legally binding on the signer or a Fund and which provides for the holding
in escrow by the Administrator of 5% of the total amount intended to be
purchased until such purchase is completed within the 13-month period. A Letter
may be dated to include shares purchased up to 90 days prior to the date the
Letter is signed. The 13-month period begins on the date of the earliest
purchase. If the intended investment is not completed, the purchaser will be
asked to pay an amount equal to the difference between the sales charge on the
shares purchased at the reduced rate and the sales charge otherwise applicable
to the total shares purchased. If such payment is not made within 20 days
following the expiration of the 13-month period, the Administrator will
surrender an appropriate number of the escrowed shares for redemption in order
to realize the difference. Such purchasers may include the value (at offering
price at the level designated in their Letter) of all their shares of the Fund
and of the Fixed Income Funds and the Equity Funds previously purchased and
still held as of the date of their Letter toward the completion of such Letter.
DETERMINATION OF NET ASSET VALUE
MONEY MARKET FUNDS -- The net asset value per share of the Money Market Funds is
calculated by adding the value of securities and other assets, subtracting
liabilities and dividing by the number of outstanding shares. Securities will
be valued by the amortized cost method which involves valuing a security at its
cost on the date of purchase and thereafter (absent unusual circumstances)
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuations in general market rates of interest on
the value of the instrument. While this method provides certainty in valuation,
it may result in periods during which a security's value, as determined by this
method, is higher or lower than the price each Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield of each
Fund may tend to be higher than a like computation made by a company with
identical investments utilizing a method of valuation based upon market prices
and estimates of market prices for all of its portfolio securities. Thus, if
the use of amortized cost by each Fund resulted in a lower aggregate portfolio
value on a particular day, a prospective investor in each Fund would be able to
obtain a somewhat higher yield than would result from investment in a company
utilizing solely market values, and existing investors in each Fund would
experience a lower yield. The converse would apply in a period of rising
interest rates.
The Money Market Funds' use of amortized cost and the maintenance of each Funds
net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7
under the 1940 Act, provided that certain conditions are met. The regulations
also require the Trustees to establish procedures which are reasonably designed
to stabilize the net asset value per share at $1.00 for each Fund. Such
procedures include the determination of
B-36
<PAGE>
the extent of deviation, if any, of each Fund's current net asset value per
share calculated using available market quotations from each Fund's amortized
cost price per share at such intervals as the Trustees deem appropriate and
reasonable in light of market conditions and periodic reviews of the amount of
the deviation and the methods used to calculate such deviation. In the event
that such deviation exceeds 1/2 of 1%, the Trustees are required to consider
promptly what action, if any, should be initiated, and, if the Trustees believe
that the extent of any deviation may result in material dilution or other unfair
results to shareholders, the Trustees are required to take such corrective
action as they deem appropriate to eliminate or reduce such dilution or unfair
results to the extent reasonably practicable. Such actions may include: the
sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity; withholding dividends;
redeeming shares in kind; or establishing a net asset value per share by using
available market quotations. In addition, if each Fund incurs a significant
loss or liability, the Trustees have the authority to reduce pro rata the number
of shares of each Fund in each shareholder's account and to offset each
shareholder's pro rata portion of such loss or liability from the shareholder's
accrued but unpaid dividends or from future dividends while each other Fund must
annually distribute at least 90% of its investment company taxable income.
FIXED INCOME AND EQUITY FUNDS -- The securities of the Fixed Income Funds and
the Equity Funds are valued by the Administrator pursuant to valuations provided
by an independent pricing service. The pricing service relies primarily on
prices of actual market transactions as well as trader quotations. However, the
service may also use a matrix system to determine valuations of fixed income
securities, which system considers such factors as security prices, yields,
maturities, call features, ratings and developments relating to specific
securities in arriving at valuations. The procedures of the pricing service and
its valuations are reviewed by the officers of the Trust under the general
supervision of the Trustees.
TAXES
The following is only a summary of certain tax considerations generally
affecting a Fund and its shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisers with
specific reference to their own tax situations, including their state and local
tax liabilities.
ALL FUNDS -- The following discussion of Federal income tax consequences is
based on the Code, and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. New legislation, certain
administrative changes, or court decisions may significantly change the
conclusions expressed herein, and may have a retroactive effect with respect to
the transactions contemplated herein.
Recent legislation, signed into law by President Clinton in August 1993,
increased the top marginal rate of tax imposed on individual taxpayers from 31%
to 36% on taxable income
B-37
<PAGE>
in excess of $140,000, and imposed a 10% surtax on high-income individual
taxpayers on taxable income in excess of $250,000. As a result of these
changes, the rate at which capital gains are taxed differs markedly from the tax
rate on ordinary income; the increases discussed above apply to the tax rates
imposed on ordinary income but the rate imposed on capital gains remains at 28%.
In addition, the recent legislation increased the alternative minimum tax rates
for noncorporate individual taxpayers from 24% to 26% on alternative minimum
taxable income ("AMTI") less the exemption amount up to $175,000 and 28% on AMTI
less the exemption amount in excess of $175,000. The corporate alternative
minimum tax rate remains at 20%.
It is the policy of each of the Trust's Funds to qualify for the favorable tax
treatment accorded regulated investment companies under Subchapter M of the
Code. By following such policy, each of the Trust's Funds expects to eliminate
or reduce to a nominal amount the Federal taxes to which such Fund may be
subject.
In order to qualify as a regulated investment company each Fund must, among
other things, (1) derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in stock, securities or currencies; (2)
derive less than 30% of its gross income each taxable year from the sale or
other disposition of certain assets held for less than three months ("Short-
Short Limitation"), including stock and securities; options, futures or forward
contracts (other than on foreign currencies); or foreign currencies (including
options, futures or forward contracts) if not directly related to the Fund's
principal business of investing in stocks and securities; and (3) diversify its
holdings so that at the end of each quarter of each taxable year (i) at least
50% of the market value of the Fund's total assets is represented by cash or
cash items, U.S. Government securities, securities of other regulated investment
companies, and other securities limited, in respect of any one issuer, to a
value not greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or securities of any other regulated investment
company) or of two or more issuers that the Fund controls and that are engaged
in the same, similar, or related trades or businesses. These requirements may
restrict the degree to which the Funds may engage in short-term trading and in
certain hedging transactions and may limit the range of the Fund's investments.
If a Fund qualifies as a regulated investment company, it will not be subject to
Federal income tax on the part of its net investment income and net realized
capital gains, if any, which it distributes each year to shareholders, provided
the Fund distributes at least (a) 90% of its "investment company taxable income"
(generally, net investment income plus net short-term capital gain) and (b) 90%
of its net interest
B-38
<PAGE>
exempt income (the excess of (i) its tax-exempt interest income over (ii)
certain deductions attributable to that income).
If a Fund fails to distribute in a calendar year at least the sum of 98% of its
ordinary income for the year and 98% of its capital gain net income (the excess
of short and long term gain over short and long term losses) for the one-year
period ending October 31 of the year (and any retained amount from the prior
calendar year), the Fund will be subject to a nondeductible 4% Federal excise
tax on the undistributed amounts.
Distributions declared in October, November, or December to shareholders of
record during those months and paid during the following January are treated as
if they were received by each shareholder on December 31 of the prior year for
tax purposes.
In certain cases, a Fund will be required to withhold and remit to the U.S.
Treasury 31% of any taxable dividends, capital gain distributions and redemption
proceeds (other than from redemption of shares of the Money Market Funds) paid
to an individual or certain other non-corporate shareholder (1) who has failed
to provide a correct taxpayer identification number, (2) who is subject to
backup withholding by the Internal Revenue Service, or (3) who has not certified
to the Fund that such shareholder is not subject to backup withholding. This
backup withholding is not an additional tax, and any amounts withheld may be
credited against the shareholder's ultimate U.S. tax liability.
A Fund's transactions in certain futures contracts, options, forward contracts,
foreign currencies, foreign debt securities, and certain other investment and
hedging activities will be subject to special tax rules. In a given case, these
rules may accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's assets, convert short-term
capital losses into long-term capital losses, or otherwise affect the character
of the Fund's income. These rules could therefore affect the amount, timing,
and character of distributions to shareholders. Each Fund will endeavor to make
any available elections pertaining to such transactions in a manner believed to
be in the best interest of the Fund.
Income from the disposition of options and futures contracts will be subject to
the Short-Short Limitation if they were held for less than three months. If a
Fund satisfies certain requirements, then any increase in value of a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether the Fund satisfies the Short-
Short Limitation. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of that limitation. To the extent
this treatment is not available, the Fund may be forced to defer the closing out
of certain options and futures contracts beyond the time when it otherwise would
be advantageous to do so.
B-39
<PAGE>
Shareholders will be advised annually as to the Federal income tax consequences
of distributions made during the year. However, information set forth in the
Prospectuses and this Statement of Additional Information which relates to
taxation is only a summary of some of the important tax considerations generally
affecting purchasers of shares of the Trust's Funds. Further tax information
regarding the Funds is included in the immediately following sections of this
Statement of Additional Information. No attempt has been made to present a
detailed explanation of the income tax treatment of a Fund or its shareholders,
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of shares of a Fund are urged to consult their
tax advisers with specific reference to their own tax situation.
The following tax information relates specifically to certain of the Trust's
Funds.
ADDITIONAL TAX INFORMATION CONCERNING THE LOUISIANA FUND AND TAX EXEMPT MONEY
MARKET FUND -- As indicated in the Prospectuses of the Louisiana Fund and Tax
Exempt Money Market Fund, these Funds are designed to provide shareholders with
current tax-exempt interest income and is not intended to constitute a balanced
investment program. Certain recipients of Social Security and railroad
retirement benefits may be required to take into account income from the Funds
in determining the taxability of their benefits. In addition, the Funds may not
be an appropriate investment for shareholders that are "substantial users" or
persons related to such users of facilities financed by private activity bonds
or industrial revenue bonds. A "substantial user" is defined generally to
include certain persons who regularly use a facility in their trade or business.
Shareholders should consult their tax advisers to determine the potential
effect, if any, on their tax liability of investing in these Funds.
If, at the close of each quarter of its taxable year, at least 50% of the value
of a Fund's total assets consists of securities the interest on which is
excludable from gross income, the Fund may pay "exempt-interest dividends" to
its shareholders. The policy of the Funds is to pay each year as dividends
substantially all of its interest income, net of certain deductions. An exempt-
interest dividend is any dividend or part thereof (other than a capital gain
dividend) paid by a Fund, and designated by the Fund as an exempt-interest
dividend in a written notice mailed to shareholders within 60 days after the
close of such Fund's taxable year. However, aggregate exempt-interest dividends
for the taxable year may not exceed the net interest from Municipal Securities
and other securities exempt from the regular Federal income tax received by the
Fund during the taxable year. The percentage of the total dividends paid for
any taxable year which qualifies as Federal exempt-interest dividends will be
the same for all shareholders receiving dividends from the Fund during such
year, regardless of the period for which the shares were held.
Exempt-interest dividends may nevertheless be subject to the alternative minimum
tax (the "Alternative Minimum Tax") imposed by section 55 of the Code or the
environmental tax (the "Environmental Tax") imposed by Section 59A of the Code.
The Environmental Tax
B-40
<PAGE>
is imposed at the rate of 0.12% and applies only to corporate taxpayers. The
Alternative Minimum Tax and the Environmental Tax may be imposed in two
circumstances. First, exempt-interest dividends derived from certain "private
activity bonds" issued after August 7, 1986, will generally be an item of tax
preference (and therefore potentially subject to the Alternative Minimum Tax and
the Environmental Tax) for both corporate and non-corporate taxpayers. Second,
in the case of exempt-interest dividends received by corporate shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they were derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as defined in
section 56(g) of the Code, in calculating the corporation's alternative minimum
taxable income for purposes of determining the Alternative Minimum Tax and the
Environmental Tax.
The deduction otherwise allowable to property and casualty insurance companies
for "losses incurred" will be reduced by an amount equal to a portion of exempt-
interest dividends received or accrued during the taxable year. Foreign
corporations engaged in a trade or business in the United States will be subject
to a "branch profits tax" on their "dividend equivalent amount" for the taxable
year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends.
Issuers of bonds purchased by the Funds (or the beneficiary of such bonds) may
have made certain representations or covenants in connection with the issuance
of such bonds to satisfy certain requirements of the Code that must be satisfied
subsequent to the issuance of such bonds. Investors should be aware that
exempt-interest dividends derived from such bonds may become subject to Federal
income taxation retroactively to the date thereof if such representations are
determined to have been inaccurate or if the issuer of such bonds (or the
beneficiary of such bonds) fails to comply with the covenants.
Under the Code, if a shareholder receives an exempt-interest dividend with
respect to any share and such share is held for six months or less, any loss on
the sale or exchange of such share will be disallowed to the extent of the
amount of such exempt-interest dividend.
Any net realized long-term capital gains of a Fund will be distributed at least
annually. The Fund will have no tax liability with respect to such gains and
the distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held the Fund's shares. Such
distributions will be designated as a capital gains dividend in a written notice
mailed to shareholders after the close of the Fund's taxable year. If a
shareholder disposes of shares in the Fund at a loss before having held those
shares for more than six months, such loss will be treated as a long-term
capital loss to the extent the shareholder has received a long-term capital gain
distribution on the shares.
B-41
<PAGE>
Although the Fund does not expect to earn any investment company taxable income
(as defined by the Code), any income earned on taxable investments will be
distributed and will be taxable to shareholders as ordinary income. In general,
"investment company taxable income" comprises taxable net investment income and
net short-term capital gains. The Fund would be taxed on any undistributed
investment company taxable income. Since any such income will be distributed,
it is anticipated that no such tax will be paid by the Fund.
As indicated in the Prospectuses of the Louisiana Fund and Tax Exempt Money
Market Fund, these Funds may acquire puts with respect to Municipal Securities
held in its portfolio. See "Additional Description Of Permitted Investments --
Puts on Municipal Securities" in this Statement of Additional Information. The
policy of the Funds is to limit acquisitions of puts to those under which an
acquiring Fund will be treated for Federal income tax purposes as the owner of
the Municipal Securities acquired subject to the put and the interest on the
Municipal Securities will be tax-exempt to such Fund. Although the Internal
Revenue Service has issued a published ruling that provides some guidance
regarding the tax consequences of the purchase of puts, there is currently no
guidance available from the Internal Revenue Service that definitively
establishes the tax consequences of many of the types of puts that these Funds
could acquire under the 1940 Act. Therefore, although the Louisiana Fund will
only acquire a put after concluding that it will have the tax consequences
described above, the Internal Revenue Service could reach a different
conclusion. If the Louisiana Fund or Tax Exempt Money Market Fund were not
treated as the owner of the Municipal Securities, income from such securities
would probably not be tax-exempt.
Although each Fund expects to qualify as a "regulated investment company" and to
be relieved of all or substantially all Federal income taxes, depending upon the
extent of its activities in states and localities in which its offices are
maintained, in which its agents or independent contractors are located, or in
which it is otherwise deemed to be conducting business, the Fund may be subject
to the tax laws of such states or localities. In addition, in those states and
localities which have income tax laws, the treatment of these Funds and their
shareholders under such laws may differ from its treatment under Federal income
tax laws. Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes.
If for any taxable year a Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to Federal tax at regular corporate rates (without any deduction for
distributions to its shareholders). Moreover, upon distribution to
shareholders, the Fund's income, including Municipal Securities interest income,
will be taxable to shareholders to the extent of the Fund's current and/or
accumulated earnings and profits.
B-42
<PAGE>
STATE TAXES -- A Fund is not liable for any income or franchise tax in
Massachusetts if it qualifies as a regulated investment company for Federal
income tax purposes. Distributions by the Funds to shareholders and the
ownership of shares may be subject to state and local taxes. Therefore,
shareholders are urged to consult with their tax advisors concerning the
application of state and local taxes to investments in the Funds, which may
differ from the Federal income tax consequences. For example, under certain
specified circumstances, state income tax laws may exempt from taxation
distributions of a regulated investment company to the extent that such
distributions are derived from interest on Federal obligations. Shareholders
are urged to consult with their tax advisors regarding whether, and under what
conditions such exemption is available.
FUND TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Adviser is responsible for placing the orders
to execute transactions for the Fund. In placing orders, it is the policy of
the Trust to seek to obtain the best net results taking into account such
factors as price (including the applicable dealer spread), the size, type and
difficulty of the transaction involved, the firm's general execution and
operational facilities, and the firm's risk in positioning the securities
involved. While the Adviser generally seeks reasonably competitive spreads or
commissions, the Trust will not necessarily be paying the lowest spread or
commission available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded over-the-
counter, but may be traded on an exchange. Where possible, the Adviser will
deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust will primarily consist of dealer spreads
and underwriting commissions.
TRADING PRACTICES AND BROKERAGE
The Adviser selects brokers or dealers to execute transactions for the purchase
or sale of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary consideration is to
have brokers or dealers execute transactions at best price and execution. Best
price and execution refers to many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. The Trust's determination of what are reasonably competitive rates
is based
B-43
<PAGE>
upon the professional knowledge of its trading department as to rates paid and
charged for similar transactions throughout the securities industry. In some
instances, the Trust pays a minimal share transaction cost when the transaction
presents no difficulty. Some trades are made on a net basis where the Trust
either buys securities directly from the dealer or sells them to the dealer. In
these instances, there is no direct commission charged but there is a spread
(the difference between the buy and sell price) which is the equivalent of a
commission.
The Trust may allocate out of all commission business generated by all of the
funds and accounts under management by the Adviser, brokerage business to
brokers or dealers who provide brokerage and research services. These research
services include (i) advice, either directly or through publications or
writings, as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; (ii) furnishing of analyses and reports
concerning issuers, securities or industries; (iii) providing information on
economic factors and trends, assisting in determining portfolio strategy,
providing computer software used in security analyses, and providing portfolio
performance evaluation and technical market analyses. Such services are used by
the Adviser in connection with its investment decision-making process with
respect to one or more funds and accounts managed by it, and may not be used
exclusively with respect to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934, as amended, higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker-
dealers who provide such brokerage and research services, the Trust believes
that the commissions paid to such broker-dealers are not, in general, higher
than commissions that would be paid to broker-dealers not providing such
services and that such commissions are reasonable in relation to the value of
the brokerage and research services provided. In addition, portfolio
transactions which generate commissions or their equivalent are directed to
broker-dealers who provide daily portfolio pricing services to the Trust.
Subject to best price and execution, commissions used for pricing may or may not
be generated by the funds receiving the pricing service.
The Adviser may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in
a manner deemed equitable to each account or fund. It is believed that the
ability of the accounts to participate in volume transactions will generally be
beneficial to the accounts and funds. Although it is recognized that, in some
cases, the joint execution of orders could adversely affect the price or volume
of the security that a particular account or trust may obtain, it is the opinion
of the Adviser and the Trust's Board of Trustees that the advantages of combined
orders outweigh the possible disadvantages of separate transactions.
B-44
<PAGE>
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution, the
Fund may place orders with broker-dealers which have agreed to defray certain
Trust expenses such as custodian fees, and may, at the request of the
Distributor, give consideration to sales of shares of the Trust as a factor in
the selection of brokers and dealers to execute Trust portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or an affiliate of the Adviser, both of which are
registered broker-dealers, for a commission in conformity with the 1940 Act, the
Securities Exchange Act of 1934 and rules promulgated by the Securities and
Exchange Commission (the "SEC"). Under these provisions, the Distributor or an
affiliate of the Adviser is permitted to receive and retain compensation for
effecting portfolio transactions for the Trust on an exchange if a written
contract is in effect between the Distributor and the Trust expressly permitting
the Distributor or an affiliate of the Adviser to receive and retain such
compensation. These rules further require that commissions paid to the
Distributor or affiliate of the Adviser by the Trust for exchange transactions
not exceed "usual and customary" brokerage commissions. The rules define "usual
and customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other renumeration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." In addition, the Trust may direct commission business to one
or more designated broker-dealers in connection with such broker-dealer's
provision of services to the Trust or payment of certain Trust expenses (e.g.,
custody, pricing and professional fees). The Trustees, including those who are
not "interested persons" of the Trust, have adopted procedures for evaluating
the reasonableness of commissions paid to the Distributor and will review these
procedures periodically.
For the fiscal year ended September 30, 1995, the funds paid the following
brokerage commissions with respect to portfolio transactions:
B-45
<PAGE>
<TABLE>
<CAPTION>
TOTAL
BROKERAGE
% OF % OF TOTAL COMMISSIONS
TOTAL TOTAL BROKERAGE PAID TO SFS TOTAL
TOTAL $ AMOUNT OF BROKERAGE TRANSACTIONS IN CONNECTION $ AMOUNT
$ AMOUNT BROKERAGE COMMISSIONS EFFECTED WITH OF BROKERAGE
OF BROKERAGE COMMISSIONS PAID TO THROUGH REPURCHASE COMMISSIONS
PORTFOLIO COMMISSIONS PAID TO AFFILIATED AFFILIATED AGREEMENT PAID
PAID AFFILIATES BROKERS BROKERS TRANSACTIONS FOR
IN LAST YEAR IN LAST YEAR FOR LAST YEAR FOR LAST YEAR FOR LAST YEAR RESEARCH
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Government -- N/A N/A N/A N/A
Securities
Louisiana Tax- -- N/A N/A N/A N/A
Free Income
Balanced 127,294 14,688 .12% .15% N/A
Value Equity 161,492 24,648 .15% .62% N/A
Treasury -- N/A N/A N/A
Securities
Money Market
Institutional -- N/A N/A N/A
Money Market
Growth Equity * * * * * *
Tax Exempt * * * * * *
Money Market
=========================================================================================================
</TABLE>
* As of September 30, 1995, had not commenced operations.
B-46
<PAGE>
For the fiscal year ended September 30, 1994, the funds paid the following
brokerage commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF
COMMISSIONS BROKERAGE COMMISSIONS
PORTFOLIO PAID 1994 PAID TO AFFILIATES IN 1994
<S> <C> <C>
Government Securities N/A N/A
Louisiana Tax-Free Income N/A N/A
Balanced 158,661 N/A
Value Equity 257,648 N/A
Treasury Securities Money Market N/A
Institutional Money Market N/A N/A
Growth Equity * *
Tax Exempt Money Market * *
============================================================================================================
</TABLE>
*As of September 30, 1995, had not commenced operations.
For the fiscal years ended September 30, 1994 and 1995, the portfolio turnover
rate for each of the Funds was as follows:
<TABLE>
<CAPTION>
TURNOVER RATE
-------------------------------------
FUND 1994 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Government Securities Fund 37.80% 18.33%
Balanced Fund 64.09% 55.06%
Value Equity Fund 161.42% 97.882%
Louisiana Tax-Free Income Fund 30.31% 2.312%
Growth Equity Fund * *
=====================================================================================
</TABLE>
*As of September 30, 1995, had not commenced operations.
DESCRIPTION OF SHARES
The Trust is a Massachusetts business trust and was organized pursuant to a
Declaration of Trust. The Declaration of Trust authorizes the Board of Trustees
to issue an unlimited number of shares, which are units of beneficial interest.
The Trust presently has series of shares which represent interests in the
following Funds: the Government Securities
B-47
<PAGE>
Fund, the Louisiana Fund, the Balanced Fund, the Value Equity Fund, the Growth
Equity Fund, the Treasury Securities Money Market Fund, the Institutional Money
Market Fund and the Tax Exempt Money Market Fund, respectively. The Trust's
Declaration of Trust authorizes the Board of Trustees to divide or redivide any
unissued shares of the Trust into one or more additional series.
Shares have no subscription or preemptive rights and only such conversion or
exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectuses and this Statement of
Additional Information, the Trust's shares will be fully paid and non-
assessable, subject only to the possibility of shareholder liability described
in the following section. All consideration received by the Trust for shares of
any additional series and all assets in which such consideration is invested
would belong to that series and would be subject to the liabilities related
thereto. In the event of a liquidation or dissolution of the Trust,
shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund which are available for distribution.
Share certificates representing shares will not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if the Trust were held to be a partnership, however, the
possibility of the shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any shareholder held personally liable for the
obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisers, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or
B-48
<PAGE>
indemnify a Trustee against any liability for his willful misfeasance, bad
faith, gross negligence or reckless disregard of his duties.
5% SHAREHOLDERS
The names and addresses of the holders of 5% or more of the outstanding shares
of any Fund as of January 3, 1996 and the percentage of outstanding shares of
such Fund held by such shareholders as of such date are, to Trust management's
knowledge, as follows/(1)/:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER
OF RECORD OF % OF
NAME OF FUND OR BENEFICIAL HOLDER SHARES OWNERSHIP
<S> <C> <C> <C>
Treasury Securities ENBECEE Company 542,396,597.5900 99.98%
Money Market Fund - 925 Common Street
Trust Class New Orleans, LA 70160
Treasury Securities National Financial Services 178,234,658.8400 52.30%
Money Market Fund - Corp. for the Exclusive Benefit
Retail Class of Our Customers
Attn: Mike McLaughlin
200 Liberty Street
New York, NY 10281
Treasury Securities ENBECEE Company 162,463,324.9500 47.67%
Money Market Fund - 925 Common Street
Cash Sweep Class New Orleans, LA 70160
Government Securities ENBECEE 6,592,774.1440 45.89%
Fund - Class A 925 Common Street
New Orleans, LA 70160
ENBECEE 7,640,309.7040 53.18%
925 Common Street
New Orleans, LA 70112
Government Securities NFSC FEBO 8,242.2070 31.49%
Fund - Class B Noelie M. Gatipon
8241 Birch Street
New Orleans, LA 70118
NFSC FEBO 2,025.3370 7.74%
Rapides Bank Customer
FBO Marilyn L. Adler IRA
4807 Westgarden
Alexandria, LA 71303
</TABLE>
B-49
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER
OF RECORD OF % OF
NAME OF FUND OR BENEFICIAL HOLDER SHARES OWNERSHIP
<S> <C> <C> <C>
NFSC FEBO 2,025.3370 7.74%
RBT Customer
FBO Homer H. Adler IRA
4807 W. Garden Boulevard
Alexandria, LA 71303
NFSC FEBO 3,408.1560 13.02%
Jacqueline A. Maroney
Rige E. Maroney
2011 Illinois Avenue
Kenner, LA 70062
NFSC FEBO 1,475.3280 5.64%
Lori L. Reeves
701 Redwood Drive
Lake Charles, LA 70611
NFSC FEBO 3,149.9040 12.04%
Don S. Carlos
629 Verret
Houma, LA 70360
Louisiana Tax-Free ENBECEE Company 679,880.0710 53.52%
Income Fund - Class A 925 Common Street
New Orleans, LA 70160-0030
NFSC FEBO 74,841.2430 5.89%
Pierre Jules Maraist
Helen B. Maraist
503 E Second St.
Crowley, LA 70526
Louisiana Tax-Free NFSC FEBO 12,868.1080 19.30%
Income Fund - Class B Mr. Jack F. Worthy
1340 Chevelle Drive
Baton Rouge, LA 70806
NFSC FEBO 10,130.8720 15.20%
Irma Lee Dorrill
29885 Joe Stafford Street
Walker, LA 70785
NFSC FEBO 5,096.4790 7.65%
Paul Boudreaux
Danielle Boudreaux
P.O. Box 384
Reserve, LA 70084-0384
</TABLE>
B-50
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER
OF RECORD OF % OF
NAME OF FUND OR BENEFICIAL HOLDER SHARES OWNERSHIP
<S> <C> <C> <C>
NFSC FEBO 4,441.9400 6.66%
Ruth Manes
3851 33rd Street
Metairie, LA 70001
NFSC FEBO 4,128.0870 6.19%
Harrison L. Cavalier &
Sybil H. Cavalier
12513 E. Sheraton
Baton Rouge, LA 70815
Balanced Fund - Class ENBECEE Company 7,807,364.0090 92.77%
A 925 Common Street
New Orleans, LA 70160-0030
ENBECEE Company 431,441.4850 5.13%
925 Common Street
New Orleans, LA 70160-0030
Balanced Fund - Class B NFSC FEBO 6,078.8920 5.43%
First NBC
IRA of Henry John Fell
321 Willowbrook Drive
Gretna, LA 70056
Value Equity Fund - ENBECEE Company 2,397,720.7530 43.40%
Class A 925 Common Street
New Orleans, LA 70160-0030
ENBECEE Company 2,799,208.9280 50.67%
925 Common Street
New Orleans, LA 70160-0030
Institutional Money ENBECEE Company 27,118,448.0800 100.00%
Market Fund 925 Common Street
New Orleans, LA 70160-0030
=========================================================================================
</TABLE>
/(1)/ The Trust believes that most of the shares referred to above were held by
the above persons in accounts for their fiduciary, agency or custodial
customers. The Trust's Treasury Securities Money Market Fund Cash Sweep Class
has not yet commenced operations.
EXPERTS
The financial statements in this Statement of Additional Information have been
audited by Arthur Andersen LLP, independent public accountants to the Trust, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
B-51
<PAGE>
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Services, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc.
("Duff") and IBCA Limited and IBCA, Inc. (together "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1, 1+ and 2, to indicate the relative degree of safety. Issues rated A-
1+ are those with an "overwhelming degree" of credit protection. Those rated A-
1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a degree of safety regarding timely payment but not as high a
degree as A-1.
Commercial paper rated Prime-1 or Prime-2 by Moody's are judged by Moody's to be
of the "highest" and "higher" quality, respectively, on the basis of relative
repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Commercial paper rated Fitch-1 is regarded as having the
strongest degree of assurance for timely payment. The rating Fitch-2 (Very Good
Grade) is the second highest commercial paper rating assigned by Fitch which
reflects an assurance of timely payment only slightly less in degree than the
strongest issues.
Commercial paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors which are supported by good
fundamental protection factors. Risk factors are minor. Ratings of Duff-1 are
further refined by the gradations of "1+" and "1-". Issues rated Duff-1+ have
the highest certainty of timely payment, outstanding short term liquidity, and
safety just below risk-free U.S. Treasury short-term obligations. Issues rated
Duff-1 have high certainty of timely payment, strong liquidity factors supported
by good fundamental protection factors, and small risk factors. Commercial
paper rated Duff-2 is regarded as having good certainty of timely payment, good
access to capital markets and sound liquidity factors and company fundamentals.
Risk factors are small.
DESCRIPTION OF CORPORATE BOND RATINGS
The following descriptions of corporate bond ratings have been published by S&P,
Moody's, Fitch, Duff and IBCA.
Bonds rated AAA have the highest rating that S&P assigns to a debt obligation.
Such a rating indicates an extremely strong capacity to pay principal and
interest. Bonds rated AA by S&P also qualify as high-quality debt obligations.
Capacity to pay principal and
A-1
<PAGE>
interest is very strong, and in the majority of instances bonds rated AA differ
from AAA issues only to a small degree. Debt rated A by S&P has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Bonds which are rated BBB by S&P are considered 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.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged" bonds. Interest payments are protected by a large, or an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes are unlikely to impair
the fundamentally strong position of such issues. Bonds rated Aa by Moody's are
judged by Moody's to be of high quality. Together with bonds rated Aaa, 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, fluctuation 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.
Bonds which are rated A by Moody's possess many favorable investment attributes
and are considered 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. Debt rated
Baa by Moody's is regarded as having an adequate capacity to pay principal and
interest and repay principal. Whereas debt in this category normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay principal
and interest and repay principal for debt in this category than in higher rated
categories.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions, and
liable to but only slight market fluctuation other than market fluctuation
caused by changes in the money rate. The prime feature of an AAA bond is a
showing of earnings several times or many times interest requirements, with such
stability of applicable earnings that safety is beyond reasonable question
whatever changes occur in conditions. Bonds rated AA by Fitch are judged by
Fitch to be of safety virtually beyond question and are readily salable. The
merits of bonds in this category are not unlike those of the AAA class, but
whose margin of safety is less strikingly broad. The issue may be the
obligation of a small company, strongly secured but influenced as to rating by
the lesser financial power of the enterprise and more local type market. Bonds
rated A by Fitch are considered to
A-2
<PAGE>
be investment grade and of high credit quality. The obligor's ability to pay
interest and repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and circumstances than
bonds with higher ratings. Bonds rated BBB by Fitch are considered to be
investment grade and of satisfactory credit quality. The obligor's ability to
pay interest and repay principal is considered to be adequate. Adverse changes
in economic condition and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.
Bonds rated AAA by Duff are judged by Duff to be of the highest credit quality,
with negligible risk factors being only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA by Duff are judged by Duff to be of high credit
quality with strong protection factors and risk that is modest but that may vary
slightly from time to time because of economic conditions. Bonds rated A by
Duff are judged by Duff to have average but adequate protection factors.
However, risk factors are more variable and greater in periods of economic
stress. bonds rated BBB by Duff are judged by Duff as having below average
protection factors but still considerable variability in risk during economic
cycles.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a
very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly. Obligations for which there is a low expectation of
investment risk are rated A by IBCA. Capacity for timely repayment of principal
and interest is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk. Obligations for
which there is currently a low expectation of investment risk are rated BBB by
IBCA. Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in higher
categories.
A-3
<PAGE>
TABLE OF CONTENTS
- ---------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders...................................................... 2
Shareholder Investment Summary.............................................. 3
Management's Discussion & Analysis of Fund Performance...................... 8
Statements of Net Assets.................................................... 16
Statement of Operations..................................................... 29
Statement of Changes in Net Assets.......................................... 30
Financial Highlights........................................................ 32
Notes to Financial Statements............................................... 33
Report of Independent Public Accountants.................................... 38
Notice to Shareholders...................................................... 39
</TABLE>
1
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
September 30, 1995
- --------------------------------------------------------------------------------
INSTITUTIONAL MONEY MARKET FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 20.4%
U.S. Treasury Bills
5.280%, 10/19/95 $1,500 $ 1,496
5.330%, 02/15/96 2,500 2,449
5.370%, 03/21/96 2,500 2,436
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $6,381,189) 6,381
-----------
REPURCHASE AGREEMENTS -- 80.1%
Aubrey G. Lanston 6.400%, dated 09/29/95, matures
10/02/95, repurchase price $1,301,000
(collateralized by U.S. Treasury Bill, par value
$1,360,000, 0.000%, 03/07/96, market value:
$1,327,000) 1,300
Fuji Bank 6.450%, dated 09/29/95, matures 10/02/95,
repurchase price $1,301,000 (collateralized by U.S.
Treasury STRIPS, par value $3,525,000, 0.000%,
05/15/10, market value: $1,333,000) 1,300
HSBC 6.400%, dated 09/29/95, matures 10/02/95,
repurchase price $1,301,000 (collateralized by U.S.
Treasury STRIPS, par value $1,455,000, 0.000%,
02/15/97, market value: $1,345,000) 1,300
J.P. Morgan 6.400%, dated 09/29/95, matures 10/02/95,
repurchase price $1,301,000 (collateralized by U.S.
Treasury STRIPS, par value $1,871,000, 0.000%,
05/15/01, market value: $1,331,000) 1,300
<CAPTION>
- --------------------------------------------------------------------------------
Value (000)
- --------------------------------------------------------------------------------
<S> <C>
Lehman Brothers 6.420%, dated 09/29/95, matures 10/02/95,
repurchase price $1,301,000 (collateralized by U.S. Treasury
STRIPS, par value $1,650,000, 0.000%, 05/15/99, market
value: $1,328,000) $ 1,300
Merrill Lynch 5.850%, dated 09/29/95, matures 10/02/95,
repurchase price $1,308,000 (collateralized by U.S. Treasury
Bond, par value $1,135,000, 8.000%, 11/15/21, market value:
$1,339,000)(1) 1,307
Morgan Stanley 6.150%, dated 09/29/95, matures 10/02/95,
repurchase price $1,301,000 (collateralized by U.S. Treasury
Bill, par value $1,350,000, 0.000% 12/21/95, market value:
$1,333,000)(1) 1,301
Nomura Securities 6.400%, dated 09/29/95, matures 10/02/95,
repurchase price $7,321,000 (collateralized by various U.S.
Treasury Obligations, par value $7,022,000, 6.500%-10.750%,
04/30/99-08/15/05, market value: $7,464,000)(1) 7,317
UBS Securities 6.420%, dated 09/29/95, matures 10/02/95,
repurchase price $7,356,000 (collateralized by U.S. Treasury
Bond, par value $7,175,000, 6.875%, 08/15/25, market value:
$7,502,000)(1) 7,352
Wachovia 6.600%, dated 09/29/95, matures 10/02/95, repurchase
price $1,301,000 (collateralized by U.S. Treasury Note, par
value $1,260,000, 7.375%, 11/15/97, market value:
$1,329,000) 1,300
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $25,076,616) 25,077
-----------
TOTAL INVESTMENTS -- 100.5%
(Cost $31,457,805) 31,458
-----------
OTHER ASSETS AND LIABILITIES -- (0.5%)
Other Assets and Liabilities, Net (144)
-----------
NET ASSETS:
Fund shares (unlimited authorization--no par value) based on
31,314,053 outstanding shares of beneficial interest 31,314
-----------
TOTAL NET ASSETS -- 100.0% $ 31,314
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $1.00
===========
</TABLE>
- --------------------------------------------------------------------------------
STRIPS -- Separate Trading of Registered Interest and Principal Securities
(1) Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
MARQUIS FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TREASURY SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 26.9%
U.S. Treasury Bills
5.610%, 11/09/95 $30,000 $ 29,817
5.510%, 11/30/95 30,000 29,725
5.470%, 12/21/95 25,000 24,692
5.290%, 01/04/96 25,000 24,651
5.305%, 01/11/96 25,000 24,624
5.190%, 02/08/96 10,000 9,813
5.285%, 02/08/96 25,000 24,523
5.445%, 03/07/96 25,000 24,403
5.380%, 05/02/96 25,000 24,200
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $216,448,224) 216,448
-----------
REPURCHASE AGREEMENTS -- 73.4%
Aubrey G. Lanston 6.400%, dated 09/29/95, matures
10/02/95, repurchase price $30,016,000
(collateralized by U.S. Treasury Note, par value
$28,010,000, 8.750%, 10/15/97, market value:
$30,616,000) 30,000
Fuji Bank 6.450%, dated 09/29/95, matures 10/02/95,
repurchase price $38,020,000 (collateralized by U.S.
Treasury STRIPS, par value $52,205,000, 0.000%,
08/15/00, market value: $38,795,000) 38,000
HSBC 6.400%, dated 09/29/95, matures 10/02/95,
repurchase price $38,020,000 (collateralized by
various U.S. Treasury STRIPS, par value $46,115,000,
0.000%, 02/15/97-02/15/98, market value:
$38,863,000) 38,000
<CAPTION>
- -------------------------------------------------------------------------------
Value (000)
- -------------------------------------------------------------------------------
<S> <C>
J.P. Morgan 6.400%, dated 09/29/95, matures 10/02/95, repurchase
price $190,102,000 (collateralized by various U.S. Treasury
STRIPS, par value $656,752,000, 0.000%, 02/15/00-05/15/22, market
value: $194,270,000) $ 190,001
Lehman Brothers 6.420%, dated 09/29/95, matures 10/02/95,
repurchase price $37,020,000 (collateralized by U.S. Treasury
STRIPS, par value $48,450,000, 0.000%, 11/15/99, market value:
$37,747,000) 37,000
Merrill Lynch 5.850%, dated 09/29/95, matures 10/02/95, repurchase
price $7,774,000 (collateralized by U.S. Treasury Bond, par value
$6,720,000, 8.000%, 11/15/21, market value: $7,926,000)(1) 7,770
Morgan Stanley 6.150%, dated 09/29/95, matures 10/02/95,
repurchase price $10,010,000 (collateralized by U.S. Treasury
Bill, par value $10,450,000, 02/29/96, market value:
$10,211,000)(1) 10,005
Nomura Securities 6.400%, dated 09/29/95, matures 10/02/95,
repurchase price $17,014,000 (collateralized by various U.S.
Treasury Obligations, par value $12,242,000, 7.125%-13.750%,
09/30/99-08/15/05, market value: $17,346,000)(1) 17,005
Prudential Securities 6.200%, dated 09/29/95, matures 10/02/95,
repurchase price $16,880,000 (collateralized by U.S. Treasury
Notes, par value $17,130,000, 5.125%-6.500%, 03/31/98-04/30/99,
market value: $17,209,000)(1) 16,871
UBS Securities 6.400%, dated 09/29/95, matures 10/02/95,
repurchase price $175,093,000 (collateralized by U.S. Treasury
Notes, par value $140,730,000, 7.500%-12.000%, 01/31/97-08/15/13,
market value: $178,761,000) 175,000
UBS Securities 6.420%, dated 09/29/95, matures 10/02/95,
repurchase price $10,584,000 (collateralized by U.S. Treasury
Bond, par value $10,320,000, 6.875%, 08/15/25, market value:
$10,791,000)(1) 10,578
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
September 30, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Value (000)
- -------------------------------------------------------------------------------
<S> <C>
Wachovia 6.600%, dated 09/29/95, matures 10/02/95, repurchase
price $20,011,000 (collateralized by U.S. Treasury Note, par
value $19,340,000, 7.375%, 11/15/97, market value: $20,406,000) $ 20,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $590,230,124) 590,230
-----------
TOTAL INVESTMENTS -- 100.3%
(Cost $806,678,348) 806,678
-----------
OTHER ASSETS AND LIABILITIES -- (0.3%)
Other Assets and Liabilities, Net (2,661)
-----------
NET ASSETS:
Fund shares of Institutional Class (unlimited authorization -- no
par value) based on 521,259,605 outstanding shares of beneficial
interest 521,260
Fund shares of Retail Class (unlimited authorization -- no par
value) based on 282,743,848 outstanding shares of beneficial
interest 282,744
Accumulated net realized gain on investments 13
-----------
TOTAL NET ASSETS -- 100.0% $ 804,017
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE --
INSTITUTIONAL CLASS $1.00
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE --
RETAIL CLASS $1.00
===========
</TABLE>
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Face Market
Amount (000) Value (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 46.6%
Treasury LINCS
6.000%, 08/15/09 $ 2,500 $ 2,309
U.S. Treasury Bills
5.300%, 11/09/95 1,500 1,491
5.300%, 05/02/96 1,500 1,452
U.S. Treasury Notes
9.250%, 01/15/96 625 631
8.875%, 02/15/96 500 506
7.375%, 05/15/96 1,500 1,515
6.125%, 07/31/96 1,500 1,504
7.250%, 08/31/96 2,575 2,609
6.250%, 01/31/97 300 302
8.500%, 04/15/97 2,250 2,337
6.500%, 04/30/97 1,450 1,464
6.875%, 04/30/97 6,000 6,096
8.500%, 07/15/97 1,500 1,566
6.500%, 08/15/97 10,500 10,620
8.625%, 08/15/97 750 786
5.125%, 04/30/98 1,800 1,767
9.000%, 05/15/98 1,250 1,343
5.125%, 06/30/98 2,500 2,451
9.250%, 08/15/98 2,200 2,390
6.375%, 01/15/99 1,500 1,519
6.000%, 10/15/99 1,500 1,502
7.875%, 11/15/99 750 800
8.500%, 02/15/00 1,500 1,641
8.750%, 08/15/00 2,250 2,504
6.375%, 08/15/02 4,250 4,314
U.S. Treasury Bond
7.125%, 02/15/23 2,500 2,650
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $58,210,614) 58,069
-----------
MORTGAGE-BACKED POOLED NOTES -- 39.4%
FHLMC
7.000%, 04/01/00 55 55
9.000%, 11/01/05 1,341 1,404
9.000%, 05/01/06 1,940 2,031
7.250%, 05/01/07 82 81
9.000%, 08/01/09 794 826
9.000%, 12/01/09 1,461 1,516
</TABLE>
- --------------------------------------------------------------------------------
STRIPS -- Separate Trading of Registered Interest and Principal Securities
(1) Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
MARQUIS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Face Market
Amount (000) Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
FHLMC CMO
7.500%, 11/15/01 $3,975 $ 4,106
6.700%, 05/15/05 1,750 1,734
7.000%, 09/15/07 3,250 3,281
6.500%, 04/15/08 4,500 4,231
7.750%, 01/15/20 3,125 3,155
9.000%, 04/15/20 1,091 1,122
FNMA
8.500%, 03/01/98 181 186
7.000%, 09/01/07 4,425 4,441
FNMA REMIC
9.150%, 08/25/03 820 834
7.350%, 06/25/07 2,000 2,004
6.250%, 10/25/22 109 107
GNMA
10.500%, 06/15/98 20 21
10.500%, 09/15/98 3 3
9.000%, 07/15/16 584 615
9.000%, 09/15/16 479 504
9.000%, 10/15/16 143 150
9.000%, 11/15/16 345 364
9.500%, 08/15/17 589 629
10.000%, 04/15/19 228 249
10.000%, 05/15/19 68 74
9.500%, 12/15/19 595 636
7.500%, 06/15/23 4,803 4,851
7.000%, 03/15/24 2,833 2,801
7.000%, 04/15/24 2,595 2,566
8.500%, 10/15/24 1,905 1,986
8.000%, 07/15/25 2,496 2,568
-----------
TOTAL MORTGAGE-BACKED POOLED NOTES
(Cost $49,057,549) 49,131
-----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 4.1%
FNMA
9.550%, 12/10/97 975 1,044
9.150%, 04/10/98 975 1,045
9.150%, 09/10/99 118 118
TVA
8.375%, 10/01/99 2,650 2,843
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $5,130,263) 5,050
-----------
<CAPTION>
- -------------------------------------------------------------------------------
Face Market
Amount (000) Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS -- 3.6%
Baxter International
7.500%, 05/01/97 $2,200 $ 2,237
Exxon Capital
8.000%, 12/01/95 1,000 1,003
Ford Capital
9.000%, 08/15/98 750 801
Patriot Shipping
8.125%, 12/07/04 389 427
-----------
TOTAL CORPORATE OBLIGATIONS
(Cost $4,451,483) 4,468
-----------
CASH EQUIVALENTS -- 2.5%
SEI Liquid Asset Trust Treasury Portfolio 3,139 3,139
-----------
TOTAL CASH EQUIVALENTS
(Cost $3,138,879) 3,139
-----------
REPURCHASE AGREEMENT -- 2.8%
UBS Securities 6.42%, dated 09/29/95, matures
10/02/95, repurchase price $3,507,975
(collateralized by U.S. Treasury Bond, total par
value $3,135,000, 7.875%, 02/15/21, market
value: 3,580,000)(2) 3,506
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $3,506,125) 3,506
-----------
TOTAL INVESTMENTS -- 99.0%
(Cost $123,494,913) 123,363
-----------
OTHER ASSETS AND LIABILITIES -- 1.0%
Other Assets and Liabilities, Net 1,285
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
September 30, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Market
Value (000)
- ------------------------------------------------------------------------------
<S> <C>
NET ASSETS:
Fund Shares of Class A (unlimited authorization -- no par value)
based on 12,608,818 outstanding shares of beneficial interest $ 125,529
Fund Shares of Class B (unlimited
authorization -- no par value) based on 24,587 outstanding
shares of beneficial interest 243
Undistributed net investment income 4
Accumulated net realized loss on investments (996)
Net unrealized depreciation on investments (132)
-----------
TOTAL NET ASSETS -- 100.0% $ 124,648
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS A $9.87
===========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($9.87/96.50%) $10.23
===========
NET ASSET VALUE AND OFFERING PRICE PER SHARE -- CLASS B(1) $9.92
===========
</TABLE>
- --------------------------------------------------------------------------------
LOUISIANA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Face Market
Amount (000) Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- LOUISIANA -- 95.1%
Alexandria, Utilities RB (FGIC)
4.500%, 05/01/96 $ 25 $ 25
5.250%, 05/01/11 100 94
Alexandria, Utilities RB Ser B (FGIC)
4.650%, 05/01/04 150 147
Ascension Parish, Parish-Wide School District GO
(AMBAC)
4.900%, 03/01/09 150 140
Baton Rouge, Sales & Use Tax RB
6.000%, 08/01/08 200 207
Bossier City, Sales & Use Tax RB, Public Improvement
Ser ST (AMBAC)
5.500%, 11/01/99 100 104
Caddo Parish, Refunding GO
5.000%, 02/01/05 350 346
East Baton Rouge Parish, Sales & Use Tax RB, Sewer
Improvements Ser ST-A (FGIC)
4.800%, 02/01/09 340 313
East Baton Rouge, Mortgage Financing Authority,
Single Family Mortgage Ser B
4.350%, 10/01/00 85 81
5.300%, 10/01/14 95 85
Energy & Power Authority RB, Rodemacher Unit Number
2
6.000%, 01/01/13 500 502
Greater New Orleans Expressway, Louisiana Expressway
RB
4.800%, 11/01/97 25 25
Gretna, Refunding Sales Tax RB (AMBAC)
5.200%, 06/01/06 225 228
Iberville Parish, School District #5 GO
5.750%, 10/01/03 250 262
</TABLE>
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
GNMA -- Government National Mortgage Association
TVA -- Tennessee Valley Authority
LINCS -- Synthetic-Linked Coupon Securities
CMO -- Collateralized Mortgage Obligation
REMIC -- Real Estate Mortgage Investment Conduit
(1) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see notes to the financial statements.
(2) Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
MARQUIS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Face Market
Amount (000) Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Jefferson Parish, Ad Valorem Property Tax Ser A GO
(FGIC)
5.250%, 09/01/05 $ 250 $ 255
Jefferson Parish, Hospital Services District #1
(FGIC)
5.100%, 01/01/05 300 297
Jefferson Parish, School District Sales & Use Tax RB
6.250%, 02/01/08 300 315
Kenner, Sales Tax RB (FGIC)
5.750%, 06/01/06 100 104
Lafayette, Public Improvement Sales Tax RB (FGIC)
4.900%, 03/01/03 505 497
4.625%, 05/01/05 300 282
5.500%, 03/01/07 200 203
Lafayette, Public Power Authority Electric RB
(AMBAC)
5.000%, 11/01/06 250 246
Lafayette, Utility Refunding RB (AMBAC)
4.100%, 11/01/99 175 172
4.700%, 11/01/04 125 122
Mandeville, Water Utility Improvements Ad Valorem
Property Tax RB
5.150%, 02/01/10 100 94
Natchitoches Parish, School District #7 GO (FSA)
4.900%, 03/01/07 190 186
New Orleans, Exhibit Hall Authority Hotel Occupancy
Tax RB (AMBAC)
5.125%, 01/15/96 50 50
New Orleans, Home Mortgage Special Obligation
6.250%, 01/15/11 500 525
Offshore Terminal Authority RB, First Stage Ser B
6.350%, 09/01/97 65 67
5.850%, 09/01/00 100 104
Orleans Parish, Public School Capital Refinancing
5.000%, 12/01/05 250 248
<CAPTION>
- -------------------------------------------------------------------------------
Face Market
Amount (000) Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Public Facilities Authority RB, Alton Ochsner
Medical Foundation Project Ser A (MBIA)
6.000%, 05/15/01 $ 100 $ 106
Public Facilities Authority RB, Alton Ochsner
Medical Foundation Project Ser B (MBIA)
6.000%, 05/15/17 100 100
Public Facilities Authority RB, Jefferson Parish
Eastbank Project (FGIC)
4.850%, 08/01/06 250 242
Public Facilities Authority RB, Our Lady of Lake
Regional Center
5.900%, 12/01/06 390 400
Public Facilities Authority RB, Special Insurance
Assessment (FSA)
4.400%, 10/01/00 120 118
Public Facilities Authority RB, Local Government
Refunding Program, Ser A (FSA)
5.100%, 03/01/01 250 252
Saint James Parish GO, Unlimited Ad Valorem Property
Tax
4.800%, 03/01/05 85 83
5.200%, 03/01/08 75 73
Saint Tammany Parish, Sales & Use Tax RB
5.750%, 04/01/06 250 261
Saint Tammany Parish, School Board Sales & Use Tax
RB (FGIC)
5.750%, 04/01/03 250 263
Saint Tammany Parish, School District #12 GO (FGIC)
6.500%, 03/01/05 200 214
Shreveport, Public Improvements Ad Valorem Property
Tax RB
4.750%, 12/01/09 200 184
Slidell, Sales & Use Tax RB, Public Improvement Ser
B
5.200%, 10/01/05 100 101
5.400%, 10/01/07 200 200
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
September 30, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Face Market
Amount (000) Value (000)
- --------------------------------------------------------------------------
<S> <C> <C>
State GO, Ser B (MBIA)
5.600%, 08/01/07 $ 250 $ 258
5.600%, 08/01/08 250 257
State Refunding GO, Ad Valorem Property
6.250%, 08/01/99 250 264
State Refunding GO, Ser A (MBIA)
4.750%, 08/01/99 115 116
5.100%, 08/01/01 250 256
5.300%, 08/01/04 250 257
5.375%, 08/01/05 400 411
5.600%, 05/15/07 250 258
5.700%, 05/15/08 250 258
State University Agricultural & Mechanical
College (FGIC)
5.400%, 07/01/05 150 152
5.500%, 07/01/06 250 255
-----------
TOTAL MUNICIPAL BONDS
(Cost $11,634,909) 11,665
-----------
CASH EQUIVALENTS -- 5.6%
SEI Tax Exempt Trust Institutional Tax Free
Portfolio 373 373
SEI Tax Exempt Trust
Tax Free Portfolio 316 316
-----------
TOTAL CASH EQUIVALENTS
(Cost $689,400) 689
-----------
TOTAL INVESTMENTS -- 100.7%
(Cost $12,324,309) 12,354
-----------
OTHER ASSETS AND LIABILITIES -- (0.7%)
Other Assets and Liabilities, Net (82)
-----------
NET ASSETS:
Fund shares of Class A (unlimited
authorization -- no par value) based on
1,196,119 outstanding shares of beneficial
interest 11,694
Fund shares of Class B (unlimited
authorization -- no par value) based on 57,920
outstanding shares of beneficial interest 583
<CAPTION>
- ---------------------------------------------------------------------------
Market
Value (000)
- ---------------------------------------------------------------------------
<S> <C>
Accumulated net realized loss on investments $ (34)
Net unrealized appreciation on investments 29
-------
TOTAL NET ASSETS -- 100.0% $12,272
=======
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS A $9.79
=======
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($9.79/96.50%) $10.15
=======
NET ASSET VALUE AND OFFERING PRICE PER
SHARE -- CLASS B(1) $9.79
=======
</TABLE>
- -------------------------------------------------------------------------
GO -- General Obligation
RB -- Revenue Bond
Ser -- Series
The following organizations have provided underlying credit support for certain
securities as defined in the Statement of Net Assets:
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
AMBAC -- American Municipal Bond Assurance Company
MBIA -- Municipal Bond Insurance Association
(1) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
MARQUIS FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Market
Shares Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 52.3%
AIR TRANSPORTATION -- 0.5%
KLM Royal Dutch Air* 11,500 $ 403
-------
AIRCRAFT -- 1.1%
Lockheed Martin 7,600 510
McDonnell Douglas 6,000 497
-------
1,007
-------
APPAREL/TEXTILES -- 0.5%
V F 7,900 403
-------
AUTOMOTIVE -- 2.5%
Dana 19,850 573
Eaton 6,900 366
Echlin 11,750 420
Paccar 11,050 517
TRW 4,800 357
-------
2,233
-------
BANKS -- 5.7%
Bank of New York 12,400 576
BankAmerica 8,800 527
Barnett Banks 8,000 453
First Bank System 11,700 563
First Chicago 5,400 371
First Interstate Bancorp 4,900 494
First Union 8,000 408
Mellon Bank 9,150 408
NDB Bancorp 11,100 425
SunTrust Banks 6,300 417
Wachovia 9,100 392
-------
5,034
-------
BUILDING & CONSTRUCTION -- 0.4%
Lennar 15,300 333
-------
CHEMICALS -- 3.4%
Dow Chemical 6,000 447
Imperial Chemical Industries 8,900 452
Lubrizol 9,900 323
Olin 5,400 371
Rhone Poulenc Rorer 9,350 425
Union Carbide 13,020 517
Vulcan Materials 8,500 451
-------
2,986
-------
COMMUNICATIONS EQUIPMENT -- 0.4%
Harris 7,000 384
-------
<CAPTION>
- -------------------------------------------------------------------------------
Market
Shares Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMPUTERS & SERVICES -- 1.8%
Compaq Computer* 11,000 $ 532
Pitney Bowes 10,500 441
Sun Microsystems* 9,600 605
-------
1,578
-------
CONCRETE & MINERAL PRODUCTS -- 0.4%
Armstrong World Industries 6,000 333
-------
CONSUMER PRODUCTS -- 0.7%
Nike 5,850 650
-------
CONTAINERS & PACKAGING -- 0.3%
Ball 10,400 308
-------
DRUGS -- 1.4%
Mallinckrodt Group 9,700 384
Schering Plough 8,200 422
Upjohn 9,200 411
-------
1,217
-------
ELECTRICAL SERVICES -- 6.6%
Cipsco 15,100 519
Consolidated Edison of New York 11,500 349
Duke Power 8,600 373
Florida Progress 10,300 333
New England Electric System 10,400 385
Nipsco Industries 10,400 363
Northeast Utilities 22,100 538
Northern States Power 7,200 327
Oklahoma Gas & Electric 9,400 354
San Diego Gas & Electric 15,600 361
SCE 23,700 421
Southern 21,100 498
Southwestern Public Service 14,600 476
Unicom 16,000 484
-------
5,781
-------
ELECTRICAL TECHNOLOGY -- 0.5%
Texas Instruments 6,000 479
-------
FINANCIAL SERVICES -- 2.3%
American Express 13,200 586
Bear Stearns 19,000 409
Beneficial 10,300 538
Transamerica 6,500 463
-------
1,996
-------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD --
1.4%
IBP 13,200 704
Philip Morris 6,200 518
-------
1,222
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
September 30, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Market
Shares Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
GAS/NATURAL GAS -- 1.4%
Mapco 5,400 $ 278
Pacific Enterprises 18,600 467
Williams 12,200 476
-------
1,221
-------
GLASS PRODUCTS -- 0.5%
PPG Industries 8,900 414
-------
INSURANCE -- 4.0%
AFLAC 10,500 436
American General 12,900 482
Aon 11,350 464
Cigna 4,900 509
Lincoln National 8,800 415
Ohio Casualty 11,000 393
Providian 9,200 382
Saint Paul 8,300 485
-------
3,566
-------
MACHINERY -- 2.4%
Briggs & Stratton 11,500 463
Caterpillar 5,200 296
Cummins Engine 8,100 312
Deere 3,900 317
Parker-Hannifin 9,150 348
Timken 9,700 413
-------
2,149
-------
MEASURING DEVICES -- 0.4%
Johnson Controls 5,700 361
-------
METALS & MINING -- 0.4%
Cyprus AMAX Minerals 13,000 366
-------
MISCELLANEOUS
TRANSPORTATION -- 0.6%
Harsco 10,300 573
-------
PAPER & PAPER PRODUCTS --
3.2%
Bowater 9,200 429
Federal Paper Board 10,700 411
Mead 6,300 369
Tambrands 7,200 316
Union Camp 8,000 461
Westvaco 9,500 433
Weyerhaeuser 8,500 388
-------
2,807
-------
PETROLEUM REFINING -- 2.1%
Amoco 6,000 385
Ashland 9,400 314
Exxon 6,350 459
Mobil 4,100 408
Murphy Oil 7,800 312
-------
1,878
-------
<CAPTION>
- -------------------------------------------------------------------------------
Shares/Face
Amount Market
(000) Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
PROFESSIONAL SERVICES -- 1.0%
Dun & Bradstreet 7,900 $ 457
Servicemaster LP 15,600 437
-------
894
-------
RAILROADS -- 0.5%
Norfolk Southern 5,850 437
-------
RETAIL -- 1.8%
American Stores 10,900 309
Circuit City Stores 15,000 474
Sears Roebuck 7,200 266
Wendy's International 23,600 499
-------
1,548
-------
RUBBER & PLASTIC -- 1.4%
Bandag 6,450 341
Premark International 9,500 483
Sonoco Products 15,120 420
-------
1,244
-------
STEEL & STEEL WORKS -- 1.3%
Asarco 12,000 378
Phelps Dodge 7,000 438
Worthington Industries 16,800 309
-------
1,125
-------
TELEPHONES & TELECOMMUNICATION -- 0.9%
Ameritech 8,200 427
Pacific Telesis Group 10,700 329
-------
756
-------
TRUCKING -- 0.1%
Pittston Services Group 2,420 66
-------
WHOLESALE -- 0.4%
Avnet 7,250 374
-------
TOTAL COMMON STOCK
(Cost $39,197,447) 46,126
-------
U.S. TREASURY OBLIGATIONS -- 27.5%
U.S. Treasury Notes
7.250%, 11/15/96 $2,250 2,285
8.000%, 01/15/97 250 257
6.750%, 05/31/97 2,000 2,028
6.000%, 08/31/97 5,000 5,015
9.000%, 05/15/98 2,000 2,148
9.250%, 08/15/98 2,000 2,173
6.375%, 01/15/99 1,000 1,012
7.000%, 04/15/99 3,000 3,096
6.375%, 07/15/99 1,000 1,013
8.000%, 08/15/99 2,000 2,137
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
MARQUIS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Face Market
Amount (000) Value (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Notes (continued)
8.500%, 02/15/00 $ 500 $ 547
5.750%, 08/15/03 1,500 1,460
U.S. Treasury Bond
7.125%, 02/15/23 1,000 1,060
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $24,569,157) 24,231
-------
MORTGAGE-BACKED POOLED
NOTES -- 14.9%
FHLMC
7.000%, 04/01/00 19 19
9.000%, 05/01/06 173 181
9.000%, 08/01/09 525 546
FHLMC CMO
9.000%, 04/15/20 508 522
FHLMC REMIC
7.150%, 01/15/23 2,000 1,963
FNMA
7.000%, 09/01/07 1,770 1,776
FNMA CMO
7.000%, 01/25/03 2,000 1,980
FNMA REMIC
9.150%, 08/25/03 774 787
GNMA
7.500%, 08/15/07 641 655
7.000%, 07/15/08 626 631
13.500%, 05/15/11 23 26
12.500%, 10/15/13 5 6
12.000%, 03/15/14 43 49
13.500%, 09/15/14 14 16
9.000%, 12/15/16 97 103
10.000%, 07/15/18 226 247
10.000%, 03/15/19 184 200
7.000%, 04/15/24 1,491 1,474
7.500%, 06/15/25 1,955 1,975
-------
TOTAL MORTGAGE-BACKED POOLED NOTES
(Cost $13,246,385) 13,156
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 0.1%
FNMA
8.150%, 08/12/96 100 102
-------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $103,170) 102
-------
<CAPTION>
- -----------------------------------------------------------------------------
Face Market
Amount (000) Value (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
CASH EQUIVALENTS -- 0.5%
SEI Liquid Asset Trust Treasury Portfolio $ 433 $ 433
--------
TOTAL CASH EQUIVALENTS
(Cost $433,487) 433
--------
REPURCHASE AGREEMENT -- 4.1%
UBS Securities 6.42%, dated 09/29/95, matures
10/02/95, repurchase price $3,628,449
(collateralized by various U.S. Treasury Bonds,
par value $3,054,000, 7.875%-8.875%, 02/15/19-
02/15/21, market value: $3,702,000)(2) 3,627
--------
TOTAL REPURCHASE AGREEMENT
(Cost $3,626,535) 3,627
--------
TOTAL INVESTMENTS -- 99.4%
(Cost $81,176,181) 87,675
--------
OTHER ASSETS AND LIABILITIES -- 0.6%
Other Assets and Liabilities, Net 538
--------
NET ASSETS:
Fund shares of Class A (unlimited
authorization -- no par value) based on 8,012,512
outstanding shares of beneficial interest 79,936
Fund shares of Class B (unlimited
authorization -- no par value) based on 104,032
outstanding shares of beneficial interest 1,040
Accumulated net realized gain on investments 738
Net unrealized appreciation on investments 6,499
--------
TOTAL NET ASSETS -- 100.0% $ 88,213
========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE --
CLASS A $10.87
========
MAXIMUM OFFERING PRICE PER SHARE -- CLASS A
($10.87/96.50%) $11.26
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B(1) $10.93
========
- ---------------------------------------------------------------------------
</TABLE>
* Non-income producing security
GNMA -- Government National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
CMO -- Collateralized Mortgage Obligation
REMIC -- Real Estate Mortgage Investment Conduit
LP -- Limited Partnership
(1) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(2) Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
September 30, 1995
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Market
Shares Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 93.5%
AIR TRANSPORTATION -- 0.9%
KLM Royal Dutch Air* 15,000 $ 525
-------
AIRCRAFT -- 2.1%
Lockheed Martin 10,700 718
McDonnell Douglas 6,500 538
-------
1,256
-------
APPAREL/TEXTILES -- 0.8%
V F 10,000 510
-------
AUTOMOTIVE -- 4.0%
Dana 14,900 430
Eaton 9,400 498
Echlin 15,850 567
Paccar 7,800 365
TRW 7,750 576
-------
2,436
-------
BANKS -- 10.4%
Bank of New York 14,900 692
BankAmerica 10,000 599
Barnett Banks 9,300 527
First Bank System 14,400 693
First Chicago 9,400 645
First Interstate Bancorp 6,500 655
First Union 10,000 510
Mellon Bank 11,600 518
NBD Bancorp 13,000 497
SunTrust Banks 5,900 390
Wachovia 12,200 526
-------
6,252
-------
BUILDING & CONSTRUCTION -- 0.7%
Lennar 20,500 446
-------
CHEMICALS -- 6.2%
Dow Chemical 7,300 544
Imperial Chemical Industries 10,500 533
Lubrizol 12,800 418
Olin 7,000 481
Rhone Poulenc Rorer 11,000 501
Union Carbide 18,620 739
Vulcan Materials 10,000 530
-------
3,746
-------
COMMUNICATIONS EQUIPMENT -- 0.8%
Harris 8,500 466
-------
<CAPTION>
- -------------------------------------------------------------------------------
Market
Shares Value (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMPUTERS & SERVICES -- 1.6%
Compaq Computer* 11,400 $ 551
Pitney Bowes 10,000 420
-------
971
-------
CONCRETE & MINERAL PRODUCTS -- 0.7%
Armstrong World Industries 8,000 444
-------
CONSUMER PRODUCTS -- 1.2%
Nike 6,250 695
-------
CONTAINERS & PACKAGING -- 0.8%
Ball 15,340 454
-------
DRUGS -- 2.7%
Mallinckrodt Group 11,400 452
Schering Plough 10,400 536
Upjohn 14,100 629
-------
1,617
-------
ELECTRICAL SERVICES -- 11.3%
Cipsco 16,100 553
Consolidated Edison of New York 15,100 459
Duke Power 8,900 386
Florida Progress 13,200 427
New England Electric System 12,300 455
Nipsco Industries 13,500 471
Northeast Utilities 14,800 361
Northern States Power 9,200 417
Oklahoma Gas & Electric 12,600 474
San Diego Gas & Electric 20,100 465
SCE 32,500 577
Southern 22,500 532
Southwestern Public Service 18,400 600
Unicom 20,400 618
-------
6,795
-------
ELECTRICAL TECHNOLOGY -- 1.0%
Texas Instruments 7,200 575
-------
FINANCIAL SERVICES -- 4.0%
American Express 15,300 679
Bear Stearns 24,000 516
Beneficial 11,900 622
Transamerica 8,300 591
-------
2,408
-------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD -- 2.3%
IBP 13,300 710
Philip Morris 7,900 660
-------
1,370
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
MARQUIS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Market
Shares Value (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
GAS/NATURAL GAS -- 2.4%
Mapco 7,500 $ 386
Pacific Enterprises 18,340 461
Williams Companies 15,300 597
-------
1,444
-------
GLASS PRODUCTS -- 0.9%
PPG Industries 12,000 558
-------
INSURANCE -- 7.4%
AFLAC 13,600 564
American General 16,050 600
Aon 14,000 572
Cigna 6,200 645
Lincoln National 11,300 533
Ohio Casualty 12,200 436
Providian 11,800 490
Saint Paul 10,000 584
-------
4,424
-------
MACHINERY -- 4.5%
Briggs & Stratton 11,200 451
Caterpillar 7,100 404
Cummins Engine 10,100 389
Deere 5,400 439
Parker-Hannifin 12,000 456
Timken 13,400 571
-------
2,710
-------
MEASURING DEVICES -- 1.0%
Johnson Controls 9,500 601
-------
METALS & MINING -- 0.7%
Cyprus AMAX Minerals 14,700 413
-------
MISCELLANEOUS BUSINESS
SERVICES -- 1.4%
Sun Microsystems* 13,100 825
-------
MISCELLANEOUS TRANSPORTATION -- 1.0%
Harsco 11,100 617
-------
PAPER & PAPER PRODUCTS -- 5.9%
Bowater 11,200 522
Federal Paper Board 13,500 518
Mead 8,200 481
Tambrands 9,000 395
Union Camp 9,600 553
Westvaco 12,000 548
Weyerhaeuser 11,100 506
-------
3,523
-------
PETROLEUM REFINING -- 3.6%
Amoco 7,400 475
Ashland 11,300 377
<CAPTION>
- ------------------------------------------------------------------------------
Shares/Face
Amount Market
(000) Value (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
PETROLEUM REFINING (continued)
Exxon 7,000 $ 506
Mobil 5,300 527
Murphy Oil 7,800 312
-------
2,197
-------
PROFESSIONAL SERVICES -- 1.7%
Dun & Bradstreet 9,400 544
Servicemaster LP 17,200 482
-------
1,026
-------
RAILROADS -- 0.9%
Norfolk Southern 7,600 568
-------
RETAIL -- 3.3%
American Stores 18,400 522
Circuit City Stores 15,400 487
Sears Roebuck 9,000 332
Wendy's International 31,000 655
-------
1,996
-------
RUBBER & PLASTIC -- 2.4%
Bandag 7,450 394
Premark International 9,900 504
Sonoco Products 19,425 539
-------
1,437
-------
STEEL & STEEL WORKS -- 2.4%
Asarco 15,000 473
Phelps Dodge 8,700 545
Worthington Industries 23,100 424
-------
1,442
-------
TELEPHONES & TELECOMMUNICATION -- 1.7%
Ameritech 10,800 563
Pacific Telesis Group 14,800 455
-------
1,018
-------
WHOLESALE -- 0.8%
Avnet 9,000 465
-------
TOTAL COMMON STOCK
(Cost $47,732,526) 56,230
-------
INVESTMENT COMPANY -- 3.4%
SEI Equity Index Fund 106 2,046
-------
TOTAL INVESTMENT COMPANY
(Cost $1,964,236) 2,046
-------
CASH EQUIVALENTS -- 2.5%
SEI Liquid Asset Trust Treasury Portfolio $ 1,495 1,495
-------
TOTAL CASH EQUIVALENTS
(Cost $1,494,796) 1,495
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
September 30, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Market
Value (000)
- -----------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENT -- 0.5%
UBS Securities 6.42%, dated 09/29/95, matures 10/02/95,
repurchase price $340,134 (collateralized by various U.S.
Treasury Bonds, par value $305,000, 7.875%-8.125%, 02/15/21-
05/15/21, market value: $351,000)(2) $ 340
-------
TOTAL REPURCHASE AGREEMENT
(Cost $340,054) 340
-------
TOTAL INVESTMENTS -- 99.9%
(Cost $51,531,612) 60,111
-------
OTHER ASSETS AND LIABILITIES -- 0.1%
Other Assets and Liabilities, Net 31
-------
NET ASSETS:
Fund shares of Class A (unlimited authorization -- no par value)
based on 4,982,425 outstanding shares of beneficial interest 49,803
Fund shares of Class B (unlimited authorization -- no par value)
based on 108,589 outstanding shares of beneficial interest 1,132
Accumulated net realized gain on investments 628
Net unrealized appreciation on investments 8,579
-------
TOTAL NET ASSETS -- 100.0% $60,142
=======
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS A $11.81
=======
MAXIMUM OFFERING PRICE PER SHARE -- CLASS A ($11.81/96.50%) $12.24
=======
NET ASSET VALUE AND OFFERING PRICE PER SHARE -- CLASS B(1) $11.86
=======
</TABLE>
- -----------------------------------------------------------------------------
* Non-income producing security
LP -- Limited Partnership
(1) Class B has a contingent deferred sales charge. For a description of a
possible redemption charge, see the notes to the financial statements.
(2) Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
STATEMENT OF OPERATIONS (000) MARQUIS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY LOUISIANA
INSTITUTIONAL SECURITIES GOVERNMENT TAX-FREE GROWTH AND VALUE
MONEY MARKET MONEY MARKET SECURITIES INCOME INCOME EQUITY
FUND FUND FUND FUND FUND FUND
============= ============ ========== ========== ========== ==========
8/10/95 10/1/94 10/1/94 10/1/94 10/1/94 10/1/94
TO 9/30/95 TO 9/30/95 TO 9/30/95 TO 9/30/95 TO 9/30/95 TO 9/30/95
============= ============ ========== ========== ========== ==========
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $230 $37,163 $ 6,692 $493 $ 2,332 $ 68
Dividend income -- -- -- -- 1,190 1,571
------------- ------------ ---------- ---------- ---------- ----------
Total investment income 230 37,163 6,692 493 3,522 1,639
EXPENSES:
Administration fees 4 1,293 212 19 155 100
Waiver of administration
fees -- -- -- (2) -- --
Investment advisory fees 6 1,939 582 33 573 368
Waiver of investment
advisory fees (6) (479) (149) (27) (144) (84)
Contribution by Adviser (8) -- -- -- -- --
Custodian -- 95 16 2 12 7
Transfer agent fees 2 67 35 31 35 37
Distribution fees(1) -- 463 1 4 7 5
Distribution fee
waiver(1) -- (135) -- -- -- --
Professional fees 1 71 14 1 9 6
Registration fees 11 128 8 2 2 3
Trustee fees -- 13 3 1 3 1
Printing expense -- 60 10 1 7 6
Amortization of deferred
organization costs -- 18 4 -- 2 1
Insurance and other fees -- 28 6 1 4 3
------------- ------------ ---------- ---------- ---------- ----------
Total expenses 10 3,561 742 66 665 453
------------- ------------ ---------- ---------- ---------- ----------
Net investment income 220 33,602 5,950 427 2,857 1,186
------------- ------------ ---------- ---------- ---------- ----------
Net realized gain (loss)
on securities sold -- 14 (381) (2) 1,310 1,816
Change in unrealized
appreciation on
investment securities -- -- 5,498 410 8,750 8,754
------------- ------------ ---------- ---------- ---------- ----------
Net realized and
unrealized gain on
investments -- 14 5,117 408 10,060 10,570
------------- ------------ ---------- ---------- ---------- ----------
Increase in net assets
resulting from
operations $220 $33,616 $11,067 $835 $12,917 $11,756
============= ============ ========== ========== ========== ==========
</TABLE>
(1) All distribution fees and waivers are incurred at the Retail Class level
for Treasury Securities Money Market Fund and the Class B level for Non-
Dollar funds.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL TREASURY SECURITIES GOVERNMENT
MONEY MARKET MONEY MARKET SECURITIES
FUND FUND FUND
============= ======================== =====================
8/10/95 10/1/94 10/1/93 10/1/94 10/1/93
TO 9/30/95 TO 9/30/95 TO 9/30/94 TO 9/30/95 TO 9/30/94
------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net investment income $ 220 $ 33,602 $ 16,494 $ 5,950 $ 4,538
Net realized gain
(loss) on securities
sold -- 14 -- (381) (615)
Net unrealized
appreciation
(depreciation) of
investment securities -- -- -- 5,498 (5,630)
------------- ----------- ----------- ---------- ----------
Net increase
(decrease) in net
assets resulting
from operations 220 33,616 16,494 11,067 (1,707)
------------- ----------- ----------- ---------- ----------
DISTRIBUTIONS TO
SHAREHOLDERS:
Income distribution
Class A (1) (220) (24,123) (14,494) (5,952) (4,520)
Income distribution
Class B (2) -- (9,479) (2,000) (9) (4)
------------- ----------- ----------- ---------- ----------
Total distribution (220) (33,602) (16,494) (5,961) (4,524)
------------- ----------- ----------- ---------- ----------
SHARE TRANSACTIONS:
Class A (1):
Shares issued 44,431 1,213,421 1,742,355 49,864 136,743
Shares issued in lieu
of cash distribution -- 6 3 3,352 3,255
Shares redeemed (13,117) (1,095,946) (1,338,580) (31,472) (36,212)
------------- ----------- ----------- ---------- ----------
Total Class A share
transactions 31,314 117,481 403,778 21,744 103,786
------------- ----------- ----------- ---------- ----------
Class B (2):
Shares issued -- 543,926 254,104 188 150
Shares issued in lieu
of cash distribution -- 7,587 1,999 8 4
Shares redeemed -- (355,617) (169,255) (107) --
------------- ----------- ----------- ---------- ----------
Total Class B share
transactions -- 195,896 86,848 89 154
------------- ----------- ----------- ---------- ----------
Increase in net assets
from shareholder
transactions 31,314 313,377 490,626 21,833 103,940
------------- ----------- ----------- ---------- ----------
Total increase in
net assets 31,314 313,391 490,626 26,939 97,709
------------- ----------- ----------- ---------- ----------
NET ASSETS:
Beginning of period -- 490,626 -- 97,709 --
End of period $ 31,314 $ 804,017 $ 490,626 $124,648 $ 97,709
============= =========== =========== ========== ==========
SHARES ISSUED AND
REDEEMED:
Class A (1):
Issued 44,431 1,213,421 1,742,355 5,196 13,755
Issued in lieu of
cash distribution -- 6 3 350 337
Redeemed (13,117) (1,095,946) (1,338,580) (3,303) (3,726)
------------- ----------- ----------- ---------- ----------
Total Class A share
transactions 31,314 117,481 403,778 2,243 10,366
------------- ----------- ----------- ---------- ----------
Class B (2):
Issued -- 543,926 254,104 19 15
Issued in lieu of
cash distribution -- 7,587 1,999 1 --
Redeemed -- (355,617) (169,255) (11) --
------------- ----------- ----------- ---------- ----------
Total Class B share
transactions -- 195,896 86,848 9 15
------------- ----------- ----------- ---------- ----------
Net increase in share
transactions 31,314 313,377 490,626 2,252 10,381
============= =========== =========== ========== ==========
</TABLE>
(1) Institutional Class for Treasury Securities Money Market Fund.
(2) Retail Class for Treasury Securities Money Market Fund.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
MARQUIS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LOUISIANA GROWTH AND VALUE
TAX-FREE INCOME INCOME EQUITY
FUND FUND FUND
======================== =========================== ===========================
10/1/94 10/1/93 10/1/94 10/1/93 10/1/94 10/1/93
TO 9/30/95 TO 9/30/94 TO 9/30/95 TO 9/30/94 TO 9/30/95 TO 9/30/94
- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 427 $ 226 $ 2,857 $ 2,107 $ 1,186 $ 777
(2) (32) 1,310 (572) 1,816 (1,188)
410 (382) 8,750 (2,251) 8,754 (174)
- ---------- ---------- ---------- ---------- ---------- ----------
835 (188) 12,917 (716) 11,756 (585)
- ---------- ---------- ---------- ---------- ---------- ----------
(408) (212) (2,834) (2,088) (1,173) (776)
(20) (13) (28) (14) (12) (2)
- ---------- ---------- ---------- ---------- ---------- ----------
(428) (225) (2,862) (2,102) (1,185) (778)
- ---------- ---------- ---------- ---------- ---------- ----------
6,559 9,735 15,154 76,453 24,265 54,146
92 40 2,718 2,032 638 558
(2,306) (2,427) (12,108) (4,313) (18,386) (11,418)
- ---------- ---------- ---------- ---------- ---------- ----------
4,345 7,348 5,764 74,172 6,517 43,286
- ---------- ---------- ---------- ---------- ---------- ----------
128 628 165 903 778 444
15 9 28 13 12 2
(195) -- (46) (23) (47) (58)
- ---------- ---------- ---------- ---------- ---------- ----------
(52) 637 147 893 743 388
- ---------- ---------- ---------- ---------- ---------- ----------
4,293 7,985 5,911 75,065 7,260 43,674
- ---------- ---------- ---------- ---------- ---------- ----------
4,700 7,572 15,966 72,247 17,831 42,311
- ---------- ---------- ---------- ---------- ---------- ----------
7,572 -- 72,247 -- 42,311 --
$12,272 $ 7,572 $ 88,213 $72,247 $60,142 $ 42,311
========== ========== ========== ========== ========== ==========
683 994 1,532 7,676 2,398 5,462
10 4 268 211 61 58
(240) (255) (1,232) (442) (1,820) (1,176)
- ---------- ---------- ---------- ---------- ---------- ----------
453 743 568 7,445 639 4,344
- ---------- ---------- ---------- ---------- ---------- ----------
14 63 15 91 72 46
2 1 3 1 1 --
(21) -- (4) (2) (5) (6)
- ---------- ---------- ---------- ---------- ---------- ----------
(5) 64 14 90 68 40
- ---------- ---------- ---------- ---------- ---------- ----------
448 807 582 7,535 707 4,384
========== ========== ========== ========== ========== ==========
</TABLE>
31
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
REALIZED RATIO OF RATIO OF
AND EXPENSES NET INCOME
NET ASSET UNREALIZED DISTRIBUTIONS NET ASSET NET ASSETS RATIO OF RATIO OF TO AVERAGE TO AVERAGE
VALUE NET GAINS OR FROM NET VALUE END OF EXPENSES NET INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT END OF TOTAL PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INVESTMENTS INCOME PERIOD RETURN+ (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ----------- ------------- --------- ------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL MONEY MARKET FUND
1995(4) $1.00 $0.01 -- $(0.01) $1.00 5.55 %* $31,314 0.25%* 5.56%* 0.60%* 5.21%*
TREASURY SECURITIES MONEY MARKET FUND INSTITUTIONAL CLASS
1995 $1.00 $0.05 -- $(0.05) $1.00 5.33 % $521,270 0.50% 5.23% 0.57% 5.16%
1994 1.00 0.03 -- (0.03) 1.00 3.22 403,778 0.50 3.15 0.60 3.05
TREASURY SECURITIES MONEY MARKET FUND RETAIL CLASS
1995 $1.00 $0.05 -- $(0.05) $1.00 5.16 % $282,747 0.68% 5.12% 0.82% 4.98%
1994(1) 1.00 0.03 -- (0.03) 1.00 3.15 * 86,848 0.59 * 3.27 * 0.83 * 3.03 *
GOVERNMENT SECURITIES FUND CLASS A
1995 $9.41 $0.54 $0.46 $(0.54) $9.87 10.84 % $124,404 0.70% 5.63% 0.84% 5.49%
1994 10.00 0.43 (0.59) (0.43) 9.41 (1.66) 97,562 0.70 4.43 0.90 4.23
GOVERNMENT SECURITIES FUND CLASS B
1995 $9.46 $0.46 $0.47 $(0.47) $9.92 10.10 % $244 1.45% 4.86% 1.59% 4.72%
1994(2) 10.04 0.31 (0.58) (0.31) 9.46 (2.84) * 147 1.45 * 3.88 * 1.69 * 3.64 *
LOUISIANA TAX-FREE INCOME FUND CLASS A
1995 $9.38 $0.42 $0.41 $(0.42) $9.79 9.01 % $11,705 0.65% 4.51% 0.95% 4.21%
1994 10.00 0.36 (0.62) (0.36) 9.38 (2.68) 6,971 0.65 4.10 1.72 3.03
LOUISIANA TAX-FREE INCOME FUND CLASS B
1995 $9.39 $0.35 $0.40 $(0.35) $9.79 8.21 % $567 1.40% 3.77% 1.70% 3.47%
1994(3) 9.87 0.27 (0.48) (0.27) 9.39 (2.58) * 601 1.40 * 3.35 * 2.47 * 2.28 *
GROWTH AND INCOME FUND CLASS A
1995 $9.59 $0.37 $1.28 $(0.37) $10.87 17.58 % $87,076 0.85% 3.70% 1.04% 3.51%
1994 10.00 0.31 (0.41) (0.31) 9.59 (1.02) 71,379 0.85 3.18 1.14 2.89
GROWTH AND INCOME FUND CLASS B
1995 $9.64 $0.30 $1.29 $(0.30) $10.93 16.75 % $1,137 1.60% 2.95% 1.79% 2.76%
1994(2) 10.03 0.18 (0.39) (0.18) 9.64 (2.24) * 868 1.60 * 2.55 * 1.94 * 2.21 *
VALUE EQUITY FUND CLASS A
1995 $9.65 $0.24 $2.16 $(0.24) $11.81 25.13 % $58,854 0.90% 2.40% 1.07% 2.23%
1994 10.00 0.18 (0.35) (0.18) 9.65 (1.64) 41,922 0.90 1.95 1.17 1.68
VALUE EQUITY FUND CLASS B
1995 $9.70 $0.15 $2.17 $(0.16) $11.86 24.17 % $1,288 1.65% 1.62% 1.82% 1.45%
1994(2) 9.95 0.08 (0.25) (0.08) 9.70 (1.82) * 389 1.65 * 1.30 * 1.93 * 1.02 *
<CAPTION>
PORTFOLIO
TURNOVER
RATE
---------
<S> <C>
INSTITUTIONAL MONEY MARKET FUND
1995(4) --
TREASURY SECURITIES MONEY MARKET FUND INSTITUTIONAL CLASS
1995 --
1994 --
TREASURY SECURITIES MONEY MARKET FUND RETAIL CLASS
1995 --
1994(1) --
GOVERNMENT SECURITIES FUND CLASS A
1995 18.33%
1994 37.80
GOVERNMENT SECURITIES FUND CLASS B
1995 18.33%
1994(2) 37.80
LOUISIANA TAX-FREE INCOME FUND CLASS A
1995 2.31%
1994 30.31
LOUISIANA TAX-FREE INCOME FUND CLASS B
1995 2.31%
1994(3) 30.31
GROWTH AND INCOME FUND CLASS A
1995 55.06%
1994 64.09
GROWTH AND INCOME FUND CLASS B
1995 55.06%
1994(2) 64.09
VALUE EQUITY FUND CLASS A
1995 97.88%
1994 161.42
VALUE EQUITY FUND CLASS B
1995 97.88%
1994(2) 161.42
</TABLE>
+ Total return does not reflect sales loads on Class B and Retail Class
shares.
* Annualized.
(1) Commenced operations on October 19, 1993.
(2) Commenced operations on October 22, 1993.
(3) Commenced operations on November 22, 1993.
(4) Commenced operations on August 10, 1995.
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS MARQUIS FUNDS
- --------------------------------------------------------------------------------
September 30, 1995
1.ORGANIZATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Marquis Funds (the "Trust") was organized as a Massachusetts business
trust under a Declaration of Trust dated June 29, 1993. The Trust is registered
under the Investment Company Act of 1940, as amended, as an open-end management
company with six funds: Institutional Money Market Fund, Treasury Securities
Money Market Fund (the "Money Market Funds"), Government Securities Fund, Loui-
siana Tax-Free Income Fund, Growth and Income Fund, and Value Equity Fund (the
"Non-Dollar Funds"). The assets of each Fund are segregated, and a sharehold-
er's interest is limited to the Fund in which shares are held. The Trust is
registered to offer the following classes of shares: Institutional, Retail, and
the Cash Sweep in the Treasury Securities Money Market Fund, and Class A and
Class B in the Non-Dollar Funds. The Cash Sweep Class of the Treasury Securi-
ties Money Market Fund has not commenced operations as of September 30, 1995.
2.SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following is a summary of the significant accounting policies followed by
the Funds.
Securities Valuation -- Investments in equity securities which are traded on a
national securities exchange (or reported on the NASDAQ national market system)
are stated at the last quoted sales price if readily available for such equity
securities on each business day; other equity securities traded in the over-
the-counter market and listed equity securities for which no sale was reported
on that date are stated at the last quoted bid price. Debt obligations exceed-
ing sixty days to maturity for which market quotations are readily available
are valued at the most recently quoted bid price. Debt obligations with sixty
days or less remaining until maturity may be valued at their amortized cost.
Under this valuation method, purchase discounts and premiums are accreted and
amortized ratably to maturity and are included in interest income. Restricted
and illiquid securities for which quotations are not readily available are val-
ued at fair value using methods determined in good faith as approved by the
Board of Trustees.
Federal Income Taxes -- It is each Fund's intention to continue to qualify as a
regulated investment company for Federal income tax purposes and to distribute
all of its taxable income and net capital gains. Accordingly, no provision for
Federal income taxes is required in the accompanying financial statements.
Security Transactions and Related Income -- Security transactions are accounted
for on the date the security is purchased or sold (trade date). Dividend income
is recognized on the ex-dividend date and interest income is recognized on the
accrual basis. Costs used in determining realized gains and losses on the sales
of investment securities are those of the specific securities sold adjusted for
the accretion and amortization of purchase discounts and premiums during the
respective holding period. Purchase discounts and premiums on securities held
by the Non-Dollar Funds are accreted and amortized to maturity using the scien-
tific interest method, which approximates the effective interest method.
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- ---------------------------------------------------------------------------
September 30, 1995
Repurchase Agreements -- Securities pledged as collateral for repurchase agree-
ments are held by the custodian bank until the respective agreements mature.
Provisions of the repurchase agreements ensure that the market value of the
collateral, including accrued interest thereon, is sufficient in the event of
default of the counterparty. The Funds also invest in tri-party repurchase
agreements. Securities held as collateral for tri-party repurchase agreements
are maintained in a segregated account by the broker's custodian bank until ma-
turity of the repurchase agreement. If the counterparty defaults and the value
of the collateral declines or if the counterparty enters an insolvency proceed-
ing, realization of the collateral by the Funds may be delayed or limited.
Net Asset Value Per Share -- The net asset value per share of each Fund is cal-
culated on each business day. In general, it is computed by dividing the assets
of each Fund, less its liabilities, by the number of outstanding shares of the
Fund.
Classes -- Class specific expenses are borne by that class. Income, expenses,
and realized and unrealized gains/losses are allocated to the respective clas-
ses on the basis of relative daily net assets.
Other -- Distributions from net investment income are declared and paid
quarterly for the Growth and Income Fund and the Value Equity Fund.
Distributions from net investment income are declared daily and paid monthly
for the Treasury Securities Money Market Fund and the Institutional Money
Market Fund. Distributions from net investment income are declared and paid
monthly for the Government Securities Fund and Louisiana Tax-Free Income Fund.
Any net realized capital gains are declared and distributed to shareholders at
least annually.
3.INVESTMENT ADVISORY, ADMINISTRATIVE, AND DISTRIBUTION AGREEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
First National Bank of Commerce in New Orleans (the "Adviser") serves as
investment adviser to each Fund pursuant to an investment advisory agreement
(the "Advisory Agreement") with the Trust. For its services, the Adviser is
entitled to a fee, which is calculated daily and paid monthly, at an annual
rate based on the average daily net assets of each Fund as follows:
Institutional Money Market Fund -- .15%, Treasury Securities Money Market
Fund -- .30%, Government Securities Fund -- .55%, Louisiana Tax-Free Income
Fund -- .35%, Growth and Income Fund -- .74%, and Value Equity Fund -- .74%.
The Adviser has voluntarily agreed to waive a portion of their fee so that
expenses of each Fund will not exceed certain annual expense limitations.
The Trust and SEI Financial Management Corporation (the "Administrator") have
entered into an Administration Agreement. Under terms of the Administration
Agreement, the Administrator is entitled to a fee calculated daily and paid
monthly at an annual rate of .10% of the average daily net assets of the Insti-
tutional Money Market Fund and .20% of the average daily net assets of the
Treasury Securities Money Market Fund, Government Securities Fund, Louisiana
Tax-Free Income Fund, Growth and Income Fund, and Value Equity Fund.
34
<PAGE>
MARQUIS FUNDS
- ---------------------------------------------------------------------------
The Trust and SEI Financial Services Company (the "Distributor") have entered
into a Distribution Agreement. As provided in certain Distribution Plans
adopted under the Distribution Agreement, the Trust will pay a fee, at an an-
nual rate of .25% of the average daily net assets of the Retail class of Trea-
sury Securities Money Market Fund and .75% of the Class B shares of the Non-
Dollar Funds to the Distributor as compensation for its services. The Distribu-
tor has agreed to waive a portion of its fee from the Treasury Securities Money
Market Fund in order to maintain a competitive expense ratio.
The Class A shares of the Non-Dollar Funds are subject to a maximum sales
load of 3.50%.
There is a contingent deferred sales charge on the Class B shares of the Non-
Dollar Funds which varies depending on the number of years from time of payment
for the purchase of shares until the time of redemption of such shares (the
"holding period"). Solely for the purpose of determining the number of years
from the time of any payment for the purchase of shares, all payments during
the month are aggregated and deemed to have been made on the first day of the
month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEARS SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
=========== =========================
<S> <C>
First 3.50%
Second 2.75%
Third 2.00%
Fourth 1.25%
Fifth 0.50%
Sixth None
</TABLE>
4.ORGANIZATIONAL COSTS AND TRANSACTIONS WITH AFFILIATES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Organizational costs have been capitalized by the Funds and are being amor-
tized over sixty months commencing with operations. In the event any of the
initial shares of the Funds are redeemed by any holder thereof during the pe-
riod that the Funds are amortizing their organizational costs, the redemption
proceeds payable to the holder thereof by the Funds will be reduced by the un-
amortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of redemption. These costs include legal fees of approximately $54,278 for
organizational work performed by a law firm of which an officer and a trustee
of the Trust are partners. Certain officers and trustees of the Trust who are
officers of the Administrator and the Distributor, received no compensation
from the Trust.
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- ---------------------------------------------------------------------------
September 30, 1995
5.INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The cost of security purchases and the proceeds from the sale of securities,
other than short-term investments, for the period ended September 30, 1995 were
as follows:
<TABLE>
<CAPTION>
LOUISIANA GROWTH
GOVERNMENT TAX-FREE AND VALUE
SECURITIES INCOME INCOME EQUITY
FUND FUND FUND FUND
(000) (000) (000) (000)
========== ========= ======= =======
<S> <C> <C> <C> <C>
PURCHASES:
U.S. Government $23,093(a) $ -- $ 6,949 $ --
Other 1,688 4,644 40,130 54,156
SALES:
U.S. Government $ 9,641 $ -- $ 4,939 $ --
Other 8,690 203 33,126 47,478
</TABLE>
(a) Does not include $6,551,000 of securities received in exchange for shares
of the Fund.
On September 30, 1995, the total cost of securities and the net realized
gains or losses on securities sold for Federal income tax purposes was not ma-
terially different from amounts reported for financial reporting purposes. The
aggregate gross unrealized appreciation and depreciation on securities at Sep-
tember 30, 1995, for each Non-Dollar Fund is as follows:
<TABLE>
<CAPTION>
LOUISIANA GROWTH
GOVERNMENT TAX-FREE AND VALUE
SECURITIES INCOME INCOME EQUITY
FUND FUND FUND FUND
(000) (000) (000) (000)
========== ========= ======== =======
<S> <C> <C> <C> <C>
Aggregate Gross Unrealized Gain $ 1,375 $ 140 $ 7,550 $9,071
Aggregate Gross Unrealized Loss (1,507) (111) (1,051) (492)
-------- ------ -------- -------
Net Unrealized Gain (Loss) $ (132) $ 29 $ 6,499 $8,579
======== ====== ======== =======
</TABLE>
6.CONCENTRATION OF CREDIT RISK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Institutional Money Market Fund and the Treasury Securities Money Market
Fund invest primarily in a portfolio of money market instruments maturing in
one year or less whose ratings are within the highest ratings category assigned
by a nationally recognized statistical rating agency or, if not rated, are be-
lieved to be of comparable quality. The ability of the issuers of the securi-
ties held by the Fund to meet their obligations may be affected by economic de-
velopments in a specific industry, state or region. The Government Securities
and Growth and Income Funds invest in debt instruments.
36
<PAGE>
MARQUIS FUNDS
- ---------------------------------------------------------------------------
The Louisiana Tax-Free Income Fund is more susceptible to factors adversely
affecting issuers of Louisiana municipal securities than a comparable municipal
bond fund that does not concentrate its investments in Louisiana municipal se-
curities.
The following table presents a summary of holdings in the Government Securi-
ties and Louisiana Tax-Free Income Funds as of September 30, 1995.
<TABLE>
<CAPTION>
LOUISIANA
GOVERNMENT TAX-FREE
SECURITIES INCOME
RATING/SECURITY CATEGORY FUND FUND
======================== ========== =========
<S> <C> <C>
U.S. Government Security 88.45% --
AAA 3.46% 82.02%
AA -- --
A 2.46% 2.87%
Not Rated 5.63% 15.11%
</TABLE>
The above percentages are stated as a percentage of total investments. U.S.
Government Securities represent obligations issued or guaranteed by the U.S.
Government and its agencies or instrumentalities. Repurchase agreements are
collateralized by U.S. Government Securities and are included in Not Rated
above.
7.CAPITAL LOSS CARRYFORWARDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Funds had capital losses carryforwards at September 30, 1995, to the ex-
tent provided in the regulations for Federal Income Tax as follows:
<TABLE>
<CAPTION>
POST
CAPITAL LOSS OCTOBER 31,
CARRYFORWARD 1994
SEPTEMBER 30, 1995, DEFERRED
FUNDS EXPIRES 2003 LOSSES
===== =================== ===========
<S> <C> <C>
Government Securities Fund $679,660 $316,663
Louisiana Tax-Free Income Fund 32,125 2,083
</TABLE>
For tax purposes, the losses in the Funds can be carried forward for a maxi-
mum of eight years to offset any net realized capital gains.
37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------------------------------------
To the Shareholders and Trustees of the Marquis Funds:
We have audited the accompanying statements of net assets of the Institutional
Money Market, Treasury Securities Money Market, Government Securities,
Louisiana Tax-Free Income, Growth and Income and Value Equity Funds of the
Marquis Funds as of September 30, 1995, and the related statements of
operations, changes in net assets and financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Institutional Money Market, Treasury Securities Money Market, Government
Securities, Louisiana Tax-Free Income, Growth and Income and Value Equity Funds
of the Marquis Funds as of September 30, 1995, the results of their operations,
changes in their net assets, and financial highlights for the periods
presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.
November 6, 1995
38
