<PAGE> 1
As filed with the Securities and Exchange Commission on October 18, 1999
Registration No. 811-8494 and 33-78408
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
/X/
/ / Pre-Effective Amendment No. ___
/X/ Post-Effective Amendment No. 7
and
REGISTRATION STATEMENT
UNDER
/X/ THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 9
/X/ (Check appropriate box or boxes)
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MAGNA FUNDS
(Exact name of registrant as specified in charter)
3435 Stelzer Road
Columbus, Ohio 43219
Registrant's Telephone Number, Including Area Code: (800) 219-4182
Name and address
of agent for service Copy to
- -------------------- -------
Walter B. Grimm John M. Loder, Esq.
BISYS Fund Services Ropes & Gray
3435 Stelzer Road One International Place
Columbus, Ohio 43219 Boston, MA 02110
--------------
It is proposed that this filing will become effective (check
appropriate box):
|_| Immediately upon filing pursuant to paragraph (b),
|_| 60 days after filing pursuant to paragraph (a)(1),
|X| 75 days after filing pursuant to paragraph (a)(2), or
|_| on ____________ pursuant to paragraph (a)(2) of rule 485.
<PAGE> 2
MAGNA FUNDS
PROSPECTUS
JANUARY 1, 2000
MAGNA GROWTH & INCOME FUND
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
MAGNA TAX EXEMPT BOND FUND
MAGNA MONEY MARKET FUND
Questions?
Call 1-800-219-4182
or your investment
representative.
THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT APPROVED OR DISAPPROVED THE SHARES
DESCRIBED IN THIS PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 3
TABLE OF CONTENTS
RISK/RETURN SUMMARY
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES EACH FUND'S
INVESTMENTS, RISKS, PAST PERFORMANCE, AND FEES.
MAGNA GROWTH & INCOME FUND
3 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND PRINCIPAL RISKS
5 PERFORMANCE INFORMATION
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
7 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND PRINCIPAL RISKS
9 PERFORMANCE INFORMATION
MAGNA TAX EXEMPT BOND FUND
11 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND PRINCIPAL RISKS
MAGNA MONEY MARKET FUND
13 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND PRINCIPAL RISKS
FEES AND EXPENSES
16
ADDITIONAL INFORMATION
18 INVESTING FOR DEFENSIVE PURPOSES
18 YEAR 2000 AND THE MAGNA FUNDS
FUND MANAGEMENT
19 INVESTMENT ADVISER
19 PORTFOLIO MANAGERS
20 DISTRIBUTOR AND ADMINISTRATOR
SHAREHOLDER INFORMATION
21 PRICING OF FUND SHARES
22 PURCHASING AND SELLING YOUR INVESTMENT SHARES
28 GENERAL POLICIES ON SELLING SHARES
30 DISTRIBUTION ARRANGEMENTS/SALES CHARGES
33 EXCHANGING YOUR SHARES 34 DIVIDENDS AND DISTRIBUTIONS
34 TAXATION
FINANCIAL HIGHLIGHTS
35
BACK COVER
36 WHERE TO LEARN MORE ABOUT THE FUNDS
2
<PAGE> 4
RISK/RETURN SUMMARY AND FUND EXPENSES
MAGNA GROWTH & INCOME FUND
INVESTMENT OBJECTIVES Long-term growth of capital, current income
and growth of income.
PRINCIPAL INVESTMENT
STRATEGIES The Fund invests primarily in common stocks
that Union Planters Bank, National
Association ("the Adviser") believes have
potential primarily for capital growth and
secondarily for income. A portion of the
Fund's assets may be invested in preferred
stocks, in bonds convertible into common
stock and in securities of foreign issuers
traded in U. S. securities markets. The Fund
expects to earn current income mainly from
dividends paid on common and preferred
stocks and from interest on convertible
bonds.
PRINCIPAL INVESTMENT
RISKS Two principal risks of investing in stocks
are MARKET RISK and SELECTION RISK. Market
risk means that the stock market in general
has ups and downs, which may affect the
performance of the individual stocks held by
the fund, and thus the performance of the
fund as a whole. Selection risk means that
the particular stocks that are selected by
the Adviser for the Fund may underperform
the market or other funds with similar
objectives.
The Magna Growth & Income Fund will invest
principally in common stocks, which have
historically presented greater potential for
capital appreciation than fixed income
securities, but do not provide the same
protection of capital or assurance of income
and therefore may involve greater risk of
loss. The Fund may invest a significant
portion of its assets in "growth
securities", which typically trade at higher
multiples of current earnings than other
stocks. As a general rule, growth securities
are often more sensitive to general market
movements than other types of securities
because their market prices tend to place
greater emphasis on future earnings
expectations.
There is no guarantee that the Magna Growth
& Income Fund will meet its goals. When you
sell your shares in the Magna Growth &
Income Fund, they may be worth more or less
than you paid for them. It is possible to
lose money by investing in the Magna Growth
& Income Fund.
3
<PAGE> 5
The Magna Growth & Income Fund may invest a
portion of its assets in securities of
foreign issuers traded in the U. S.
securities markets. The Fund will invest in
such securities primarily by purchasing
"American Depository Receipts" (ADRs), which
are traded in the U.S. markets, rather than
by purchasing foreign securities directly on
foreign markets. Overseas investing carries
potential risks not associated with domestic
investments. Such risks may include, but are
not limited to: (1) currency exchange rate
fluctuations, including adverse effects due
to the euro conversion (2) political and
financial instability, (3) less liquidity
and greater volatility of foreign
investments, (4) the lack of uniform
accounting, auditing and financial reporting
standards, (5) less government regulation
and supervision of foreign stock exchanges,
brokers and listed companies, (6) increased
price volatility, (7) delays in transaction
settlement in some foreign markets, and (8)
adverse impact of the euro conversion on the
business or Financial condition of companies
in which the Fund is invested.
Investing in the Magna Growth & Income Fund
involves risks common to any investment in
securities. By itself, no Fund constitutes a
balanced investment program.
An investment in the Magna Growth & Income
Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency.
A full discussion of the Fund's permissible
investments can be found in the Statement of
Additional Information.
4
<PAGE> 6
RISK/RETURN SUMMARY AND FUND EXPENSES- MAGNA GROWTH & INCOME FUND
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and as compared to
broad-based securities index. The Standard and Poor's 500 Composite Stock Price
Index (the "S&P 500") in the table below is an unmanaged index of 500 selected
common stocks, most of which are listed on the New York Stock Exchange.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 (1)
<TABLE>
<CAPTION>
1995 1996 1997 1998
<C> <C> <C> <C>
</TABLE>
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns. Of course, past performance does not
indicate how the Fund will perform in the future. For the period January 1, 1999
through September 30, 1999 the total return was %.
Best quarter:
Worst quarter:
Past performance does not indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception One Year Past 5 Years Past 10 Years Since Inception
Date
<S> <C> <C> <C> <C> <C>
MAGNA GROWTH & INCOME FUND
(with 4.00% sales charge) 9/1/94 25.25% N/A N/A 26.78%
S&P 500(R) INDEX 28.58% N/A N/A 27.13%
LIPPER GROWTH & INCOME INDEX 8.17% N/A N/A 19.83%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions
5
<PAGE> 7
RISK/RETURN SUMMARY AND FUND EXPENSES - MAGNA GROWTH & INCOME FUND
<TABLE>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Magna Growth & Income Fund if you are:
|-| PURSUING A LONG-TERM GOAL SUCH AS RETIREMENT
|-| SEEKING TO ADD A GROWTH AND INCOME COMPONENT TO YOUR PORTFOLIO
|-| WILLING TO ACCEPT THE RISKS OF INVESTING IN THE STOCK MARKET IN
EXCHANGE FOR LONG-TERM RETURNS
The Magna Growth & Income Fund will not be appropriate for anyone:
|-| PURSUING A SHORT-TERM GOAL OR INVESTING EMERGENCY RESERVES
</TABLE>
6
<PAGE> 8
RISK/RETURN SUMMARY AND FUND EXPENSES
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
INVESTMENT OBJECTIVES Current income consistent with preservation
of capital.
PRINCIPAL INVESTMENT
STRATEGIES The Fund invests primarily in U.S.
Government securities (those that are issued
or guaranteed as to principal and/or
interest payments by the U.S. Government or
its agencies or instrumentalities). The Fund
will maintain a dollar- weighted average
portfolio maturity between three and ten
years, but may purchase individual
securities with longer or shorter
maturities.
By limiting the maturity of its portfolio
securities the Fund seeks to moderate
principal fluctuations. In addition, the
Fund's Adviser seeks to increase total
return by actively managing portfolio
maturity and security selection considering
economic and market conditions.
While short-term interest rate bets are
avoided, the Adviser constantly monitors
economic conditions and adjusts portfolio
maturity, where appropriate, to capitalize
on interest rate trends. Security selection
is managed considering factors such as
credit risk and relative interest rate
yields available among fixed income market
sectors.
The Fund may also invest in corporate debt
obligations, mortgage-backed securities,
collateralized mortgage obligations and
repurchase agreements.
While maturity and credit quality are the
most important investment factors, the Fund
also considers the following when making
investment decisions:
o Current yield and yield to
maturity.
o Potential for capital gain.
7
<PAGE> 9
PRINCIPAL INVESTMENT
RISKS Investing in the Magna Intermediate
Government Bond Fund involves risks common
to any investment in securities. By itself,
no Fund constitutes a balanced investment
program.
The Magna Intermediate Government Bond Fund
will invest primarily in fixed income
securities, which provide income and a level
of protection of capital, but present a
lesser potential for capital appreciation
than equity securities. There is no
guarantee that the Magna Intermediate
Government Bond Fund will meet its goals.
When you sell your shares in the Magna
Intermediate Government Bond Fund, they may
be worth more or less than you paid for
them. It is possible to lose money investing
in the Fund.
8
<PAGE> 10
An investment in the Magna Intermediate
Government Bond Fund is not a bank deposit
and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any
other government agency.
Two principal risks of fixed income (bond)
investing are MARKET RISK and SELECTION
RISK. Market risk means that the bond market
in general has ups and downs, which may
affect the performance of any individual
fixed income security. Selection risk means
that the particular bonds that are selected
for a Fund may underperform the market or
other funds with similar objectives.
INTEREST RATE RISK
All bonds fluctuate in value as interest
rates fluctuate. Generally, as interest
rates rise, the value of a Fund's bond
investments, and of its shares, will
decline. If interest rates decline, the
Fund's bond investments (and its share
price) will generally increase in value. In
general, the shorter the maturity of a bond,
the lower the risk of price fluctuation and
the lower the return.
CREDIT RISK
It is possible that a bond issuer may have
its credit rating downgraded, or may not
make timely interest and/or principal
payments on its bonds. The lower a bond's
rating, the greater its credit risk. Nearly
all fixed income investments have exposure
to some degree of credit risk. Corporate
bonds and notes, which may constitute up to
35% of the Fund's assets, generally involve
more credit risk although certain Government
securities are generally considered to have
some credit risk. Mortgage-backed securities
may also be exposed to high levels of credit
risk, depending upon the credit of the
assets underlying such securities, the
issuers exposure to the credit risk of its
affiliates and others, and the amount and
quality of any credit enhancement associated
with the security.
INCOME RISK
It is possible that the Fund's income will
decline over time because of a decrease in
interest rates. Income risk is lower for
long-term bonds and higher for short-term
bonds. Because interest rates vary, it is
impossible to predict the income or yield of
the Fund for any particular period.
9
<PAGE> 11
PREPAYMENT RISK
Many of the Fund's investments, including
investments in mortgage-backed securities,
are subject to the risk that the principal
amount of the underlying mortgage may be
repaid prior to the bond's maturity date.
Such repayments are common when interest
rates decline. When such a repayment occurs,
no additional interest will be paid on the
investment. Prepayment exposes a Fund to
potentially lower return upon subsequent
reinvestment of the principal.
A full discussion of all permissible
investments can be found in the Statement of
Additional Information.
10
<PAGE> 12
RISK/RETURN SUMMARY AND FUND EXPENSES - MAGNA INTERMEDIATE GOVERNMENT BOND FUND
PERFORMANCE INFORMATION
The bar chart and table provide an indication
of the risks of an investment in the Fund by
showing its performance from year to year and
as compared to a broad-based securities index.
The Lipper Intermediate Government Bond Index in the table below, is an
unmanaged index comprised of U.S. Treasury issues, publicly issued debt of U.S.
Government agencies, and corporate debt guaranteed by the U.S.
Government.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 (1)
<TABLE>
<CAPTION>
1995 1996 1997 1998
<C> <C> <C> <C>
</TABLE>
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns. Of course, past performance does not
indicate how the Fund will perform in the future. For the period January 1, 1999
through September 30, 1999 the total return was %.
Best quarter:
Worst quarter:
Past performance does not indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDING DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Inception Past Year Past 5 Years Past 10 Years Since Inception
Date
<S> <C> <C> <C> <C> <C>
MAGNA INTERMEDIATE GOVERNMENT
BOND FUND 9/1/94 3.89% N/A N/A 7.56%
(with 4.00% sales charge)
LIPPER INTERMEDIATE GOVERNMENT BOND
INDEX 6/1/91 8.17% N/A N/A 7.69%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions
11
<PAGE> 13
RISK/RETURN SUMMARY AND FUND EXPENSES - MAGNA INTERMEDIATE GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Magna Intermediate Government Bond Fund if you are:
|-| SEEKING TO ADD A MONTHLY INCOME COMPONENT TO YOUR PORTFOLIO
|-| SEEKING HIGHER POTENTIAL RETURNS THAN THOSE PROVIDED BY MONEY MARKET
FUNDS
|-| WILLING TO ACCEPT HIGHER RISKS OF PRICE AND DIVIDEND FLUCTUATIONS
The Magna Intermediate Government Bond Fund will not be appropriate for
anyone:
|-| SEEKING SAFETY OF PRINCIPAL
</TABLE>
12
<PAGE> 14
RISK/RETURN SUMMARY AND FUND EXPENSES
MAGNA TAX EXEMPT BOND FUND
INVESTMENT OBJECTIVES Current income that is exempt from federal
income tax consistent with preservation of
capital. Capital Appreciation is a secondary
objective.
PRINCIPAL INVESTMENT The Magna Tax Exempt Bond Fund normally
STRATEGIES invests at least 80% of its net assets in
federally tax-exempt obligations. Federally
tax-exempt obligations may include municipal
bonds, notes and commercial paper issued by
states and other local governments that are
exempt from federal taxes. Securities whose
interest is considered a tax preference item
under the federal alternative minimum tax
will be considered taxable for purposes of
this policy. The Fund may invest up to 20%
of its net assets in U.S. Government
Securities, money market instruments or
"private activity" bonds. The Fund may
invest more than 25% of its assets in bonds
of issuers in the same state. The Fund
maintains a dollar-weighted average
portfolio maturity between ten and
twenty-five years.
The Magna Tax Exempt Bond Fund will purchase
securities rated in one of the four highest
rating categories by Rating Agencies or
unrated securities of comparable quality.
While maturity and credit quality are the
most important investment factors, the Fund
also considers the following when making
investment decisions:
o Current yield and yield to
maturity.
o Potential for capital gain.
The Fund may also sell a security if it
falls below the minimum credit quality
required for purchase.
PRINCIPAL INVESTMENT Investing in the Magna Tax Exempt Bond Fund
RISKS involves risks common to any investment in
securities. By itself, no Fund constitutes a
balanced investment program.
The Magna Tax Exempt Bond Fund will invest
primarily in fixed income securities, which
provide income and a level of protection of
capital, but present a lesser potential for
capital appreciation than equity securities.
There is no guarantee that the Magna Tax
Exempt Bond Fund will meet its goals. When
you sell your shares in the Magna Tax Exempt
Bond Fund , they may be worth more or less
than you paid for them. It is possible to
lose money by investing in the Fund.
An investment in the Magna Tax Exempt Bond
Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency.
13
<PAGE> 15
INTEREST RATE RISK
All bonds fluctuate in value as interest
rates fluctuate. Generally, as interest
rates rise, the value of a Fund's bond
investments, and of its shares, will
decline. If interest rates decline, the
Fund's bond investments (and its share
price) will generally increase in value. In
general, the shorter the maturity of a bond,
the lower the risk of price fluctuation and
the lower the return.
CREDIT RISK
It is possible that a bond issuer may have
its credit rating downgraded, or may not
make timely interest and/or principal
payments on its bonds. The lower a bond's
rating, the greater its credit risk. Nearly
all fixed income investments have exposure
to some degree of credit risk.
Two principal risks of fixed income (bond)
investing are MARKET RISK and SELECTION
RISK. Market risk means that the bond market
in general has ups and downs, which may
affect the performance of any individual
fixed income security. Selection risk means
that the particular bonds that are selected
for a Fund may underperform the market or
other funds with similar objectives.
INCOME RISK
It is possible that the Fund's income will
decline over time because of a decrease in
interest rates. Income risk is lower for
long-term bonds and higher for short-term
bonds. Because interest rates vary, it is
impossible to predict the income or yield of
the Fund for any particular period.
PREPAYMENT RISK
Many of the Fund's investments, including
investments in mortgage-backed securities,
are subject to the risk that the principal
amount of the underlying mortgage may be
repaid prior to the bond's maturity date.
Such repayments are common when interest
rates decline. When such a repayment occurs,
no additional interest will be paid on the
investment. Prepayment exposes a Fund to
potentially lower return upon subsequent
reinvestment of the principal.
NON-DIVERSIFICATION RISK
The Magna Tax Exempt Bond Fund is not
"diversified" within the meaning of the 1940
Act. This means that the Fund is allowed to
invest in a relatively small number of
issuers with greater concentrations of risk.
A full discussion of all permissible
investments can be found in the Statement of
Additional Information.
14
<PAGE> 16
No performance is shown for the Magna Tax Exempt Bond Fund which as of the date
of this Prospectus, has not completed a year of operations. The yield of the
Fund will fluctuate with market conditions.
15
<PAGE> 17
RISK/RETURN SUMMARY AND FUND EXPENSES
MAGNA MONEY MARKET FUND
INVESTMENT OBJECTIVES Maximum current income consistent with
preservation of capital and liquidity.
PRINCIPAL INVESTMENT The Fund invests in a variety of
STRATEGIES high-quality money market instruments,
including U. S. Government Securities,
taxable municipal debt, commercial paper and
other corporate debt obligations,
certificates of deposit, bankers'
acceptances and other dollar-denominated
bank obligations, including obligations
issued by U. S. banks, their foreign
branches and/or foreign banks.
The Magna Money Market Fund will invest
primarily in fixed income securities, which
provide income and a level of protection of
capital, but present less potential for
capital appreciation than equity securities.
Investing in the Magna Money Market Fund
involves risks common to any investment in
securities. By itself, no Fund constitutes a
balanced investment program.
PRINCIPAL INVESTMENT An investment in the Magna Money Market Fund
RISKS is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Although the Magna Money Market Fund seeks
to preserve the value of your investment at
$1.00 per share, it is possible to lose
money by investing in the Fund.
There can be no assurance that the
investment objective of the Magna Money
Market Fund will be achieved.
INTEREST RATE RISK
All bonds fluctuate in value as interest
rates fluctuate. Generally, as interest
rates rise, the value of a Fund's bond
investments, and of its shares, will
decline. If interest rates decline, the
Fund's bond investments (and its share
price) will generally increase in value. In
general, the shorter the maturity of a bond,
the lower the risk of price fluctuation and
the lower the return.
CREDIT RISK
It is possible that a bond issuer may have
its credit rating downgraded, or may not
make timely interest and/or principal
payments on its bonds. The lower a bond's
rating, the greater its credit risk. Nearly
all fixed income investments have
16
<PAGE> 18
exposure to some degree of credit risk.
Corporate bonds and notes generally involve
more credit risk although certain Government
securities are generally considered to have
some credit risk. Mortgage-backed and other
asset-backed securities may also be exposed
to high levels of credit risk, depending
upon the credit of the assets underlying
such securities, the issuers exposure to the
credit risk of its affiliates and others,
and the amount and quality of any credit
enhancement associated with the security.
The Fund's use of repurchase agreements also
involves credit risk, primarily the risk of
loss if the seller defaults.
INCOME RISK
It is possible that the Fund's income will
decline over time because of a decrease in
interest rates. Because interest rates vary,
it is impossible to predict the income or
yield of the Fund for any particular period.
A full discussion of all permissible
investments can be found in the Statement of
Additional Information.
RISK/RETURN SUMMARY - MAGNA MONEY MARKET FUND
<TABLE>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Magna Money Market Fund if you:
- ARE SEEKING PRESERVATION OF CAPITAL
- HAVE A LOW RISK TOLERANCE
- ARE WILLING TO ACCEPT LOWER POTENTIAL RETURNS IN EXCHANGE FOR STRONG
PRESERVATION OF CAPITAL
- ARE INVESTING SHORT-TERM RESERVES
The Magna Money Market Fund will generally not be appropriate for anyone:
- SEEKING HIGH TOTAL RETURNS
- PURSUING A LONG-TERM GOAL OR INVESTING FOR RETIREMENT
</TABLE>
17
<PAGE> 19
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE MAGNA FUNDS PORTFOLIOS.
Annual Fund operating expenses are paid out of Fund assets, and are reflected in
the share price. Each Fund's fees and expenses are based upon the Fund's
estimated operating expenses for the fiscal year ending August 31, 2000. The
Funds' Adviser and Distributor have contractually agreed to waive all or a
portion of their fee with respect to the Funds. (See the footnotes to the Fee
Table below.)
<TABLE>
<CAPTION>
FEE TABLE
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR MAGNA GROWTH & MAGNA INTERMEDIATE MAGNA TAX EXEMPT MAGNA MONEY MARKET
INVESTMENT) INCOME FUND GOVERNMENT FUND BOND FUND(3) FUND(3)
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases 4.00% 4.00% 4.00% None
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends None None None None
Maximum Deferred Sales Load(1) None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)
Management fees 0.75% 0.50% 0.50% 0.40%
(12b-1) fees 0.25% 0.25% 0.25% 0.25%
Other expenses 0.37% 0.42% 0.57% 0.37%
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.37% 1.17% 1.32%(3) 1.02%(3)
FEE WAIVER(2) 0.50% 0.35% 0.45% 0.51%
NET ANNUAL FUND
OPERATING EXPENSES 0.87% 0.82% 0.87% 0.51%
</TABLE>
(1) On purchases over $3 million the Magna Growth & Income Fund, the Magna
Intermediate Government Bond Fund and the Magna Tax Exempt Bond Fund
may charge a 1% Contingent Deferred Sales Charge on amounts redeemed
within one year after purchase.
(2) The Advisor has contractually agreed to waive a portion of its
management fees through August 31, 2000. As a result, management fees
would be 0.50%, 0.40%, 0.30% and 0.17% for the Magna Growth & Income
Fund, the Magna Intermediate Government Bond Fund, the Magna Tax Exempt
Bond Fund and the Magna Money Market Fund respectively. The Distributor
has contractually agreed to waive its entire fee amount under each
Fund's 12b-1 plan through August 31, 2000. The Administrator has
contractually agreed to waive a portion of its Administration fees
through August 31, 2000. As a result, Administration fees would be
0.20%.
(3) Other Expenses and Total Fund Operating Expenses for these Funds are
estimated for the current fiscal year.
18
<PAGE> 20
RISK/RETURN SUMMARY AND FUND EXPENSES - MAGNA FUNDS
Expense Example
Use the table at right to compare fees and expenses with those of other Funds.
It illustrates the amount of fees and expenses you would pay, assuming the
following:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison only, your actual costs
will be different. Estimated expenses through the first year of each period
shown in the examples reflect applicable fee waivers; thereafter, no fee waivers
are reflected.
<TABLE>
<CAPTION>
MAGNA GROWTH AND INCOME FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
$89 $385 $702 $1603
MAGNA INTERMEDIATE GOVERNMENT 1 3 5 10
BOND FUND Year Years Years Years
$84 $337 $610 $1389
MAGNA TAX EXEMPT BOND FUND 1 3
Year Years
$89 $374
MAGNA MONEY MARKET FUND 1 3
Year Years
$52 $274
</TABLE>
19
<PAGE> 21
ADDITIONAL INFORMATION
INVESTING FOR When the Adviser determines that market
DEFENSIVE PURPOSES conditions are appropriate, each Fund may,
for temporary defensive purposes, invest up
to 100% of its assets in money market
instruments. Each of the Funds may also
shorten its dollar-weighted average maturity
below its normal range if such action is
deemed appropriate by the Adviser for
temporary defensive purposes. If a Fund is
investing defensively, it will not be
pursuing its investment objective.
YEAR 2000 AND THE Like other funds and business organizations
MAGNA FUNDS around the world, the Funds could be
adversely affected if the computer systems
used by the Adviser and the Funds' other
service providers do not properly process
dates beyond December 31, 1999. In addition,
year 2000 issues may adversely affect
companies in which the Funds invest where,
for example, such companies incur
substantial costs to address year 2000
issues or suffer losses caused by the
failure to adequately or timely do so.
The Funds have been assured that the Adviser
and other service providers have developed
and are implementing clearly defined and
documented plans intended to minimize risks
to services critical to the Funds'
operations associated with year 2000 issues.
Internal efforts include a commitment to
dedicate adequate staff and funding to
identify and remedy year 2000 issues, and
specific actions such as inventorying
software systems, determining inventory
items that may not function properly after
December 31, 1999, reprogramming or
replacing such systems, and retesting for
year 2000 readiness. The Adviser and the
Funds' service providers are likewise
seeking assurances from their respective
vendors and suppliers that such entities are
addressing any year 2000 issues, and each
provider intends to engage, where
appropriate, in private and/or industry
interface testing of systems for year 2000
readiness.
In the event that any systems upon which the
Funds are dependent are not year 2000 ready
by December 31, 1999, administrative errors
and account maintenance failure would likely
occur.
While the ultimate costs or consequences of
incomplete or untimely resolution of year
2000 issues by the Adviser or the Funds'
service providers cannot be accurately
assessed at this time, the Funds currently
have no reason to believe that the year 2000
plans of the Adviser and the Funds' service
providers will not be completed by December
31, 1999, or that the anticipated costs
associated with full implementation of their
plans will have a material adverse impact on
either their business operations or
financial conditions or those of the Funds.
The Funds and the Adviser will continue to
closely monitor developments relating to
this issue, including development by the
Adviser and the Funds' service providers of
contingency plans for providing back-up
computer services in the event of a systems
failure or the inability of any provider to
achieve year 2000 readiness. Separately, the
Adviser will monitor potential investment
risk related to year 2000 issues.
20
<PAGE> 22
FUND MANAGEMENT
INVESTMENT ADVISER
Union Planters Bank, National Association, 1401 South Brentwood Boulevard, St.
Louis. Missouri, 63144 serves as investment adviser to the Magna Funds. On
October 9, 1998, Magna Bank, N.A. ("Magna Bank"), which together with its
predecessors had served as the investment adviser to the Magna Funds since the
Funds' inception in 1994, merged with Union Planters. The same portfolio
managers who were responsible for the investment of the assets of the Magna
Funds portfolios immediately prior to the merger continue to be responsible for
the investment of the portfolios as employees of Union Planters at the date of
this prospectus. Union Planters, a wholly owned subsidiary of Union Planters
Corporation, is a multi-state national banking association headquartered in
Memphis, Tennessee with total assets of approximately $30 billion.
For investment advisory services provided by Union Planters, the Funds paid as
follows during their fiscal year ended August 31, 1999:
<TABLE>
<CAPTION>
As a percentage of
average net assets
as of 8/31/99
<S> <C>
Magna Growth & Income Fund 0.50%
Magna Intermediate Government Bond Fund 0.40%
Magna Money Market Fund 0.17%
</TABLE>
* The Adviser waived a portion of its contractual fees for these Funds for the
most recent fiscal year. Contractual fees (without waivers) are 0.75% for the
Growth & Income Fund, 0.50% for the Intermediate Government Bond Fund, and 0.40%
for the Money Market Fund.
PORTFOLIO MANAGERS
Union Planters has several portfolio managers committed to the day-to-day
management of the Funds.
L. Clark Zedric is the portfolio manager for the Intermediate Government Income
Fund. He received his MBA from Illinois State University and is currently Vice
President of Union Planters.
Gary J. Guthrie is the portfolio manager for the Growth & Income Fund. Mr.
Guthrie is a graduate of Southern Illinois University and is currently Vice
President of Union Planters.
Both Mr. Zedric and Mr. Guthrie have served as portfolio managers for the Magna
Funds since the Funds' inception in 1994.
Lucy Kasson is the portfolio manager for the Magna Money Market Fund. A graduate
of DePaul University, Ms. Kasson has served as the portfolio manager for the
fund since the its inception in 1999. She is currently Vice President of Union
Planters. Prior to joining Union Planters in 1999, Ms. Kasson was involved in
managing money market fund portfolios for Nuveen Advisory Corporation.
The Statement of Additional Information or SAI has more detailed information
about the Adviser and other service providers.
21
<PAGE> 23
DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services ("BISYS") provides management and administrative services to
the Funds, including providing office space, equipment and clerical personnel to
the Funds and supervising custodial, auditing, valuation, bookkeeping and legal
services. BISYS Fund Services, Inc., an affiliate of BISYS, acts as the fund
accountant, transfer agent and dividend paying agent of the Funds. BISYS and
BISYS Fund Services, Inc. are each located at 3435 Stelzer Road, Columbus, Ohio
43219.
22
<PAGE> 24
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
HOW NAV IS CALCULATED
The NAV is calculated by
adding the total value of the
Fund's investments and other
assets, subtracting its
liabilities and then dividing
that figure by the number of
outstanding shares of the
Fund:
NAV =
TOTAL ASSETS - LIABILITIES
Number of Shares
Outstanding
MAGNA MONEY MARKET FUND
The Magna Money Market Fund's net asset value, or
NAV, is expected to be constant at $1.00 per share,
although this value is not guaranteed. The NAV is
determined at 1:00 p.m. Eastern time on days when
the New York Stock Exchange (the "Exchange") is open.
The Magna Money Market Fund values its securities at
amortized cost. The amortized cost method involves
valuing a portfolio security initially at its cost on
the date of the purchase and thereafter assuming a
constant amortization to maturity of the difference
between the principal amount due at maturity and
initial cost.
MAGNA GROWTH & INCOME FUND MAGNA
INTERMEDIATE GOVERNMENT BOND FUND
MAGNA TAX EXEMPT BOND FUND
The per share NAV for each non-Money Market Fund is
determined and its shares are priced at the close of
regular trading on the Exchange, normally at 4:00
p.m. Eastern time, on days the Exchange is open.
Your order for purchase, sale or exchange of shares
is priced at the next NAV calculated after your order
is received in good order and accepted by the Fund
less any applicable sales charges (see "Distribution
Arrangements/Sales Charges") on any day that both the
Exchange and the Funds' custodian are open for
business. For example: If you place a purchase order
to buy shares of the Magna Growth & Income Fund, it
must be received by 4:00 p.m. Eastern time in order
to receive the NAV calculated at 4:00 p.m. Eastern
time. If your order is received after 4:00 p.m.
Eastern time, you will receive the NAV calculated on
the next business day at 4:00 p.m. Eastern time.
The non-Money Market Funds' securities, other than
short-term debt obligations, are generally valued at
current market prices unless market quotations are
not available, in which case securities will be
valued by a method that the Board of Directors
believes accurately reflects fair value. Debt
obligations with remaining maturities of 60 days or
less are valued at amortized cost or based on their
acquisition cost.
23
<PAGE> 25
SHAREHOLDER INFORMATION
PURCHASING AND SELLING YOUR INVESTMENT SHARES
You may purchase Magna Funds through the Funds' Distributor or through banks,
brokers and other investment representatives, which may charge additional fees
and may require higher minimum investments or impose other limitations on buying
and selling shares. If you purchase shares through an investment representative,
that party is responsible for transmitting orders by close of business and may
have an earlier cut-off time for purchase and sale requests. Consult your
investment representative or institution for specific information.
<TABLE>
<CAPTION>
PURCHASING AND ADDING TO YOUR SHARES
ACCOUNT TYPE MINIMUM MINIMUM
INITIAL INVESTMENT SUBSEQUENT INVESTMENT
<S> <C> <C>
Regular
(non-retirement) $ 250 $ 150
Retirement (IRA $ 150 $ 150
Automatic Investment
Plan $ 100 $ 100
</TABLE>
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted.
For details and application forms, call 1-800-219-4182 or write to: Magna Funds,
P.O. Box 182754, Columbus, OH 43218-2784
A Fund may waive its minimum investment requirement and the Distributor may
reject a purchase order if it considers it in the best interest of the Fund and
its shareholders
AVOID 31% TAX WITHHOLDING
Each Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
24
<PAGE> 26
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
BY MAIL
If purchasing through your financial advisor or brokerage account, simply tell
your advisor or broker that you wish to purchase shares of the Funds and he or
she will take care of the necessary documentation. For all other purchases,
follow the instructions below.
All investments made by regular mail or express delivery, whether initial or
subsequent, should be sent:
BY REGULAR MAIL: BY EXPRESS MAIL:
Magna Funds Magna Funds
P.O. Box 182754 3435 Stelzer Road
Columbus, OH 43218-2784 Columbus, OH 43219
For Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "Magna Funds" and include
the name of the appropriate Fund(s) on the check.
3. Mail or deliver application and payment to address above.
For Subsequent Investment:
1. Use the investment slip attached to your account statement. Or, if
unavailable, provide the following information:
- Fund name
- Amount invested
- Account name and account number
2. Make check, bank draft or money order payable to "Magna Funds" and include
your account number on the check.
3. Mail or deliver investment slip and payment to the address above.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be a
U. S. Bank. Your bank or broker may charge for this service.
Establish the electronic purchase option on your account application or call
1-800-219-4182. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-219-4182 to arrange a transfer from your bank account.
25
<PAGE> 27
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial
institutions to send funds to each
other, almost instantaneously. With
an electronic purchase or sale, the
transaction is made through the
Automated Clearing House (ACH). ACH
transactions usually clear within 2
to 3 days, but may take up to eight.
There is generally no fee for ACH
transactions.
BY WIRE TRANSFER
For Initial Investments: Call 1-800-219-4182 for a confirmation number and
instructions for returning your completed application.
Instruct your bank to wire transfer your investment to:
Name of Bank
Routing Number: ABA #000000
DDA#
Include:
Your name
Your confirmation number
After instructing your bank to wire the funds, call 1-800-219-4182 to advise us
of the amount being transferred and the name of your bank
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
You can add to your account by using the convenient options described below. The
Funds reserve the right to change or eliminate these privileges at any time with
60 days notice.
26
<PAGE> 28
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES, CONTINUED
AUTOMATIC INVESTMENT PROGRAM
You can make automatic investments in the Funds from your bank account, through
payroll deduction or from your federal employment, Social Security, Supplement
Security Income or other regular government checks. Automatic investments can be
as little as $100.
To invest regularly from your bank account:
- Complete the Automatic Investment Plan portion on your
Account Application.
Make sure you note:
- Your bank name, address and account number
- The amount you wish to invest automatically (minimum $100)
- How often you want to invest (every month, 4 times a
year, twice a year or once a year)
- Attach a voided personal check.
To invest regularly from your paycheck or government check:
Call 1-800-219-4182 for an enrollment form.
DIRECTED DIVIDEND OPTION
By selecting the appropriate box in the Account Application, you can elect to
receive your distributions in cash (check) or have distributions (capital gains
and dividends) reinvested in another Magna Fund without a sales charge. You
must maintain the minimum balance in each Fund into which you plan to reinvest
dividends or the reinvestment will be suspended and your dividends paid to you.
The Fund may modify or terminate this reinvestment option without notice. You
can change or terminate your participation in the reinvestment option at any
time.
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. You can receive them in cash or by electronic funds transfer
to your bank account if you are not a participant in an IRA account or in a tax
qualified plan. There are no sales charges for reinvested distributions. Capital
gains are distributed at least annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE OWNED
YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION DATE, SOME
OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A TAXABLE
DISTRIBUTION.
27
<PAGE> 29
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
You may sell your shares at any time the New York Stock Exchange and custodian
are open for business. Your sales price will be the next NAV after your sell
order is received by the Funds, its transfer agent, or your investment
representative. Normally you will receive your proceeds within a week after your
request is received. See section on "General Policies on Selling Shares below."
WITHDRAWING MONEY FROM YOUR FUND
INVESTMENT
As a mutual fund shareholder, you are
technically selling shares when you
request a withdrawal in cash. This is
also known as redeeming shares or a
redemption of shares.
INSTRUCTIONS FOR SELLING SHARES
If selling your shares through your
financial adviser or broker, ask him
or her for redemption procedures. Your
adviser and/or broker may have
transaction minimums and/or
transaction times which will affect
your redemption. For all other sales
transactions, follow the instructions
below.
<TABLE>
<CAPTION>
<S> <C>
By telephone 1. Call 1-800-219-4182 with instructions as to how you wish to
(unless you have declined telephone receive your funds (mail, wire, electronic transfer). (See
sales privileges) "General Policies on Selling Shares--Verifying Telephone
Redemptions" below.)
By mail 1. Call 1-800-219-4182 to request redemption forms or write a letter
(See "General Policies on Selling of instruction indicating:
Shares - When Written Redemption - your Fund and account number
Requests are Required" below.) - amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to:
Magna Funds
P.O. Box 182754
Columbus, OH 43218-2784
By overnight service See instruction 1 above.
(See "General Policies on Selling 2. Send to
Shares--Redemptions in Writing Required" Magna Funds
below.) c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
28
<PAGE> 30
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
<TABLE>
<CAPTION>
<S> <C>
Wire transfer Call 1-800-219-4182 to request a wire transfer.
You must indicate this option on
your application. If you call by 1 p.m. Eastern time for transfers from the
Magna Money Market Fund, or by 4 p.m. Eastern time for
The Fund may charge a wire transfers from the Magna Growth & Income Fund or the Magna
transfer fee. Intermediate Government Bond Fund, your payment will normally
Note: Your financial institution be wired to your bank on the next business day.
may also charge a separate fee.
Electronic Redemptions Call 1-800-219-4182 to request an electronic redemption.
Your bank must participate in If you call by 4 p.m. Eastern time, the NAV of your shares
the Automated Clearing House will normally be determined on the same day and the proceeds
(ACH) and must be a U.S. bank. will be credited within 8 days.
Your bank may charge for this
service.
</TABLE>
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The maximum withdrawal per year is 12% of the
account value at the time of election. To activate this feature:
- - Make sure you've checked the appropriate box on the Account Application. Or
call 1-800-219-4182.
- - Include a voided personal check.
- - Your account must have a value of $5,000 or more to start automatic
withdrawals.
- - If the value of your account falls below $500, you may be asked to add
sufficient funds to bring the account back to $500, or the Fund may close
your account and mail the proceeds to you.
29
<PAGE> 31
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
REDEMPTION BY CHECK WRITING - THE MONEY MARKET FUND
You may write checks in amounts of $250 or more on your account in the Money
Market Fund. To obtain checks, complete the signature card section of the
Account Application or contact the Fund to obtain a signature card. Dividends
and distributions will continue to be paid up to the day the check is presented
for payment. You must maintain the minimum required account balance of $10,000
and you may not close your Money Market Fund account by writing a check.
GENERAL POLICIES ON SELLING SHARES
- ----------------------------------
WHEN WRITTEN REDEMPTION REQUESTS ARE REQUIRED
You must request redemptions in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee, which include each of
the following.
- Redemptions over $10,000 o Your account registration or
the name(s) in your account has changed within the last 90 days
- The check is not being mailed to the address on your account o The check
is not being made payable to the owner of the account
- The redemption proceeds are being transferred to another Fund account
with a different registration.
Signature guarantees can be obtained from a U.S. stock exchange member, a
U.S. commercial bank or trust company, or any other financial institution
that is a member of the STAMP (Securities Transfer Agents Medallion
Program), MSP (New York Stock Exchange Medallion Signature Program) or
SEMP (Stock Exchanges Medallion Program). Members are subject to dollar
limitations which must be considered when requesting their guarantee. The
Transfer Agent may reject any signature guarantee if it believes the
transaction would otherwise be improper.
VERIFYING TELEPHONE REDEMPTIONS
The Funds make every effort to insure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders. If appropriate precautions have not been taken, the
Transfer Agent may be liable for losses due to unauthorized transactions.
30
<PAGE> 32
SHAREHOLDER INFORMATION
SELLING YOUR SHARES, CONTINUED
REDEMPTIONS WITHIN 10 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, you cannot redeem any
portion of it until the Transfer Agent is satisfied that the check has cleared
(which may require up to 10 business days). You can avoid this delay by
purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
The Funds may postpone payment for shares at times when the New York Stock
Exchange is closed or under any emergency circumstances as determined by the
U.S. Securities and Exchange Commission. If you experience difficulty making a
telephone redemption during periods of drastic economic or market change, you
can send the Funds your request by regular or express mail. Follow the
instructions above under "Withdrawing Money From Your Fund Investment--By Mail"
in this section.
REDEMPTION IN KIND
The Funds reserve the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(for example, more than 1% of a Fund's net assets). If the Fund deems it
advisable for the benefit of all shareholders, redemption in kind will consist
of securities equal in market value to your shares. When you convert these
securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below $25 or, in the case of the Magna Money Market Fund
$100, a Fund may ask you to increase your balance. If it is still below the
minimum after 60 days, the Fund may close your account and send you the proceeds
at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that remain
uncashed for six months will be canceled and the money reinvested in the
appropriate Fund.
31
<PAGE> 33
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CALCULATION OF SALES CHARGES
Shares of the Magna Funds are sold at their public offering price. This price
includes the initial sales charge. Therefore, part of the money you invest will
be used to pay the sales charge. The remainder is invested in Fund shares. The
sales charge decreases with larger purchases. There is no sales charge on
reinvested dividends and distributions.
The current sales charge rates for the MAGNA GROWTH & INCOME FUND, MAGNA
INTERMEDIATE GOVERNMENT BOND FUND and the MAGNA TAX EXEMPT BOND FUND are as
follows:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT
<S> <C> <C>
Up to $99,999 4.00% 4.17%
$100,000 up to $249,999 3.50% 3.63%
$250,000 up to $499,999 3.00% 3.09%
$500,000 up to $749,999 2.50% 2.56%
$750,000 up to $999,999 1.75% 1.78%
$1,000,000 up to $299,999 1.00% 1.01%
$3,000,000 and over 0.00% 0.00%
</TABLE>
32
<PAGE> 34
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES, CONTINUED
SALES CHARGE REDUCTIONS
Reduced sales charges are available to shareholders with investments of $100,000
or more. In addition, you may qualify for reduced sales charges under the
following circumstances.
- - Letter of Intent. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge.
- - Rights of Accumulation. When the value of shares you already own plus
the amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
- - Combination Privilege. An investor may qualify for a lower sales charge
by combining concurrent purchases of shares of one or more of the Funds
sold with a sales charge. For example, if a shareholder concurrently
purchases shares in one Fund sold with a sales charge at the total public
offering price of $50,000 and shares in another Fund of the Trust at the
total public offering price of $50,000 , the sales charge would be that
applicable to a $100,000 purchase as shown in the table above.
SALES CHARGE WAIVERS
The following qualify for waivers of sales charges:
- - Shares purchased by investment representatives through fee-based
investment products or accounts.
- - Proceeds from redemptions from another mutual fund complex within 30
days after redemption, if you paid a front end sales charge for those
shares. To qualify for this waiver, you must furnish a broker's
confirmation statement showing the payment of the sales charge. This
arrangement is not available if you paid a contingent deferred sales charge
on the redemption.
- - Shares purchased by Union Planters or its affiliates for the account of
their trust customers.
- - Shares purchased by directors, trustees, employees or retired
employees, and family members of employees or retired employees of the
Adviser and its affiliates and of BISYS Fund Services and its affiliates.
33
<PAGE> 35
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES, CONTINUED
DISTRIBUTION AND SERVICE (12b-1) FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and distribution
of the Fund's shares and/or for providing shareholder services. 12b-1 fees are
paid from Fund assets on an ongoing basis, and will increase the cost of your
investment. 12b-1 fees may cost you more than paying other types of sales
charges.
- - The Distributor may use up to .25% of the 12b-1 fee for shareholder
servicing.
Over time shareholders will pay more than the equivalent of the maximum
permitted front-end sales charge because 12b-1 service fees are paid out of the
Fund's assets on an on-going basis.
34
<PAGE> 36
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your shares in one Fund INSTRUCTIONS FOR EXCHANGING SHARES
for shares of another Magna Fund, often Exchanges may be made by sending a
without paying additional sales charges written request to Magna Funds, P.O.
(see "Notes" below). No transaction fees Box 182754, Columbus OH 43218-2784,
are charged for exchanges. or by calling 1-800-219-4182. Please
provide the following information:
You must meet the minimum investment o Your name and telephone number
requirements for the Fund into which you o The exact name on your account and
are exchanging. Exchanges from one Fund account number
to another are taxable. o Taxpayer identification number
(usually your Social Security
number)
o Dollar value or number of shares
to be exchanged
o The name of the Fund from which
the exchange is to be made
o The name of the Fund into
which the exchange is being made
See "General Policies on Selling
Shares" above for important
information about telephone
transactions.
AUTOMATIC EXCHANGES NOTES ON EXCHANGES
You can use the Funds' Automatic When exchanging from a Fund that has
Exchange feature to purchase shares of no sales charge or a lower sales
the Funds at regular intervals through charge to a Fund with a higher sales
regular, automatic redemptions from the charge, you will pay the difference.
Money Market Fund. To participate in the For example, if you exchange shares
Automatic Exchange: of the Magna Money Market Fund for
shares of the Magna Growth & Income
o Complete the appropriate Fund, you will be subject to a sales
section of the Account charge of up to 4.00%, subject to
Application. any applicable reduction or waiver
o Keep a minimum of $10,000 in of the sales charge.
the Money Market Fund and The registration and tax
$1,000 in the Fund whose shares identification numbers of the two
you are buying. accounts must be identical. If you
don't have an account with the new
To change the Automatic Exchange Fund, a new account will be opened
instructions or to discontinue the with the same features unless you
feature, you Magna Funds, P.O. Box write to tell us to change them.
182754, Columbus, Ohio 43218-2784.
The Exchange Privilege (including
automatic exchanges) may be changed
or eliminated at any time.
Be sure to read the Prospectus
carefully of any Fund into which you
wish to exchange shares.
The exchange privilege is available
only in states where shares of the
new Fund may be sold.
If shares of a Fund are purchased
by check, those shares cannot be
exchanged until your check has been
collected. This could take 10 days
or more.
All exchanges are based on the
relative net asset value next
determined after the exchange order
is received by the Funds, subject to
any applicable sales charge.
35
<PAGE> 37
SHAREHOLDER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
The Funds pay dividends to their shareholders from the Funds' respective net
investment income. The Funds distribute any net capital gains that have been
realized. Income dividends on the Growth & Income Fund are declared and paid
quarterly, income dividends for the Magna Intermediate Government Bond Fund,
Magna Tax Exempt Bond Fund and for the Magna Money Market Fund are declared
daily and paid monthly. Capital gains, if any, for all Funds are distributed at
least annually.
TAXATION
Federal Taxes
Each Fund contemplates declaring as dividends each year all or substantially all
of its taxable income, including its net capital gain (the excess of long- term
capital gain over short-term capital loss). You will be subject to income tax on
these distributions regardless of whether they are paid in cash or rein- vested
in additional shares. Distributions properly designated by a fund as derived
from net capital gain of a Fund will be taxable to you as such, regardless of
how long you have held your shares. Other Fund distributions other than
"exempt-interest dividends" paid by the Magna Tax-Exempt Bond Fund will
generally be tax-able as ordinary income. Distributions designated by the Magna
Tax-Exempt Bond Fund as "exempt-interest dividends" are not generally subject to
federal income tax. However, if you receive social security or railroad
retirement benefits, you should consult your tax adviser to determine what
effect, if any, an investment in such fund may have on the federal taxation of
your benefits. In addition, an investment in the Magna Tax-Exempt Bond Fund may
result in liability for federal alternative minimum tax, both for corporate and
individual shareholders. You will be notified annually of the tax status of
distributions to you.
You should note that if you purchase shares just prior to a capital gain
distribution, the purchase price will reflect the amount of the upcoming
distribution, but you will be taxable on the entire amount of the distribution
received, even though, as an economic matter, the distribution simply
constitutes a return of capital. This is known as "buying into a dividend."
Except in the case of the Magna Money Market Fund, you will recognize taxable
gain or loss on a sale, exchange or redemption of your shares, including an
exchange for shares of another Fund based on the difference between your tax
basis in the shares and the amount you receive for them. (To aid in computing
your tax basis, you generally should retain your account statements for the
periods during which you held shares.) Any loss realized on shares held for six
months or less will be treated as a long-term capital loss to the extent of any
capital gain dividends that were received on the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
36
<PAGE> 38
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE FUNDS'
FINANCIAL PERFORMANCE FOR THE PAST 5 YEARS [OR, IF SHORTER, THE PERIOD OF EACH
FUND'S OPERATIONS]. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE
FUND SHARE. THE TOTAL RETURNS IN THE TABLES REPRESENT THE RATE THAT AN INVESTOR
WOULD HAVE EARNED OR LOST ON AN INVESTMENT IN A FUND (ASSUMING REINVESTMENT OF
ALL DIVIDENDS AND DISTRIBUTIONS). THIS INFORMATION HAS BEEN AUDITED BY
____________________, WHOSE REPORT, ALONG WITH THE FUNDS' FINANCIAL STATEMENTS,
ARE INCLUDED IN THE SAI, WHICH IS AVAILABLE UPON REQUEST.
37
<PAGE> 39
The following additional information is available to you upon request and
without charge.
ANNUAL/SEMIANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during the previous fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
YOU CAN GET FREE COPIES OF ANNUAL AND SEMI-ANNUAL REPORTS AND THE SAI, OR
REQUEST OTHER INFORMATION AND DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY
CONTACTING A BROKER OR OTHER FINANCIAL INSTITUTION THAT SELLS THE FUNDS. IN
ADDITION, YOU MAY CONTACT THE FUNDS AT:
MAGNA FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-219-4182
You can review the Annual and Semi-Annual Reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission. You can get copies:
o For a fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009 or calling
1-800-SEC-0330.
o At no charge from the Commission's Website at
http://www.sec.gov.
Investment Company Act file no. 811-8494
38
<PAGE> 40
MAGNA FUNDS
STATEMENT OF ADDITIONAL INFORMATION
January 1, 2000
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the Magna Funds Prospectus dated
January 1, 2000, and should be read in conjunction therewith. A copy of the
Prospectus may be obtained by writing to Magna Funds, P.O. Box 182754, Columbus,
OH 43218-2784, or calling (800) 219-4182.
<PAGE> 41
TABLE OF CONTENTS
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS..........................- 1 -
MANAGEMENT OF THE TRUST...................................................- 22 -
INVESTMENT ADVISORY AND OTHER SERVICES....................................- 25 -
PORTFOLIO TRANSACTIONS AND BROKERAGE......................................- 28 -
DESCRIPTION OF THE TRUST..................................................- 29 -
HOW TO BUY SHARES.........................................................- 33 -
NET ASSET VALUE AND PUBLIC OFFERING PRICE.................................- 34 -
SHAREHOLDER SERVICES......................................................- 35 -
REDEMPTIONS...............................................................- 37 -
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS..............- 38 -
PERFORMANCE INFORMATION...................................................- 41 -
APPENDIX A...................................................................A-1
DESCRIPTION OF CERTAIN FUND INVESTMENTS......................................A-1
APPENDIX B...................................................................B-1
DESCRIPTION OF BOND RATINGS .................................................B-1
APPENDIX C...................................................................C-1
FINANCIAL STATEMENTS.........................................................C-1
<PAGE> 42
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective and policies of each Fund (a "Fund") of Magna
Funds (the "Trust") are summarized in the Trust's Prospectus. The investment
policies set forth in the Prospectus and in this Statement of Additional
Information may be changed by Union Planters Bank, National Association ("Union
Planters"), the Funds' adviser, subject to review and approval by the Trust's
board of trustees, without shareholder approval, except that any Fund policy
explicitly identified as "fundamental" may not be changed without the approval
of the holders of a majority of the outstanding shares of the Fund (which in the
Prospectus and this Statement of Additional Information means the lesser of (i)
67% of the shares of the Fund represented at a meeting at which 50% or more of
the outstanding shares are represented or (ii) more than 50% of the outstanding
shares). The investment objectives of each of the Growth & Income Fund and
Intermediate Government Bond Fund are fundamental.
There is no assurance that any Fund will achieve its investment
objective. The Funds are permitted to invest in a variety of different
securities and instruments, subject to the policies and limitations set forth in
the Prospectus and this Statement of Additional Information. The Funds are not
required, however, to use all of the different investment instruments and
techniques described in the Prospectus or this Statement of Additional
Information. At any particular time, each Fund's assets will consist of
investments that Union Planters believes are appropriate for that Fund under the
market and economic conditions in effect at that time, consistent with the
Fund's investment objectives and policies.
Growth & Income Fund
- --------------------
As described in the Prospectus, the investment objective of the Growth
& Income Fund is to seek long-term growth of capital, current income and growth
of income. The Fund invests primarily in common stocks, preferred stocks and
securities convertible into common stocks of companies which offer the prospect
for growth of earnings while paying current dividends (or interest, in the case
of certain convertible securities). Over time, continued growth of earnings
tends to lead to higher dividends and enhancement of capital value. The Fund may
also purchase such securities which do not pay current dividends but which offer
prospects for growth of capital and future income. The Fund may invest a portion
of its assets in securities of foreign issuers traded in U.S. securities
markets, which may subject it to special risks. The Fund allocates its
investments among different industries and companies, and changes its portfolio
securities for investment considerations and not for trading purposes.
- 1 -
<PAGE> 43
In addition, the Fund may invest up to 10% of its total assets in debt
obligations with maturities of longer than one year at the time of purchase,
including U.S. Government Securities, high grade bonds and notes of
non-governmental issuers and other fixed income securities generally suitable
for investment by the Intermediate Government Bond Fund. The Fund may also
invest in repurchase agreements, and may engage in options transactions for
hedging purposes.
Intermediate Government Bond Fund
- ---------------------------------
As described in the Prospectus, the investment objective of the
Intermediate Government Bond Fund is to achieve current income consistent with
preservation of capital. The Fund pursues this objective by investing in a
portfolio consisting primarily of U.S. Government Securities, and high grade
bonds and notes of non-governmental issuers. Under normal circumstances, the
Fund will invest at least 65% of its total assets in U.S. Government Securities,
which include all securities issued or guaranteed by the U.S. Government or any
of its agencies, authorities or instrumentalities. Repurchase agreements that
are fully collateralized by U.S. Government Securities will be treated as U.S.
Government Securities for the purpose of this 65% test. U.S. Government
Securities include certain mortgage-backed securities. The Fund will maintain a
dollar-weighted average portfolio maturity of between three and ten years, but
may purchase individual securities with longer or shorter maturities. For
purposes of computing average maturity, (1) securities that are subject to call,
refund or redemption will be treated as maturing on the ultimate maturity date
unless Union Planters believes it is probable that the issuer of the security
will take advantage of the call, refund or redemption provision (in which case
the date of such probable call, refund or redemption will be treated as the
maturity date), (2) new issues by the Government National Mortgage Association
("GNMA") or the Federal National Mortgage Association ("FNMA"), which typically
have a 30-year stated maturity, will be treated as having a 12-year maturity
unless Union Planters believes, based on publicly available information from a
nationally recognized source, that the issue will have a longer or shorter
average life; and (3) certain nominally long-term securities will be deemed to
have a shorter-maturity because of the existence of a demand feature exercisable
by the Fund prior to the stated maturity.
The securities in which the Fund invests include, but are not limited
to:
o direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds;
o obligations of U.S. government agencies, authorities or
instrumentalities such as the Federal Home Loan Banks, FNMA, GNMA, the
Federal Farm
- 2 -
<PAGE> 44
Credit Banks, the Student Loan Marketing Association, the Federal Home
Loan Mortgage Corporation or the Tennessee Valley Authority;
o corporate debt obligations having floating or fixed rates of interest
and rated in one of the three highest categories by a nationally
recognized statistical rating organization ("NRSRO") (that is, rated
Aaa, Aa or A by Moody's Investors Service, Inc. ("Moody's") or AAA, AA
or A by Standard & Poor's Corporation ("Standard & Poor's") or Fitch
Investors Service, Inc. ("Fitch")), or which are not rated but are of
comparable quality in the judgment of Union Planters;
o asset-backed securities rated A or higher by an NRSRO, which may
include, but are not limited to interests in pools of receivables such
as motor vehicle installment purchase obligations and credit card
receivables;
o mortgage-backed securities;
o collateralized mortgage obligations; and
o repurchase agreements collateralized by eligible investments.
If a security's rating is reduced below the required minimum after the Fund has
purchased it, the Fund is not required to sell the security, but may consider
doing so. However, the Fund does not intend to hold more than 5% of its assets
in securities that have been downgraded below investment grade (that is, below
BBB or Baa).
The Fund may also engage in options transactions for hedging purposes.
Tax Exempt Bond Fund
- --------------------
In addition to the investments described in the Prospectus, the Tax
Exempt Bond Fund may also invest in any of the securities and other instruments
described above with respect to the Intermediate Government Bond Fund.
Money Market Fund
- -----------------
The Money Market Fund will invest only in securities which Union
Planters, acting under guidelines established by the Trust's board of trustees,
has determined are of high quality and present minimal credit risk. For a
description of certain of the money market instruments in which the Money Market
Fund may invest, and the related descriptions of the ratings of Standard &
Poor's Corporation ("S&P") and Moody's Investors Service, Inc. ("Moody's"), see
- 3 -
<PAGE> 45
Appendices A and B to this Statement. Money market instruments maturing in less
than one year may yield less than obligations of comparable quality having
longer maturities.
As described in the Prospectus, the Money Market Fund's investments may
include certain U.S. dollar-denominated obligations of foreign banks or of
foreign branches and subsidiaries of U.S. banks, which may be subject to foreign
economic, political and legal risks. Such risks include foreign economic and
political developments, foreign governmental restrictions that may adversely
affect payment of principal and interest on the obligations, foreign withholding
and other taxes on interest income, difficulties in obtaining and enforcing a
judgment against a foreign obligor, exchange control regulations (including
currency blockage), and the expropriation or nationalization of assets or
deposits. Foreign branches of U.S. banks and foreign banks are not necessarily
subject to the same or similar regulatory requirements that apply to domestic
banks. For instance, such branches and banks may not be subject to the types of
requirements imposed on domestic banks with respect to mandatory reserves, loan
limitations, examinations, accounting, auditing, record keeping and the public
availability of information. Obligations of such branches or banks will be
purchased only when Union Planters believes the risks are minimal.
Considerations of liquidity, safety and preservation of capital may
preclude the Money Market Fund from investing in money market instruments paying
the highest available yield at a particular time. The Money Market Fund,
consistent with its investment objective, attempts to maximize yields by
engaging in portfolio trading and by buying and selling portfolio investments in
anticipation of or in response to changing economic and money market conditions
and trends. The Money Market Fund also invests to take advantage of what are
believed to be temporary disparities in the yields of the different segments of
the high quality money market or among particular instruments within the same
segment of the market. These policies, as well as the relatively short maturity
of obligations to be purchased by the Fund, may result in frequent changes in
the portfolio of the Fund. There are usually no brokerage commissions as such
paid by the Fund in connection with the purchase of securities of the type in
which it invests. See "Portfolio Transactions and Brokerage" below.
As described in the Prospectus, all of the Money Market Fund's
investments will, at the time of investment, have remaining maturities of 397
days or less. The average maturity of the Money Market Fund's portfolio
securities based on dollar value will not exceed 90 days at the time of each
investment. If the disposition of a portfolio security results in a
dollar-weighted average portfolio maturity in excess of 90 days for the Money
Market Fund, the Fund will invest its available cash in such a manner as to
reduce its dollar-weighted average portfolio maturity to 90 days or less as soon
as reasonably practicable. For the purposes of the
- 4 -
<PAGE> 46
foregoing maturity restrictions, variable rate instruments which are scheduled
to mature in more than 397 days are treated as having a maturity equal to the
longer of (i) the period remaining until the next readjustment of the interest
rate and (ii) if the Fund is entitled to demand prepayment of the instrument,
the notice period remaining before the Fund is entitled to such prepayment;
other variable rate instruments are treated as having a maturity equal to the
shorter of such periods. Floating rate instruments which are scheduled to mature
in more than 397 days are treated as having a maturity equal to the notice
period remaining before the Fund is entitled to demand prepayment of the
instrument; other floating rate instruments, and all such instruments which are
U.S. Government Securities, are treated as having a maturity of one day.
The value of the securities held by the Fund can be expected to vary
inversely with changes in prevailing interest rates. Thus, if interest rates
increase after a security is purchased, that security, if sold, might be sold at
a loss. Conversely, if interest rates decline after purchase, the security, if
sold, might be sold at a profit. In either instance, if the security was held to
maturity, no gain or loss would normally be realized as a result of these
fluctuations. Substantial redemptions of Fund shares could require the sale of
portfolio investments at a time when a sale might not be desirable.
After purchase by the Money Market Fund, a security may cease to be
rated or its rating may be reduced below the minimum required for purchase by
such Fund. Neither event will necessarily require a sale of such security by
such Fund. However, such event will be considered in determining whether the
Fund should continue to hold the security. To the extent that the ratings given
by Moody's or S&P (or another SEC-approved nationally recognized statistical
rating organization ("NRSRO")) may change as a result of changes in such
organizations or their rating systems, each Fund will, in accordance with
standards approved by the Board of Trustees, attempt to use comparable ratings
as standards for investments in accordance with the investment policies
contained in the Prospectus.
Investment Restrictions - All Funds except Magna Money Market Fund
- ------------------------------------------------------------------
In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of each Fund (and
those marked with an asterisk are fundamental policies of each Fund) except for
the Money Market Fund:
Each such Fund will not:
(1) Invest in companies for the purpose of exercising control
or management.
- 5 -
<PAGE> 47
*(2) Act as underwriter, except to the extent that, in
connection with the disposition of portfolio securities, it may be
deemed to be an underwriter under certain federal securities laws.
*(3) Invest in oil, gas or other mineral leases, rights or
royalty contracts or in real estate, commodities or commodity
contracts. (This restriction does not prevent any Fund from investing
in issuers that invest or deal in the foregoing types of assets or from
purchasing securities that are secured by real estate.)
*(4) Make loans. (For purposes of this investment restriction,
neither (i) entering into repurchase agreements nor (ii) purchasing
bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public
or of a type commonly purchased by financial institutions, is
considered the making of a loan.)
(5) Purchase any security (other than a U.S. Government
Security) if, as a result, more than 5% of the Fund's total assets
(taken at current value) would then be invested in securities of a
single issuer.
(6) Invest more than 5% of its total assets (taken at
current value) in securities of companies that (with predecessor
companies) have a record of less than three years of continuous
operations.
(7) Acquire more than 10% of any class of securities of an
issuer (taking all preferred stock issues as a single class and all
debt issues as a single class) or acquire more than 10% of the
outstanding voting securities of an issuer.
(8) Invest in the securities of other investment companies,
except by purchases in the open market involving only customary
brokers' commissions or in connection with a merger, consolidation or
similar transaction. (Under the Investment Company Act of 1940 (the
"1940 Act"), each Fund generally may not: (a) invest more than 10% of
its total assets (taken at current value) in such securities; (b) own
securities of any one investment company having a value in excess of 5%
of the Fund's total assets (taken at current value); or (c) own more
than 3% of the outstanding voting stock of any one investment company.)
(9) Pledge, mortgage, hypothecate or otherwise encumber any
of its assets, except that each Fund may pledge assets having a value
not exceeding 10% of its total assets to secure borrowings permitted by
restriction (12) below. (For the purpose of this restriction,
collateral
- 6 -
<PAGE> 48
arrangements with respect to options, futures contracts and options on
futures contracts and with respect to initial and variation margin are
not deemed to be a pledge or other encumbrance of assets.)
(10) Purchase or retain securities of an issuer if officers
and trustees of the Trust and officers and directors of its investment
adviser who individually own more than 1/2 of 1% of the shares or
securities of such issuer together own more than 5% of such shares or
securities.
*(11) Purchase any security (other than U.S. Government
Securities) if, as a result, 25% or more of the Fund's total assets
(taken at current value) would be invested in any one industry (in the
utilities category, gas, electric, water and telephone companies will
be considered as being in separate industries).
*(12) Borrow money in excess of 10% of its total assets (taken
at cost) or 5% of its total assets (taken at current value), whichever
is lower, nor borrow any money except as a temporary measure for
extraordinary or emergency purposes.
*(13) Purchase securities on margin (except such short term
credits as are necessary for clearance of transactions); or make short
sales (except where, by virtue of ownership of other securities, it has
the right to obtain, without payment of additional consideration,
securities equivalent in kind and amount to those sold).
(14) Participate on a joint or joint and several basis in
any trading account in securities. (The "bunching" of orders for the
purchase or sale of portfolio securities with Union Planters or its
affiliates or accounts under their management to reduce brokerage
commissions, to average prices among them or to facilitate such
transactions is not considered a trading account in securities for
purposes of this restriction.)
(15) Purchase any illiquid security if, as a result, more
than 15% of the Fund's net assets (based on current value) would then
be invested in such securities; provided, however, that no more than
10% of the Fund's total assets may be invested in the aggregate in (1)
restricted securities, (2) securities of companies that (with
predecessor companies) have a record of less than three years of
continuous operations and (3) securities that are not readily
marketable.
(16) Write or purchase puts, calls or combinations of both
except that each Fund may (1) acquire warrants or rights to subscribe
to securities of companies issuing such warrants or rights, or of
parents or subsidiaries of such companies, (2) write, purchase and sell
put and call options on securities, securities indices or futures
contracts and (3) write, purchase
- 7 -
<PAGE> 49
and sell put and call options on currencies and enter into currency
forward contracts.
*(17) Issue senior securities. (For the purpose of this
restriction none of the following is deemed to be a senior security:
any pledge or other encumbrance of assets permitted by restriction (9)
above; any borrowing permitted by restriction (12) above; any
collateral arrangements with respect to options, futures contracts and
options on futures contracts and with respect to initial and variation
margin; and the purchase or sale of options, forward contracts, futures
contracts or options on futures contracts.)
Each Fund intends, based on the views of the staff of the Securities
and Exchange Commission (the "SEC"), to restrict its investments in repurchase
agreements maturing in more than seven days, together with other investments in
illiquid securities, to 15% of the Fund's net assets.
Although authorized to invest in restricted securities, each Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities in the coming year. Although authorized to make short sales
subject to the condition specified in restriction (13) above, each Fund as a
matter of non-fundamental operating policy currently does not intend to make
such short sales in the coming year. Although authorized under restriction (16)
above to write, purchase and sell put and call options on currencies and to
enter into currency forward contracts, each Fund, as a matter of non-fundamental
operating policy, currently does not intend to do so in the coming year.
Investment Restrictions - Money Market Fund
- -------------------------------------------
The following is a list of the Money Market Fund's investment
restrictions. The restrictions set forth in the numbered paragraphs marked with
an asterisk are fundamental policies and, accordingly, will not be changed
without the consent of the holders of a majority of the outstanding voting
securities of the applicable Fund.
The Fund will not:
(1) Purchase any security (other than U.S. Government Securities and
repurchase agreements relating thereto) if, as a result, more than 5% of the
Fund's total assets (taken at current value) would be invested in securities of
a single issuer. This restriction applies to securities subject to repurchase
agreements but not to the repurchase agreements themselves;
*(2) Purchase any security if, as a result, more than 25% of the Fund's
total assets (taken at current value) would be invested in any one industry.
This
- 8 -
<PAGE> 50
restriction does not apply to U.S. Government Securities and bank obligations.
For purposes of this restriction, telephone, gas and electric public utilities
are each regarded as separate industries and finance companies whose financing
activities are related primarily to the activities of their parent companies are
classified in the industry of their parents;
*(3) Purchase securities on margin (but it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities); or make short sales except where, by virtue of ownership of other
securities, it has the right to obtain, without payment of further
consideration, securities equivalent in kind and amount to those sold, and the
Fund will not deposit or pledge more than 10% of its total assets (taken at
current value) as collateral for such sales;
(4) Acquire more than 10% of the total value of any class of the
outstanding securities of an issuer or acquire more than 10% of the outstanding
voting securities of an issuer. This restriction does not apply to U.S.
Government Securities;
*(5) Borrow money, except as a temporary measure for extraordinary or
emergency purposes (but not for the purpose of investment), in excess of 10% of
its total assets (taken at cost) or 5% of such total assets (taken at current
value), whichever is lower;
(6) Pledge, mortgage or hypothecate more than 10% of its total assets
(taken at cost);
*(7) Make loans, except by purchase of debt obligations in which the
Fund may invest consistent with its objective and investment policies. This
restriction does not apply to repurchase agreements;
*(8) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, commodities or commodity contractors or real estate. This restriction
does not prevent the Fund from purchasing securities of companies investing in
real estate or of companies which are not principally engaged in the business of
buying or selling such leases, rights or contracts;
*(9) Act as underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws;
(10) Make investments for the purpose of exercising control or
management;
- 9 -
<PAGE> 51
(11) Participate on a joint or joint and several basis in any trading
account in securities (the "bunching" of orders for the purchase or sale of
portfolio securities with other accounts under the management of Union Planters
to reduce acquisition costs, to average prices among them, or to facilitate such
transactions, is not considered participating in a trading account in
securities);
(12) Write or purchase puts, calls or combinations thereof; except that
the Fund may (1) acquire warrants or rights to subscribe to securities of
companies issuing such warrants or rights, or of parents or subsidiaries of such
companies, and (2) write, purchase and sell put and call options on securities,
securities indices, futures contracts and currencies.
(13) Invest in the securities of other investment companies, except in
connection with a merger, consolidation or similar transaction; or
(14) Issue senior securities. (For the purpose of this restriction,
none of the following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction 6 above; any borrowing permitted
by restriction 5 above; any collateral arrangements with respect to options,
futures contracts and options on futures contracts and with respect to initial
and variational margin; and the purchase or sale of options, forward contracts,
futures contracts or options on futures contracts.)
Except as otherwise stated, the foregoing percentages and the
percentage limitations set forth in the Prospectus will apply at the time of the
purchase of a security and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of a purchase of
such security.
The Fund will not purchase any security restricted as to disposition
under federal securities laws if, as a result, more than 10% of the Fund's net
assets would be invested in such securities or in other securities that are
illiquid.
The staff of the SEC is currently of the view that repurchase
agreements maturing in more than seven days are "illiquid" securities. The Fund
currently intends to conduct its operations in a manner consistent with this
view. In addition, certain loan participations may be "illiquid" securities for
this purpose.
U.S. GOVERNMENT SECURITIES
- 10 -
<PAGE> 52
As described in the Prospectus, each Fund may invest in U.S. Government
Securities. U.S. Government Securities include direct obligations of the U.S.
Treasury, as well as securities issued or guaranteed by U.S. Government
agencies, authorities and instrumentalities, including, among others, the
Government National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, the Federal Housing
Administration, the Resolution Funding Corporation, the Federal Farm Credit
Banks, the Federal Home Loan Banks, the Tennessee Valley Authority, the Student
Loan Marketing Association and the Small Business Administration. More detailed
information about some of these categories of U.S. Government Securities
follows.
o U.S. Treasury Bills--Direct obligations of the United States
Treasury which are issued in maturities of one year or less.
No interest is paid on Treasury bills; instead, they are
issued at a discount and repaid at full face value when they
mature. They are backed by the full faith and credit of the
United States Government.
o U.S. Treasury Notes and Bonds--Direct obligations of the
United States Treasury issued in maturities that vary between
one and forty years, with interest normally payable every six
months. They are backed by the full faith and credit of the
United States Government.
o "Ginnie Maes"--Debt securities issued by a mortgage banker or
other mortgagee which represent an interest in a pool of
mortgages insured by the Federal Housing Administration or the
Farmer's Home Administration or guaranteed by the Veterans
Administration. The Government National Mortgage Association
("GNMA") guarantees the timely payment of principal and
interest when such payments are due, whether or not these
amounts are collected by the issuer of these certificates on
the underlying mortgages. An assistant attorney general of the
United States has rendered an opinion that the guarantee by
GNMA is a general obligation of the United States backed by
its full faith and credit. Mortgages included in single family
or multi-family residential mortgage pools backing an issue of
Ginnie Maes have a maximum maturity of up to 30 years.
Scheduled payments of principal and interest are made to the
registered holders of Ginnie Maes (such as the Fund) each
month. Unscheduled prepayments may be made by homeowners, or
as a result of a default. Prepayments are passed through to
the registered holder of Ginnie Maes along with regular
monthly payments of principal and interest.
o "Fannie Maes"--The Federal National Mortgage Association
("FNMA") is a government-sponsored corporation owned entirely
by private
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stockholders that purchases residential mortgages from a list
of approved seller/servicers. Fannie Maes are pass-through
securities issued by FNMA that are guaranteed as to timely
payment of principal and interest by FNMA but are not backed
by the full faith and credit of the United States Government.
o "Freddie Macs"--The Federal Home Loan Mortgage Corporation
("FHLMC") is a corporate instrumentality of the United States
Government. Freddie Macs are participation certificates issued
by FHLMC that represent interests in residential mortgages
from FHLMC's National Portfolio. FHLMC guarantees the timely
payment of interest and ultimate collection of principal, but
Freddie Macs are not backed by the full faith and credit of
the United States Government.
As described in the Prospectus, U.S. Government Securities do not
involve the credit risks associated with investments in other types of
fixed-income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed-income securities. Like other fixed-income securities, however,
the values of U.S. Government Securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.
WHEN-ISSUED SECURITIES
Each Fund may enter into agreements with banks or broker-dealers for
the purchase or sale of securities at an agreed-upon price on a specified future
date. Such agreements might be entered into, for example, when a Fund that
invests in fixed-income securities anticipates a decline in interest rates and
is able to obtain a more advantageous yield by committing currently to purchase
securities to be issued later. When a Fund purchases securities in this manner
(i.e., on a when-issued or delayed-delivery basis), it is required to create a
segregated account with the Trust's custodian and to maintain in that account
cash, U.S. Government Securities or other liquid securities in an amount equal
to or greater than, on a daily basis, the amount of the Fund's when-issued or
delayed-delivery commitments. Each Fund will make commitments to purchase on a
when-issued or delayed-delivery basis only securities meeting that Fund's
investment criteria. The Fund may take delivery of these securities or, if it is
deemed advisable as a matter of investment strategy, the Fund may sell these
securities before the settlement date. When the time comes to pay for
when-issued or delayed-delivery securities, the Fund will meet its obligations
from then available cash flow or the sale of securities, or from the sale of the
when-issued or delayed-delivery
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<PAGE> 54
securities themselves (which may have a value greater or less than the Fund's
payment obligation).
CONVERTIBLE SECURITIES
The Growth & Income Fund may invest in convertible securities.
Convertible securities include corporate bonds, notes or preferred stocks of
U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities. Convertible securities also include
other securities, such as warrants, that provide an opportunity for equity
participation. The price of a convertible security will normally vary in some
proportion to changes in the price of the underlying common stock because of
this conversion feature. A convertible security will normally also provide fixed
income stream. For this reason, a convertible security may not decline in price
as rapidly as the underlying common stock.
Union Planters will select convertible securities to be purchased by
the Growth & Income Fund based primarily upon its evaluation of the fundamental
investment characteristics and growth prospects of the issuer of the security.
As a fixed-income security, a convertible security tends to increase in market
value when interest rates decline and to decrease in value when interest rates
rise. While convertible securities generally offer lower interest or dividend
yields than non-convertible fixed-income securities of similar quality, their
value tends to increase as the market value of the underlying stock increases
and to decrease when the value of the underlying stock decreases. The Growth &
Income Fund will not purchase any convertible security that is rated below BBB
by Standard & Poor's or Baa by Moody's (or that is unrated but determined by
Union Planters to be comparable in quality to securities rated below BBB or
Baa), if as a result of such purchase more than 5% of the Fund's assets would be
invested in such securities. Securities rated BBB or Baa or lower (and
comparable unrated securities) have speculative characteristics. Unfavorable
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity of the issuer of these securities to make principal and
interest payments than is the case with higher quality securities.
ZERO COUPON BONDS
The Intermediate Government Bond Fund and the Tax Exempt Bond Fund may
each invest in zero coupon bonds. Zero coupon bonds are debt obligations that do
not entitle the holder to any periodic payments of interest either for the
entire life of the obligation or for an initial period after the issuance of the
obligations. Such bonds are issued and traded at a discount from their face
amounts. The amount of the discount varies depending on such factors as the time
remaining until maturity of the bonds, prevailing interest rates, the liquidity
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<PAGE> 55
of the security and the perceived credit quality of the issuer. The market
prices of zero coupon bonds generally are more volatile than the market prices
of securities that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do non-zero coupon bonds
having similar maturities and credit quality. In order to satisfy a requirement
for qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended (the "Code"), each Fund must distribute each year at
least 90% of its net investment income, including the original issue discount
accrued on zero coupon bonds. Because a Fund investing in zero coupon bonds will
not on a current basis receive cash payments from the issuer in respect of
accrued original issue discount, the Fund may have to distribute cash obtained
from other sources in order to satisfy the 90% distribution requirement under
the Code. Such cash might be obtained from selling other portfolio holdings of
the Fund. In some circumstances, such sales might be necessary in order to
satisfy cash distribution requirements even though investment considerations
might otherwise make it undesirable for the Fund to sell such securities at such
time.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements, by which the Fund
purchases a security and obtains a simultaneous commitment from the seller (a
bank or, to the extent permitted by the 1940 Act, a recognized securities
dealer) to repurchase the security at an agreed upon price and date (usually
seven days or less from the date of original purchase). The resale price is in
excess of the purchase price and reflects an agreed upon market rate unrelated
to the coupon rate on the purchased security. Such transactions afford the Funds
the opportunity to earn a return on temporarily available cash at minimal market
risk. While the underlying security may be a bill, certificate of indebtedness,
note or bond issued by an agency, authority or instrumentality of the United
States Government, the obligation of the seller is not guaranteed by the U.S.
Government or the issuer of any other high quality money market instrument
underlying the agreement, and there is a risk that the seller may fail to
repurchase the underlying security. In such event, the Fund would attempt to
exercise rights with respect to the underlying security, including possible
disposition in the market. However, the Fund may be subject to various delays
and risks of loss, including (a) possible declines in the value of the
underlying security during the period while the Fund seeks to enforce its rights
thereto, (b) possible reduced levels of income and lack of access to income
during this period and (c) possible inability to enforce rights and the expenses
involved in enforcement or attempted enforcement. The Funds will enter into
repurchase agreements only where the market value of the underlying security
equals or exceeds the repurchase price, and the Fund will require the seller to
provide additional collateral if this market value falls below the repurchase
price at any time during the term of the repurchase agreement.
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<PAGE> 56
LOANS OF PORTFOLIO SECURITIES
Each Fund may lend its portfolio securities to broker-dealers under
contracts calling for cash or eligible liquid securities as collateral equal to
at least the market value of the securities loaned, marked to the market on a
daily basis. A Fund will continue to benefit from interest or dividends on the
securities loaned and will also receive interest through investment of the cash
collateral in short-term liquid investments, which may include shares of money
market funds, subject to the investment restrictions listed above. Any voting
rights, or rights to consent, relating to securities loaned pass to the
borrowers. However, if a material event affecting the investment occurs, such
loans may be called so that the securities may be voted by the Fund. The Funds
pay various fees in connection with such loans. If the borrower of the security
does not redeliver the loaned securities as required by the terms of the loan,
the Fund has rights to sell the collateral. However, the Fund may be subject to
various delays and risks of loss, including (a) possible declines in the value
of the collateral while the Fund seeks to enforce its rights thereto, (b)
possible reduced levels of income and lack of access to income during this
period and (c) possible inability to enforce rights and the expenses involved in
enforcement or attempted enforcement.
OPTIONS
The Funds may engage in certain options transactions for hedging
purposes.
An "American style" option allows exercise of the option at any time
during the term of the option. A "European style" option allows an option to be
exercised only at the end of its term. Options may be traded on or off an
established securities exchange.
If the holder of an option wishes to terminate its position, it may
seek to effect a closing sale transaction by selling an option identical to the
option previously purchased. The effect of the purchase is that the previous
option position will be canceled. A Fund will realize a profit from closing out
an option if the price received for selling the offsetting position is more than
the premium paid to purchase the option; the Fund will realize a loss from
closing out an option transaction if the price received for selling the
offsetting option is less than the premium paid to purchase the option.
The successful use of options depends in part on the ability of Union
Planters to forecast correctly the direction and extent of interest rate or
stock price movements within a given time frame. To the extent interest rates or
stock prices move in a direction opposite to that anticipated, a Fund may
realize a loss on the hedging transaction that is not fully or partially offset
by an increase in the value of portfolio securities. In addition, whether or not
interest rates or stock prices
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<PAGE> 57
move during the period that the Fund holds options positions, the Fund will pay
the cost of acquiring those positions (i.e., brokerage costs). As a result of
these factors, the Fund's total return for such period may be less than if it
had not engaged in the hedging transaction.
An over-the-counter option (an option not traded on an established
exchange) may be closed out only with the other party to the original option
transaction. While each Fund will seek to enter into over-the counter options
only with dealers who agree to or are expected to be capable of entering into
closing transactions with the Fund, there can be no assurance that a Fund will
be able to liquidate an over-the-counter option at a favorable price at any time
prior to its expiration. Accordingly, a Fund might have to exercise an
over-the-counter option it holds in order to achieve the intended hedge.
Over-the-counter options are not subject to the protections afforded purchasers
of exchange-listed options by the Options Clearing Corporation or other clearing
organization.
The staff of the SEC has taken the position that over-the-counter
options should be treated as illiquid securities for purposes of each Fund's
investment restriction prohibiting it from investing more than 15% of its net
assets in illiquid securities. The Funds intend to comply with this position.
FUTURES AND RELATED OPTIONS TRANSACTIONS
A futures contract is an agreement between two parties to buy and sell
a security or commodity for a set price on a future date. These contracts are
traded on exchanges, so that, in most cases, either party can close out its
position on the exchange for cash, without actually delivering the security or
commodity. An option on a futures contract gives the holder of the option the
right to buy or sell a position in a futures contract to the writer of the
option, at a specified price and on or before a specified expiration date.
Each Fund [(EXCEPT FOR THE MONEY MARKET FUND)] may buy or sell futures
contracts relating to U.S. Government Securities, and may buy or sell options on
such futures contracts. In addition, the Growth & Income Fund may buy or sell
futures contracts relating to stock indexes, and may buy or sell options on such
futures contracts.
These Funds may use futures contracts to "hedge" against the adverse
effects of broad movements in the securities markets or changes in the value of
specific securities. For example, to protect against the fall in the value of
its investments in long-term debt securities that would result from an increase
in interest rates, the Intermediate Government Bond Fund might sell futures
contracts with respect to U.S. Government Securities. Then if interest rates do
rise and
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<PAGE> 58
the value of the securities declines, the value of the futures contracts should
increase. Likewise, if the Intermediate Government Bond Fund holds cash reserves
and short-term investments and Union Planters expects interest rates to fall,
the Fund might purchase futures contracts on U.S. Government Securities. If, as
expected, the market value both of long-term debt securities and futures
contracts with respect thereto increases, the Fund would benefit from a rise in
the value of long-term securities without actually buying them until the market
had stabilized. The Growth & Income Fund could make similar use of stock index
futures, to hedge against broad movements in stock market values.
Options on futures contracts may also be used for hedging. For example,
if the value of the Intermediate Government Bond Fund's portfolio securities is
expected to decline as a result of an increase in interest rates, the Fund might
purchase put options on futures contracts rather than selling futures contracts.
Similarly, to hedge against an anticipated increase in the price of long-term
debt securities, the Fund might purchase call options as a substitute for the
purchase of futures contracts.
When a Fund enters into a futures contract, it is required to deposit
with the broker as "initial margin" an amount of cash or short-term U.S.
Government Securities equal to approximately 5% of the contract amount. That
amount is adjusted by payments to or from the broker ("variation margin") as the
value of the contract changes. Neither Fund will purchase or sell futures
contracts or related options if as a result such Fund's initial margin deposits
plus premiums paid for outstanding related options would be greater than 5% of
the Fund's total assets. Further information concerning futures contracts and
options on futures contracts is set forth below.
Futures Contracts. A futures contract sale creates an obligation by the
seller to deliver the type of commodity or financial 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
underlying commodity or financial instrument in a specified delivery month at a
stated price. The specific instruments delivered or taken, respectively, at
settlement date are not determined until at or near that date. The determination
is made in accordance with the rules of the exchange on which the futures
contract sale or purchase was made. A stock index futures contract is similar
except that the parties agree to take or make delivery of an amount of cash
equal to a specified dollar amount times the difference between the stock index
value at the close of the last trading day of the contract and the price at
which the futures contract is originally struck. Futures contracts are traded
only on commodity exchanges--known as "contract markets"-- approved for such
trading by the Commodity Futures Trading Commission (the "CFTC"), and must be
executed through a futures commission merchant or brokerage firm which is a
member of a contract market.
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<PAGE> 59
Although futures contracts by their terms call for actual delivery or
acceptance of commodities or securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out a futures contract sale is effected by purchasing a futures contract for the
same aggregate amount of the specific type of financial instrument or commodity
and 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. Conversely, if the price of the offsetting
purchase exceeds the price of the initial sale, the seller realizes a loss.
Similarly, the closing out of a futures contract purchase is effected by the
purchaser entering into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the purchaser realizes a gain, and if the purchase
price exceeds the offsetting sale price, it realizes a loss.
The purchase of (that is, assuming a long position in) or sale of (that
is, assuming a short position in) a futures contract differs from the purchase
or sale of a security or an option, in that no price or premium is paid or
received. Instead, an amount of cash or U.S. Treasury bills generally not
exceeding 5% of the contract amount must be deposited with the broker. This
amount is known as initial margin. Subsequent payments to and from the broker,
known as variation margin, are made on a daily basis as the price of the
underlying futures contract fluctuates, making the long and short positions in
the futures contract more or less valuable, a process known as "marking to
market." At any time prior to the settlement date of the futures contract, the
position may be closed out by taking an opposite position which will operate to
terminate the position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid to or
released by the broker, and the purchaser realizes a loss or gain. In addition,
a commission is paid on each completed purchase and sale transaction.
Each Fund (except for the Money Market Fund) may engage in transactions
in futures contracts for the purpose of hedging against changes in the values of
securities. Each such Fund may sell such futures contracts in anticipation of a
decline in the value of its investments. The risk of such a decline could be
reduced without employing futures as a hedge by selling long-term debt
securities or equity securities and either reinvesting the proceeds in
securities with shorter maturities or by holding assets in cash. This strategy,
however, entails increased transaction costs in the form of brokerage
commissions and dealer spreads and will typically reduce a Fund's average yield
(with respect to futures on debt securities) as a result of the shortening of
maturities. The sale of futures contracts provides an alternative means of
hedging a Fund against a decline in the value of its investments in debt or
equity securities. As such values decline, the value of a Fund's position in the
futures contracts will tend to increase, thus offsetting all or a portion of the
depreciation in the market value of the securities
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<PAGE> 60
that are being hedged. While the Fund will incur commission expenses in
establishing and closing out futures positions, commissions on futures
transactions may be significantly lower than transaction costs incurred in the
purchase and sale of debt or equity securities. Employing futures as a hedge may
also permit a Fund to assume a defensive posture without reducing its yield on
its investments.
Stock Index Futures. A stock index assigns relative values to the
common stocks included in the index. A stock index futures contract is a
bilateral agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to a specified dollar amount times the difference
between the stock index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. No
physical delivery of the underlying stocks in the index is made.
The Growth & Income Fund may engage in transactions in stock index
futures contracts only for hedging purposes. Examples of the use of such
contracts for hedging purposes include (1) the sale of a futures contract to
offset possible declines in the value of securities the Fund owns and (2) the
purchase of a futures contract when the Fund holds cash and seeks to protect
against the possibility that the equity markets will rise before the Fund has
had the opportunity to invest the cash in equity securities. As discussed below
under "Risk Factors in Options and Futures Transactions," the Fund will
generally not own (or intend to own) all of the securities in the index that is
the subject of the futures contract. Thus, hedging through stock index futures
involves significant "correlation risk."
Call Options on Futures Contracts. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the futures contract upon which it is based, or upon the price of the
underlying securities or index, it may be more or less risky than ownership of
the futures contract or underlying securities. As with the purchase of a futures
contract, the Funds may purchase a call option on a futures contract to hedge
against a market advance when the Fund is not fully invested.
Put Options on Futures Contracts. The purchase of a put option on a
futures contract is similar in some respects to the purchase of protective put
options on portfolio securities. The Funds may purchase put options on futures
contracts to hedge against the risk of rising interest rates or declines in
stock market prices. The Funds may purchase put options on futures contracts for
the same reasons as they would sell futures contracts.
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<PAGE> 61
LIMITATIONS ON THE USE OF OPTIONS AND FUTURES PORTFOLIO STRATEGIES
The Funds will not "over-hedge," that is, no Fund will maintain open
short positions in futures contracts if, in the aggregate, the value of its open
positions (marked to market) exceeds the current market value of its securities
portfolio plus or minus the unrealized gain or loss on such open positions,
adjusted for the historical volatility relationship between the portfolio and
futures contracts.
A Fund's ability to engage in the options and futures strategies
described above will depend on the availability of liquid markets in such
instruments. Markets in certain options and futures are relatively new and still
developing. It is impossible to predict the amount of trading interest that may
exist in various types of options or futures. Therefore no assurance can be
given that a Fund will be able to utilize these instruments effectively for the
purposes set forth above. Furthermore, a Fund's ability to engage in options and
futures transactions may be limited by tax considerations, CFTC rules and
transaction costs.
RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS
Options Transactions. An exchange-traded option may be closed out only
on a national securities exchange (an "Exchange") which generally provides a
liquid secondary market for an option of the same series. An over-the-counter
option may be closed out only with the other party to the option transaction. If
a liquid secondary market for an exchange-traded option does not exist, it might
not be possible to effect a closing transaction with respect to a particular
option, with the result that the Fund would have to exercise the option in order
to realize any profit. Reasons for the absence of a liquid secondary market on
an Exchange include the following: (i) there may be insufficient trading
interest in certain 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 options or underlying securities; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an Exchange; (v) the
facilities of an Exchange or the Options 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 options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue to be
exercisable in accordance with their terms.
The Exchanges have established limitations governing the maximum number
of options which may be written by an investor or group of investors acting in
concert. It is possible that the Trust, Union Planters and its affiliates and
their other clients may be considered to be such a group. These position
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limits may restrict the Funds' ability to purchase or sell options on a
particular security.
Futures Transactions. Investment by a Fund in futures contracts
involves risk. Some of that risk may be caused by an imperfect correlation
between movements in the price of the futures contract and the price of the
security or other investment being hedged. The hedge will not be fully effective
where there is such imperfect correlation. For example, if the price of the
futures contract moves more than the price of the hedged security, a Fund would
experience either a loss or gain on the future which is not completely offset by
movements in the price of the hedged securities. To compensate for imperfect
correlations, a Fund may purchase or sell futures contracts in a greater dollar
amount than the hedged securities if the volatility of the hedged security is
historically greater than the volatility of the futures contracts. Conversely, a
Fund may purchase or sell fewer contracts if the volatility of the price of the
hedged securities is historically less than that of the futures contracts. The
risk of imperfect correlation generally tends to diminish as the maturity date
of a futures contract approaches.
Futures contracts or options thereon may be used to hedge against a
possible increase in the price of securities which a Fund anticipates
purchasing. In such instances, it is possible that the market may instead
decline. If the Fund does not then invest in such securities because of concern
as to possible further market decline or for other reasons, the Fund may realize
a loss on the futures contract or option that is not offset by a reduction in
the price of securities purchased.
The amount of risk a Fund assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.
The liquidity of a secondary market in a futures contract may be
adversely affected by "daily price fluctuation limits" established by commodity
exchanges which limit the amount of fluctuation in a futures contract price
during a single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions. Prices have in the past
exceeded the daily limit on a number of consecutive trading days.
The successful use of transactions in futures and related options also
depends on the ability of Union Planters to forecast correctly the direction and
extent of interest rate movements within a given time frame. To the extent
interest rates or stock index levels remain stable during the period in which a
futures contract or related option is held by a Fund or such rates or index
levels move in
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a direction opposite to that anticipated, a Fund may realize a
loss on the hedging transaction which is not fully or partially offset by an
increase in the value of portfolio securities. As a result, a Fund's total
return for such period may be less than if it had not engaged in the hedging
transaction.
MORTGAGE-BACKED AND OTHER ASSET BACKED SECURITIES
The Intermediate Government Bond Fund and the Tax Exempt Bond Fund may
invest in various types of asset-backed securities. Asset-backed securities are
created by the grouping of certain governmental, government-related or private
loans, receivables and other lender assets into pools. Interests in these pools
are sold as individual securities. Payments from the asset pools may be divided
into several different classes of debt securities, with some classes entitled to
receive regular installments of principal and interest, other classes entitled
to receive regular installments of interest, with principal payable at maturity
or upon specified call dates, and other classes entitled to receive payments of
principal and accrued interest only at maturity or upon specified call dates.
Different classes of securities will bear different interest rates, which may be
fixed or floating. Certain classes may be entitled to receive only interest, or
only principal; the value of these classes may fluctuate dramatically during
periods when market interest rates are changing.
Because the loans held in an asset pool often may be prepaid without
penalty or premium (with prepayments passed through to the holders of the
asset-backed securities), asset-backed securities are generally subject to
higher prepayment risks than most other types of debt instruments. For example,
prepayment risks on mortgage securities tend to increase during periods of
declining mortgage interest rates, because many borrowers refinance their
mortgages to take advantage of the more favorable rates. Depending upon market
conditions, the yield that a Fund receives from the reinvestment of such
prepayments, or any scheduled principal payments, may be lower than the yield on
the original mortgage security. As a consequence, mortgage securities may be a
less effective means of "locking in" interest rates than other types of debt
securities having the same stated maturity and may also have less potential for
capital appreciation. For certain types of asset pools, such as collateralized
mortgage obligations ("CMOs") (see below), prepayments may be allocated to one
class of securities ahead of other classes, in order to reduce the risk of
prepayment for the other classes. Prepayments may result in a capital loss to
the Fund to the extent that the prepaid mortgage securities were purchased at a
market premium over their stated principal amount. Conversely, the prepayment of
mortgage securities purchased at a market discount from their stated principal
amount will accelerate the recognition of interest income by a Fund, which would
be taxed as ordinary income when distributed to shareholders.
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<PAGE> 64
CMOs are bonds issued by single purpose finance subsidiaries or trusts
established by financial institutions, government agencies, brokerage firms or
companies related to the construction industry. CMOs purchased by the Fund may
be:
o collateralized by pools of mortgages in which every mortgage
is guaranteed as to payment of principal and interest by an
agency or instrumentality of the U.S. government;
o collateralized by pools of mortgages in which payment of
principal and interest is guaranteed by the issuer of the CMO
and such guarantee is collateralized by government securities;
or
o securities in which the proceeds of the issuance are invested
in mortgage securities and payment of the principal and
interest is supported by the credit of an agency or
instrumentality of the U.S. government.
No Fund will invest more than 25% of its total assets in CMOs.
A Fund may invest in non-mortgage related asset-backed securities,
including interests in pools of receivables, such as credit card or other
accounts receivable, student loans or motor vehicle and other installment
purchase obligations and leases. The securities, which are generally issued by
non-governmental entities and carry no direct or indirect government guarantee,
are structurally similar to collateralized mortgage obligations and mortgage
pass-through securities. Like mortgage-backed securities, other asset-backed
securities are typically subject to substantial prepayment risk.
Many mortgage-backed securities are issued or guaranteed by a U.S.
Government agency or instrumentality, such as GNMA, FNMA or the Federal Home
Loan Mortgage Corporation; they are treated as U.S. Government Securities for
purposes of the Intermediate Government Bond Fund's policy of normally investing
at least 65% of its total assets in U.S. Government Securities. For purposes of
this policy, this Fund will not treat as a U.S. Government Security any mortgage
or other asset-backed security that is not issued or guaranteed by a U.S.
Government agency, authority or instrumentality (even if the underlying
mortgages or other assets are Government-guaranteed). These non-U.S. Government
mortgage-backed or other asset-backed securities will constitute less than 25%
of the Intermediate Government Bond Fund's total assets, and together with any
other assets that are not U.S. Government Securities will normally constitute
less than 35% of the Fund's total assets.
The credit characteristics of mortgage-backed and other asset-backed
securities differ in a number of respects from those of traditional debt
securities. The credit quality of most asset-backed securities (other than those
issued or guaranteed by a U.S. Government agency or instrumentality) depends
primarily
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upon the credit quality of the assets underlying such securities, how
well the entity issuing the securities is insulated from the credit risk of the
originator or any other affiliated entities, and the amount and quality of any
credit enhancement to such securities.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
Each Fund may invest up to 10% of its assets in securities of other
investment companies. As a shareholder of an investment company, a Fund will
indirectly bear investment management fees and other operating expenses of that
investment company, which are in addition to the management fees the Fund pays
Union Planters and the Fund's other expenses.
Pursuant to the terms of an exemptive order received by the Trust from
the Securities and Exchange Commission, the Growth & Income Fund, the
Intermediate Government Bond Fund and the Tax Exempt Bond Fund may each purchase
and redeem shares of the Money Market Fund. Any such investments will result in
Union Planters receiving management fees from both the investing Fund and the
Money Market Fund. Any such investments will also count toward the investing
Fund's 10% limitation described above.
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows (an asterisk indicates a trustee who
is an "interested person" of the Trust as defined in the 1940 Act):
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND POSITION WITH THE DURING THE PAST FIVE
AGE TRUST YEARS
- ----------------- ----------------- ---------------------
<S> <C> <C>
Robert R. Archibald, Ph.D (50) Trustee President, Missouri
Missouri Historical Society Historical Society
P.O. Box 11940
St. Louis, MO 63112-0940
Earl E. Lazerson (67) Trustee Director, National Stockyards;
5 Hidden Valley Lane Director, AAA of Missouri; President
Edwardsville, IL 62022 (until 1993)and Professor (until 1994),
So. Illinois University at Edwardsville
Brad L. Badgley* (47) Trustee Attorney, Heiligenstein & Badgley,
Heiligenstein & Badgley PC PC; Director, Magna Trust Company (an
30 Public Square affiliate of Magna Bank, N.A.,
Belleville, Illinois 62220 which merged into Union Planters in 1998)
(until 1997); Director, Banc Star One
(1995 to present)
</TABLE>
- 24 -
<PAGE> 66
<TABLE>
<CAPTION>
<S> <C> <C>
Robert E. Saur (55) Trustee President and Owner,
750 S. Hanley Street Conrad Properties Corp.
Clayton, MO 63105 (real estate); Director, Enterbank
Holding Company
Harry R. Maier* (52) Trustee Chief Executive Holder,
118 Sun Lake Dr. Memorial Hospital
Belleville, IL 62221 Belleville, Illinois
</TABLE>
- 25 -
<PAGE> 67
<TABLE>
<CAPTION>
<S> <C> <C>
Neil Seitz (55) Trustee Dean, School of Business
School of Business Saint Louis University;
Saint Louis University Professor, Saint Louis
3674 Lindell Blvd. University (until 1993)
St. Louis, MO 63108
Walter B. Grimm (53) President Senior Vice President, BISYS Fund
BISYS Fund Services Services, Limited Partnership;
3435 Stelzer Road President, Leigh Investments Consulting
Columbus, Ohio 43219 (investments firm)
George Landreth (57) Vice President Senior Vice President, BISYS
BISYS Fund Services Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Chuck L. Booth (38) Vice President Vice President, BISYS
BISYS Fund Services Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Gary Tenkman (29) Treasurer From April 1998 to present, employee
3435 Stelzer Road of BISYS Fund Services; from September
Columbus, Ohio 43219 1990 to April 1998, employee of
Ernst & Young LLP
Robert L. Tuch (47) Secretary Vice President, BISYS Fund Services,
BISYS Fund Services Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Alaina V. Metz (31) Assistant Chief Administrator, Administrative
BISYS Fund Services Secretary and Regulatory Services, BISYS Fund
3435 Stelzer Road Services, Limited Partnership
Columbus, Ohio 43219
Warren Leslie (37) Assistant From May 1995 to present, employee
BISYS Fund Services Secretary of BISYS Fund Services; from April
3435 Stelzer Road April 1988 to May 1995, employee
Columbus, Ohio 43219 of American Express
</TABLE>
- -----------------------
* Trustee who is an "interested person" (as defined in the 1940 Act) of the
Trust. Mr. Maier and Mr. Badgley are "interested persons" by reason of owning
shares of Union Planters Corporation, the ultimate parent company of Union
Planters.
- 26 -
<PAGE> 68
Previous positions of officers of the Trust during the past five years
with BISYS or its affiliates are omitted if not materially different from their
current positions. Mr. Grimm was first elected by the trustees to serve in the
office noted above in January 1997. Ms. Metz and Messrs. Booth and Tuch were
first elected by the trustees to serve in the offices noted above in October
1997. Messrs. Landreth, Tenkman and Leslie were first elected by the trustees to
service in offices noted in April 1999. Each officer of the Trust serves at the
pleasure of the trustees until his or her successor is elected or qualified, or
until he or she sooner dies, resigns, is removed or becomes disqualified.
The Trust pays no compensation to its officers. Each trustee is
compensated at the rate of $5,000 per annum plus $500 for each meeting of the
trustees he attends. The Trust provides no pension or retirement benefits to
Trustees, but has adopted a deferred payment arrangement under which each
Trustee may elect not to receive fees from the Trust on a current basis but to
receive in a subsequent period an amount equal to the value that such fees would
have if they had been invested in each Fund on the normal payment date for such
fees. As a result of this method of calculating the deferred payments, each
Fund, upon making the deferred payments, will be in the same financial position
as if the fees had been paid on the normal payment dates.
The following table sets forth the amount of the compensation paid (or
deferred in lieu of current payment) by the Trust during its fiscal year ended
August 31, 1999 to the persons who served as Trustees during all or any portion
of such fiscal year:
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PERSON FROM TRUST
- ------ ------------
<S> <C>
Robert R. Archibald [$7000]
Brad L. Badgley [$7000]
Earl E. Lazerson [$7000]
Harry R. Maier [$7000]
Robert E. Saur [$7000]
Neil Seitz [$7000]
</TABLE>
As of December 1, 1999, the Trustees and officers of the Trust
beneficially owned as a group less than [1%] of the outstanding shares of each
Fund.
- 27 -
<PAGE> 69
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Under a separate investment advisory agreement with each Fund, Union
Planters provides investment advice for, and supervises the investment programs
of, the Funds. Union Planters, located at 1401 South Brentwood Boulevard, St.
Louis, Missouri 63144, is a wholly-owned subsidiary of Union Planters Holding
Corporation, itself a wholly-owned subsidiary of Union Planters Corporation, a
Tennessee corporation and a bank holding company. Union Planters Corporation,
headquartered in Memphis, Tennessee, is one of the [30] largest banking
organizations in the country, with total assets of approximately [$30] billion.
Through their offices in twelve states, Union Planters Corporation and its
subsidiaries provide a broad range of financial services to individuals and
businesses.
Each of the Funds pays Union Planters an annual investment advisory fee
based on a percentage of the Fund's average daily net assets. Pursuant to Union
Planters' agreement to reduce its advisory fees through [August 31, 2000], such
fees are as follows: Intermediate Government Bond Fund, 0.40%; Growth & Income
Fund, 0.50%; Money Market Fund, 0.40%; Tax-Exempt Bond Fund, 0.__%. Without such
reduction, such fees would be as follows: Intermediate Government Bond Fund,
0.50%; Growth & Income Fund, 0.75%; Money Market Fund, 0.20%; Tax-Exempt Bond
Fund, 0.__)%.
Each advisory agreement provides that it will continue in effect for
two years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the board of trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
relevant Fund and (ii) by vote of a majority of the trustees who are not
"interested persons" of the Trust, as that term is defined in the 1940 Act, cast
in person at a meeting called for the purpose of voting on such approval. Any
amendment to an advisory agreement must be approved (i) by vote of a majority of
the outstanding voting securities of the relevant Fund and (ii) by vote of a
majority of the trustees who are not such interested persons, cast in person at
a meeting called for the purpose of voting on such approval. Each agreement may
be terminated without penalty by vote of the board of trustees or by vote of a
majority of the outstanding voting securities of the relevant Fund, upon sixty
days' written notice, or by Union Planters upon ninety days' written notice, and
terminates automatically in the event of its assignment. In addition, each
agreement will automatically terminate if the Trust or the Fund shall at any
time be required by Union Planters to eliminate all reference to the word
"Magna" in the name of the Trust or the Fund, unless the continuance of the
agreement after such change of name is approved by a majority of the outstanding
voting securities of the relevant Fund and by a majority of the trustees who are
not interested persons of the Trust or Union Planters.
- 28 -
<PAGE> 70
Each advisory agreement provides that Union Planters shall not be
subject to any liability in connection with the performance of its services
thereunder in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
Union Planters and its affiliates also provide investment advice to
numerous other corporate and fiduciary clients. These other clients sometimes
invest in securities in which the Funds also invest. If a Fund and such other
clients desire to buy or sell the same portfolio securities at the same time,
purchases and sales may be allocated, to the extent practicable, on a pro rata
basis in proportion to the amounts desired to be purchased or sold for each. It
is recognized that in some cases the practices described in this paragraph could
have a detrimental effect on the price or amount of the securities which a Fund
purchases or sells. In other cases, however, it is believed that these practices
may benefit the Funds. It is the opinion of the trustees that the desirability
of retaining Union Planters as adviser for the Funds outweighs the
disadvantages, if any, which might result from these practices.
During the last three fiscal years, each Fund paid the following
amounts as investment advisory fees to Union Planters (including all amounts
paid by the Fund to Magna Bank, N.A., which served as investment adviser to each
Fund from inception through October 1998, when Magna Bank, N.A. merged with and
into Union Planters), pursuant to the relevant advisory agreement:
- 29 -
<PAGE> 71
<TABLE>
<CAPTION>
FISCAL GROSS (BEFORE NET (AFTER
YEAR ENDED VOLUNTARY VOLUNTARY
FUND AUG. 31 REDUCTION) REDUCTION REDUCTION)
---- ---------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Magna Intermediate
Government Bond Fund 1997 $304,596 $ 60,919 $243,677
1998 $338,078 $ 67,615 $270,463
1999 $_______ $_______ $_______
Magna Growth & Income Fund 1997 $396,797 $132,266 $264,531
1998 $596,301 $198,767 $397,534
1999 $_______ $_______ $_______
Magna Money Market Fund 1999 $_______ $_______ $_______
</TABLE>
ADMINISTRATOR
BISYS Fund Services ("BISYS"), under an agreement with the Trust,
provides management and administrative services to the Funds, and, in general,
supervises the operations of the Trust. BISYS does not provide investment
advisory services. As part of its duties, BISYS provides office space, equipment
and clerical personnel for managing and administering the affairs of the Trust.
BISYS supervises the provision of custodial, auditing, valuation, bookkeeping,
legal, and dividend disbursing services and provides other management and
administrative services. The Trust pays BISYS a fee for its services to each
Fund at the annual rate of 0.20% of the Trust's average daily net assets;
provided, however, that BISYS has voluntarily agreed to reduce its fees with
respect to the Magna Money Market Fund to 0.17% through August 31, 2000.
For the fiscal year ended August 31, 1999, pursuant to the terms of
this Agreement, the Growth & Income Fund paid BISYS $_______, the Intermediate
Government Bond Fund paid BISYS $_______, and the Money Market Fund paid BISYS
$_______. For the fiscal year ended August 31, 1998, pursuant to the terms of
this Agreement, the Growth & Income Fund paid BISYS $158,698, and the
Intermediate Government Bond Fund paid BISYS $134,948. For the period June 2,
1997 (the date the Trust entered into this agreement with BISYS) through August
31, 1997, pursuant to the terms of this Agreement, the Growth & Income Fund paid
BISYS $29,572, and the Intermediate Government Bond Fund paid BISYS $27,878.
Prior to June 2, 1997, Ernst Asset Management Corporation ("EAMC") provided
management and administrative services to the Funds. For the
- 30 -
<PAGE> 72
period September 1, 1996 through June 1, 1997, the Growth & Income Fund and the
Intermediate Bond Fund paid EAMC $70,951 and $87,869, respectively.
TRUST EXPENSES
The Trust pays the compensation of its trustees; registration, filing
and other fees in connection with requirements of regulatory authorities; all
charges and expenses of its custodian and transfer agent; the charges and
expenses of its independent accountants; all brokerage commissions and transfer
taxes in connection with portfolio transactions; all taxes and fees payable to
governmental agencies; the cost of any certificates representing shares of the
Funds; the expenses of meetings of the shareholders and trustees of the Trust;
the charges and expenses of the Trust's legal counsel; interest on any
borrowings by the Funds; the cost of services, including services of counsel,
required in connection with the preparation of, and the cost of printing, the
Trust's registration statements and prospectuses, including amendments and
revisions thereto, annual, semiannual and other periodic reports of the Trust,
and notices and proxy solicitation material furnished to shareholders or
regulatory authorities, to the extent that any such materials relate to the
Trust or its shareholders; and the Trust's expenses of bookkeeping, accounting,
auditing and financial reporting, including related clerical expenses.
Custodial Arrangements. The Fifth Third Bank, Fifth Third Center,
Cincinnati, Ohio 45263, became the Trust's custodian on June 2, 1997. As such,
The Fifth Third Bank holds in safekeeping securities and cash belonging to the
Funds and, in such capacity, is the registered owner of securities held in book
entry form belonging to the Funds. Upon instruction, The Fifth Third Bank
receives and delivers cash and securities of the Funds in connection with Fund
transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities. Pursuant to an agreement with the Trust,
the Custodian receives compensation from each Fund for such services based upon
a percentage of each Fund's average daily net assets.
Independent Accountants. The Funds' independent accountants are ______.
___________ conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Funds' federal and state income
tax returns and consults with the Funds as to matters of accounting and federal
and state income taxation.
- 31 -
<PAGE> 73
PORTFOLIO TRANSACTIONS AND BROKERAGE
Transactions on U.S. stock exchanges and other agency transactions for
the account of a Fund involve the payment by the Fund of negotiated brokerage
commissions. Such commissions vary among different brokers. A particular broker
may charge different commissions according to such factors as the difficulty and
size of the transaction. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid by the
Fund usually includes an undisclosed dealer commission or markup. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. It is anticipated
that most purchases and sales of securities by the Funds (except for the Growth
& Income Fund) will be with the issuer or with underwriters of or dealers in
those securities, acting as principal. Accordingly, only the Growth & Income
Fund will ordinarily pay significant brokerage commissions with respect to
securities transactions.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive brokerage and research services (as defined in the Securities
Exchange Act of 1934 (the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such advisers and from third parties
with which such broker-dealers have arrangements. Union Planters or its
affiliates receive brokerage and research services and other similar services
from many broker-dealers with which Union Planters places the Funds' portfolio
transactions and from third parties with which these broker-dealers have
arrangements. These services include such matters as general economic and market
reviews, industry and company reviews, evaluations of investments, newspapers,
magazines, pricing services, quotation services, news services, timing services
and personal computers utilized by Union Planters' or its affiliates' portfolio
managers and analysts. Some of these services are of value to Union Planters and
its affiliates in advising various of their clients (including the Funds),
although not all of these services are necessarily useful and of value in
managing the Funds. The management fees paid by the Funds are not reduced
because Union Planters and its affiliates receive these services, even though
Union Planters might otherwise be required to purchase some of these services
for cash.
Union Planters places all orders for the purchase and sale of portfolio
investments for the Funds. In doing so, Union Planters uses its best efforts to
obtain for each Fund the most favorable price and execution available, except to
the extent it may be permitted to pay higher brokerage commissions as described
below. In seeking the most favorable price and execution, Union Planters, having
in mind the Fund's best interests, considers all factors it deems relevant,
including, by way of illustration, price, the size of the transaction, the
nature of the market for the security or other investment, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker-dealer
involved and the quality of service rendered by the broker-dealer in other
transactions.
- 32 -
<PAGE> 74
As permitted by Section 28(e) of the 1934 Act, Union Planters may cause
each Fund to pay a broker-dealer which provides "brokerage and research
services" (as defined in the 1934 Act) to Union Planters or its affiliates an
amount of disclosed commission for effecting securities transactions on stock
exchanges and other transactions for the Fund on an agency basis in excess of
the commission which another broker would have charged for effecting that
transaction. Union Planters' authority to cause the Funds to pay any such
greater commissions is also subject to such policies as the Trust's trustees may
adopt from time to time. It is the position of the staff of the SEC that Section
28(e) does not apply to the payment of such greater commissions in "principal"
transactions. Accordingly, Union Planters will use its best effort to obtain the
most favorable price and execution available with respect to such transactions,
as described above.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trust's trustees may
determine, Union Planters considers sales of shares of the Funds as a factor in
the selection of broker-dealers to execute portfolio transactions for the Funds.
Under the 1940 Act, persons affiliated with the Trust are prohibited
from dealing with the Funds as a principal in the purchase and sale of
securities. Since transactions in the over-the-counter market usually involve
transactions with dealers acting as principals for their own accounts,
affiliated persons of the Trust, such as BISYS, may not serve as the Funds'
dealer in connection with such transactions.
During the fiscal years ended August 31, 1997, August 31, 1998 and
August 31, 1999, the Trust paid, on behalf of the Growth & Income Fund, $24,797,
$31,137 and $______, respectively, in brokerage commissions. No such commissions
were paid to the Trust.
DESCRIPTION OF THE TRUST
The Trust, registered as a diversified open-end management investment
company, is organized as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust (the "Declaration of
Trust") dated April 28, 1994. The Trust is currently divided into four separate
series - one for each of the Growth & Income Fund, the Intermediate Government
Bond Fund, the Money Market Fund and the Tax-Exempt Bond Fund.
SERIES AND CLASSES OF SHARES
The Declaration of Trust currently permits the trustees to issue an
unlimited number of full and fractional shares, in multiple series. Each Fund
represents a
- 33 -
<PAGE> 75
separate series of shares. Each share of each Fund represents an equal
proportionate interest in such Fund with each other share of that Fund and is
entitled to a proportionate interest in the dividends and distributions from
that Fund. The shares of each Fund do not have any preemptive rights. Upon
termination of any Fund, whether pursuant to liquidation of the Trust or
otherwise, shareholders of that Fund are entitled to share pro rata in the net
assets of that Fund available for distribution to shareholders. The Declaration
of Trust also permits the Trustees to charge shareholders directly for
custodial, transfer agency and servicing expenses.
The assets received by each Fund for the issue or sale of its shares
and all income, earnings, profits, losses and proceeds therefrom, subject only
to the rights of creditors, are allocated to, and constitute the underlying
assets of, that Fund. The underlying assets are segregated and are charged with
the expenses with respect to that Fund and with a share of the general expenses
of the Trust. Any general expenses of the Trust that are not readily
identifiable as belonging to a particular Fund are allocated by or under the
direction of the Trustees in such manner as the trustees determine to be fair
and equitable. Although the expenses of the Trust are allocated to the separate
books of account of each Fund, certain expenses may be legally chargeable
against the assets of both Funds.
The Declaration of Trust also permits the trustees, without shareholder
approval, to subdivide any series of shares into various sub-series or classes
of shares with such dividend preferences and other rights as the trustees may
designate. The Trust may at a future date offer different classes of shares of
each Fund with different sales charge arrangements. The trustees may also,
without shareholder approval, establish one or more additional separate
portfolios for investments in the Trust or merge two or more existing
portfolios. Shareholders' investments in such an additional or merged portfolio
would be evidenced by a separate series of shares (i.e., a new "Fund").
The Declaration of Trust provides for the perpetual existence of the
Trust. The Trust or any Fund, however, may be terminated at any time by a vote
of at least two-thirds of the outstanding shares of each Fund affected. The
Declaration of Trust further provides that the trustees may also terminate the
Trust or any Fund upon written notice to the shareholders.
VOTING RIGHTS
As summarized in the Prospectus, shareholders are entitled to one vote
for each full share held (with fractional votes for each fractional share held)
and may vote (to the extent provided in the Declaration of Trust) in the
election of trustees and the termination of the Trust and on other matters
submitted to the vote of shareholders.
- 34 -
<PAGE> 76
The Declaration of Trust provides that on any matter submitted to a
vote of all Trust shareholders, all Trust shares entitled to vote shall be voted
together irrespective of series or sub-series unless the rights of a particular
series or sub-series would be adversely affected by the vote, in which case a
separate vote of that series or sub-series shall also be required to decide the
question. Also, a separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule l8f-2 under the 1940 Act provides in effect that a
class shall be deemed to be affected by a matter unless it is clear that the
interests of each class in the matter are substantially identical or that the
matter does not affect any interest of such class. On matters affecting an
individual series, only shareholders of that series are entitled to vote.
Consistent with the current position of the SEC, shareholders of all series vote
together, irrespective of series, on the election of trustees and the selection
of the Trust's independent accountants, but shareholders of each series vote
separately on other matters requiring shareholder approval, such as certain
changes in investment policies of that series or the approval of the investment
advisory agreement relating to that series.
There will normally be no meetings of shareholders for the purpose of
electing trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of trustees at such time as
less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the board of trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may be filled only by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for that purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by the holders of shares having a net asset value
constituting 1% of the outstanding shares stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to provide a list of shareholders or to disseminate
appropriate materials (at the expense of the requesting shareholders).
Except as set forth above, the trustees shall continue to hold office
and may appoint successor trustees. Voting rights are not cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust, except
(i) to change the Trust's name or to cure technical problems in the Declaration
of Trust and (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value).
- 35 -
<PAGE> 77
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund of
which they are shareholders. However, the Declaration of Trust disclaims
shareholder liability for acts or obligations of each Fund and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the trustees. The Declaration of Trust
provides for indemnification out of Fund property for all loss and expense of
any shareholder held personally liable for the obligations of a Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which the
disclaimer is inoperative and the relevant Fund itself would be unable to meet
its obligations.
The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
RECORD AND BENEFICIAL OWNERS OF 5% OR MORE OF THE FUND'S SHARES
As of November __, 1999, ____% of the Intermediate Government Bond Fund
shares, ____% of the Growth & Income Fund shares and ____% of the Money Market
Fund shares were owned of record by Union Planters; all of such shares were held
for the benefit of accounts for which Union Planters acts as trustee or
custodian.
The following chart sets forth the names, addresses and percentage
ownership of those shareholders known to the Trust as owning beneficially 5% or
more of the outstanding shares of any Fund as of November __, 1999: [TO BE
PROVIDED]
- 36 -
<PAGE> 78
<TABLE>
<CAPTION>
Name and Address %
Fund of Beneficial Owner Ownership
---- ------------------- ---------
<S> <C> <C>
Magna Growth & Income Fund [MAGNA GROUP, INC. PENSION FUND]
c/o [MAGNA TRUST COMPANY AS TRUSTEE],
One South Church Street
Belleville, IL 62220
[ ]%Magna [MAGNA GROUP, INC. PENSION FUND] [ ]%
Intermediate Government Bond Fund c/o [MAGNA TRUST COMPANY AS TRUSTEE],
One South Church Street
Belleville, IL 62220
Magna Money Market Fund [MAGNA GROUP, INC. PENSION FUND] [ ]%
c/o [MAGNA TRUST COMPANY AS TRUSTEE],
One South Church Street
Belleville, IL 62220
</TABLE>
HOW TO BUY SHARES
The procedures for purchasing shares of the Funds are summarized in the
Prospectus under "Purchasing and Selling Your Shares."
- 37 -
<PAGE> 79
NET ASSET VALUE AND PUBLIC OFFERING PRICE
All Funds
- ---------
The net asset value of the shares of each Fund is determined by
dividing that Fund's total net assets (the excess of its assets over its
liabilities) by the total number of shares of the Fund outstanding and rounding
to the nearest cent. Such determination is made by BISYS as of the close of
regular trading on the New York Stock Exchange on each day on which that
Exchange is open for unrestricted trading, and no less frequently than once
daily on each day during which there is sufficient trading in a Fund's portfolio
securities that the value of that Fund's shares might be materially affected.
The New York Stock Exchange is expected to be closed on the following weekdays:
Thanksgiving Day, Christmas Day, New Year's Day, President's Day, Good Friday,
Martin Luther King, Jr. Day, Memorial Day, Independence Day and Labor Day.
All Funds (except for the Money Market Fund)
- --------------------------------------------
Equity securities listed on an established securities exchange or on
the NASDAQ National Market System are normally valued at their last sale price
on the exchange where primarily traded or, if there is no reported sale during
the day, and in the case of over-the-counter securities not so listed, at the
last bid price. Long-term debt securities are valued by a pricing service, which
determines valuations of normal institutional-size trading units of long-term
debt securities. Such valuations are determined using methods based on market
transactions for comparable securities and on various relationships between
securities which are generally recognized by institutional traders. Other
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at fair
value as determined in good faith by the trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
trustees.
Money Market Fund
- -----------------
Under normal market conditions, the Money Market Fund values its
portfolio securities at "amortized cost." Under the amortized cost method of
valuation, securities are valued at cost on the date of purchase. Thereafter,
the value of securities purchased at a discount or premium is increased or
decreased incrementally each day so that at the maturity the purchase discount
or premium is fully amortized and the value of the security is equal to its
principal amount. Due to fluctuations in interest rates, the amortized cost
value of the securities of the Fund may at times be more or less than their
market value.
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<PAGE> 80
By using amortized cost valuation, the Fund seeks to maintain a
constant net asset value of $1.00 per share despite minor shifts in the market
value of its portfolio securities. The yield on a shareholder's investment may
be more or less than that which would be recognized if the net asset value per
share were not constant and were permitted to fluctuate with the market value.
It is believed that any difference will normally be minimal. The trustees
monitor quarterly the deviation between the Fund's net asset value per share as
determined by using available market quotations and its amortized cost price per
share. Union Planters makes such comparisons at least weekly and will advise the
trustees promptly in the event of any significant deviation. If the deviation
exceeds 1/2 of 1% for the Fund, the board of trustees will consider what action,
if any, should be initiated to provide fair valuation of the portfolio
securities of the Fund and prevent material dilution or other unfair results to
shareholders. Such action may include redemption of shares in kind; selling
portfolio securities prior to maturity; withholding dividends; or using a net
asset value per share as determined by using available market quotations. There
is no assurance that the Fund will be able to maintain its net asset value at
$1.00.
SHAREHOLDER SERVICES
OPEN ACCOUNTS
A shareholder's investment in any Fund is automatically credited to an
open account maintained for the shareholder by BISYS Fund Services, Inc.
("BISYS"), the shareholder servicing agent for Trust. Following each transaction
in the account, a shareholder will receive an account statement disclosing the
current balance of shares owned and the details of recent transactions in the
account. After the close of each fiscal year, BISYS will send each shareholder a
statement providing federal tax information on dividends and distributions paid
to the shareholder during the year. This should be retained as a permanent
record. Shareholders will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional
shares and, by making the issuance and delivery of certificates representing
shares unnecessary, eliminates the problems of handling and safekeeping
certificates, and the cost and inconvenience of replacing lost, stolen,
mutilated or destroyed certificates.
The costs of maintaining the open account system are borne by the
Trust, and no direct charges are made to shareholders. Although the Trust has no
present intention of making such direct charges to shareholders, it reserves the
right to do so. Shareholders will receive prior notice before any such charges
are made.
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<PAGE> 81
SYSTEMATIC WITHDRAWAL PLAN
A Systematic Withdrawal Plan, referred to in the Prospectus under
"Shareholder Information," provides for monthly, quarterly, semiannual or annual
withdrawal payments of $50 or more ($100 or more in the case of the Money Market
Fund) from the account of a shareholder provided that the account has a value of
at least $250 ($10,000 in the case of the Money Market Fund) at the time the
plan is established.
Payments will be made either to the shareholder or to any other person
designated by the shareholder. If payments are issued to an individual other
than the registered owner(s), a signature guarantee will be required on the Plan
application. Income dividends and capital gain distributions will be reinvested
at the net asset value determined as of the close of regular trading on the New
York Stock Exchange on the record date for the dividend or distribution.
Since withdrawal payments represent proceeds from the liquidation of
shares, the shareholder should recognize that withdrawals may reduce and
possibly exhaust the value of the account, particularly in the event of a
decline in net asset value. Accordingly, the shareholder should consider whether
a Systematic Withdrawal Plan and the specified amounts to be withdrawn are
appropriate in the circumstances. The Fund makes no recommendations or
representations in this regard. It may be appropriate for the shareholder to
consult a tax adviser before establishing such a plan. See "Redemptions" and
"Income Dividends, Capital Gain Distributions and Tax Status" below for certain
information as to federal income taxes.
IRA'S
Under "Shareholder Services--Retirement Plans," the Prospectus refers
to IRAs established under a prototype plan made available by Union Planters.
These plans may be funded with shares of any Fund.
All income dividends and capital gain distributions of plan
participants must be reinvested. Plan documents and further information can be
obtained from Union Planters.
Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.
CHECK WRITING (MONEY MARKET FUND ONLY)
A Money Market Fund shareholder may select the check writing option by
completing the relevant section of the application, the signature card and the
other related materials included in or attached to the application. Existing
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<PAGE> 82
shareholders may add check writing to an existing account by contacting BISYS at
1-800-219-4182 to receive the application and related materials. The Fund will
send you checks drawn on The Huntington Bank. You will continue to earn
dividends on shares redeemed by check until the check clears. Each check must be
written for $250 or more, except that qualified corporate retirement plans and
certain other corporate accounts may write checks for any amount.
If you use withdrawal checks, you will be subject to The Huntington
Bank's rules governing checking accounts. The Fund, Union Planters, BISYS and
their respective affiliates are in no way responsible for any check writing
account established with The Huntington Bank.
A shareholder may not close its Fund account by withdrawal check,
because the exact balance of the shareholder's account will not be known until
after the check is received by The Huntington Bank.
AUTOMATIC INVESTMENT
The Trust has an automatic investment plan. A shareholder may authorize
automatic monthly transfers of $100 or more from its bank checking or savings
account to purchase shares of the Fund (or any other fund of the Trust).
For an initial investment, shareholders should indicate that they would
like to begin an automatic investment plan in the appropriate section of the
application. Please indicate the amount of the monthly investment and enclose a
check marked "Void" or a deposit slip from your bank account.
To add the automatic investment plan option to an existing account,
please call BISYS at 1-800-219-4182 for an application.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests must be
guaranteed by commercial banks, trust companies, savings associations, credit
unions or brokerage firms that are members of domestic securities exchanges.
Signature guarantees by notaries public are not acceptable. However, as noted in
the Prospectus, a signature guarantee will not be required if the proceeds of
the redemption do not exceed $10,000 and the proceeds check is made payable to
the registered owner(s) and mailed to the record address.
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<PAGE> 83
If a shareholder selects the telephone redemption service in the manner
described in the next paragraph, Fund shares may be redeemed by making a
telephone call directly to BISYS at (800) 219-4182. When a telephonic redemption
request is received, the proceeds are wired to the bank account previously
chosen by the shareholder and a nominal wire fee (currently $5.00) is deducted.
Telephonic redemption requests must be received by BISYS prior to the close of
regular trading on the New York Stock Exchange on a day when the Exchange is
open for business. Requests made after that time or on a day when the New York
Stock Exchange is not open for business will receive the net asset value per
share next determined after the redemption request is received in proper form.
In order to redeem shares by telephone, a shareholder must either
select this service when completing the Fund application or must do so
subsequently on the Service Options Form available from BISYS. When selecting
the service, a shareholder must designate a bank account to which the redemption
proceeds should be wired. Any change in the bank account so designated must be
made by furnishing to BISYS a completed Service Options Form with a signature
guarantee. Whenever the Service Options Form is used, the shareholder's
signature must be guaranteed as described above. Telephone redemptions may only
be made if an investor's bank is a member of the Federal Reserve System or has a
correspondent bank that is a member of the System. If the account is with a
savings bank, it must have only one correspondent bank that is a member of the
System. The Trust, BISYS and The Fifth Third Bank are not responsible for the
authenticity of withdrawal instructions received by telephone where reasonable
procedures are followed to verify that telephone instructions are correct.
The redemption price will be the net asset value per share next
determined after the redemption request and any necessary special documentation
are received by BISYS in proper form. Proceeds resulting from a written
redemption request will normally be mailed to you within seven days after
receipt of your request in good order. Telephonic redemption proceeds will
normally be wired on the first business day following receipt of a proper
redemption request. In those cases where you have recently purchased your shares
by check and your check was received less than 10 days prior to the redemption
request, the Fund may withhold redemption proceeds until your check has cleared,
which may take up to 10 days from the purchase date.
Each Fund will normally redeem shares for cash; however, each Fund
reserves the right to pay the redemption price wholly or partly in kind if the
board of trustees of the Trust determines it to be advisable in the interest of
the remaining shareholders. If portfolio securities are distributed in lieu of
cash, the shareholder will normally incur brokerage commissions upon subsequent
disposition of any such securities. However, the Trust has elected to be
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<PAGE> 84
governed by Rule l8f-l under the 1940 Act pursuant to which the Trust is
obligated to redeem shares solely in cash for any shareholder during any 90-day
period up to the lesser of $250,000 or 1% of the total net asset value of the
Trust at the beginning of such period.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gains
or loss. See "Income Dividends, Capital Gains Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS
It is the policy of each Fund to pay its shareholders, as dividends,
substantially all net investment income and to distribute annually all net
realized capital gains, if any, after offsetting any capital loss carryovers.
Please refer to "Dividends and Distributions" in the Prospectus for information
regarding the frequency with which each Fund declares and pays dividends.
Income dividends and capital gains distributions are payable in full
and fractional shares of the particular Fund based upon the net asset value
determined as of the close of regular trading on the New York Stock Exchange on
the record date for each dividend or distribution. Shareholders, however, may
elect to receive their income dividends or capital gains distributions, or both,
in cash. The election may be made at any time by submitting a written request
directly to BISYS. In order for a change to be in effect for any dividend or
distribution, it must be received by BISYS on or before the record date for such
dividend or distribution.
As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
Each Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Code. In order so to qualify, the Fund must,
among other things, (i) derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, gains from the sale
or other disposition of stock or securities, or other income (including but not
limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock or securities; (ii)
distribute with respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income, and the excess, if
any, of net short-term capital gains over net long-term capital losses for such
year; and (iii) at the end of each fiscal quarter maintain at least 50% of the
value of its total assets in cash, U.S. government securities, securities of
other regulated investment companies, and other securities of issuers which
represent, with respect to each issuer, no more than 5% of the value of the
- 43 -
<PAGE> 85
Fund's total assets and 10% of the outstanding voting securities of such issuer,
with no more than 25% of its assets invested in the securities (other than those
of the U.S. government or other regulated investment companies) of any one
issuer or of two or more issuers which the Fund controls and which are engaged
in the same, similar or related trades and businesses. To satisfy these
conditions, the Funds may be limited in their ability to use certain investment
techniques and may be required to liquidate assets to distribute income.
Moreover, some investment techniques used by the Funds may change the character
and amount of income recognized by the Funds. As a regulated investment company,
each Fund will not be subject to federal income tax on income paid on a timely
basis to its shareholders in the form of dividends or capital gain
distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any,
of each Fund's "required distribution" (as defined in the Code) over its actual
distributions in any calendar year. Generally, the "required distribution" is
98% of the Fund's ordinary income for the calendar year plus 98% of its capital
gain net income recognized during the one-year period ending on October 31 plus
undistributed amounts from prior years. Each Fund intends to make distributions
sufficient to avoid imposition of the excise tax. Distributions declared by a
Fund during October, November or December to shareholders of record on a date in
any such month and paid by the Fund during the following January will be treated
for federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
The Tax-Exempt Bond Fund will be qualified to pay "exempt-interest
dividends" to its shareholders only if, at the close of each quarter of the
Fund's taxable year, at least 50% of the total value of the Fund's assets
consists of obligations, the interest on which is exempt from federal income
tax. Distributions that the Fund properly designates as exempt-interest
dividends are treated as interest excludable from shareholders' gross income for
federal income tax purposes but may be taxable for federal alternative minimum
tax purposes and for state and local purposes.
If a shareholder incurs or continues indebtedness to purchase by or
carry shares of the Tax-Exempt Bond Fund, that portion of interest paid or
accrued on such indebtedness that equals the total interest paid or accrued on
the indebtedness, multiplied by the percentage of the Fund's total distributions
(not including distributions from net long-term capital gains) paid to such
shareholder that are exempt-interest dividends, is not deductible for federal
income tax purposes. The Internal Revenue Service may consider the purchase of
shares to have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.
- 44 -
<PAGE> 86
Each shareholder is advised to consult his or her tax adviser with
respect to whether exempt-interest dividends would retain the exclusion from tax
if such shareholder were treated as a "substantial user" or a "related person",
as those terms are defined in the Code, with respect to facilities financed
through any of the tax-exempt obligations held by the Tax-Exempt Bond Fund. In
addition, if you receive social security or railroad retirement benefits, you
should consult your tax adviser to determine what effect, if any, an investment
in the Tax-Exempt Bond Fund may have on the taxation of your benefits.
Shareholders of each Fund will be subject to federal income taxes on
distributions made by each Fund, whether received in cash or additional shares
of the Fund, as described herein and in the Prospectus. Distributions by each
Fund of net income and short-term capital gains, if any, will be taxable to
shareholders as ordinary income. Distributions designated by a Fund as deriving
from net gains on securities held for more than one year will be taxable to
shareholders as long-term capital gain (generally at a 20% rate for noncorporate
shareholders), regardless of how long a shareholder has held shares in the Fund.
A loss on the sale of shares held for six months or less will be treated as a
long-term capital loss to the extent of any long-term capital gain dividend paid
to the shareholder with respect to such shares. If a shareholder sells
Tax-Exempt Bond Fund shares held for six months or less at a loss, the loss will
be disallowed to the extent of any exempt-interest dividends received by the
shareholder with respect to the shares.
Dividends and distributions on a Fund's shares are generally subject to
a federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.
Redemptions, sales and exchanges of each Fund's shares are taxable
events and, accordingly, shareholders may realize gains and losses on these
transactions. Provided the shareholder holds the shares as a capital asset, any
gain realized upon a taxable disposition of shares will be treated as long-term
capital gain if the shares have been held for more than 12 months. Otherwise,
the gain on the redemption, sale or exchange of fund shares will be treated as
short-term capital gain. In general, any loss realized upon a taxable
disposition of shares will be treated as a long-term capital loss if the shares
have been held for more than 12 months, and otherwise as short-term capital
loss. No loss will be allowed on the sale of Fund shares to the
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<PAGE> 87
extent the shareholder acquired other shares of the same Fund within 30 days
prior to the sale of the loss shares or 30 days after such sale.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and regulations currently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative action.
Dividends and distributions also may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. investors. Non-U.S.
investors should consult their tax advisers concerning the tax consequences of
ownership of shares of a Fund, including the possibility that distributions may
be subject to a 30% United States withholding tax (or a reduced rate of
withholding provided by treaty).
PERFORMANCE INFORMATION
Each Fund may from time to time include its total return and/or yield
in advertisements or in information furnished to present or prospective
shareholders. Each Fund may from time to time include in advertisements its
total return and the ranking of those performance figures relative to such
figures for groups of mutual funds categorized by Morningstar, Donoghue or
Lipper Analytical Services as having the same investment objectives.
Each Fund may make reference in its advertising and sales literature to
awards, citations and honor bestowed on it or Union Planters by industry
organizations and other observers and raters, including, but not limited to
Dalbar's Quality Tested Service Seal and Key Honors Award. Such reference may
explain the criteria for the award, indicate the nature and significance of the
honor and provide statistical and other information about the award and the
selection process, including, but not limited to, the scores and categories in
which the Fund excelled, the names of funds and fund companies that have
previously won the award and comparative information and data about those
against whom the Fund competed for the award, honor or citation.
Total Return. Quotations of average annual total return for each Fund will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund or class over periods of one, five, and ten
years (or for such shorter periods as shares of the Fund have been offered),
calculated pursuant to the following formula: P (1 + T) [n exponent]= ERV (where
P = a hypothetical initial payment of $1,000, T = the average annual total
return, n = the number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). Except as
noted below, all total return figures reflect the deduction of a proportional
share of Fund expenses on an annual basis, and assume that (i) the maximum sales
load (or other charges deducted from payments) is deducted from the initial
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<PAGE> 88
$1,000 payment and (ii) all dividends and distributions are reinvested when
paid. Quotations of total return may also be shown for other periods. Each Fund
may also, with respect to certain periods of less than one year, provide total
return information for that period that is unannualized. Any such information
would be accompanied by standardized total return information.
Yield. Each Fund's yield, as it may appear in advertisements or written sales
material, represents the net change, exclusive of capital changes, in the value
of a hypothetical account having a balance of one share at the beginning of the
period for which yield is determined (the "base period"). Current yield for the
base period (for example, seven calendar days) is calculated by dividing (i) the
net change in the value of the account for the base period by (ii) the number of
days in the base period. The resulting number is then multiplied by 365 to
determine the net income on an annualized basis. This amount is divided by the
value of the account as of the beginning of the base period, normally $1, in
order to state the current yield as a percentage. Yield may also be calculated
on a compound basis ("effective" or "compound" yield) which assumes continual
reinvestment throughout an entire year of net income earned at the same rate as
net income is earned by the account for the base period.
Yield is calculated without regard to realized and unrealized gains and
losses. A Fund's yield will vary depending on prevailing interest rates,
operating expenses and the quality, maturity and type of instruments held in the
Fund's portfolio. Consequently, no yield quotation should be considered as
representative of what a Fund's yield may be for any future period. A Fund's
yields are not guaranteed.
Shareholders comparing Fund yield with that of alternative investments
(such as savings accounts, various types of bank deposits, and other money
market funds) should consider such things as liquidity, minimum balance
requirements, check writing privileges, the differences in the periods and
methods used in the calculation of the yields being compared, and the impact of
taxes on alternative types of investments.
Yield information may be useful in reviewing a Fund's performance and
providing a basis for comparison with other investment alternatives. However,
unlike bank deposits, traditional corporate or municipal bonds or other
investments which pay a fixed yield for a stated period of time, money market
and tax exempt money market fund yields fluctuate.
The table below sets forth the average annual total return of each Fund
for the one year period ending August 31, 1998 and for the period from the
commencement of the Funds' operations until August 31, 1998:
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<PAGE> 89
<TABLE>
<CAPTION>
TOTAL RETURN OF FUND SHARES FOR THE PERIODS LISTED Assuming MAXIMUM sales load
(4.00%):
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Return Total Return Total Return
FUND (One Year) (Three Year) (Since Inception)
- ------------------------------------------------------------------------------------------------------------
Magna Growth & Income Fund ____% ____% ____%
(commencement of operations:
September 1, 1994)
- ------------------------------------------------------------------------------------------------------------
Magna Intermediate Government ____% ____% ____%
Bond Fund (commencement of
operations: September 1, 1994)
- ------------------------------------------------------------------------------------------------------------
Assuming NO sales load (0.00%):
- ------------------------------------------------------------------------------------------------------------
Total Return Total Return Total Return
FUND (One Year) (Three Year) (Since Inception)
- ------------------------------------------------------------------------------------------------------------
Magna Growth & Income Fund ____% _____% _____%
(commencement of operations:
September 1, 1994)
- ------------------------------------------------------------------------------------------------------------
Magna Intermediate Government ____% ____% ____%
Bond Fund (commencement of
operations: September 1, 1994)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 90
APPENDIX A
DESCRIPTION OF CERTAIN FUND INVESTMENTS
Obligations Backed by Full Faith and Credit of the U.S. Government --
are bills, certificates of indebtedness, notes and bonds issued by (i) the U.S.
Treasury or (ii) agencies, authorities and instrumentalities of the U.S.
Government. Such obligations include, but are not limited to, obligations issued
by the Government National Mortgage Association, the Farmers' Home
Administration and the Small Business Administration.
Other U.S. Government Obligations -- are bills, certificates of
indebtedness, notes and bonds issued by agencies, authorities and
instrumentalities of the U.S. Government which are supported by the right of the
issuer to borrow from the U.S. Treasury or by the credit of the agency,
authority or instrumentality itself. Such obligations include, but are not
limited to, obligations issued by the Tennessee Valley Authority, the Bank for
Cooperatives, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Land Banks and the Federal National Mortgage Association.
Repurchase Agreements -- are agreements by which the Fund purchases a
security (usually a U.S. Government Obligation) and obtains a simultaneous
commitment from the seller (a member bank of the Federal Reserve System) to
repurchase the security at an agreed upon price and date. The resale price is in
excess of the purchase price and reflects an agreed upon market rate unrelated
to the coupon rate on the purchased security. Such transactions afford an
opportunity for the Fund to earn a return on temporarily available cash at
minimal market risk, although the Fund may be subject to various delays and
risks of loss if the seller is unable to meet its obligation to repurchase.
Certificates of Deposit -- are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified rate of
return and are normally negotiable.
Bankers' Acceptances -- are short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.
Yankee dollar Obligations -- obligations of U.S. branches of foreign
banks.
Commercial Obligations -- include bonds and notes issued by
corporations in order to finance longer-term credit needs. (See Appendix B.)
A-1
<PAGE> 91
APPENDIX B
DESCRIPTION OF BOND RATINGS ASSIGNED BY
STANDARD & POOR'S CORPORATION AND
MOODY'S INVESTORS SERVICE, INC.
STANDARD & POOR'S CORPORATION
Corporate Bonds
- ---------------
AAA
This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
principal.
AA
Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay interest and repay principal is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for bonds in higher-rated categories.
BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Commercial Paper
- ----------------
Commercial paper rated A-1 by S&P has the following characteristics:
Liquidity ratios are adequate to meet cash requirements. Long-term senior debt
B-1
<PAGE> 92
is rated "A" or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances. Typically, the issuer's industry is
well established and the issuer has a strong position within the industry. Their
reliability and quality of management are unquestioned. Commercial paper within
the A-1 category which has overwhelming safety characteristics is denoted
"A-1+."
C
The rating C is reserved for income bonds on which no interest is being
paid.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC.
Corporate Bonds
- ---------------
Aaa
Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa
Bonds that are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A
Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
B-3
<PAGE> 93
Baa
Bonds that are rated Baa are considered as medium-grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often, the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest
Ca
Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest-rated class of bonds, and issues
so rated can be regarded having extremely poor prospects of ever attaining any
real investment standing.
Should no rating be assigned by Moody's, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
B-4
<PAGE> 94
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1 and B1.
Commercial Paper
- ----------------
The rating P-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
Issuers rated Prime-1 are judged to be of the best quality. Their
short-term debt obligations carry the smallest degree of investment risk.
Margins of support for current indebtedness are large or stable with cash flow
and asset protection well assured. Current liquidity provides ample coverage of
near-term liabilities and unused alternative financing arrangements are
generally available. While protective elements may change over the intermediate
or long term, such changes are most unlikely to impair the fundamentally strong
position of short-term obligations.
B-5
<PAGE> 95
APPENDIX C
FINANCIAL STATEMENTS
The Trust's audited Financial Statements for the fiscal year ended
August 31, 1999 included in the Trust's Annual Report filed with the Securities
and Exchange Commission on October __, 1999 pursuant to Section 30(d) of the
Investment Company Act of 1940, as amended, and the rules promulgated
thereunder, are hereby incorporated in this Statement of Additional Information.
A copy of the Trust's Annual Report is available without charge upon request
from Magna Funds, P.O. Box 182754, Columbus, Ohio 43218-2754, or by calling
(800) 219-4182.
<PAGE> 96
Part C. OTHER INFORMATION
Item 23. Exhibits
--------
Exhibits:
a. Agreement and Declaration of Trust.(1)
b. By-Laws.(1)
c. None.
d. Forms of Investment Advisory Agreements for each of Magna
Growth & Income Fund and Magna Intermediate Government Bond
Fund.(3) Form of Investment Advisory Agreement for Magna Money
Market Fund.(4) Form of Investment Advisory Agreement for
Magna Tax Exempt Bond Fund.
e. Forms of Distribution Agreement for each of Magna Growth &
Income Fund and Magna Intermediate Government Bond Fund.(2)
Form of Amendment to Distribution
- ----------------
1 Incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement (File No. 33-78408) filed electronically
with the Securities and Exchange Commission on December 20, 1996.
2 Incorporated by reference to Post-Effective Amendment No. 4 to
Registrant's Registration Statement (File No. 33-78408) filed electronically
with the Securities and Exchange Commission on December 18, 1997.
3 Incorporated by reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement (File No. 33-78408) filed electronically
with the Securities and Exchange Commission on November 30, 1998.
4 Incorporated by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement (File No. 33-78408) filed electronically
with the Securities and Exchange Commission on March 15, 1999.
<PAGE> 97
Agreement for Magna Money Market Fund.(4) Form of Amendment to
Distribution Agreement for Magna Tax Exempt Bond Fund.
f. None.
g. Form of Custodian Agreement for Magna Growth & Income Fund and
Magna Intermediate Government Bond Fund.(2) Form of Amendment
to Custodian Agreement for Magna Money Market Fund.(4) Form of
Amendment to Custodian Agreement for Magna Tax Exempt Bond
Fund.
h.(i) Form of Administration Agreement for Magna Growth & Income
Fund and Magna Intermediate Government Bond Fund.(2) Form of
Amendment to Administration Agreement for Magna Money Market
Fund.(4) Form of Amendment to Administration Agreement for
Magna Tax Exempt Bond Fund.
h.(ii) Form of Transfer Agent Agreement for Magna Growth & Income
Fund and Magna Intermediate Government Bond Fund.(2) Form of
Amendment to Transfer Agent Agreement for Magna Money Market
Fund.(4) Form of Amendment to Transfer Agent Agreement for
Magna Tax Exempt Bond Fund.
h.(iii) Form of Fund Accounting Agreement for Magna Growth & Income
Fund and Magna Intermediate Government Bond Fund.(2) Form of
Amendment to Fund Accounting Agreement for Magna Money Market
Fund.(4) Form of Amendment to Fund Accounting Agreement for
Magna Tax Exempt Bond Fund.
h.(iv) Form of Notification of Fee Waiver.
i. Opinion and Consent of Counsel.(2) Form of Opinion and Consent
with respect to Magna Tax Exempt Bond Fund.
j. Not Applicable.
k. None.
<PAGE> 98
l. Form of Organizational Expense Reimbursement Agreement(2);
Letter regarding sale of initial shares.(2)
m. Rule 12b-1 Plans for each of Magna Growth & Income Fund and
Magna Intermediate Government Bond Fund.(2) Form of Rule 12b-1
Plan for Magna Money Market Fund. Form of Rule 12b-1 Plan for
Magna Tax Exempt Bond Fund.
n. Not Applicable.
o. Powers of Attorney of Robert A. Archibald, Earl E. Lazerson,
Robert E. Saur, Harry R. Maier, Neil Seitz and Brad L.
Badgley.(3)
Item 24. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
None.
Item 25. Indemnification
---------------
See Item 27 of Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (File No. 33-78408) filed on July 15, 1994,
which is hereby incorporated by reference.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
(a) Union Planters Bank, National Association ("Union Planters"),
the adviser of the Registrant, is a national bank. Union
Planters operates as a community bank providing various
financial services to customers and mid-sized businesses in
its immediate geographic area. Union Planters serves as
investment adviser to one other registered investment company,
"The Planters Funds Tennessee Tax-Free Bond Fund."
(b) The name, address and principal occupation of Union Planters'
directors and principal executive officers are as follows [TO
BE UPDATED BY UPB]:
<TABLE>
<CAPTION>
- --------------------------------------------- --------------------- ------------------------------------------------
Name and Business Address Title Principal Occupation
- --------------------------------------------- --------------------- ------------------------------------------------
<S> <C> <C>
Albert M. Austin Director Chairman, Cannon, Austin & Cannon, Inc.
Cannon, Austin & Cannon, Inc.
6685 Poplar Avenue, #200
Germantown, TN 38138
============================================= ===================== ================================================
</TABLE>
-3-
<PAGE> 99
<TABLE>
<CAPTION>
- --------------------------------------------- --------------------- ------------------------------------------------
Name and Business Address Title Principal Occupation
- --------------------------------------------- --------------------- ------------------------------------------------
<S> <C> <C>
Marvin E. Bruce Director Retired
3260 Habersham Road
Atlanta, GA 30305
- --------------------------------------------- --------------------- ------------------------------------------------
George W. Bryan Director Senior Vice President, Sara Lee Corporation
Sara Lee Corporation
8000 Centerview Parkway
Suite 300
Cordova, TN 38018
- --------------------------------------------- --------------------- ------------------------------------------------
James E. Harwood Director President, Sterling Equities
Sterling Equities
845 Crossover Lane, Suite 124
Memphis, TN 38117
- --------------------------------------------- --------------------- ------------------------------------------------
Parnell S. Lewis, Jr. Director President, Anderson-Tully Company
Anderson-Tully Company
1242 N. Second Street
Memphis, TN 38101
- --------------------------------------------- --------------------- ------------------------------------------------
C.J. Lowrance, III Director President, Lowrance Brothers & Company, Inc.
Lowrance Brothers & Company, Inc.
Highway 61
Driver, AR 72329
- --------------------------------------------- --------------------- ------------------------------------------------
Jackson W. Moore Director, President President and Chief Operating Officer, Union
Union Planters Corporation and Chief Operating Planters Corporation and Union Planters Bank,
7130 Goodlett Farms Pkwy. Officer N.A.
Memphis, TN 38017
- --------------------------------------------- --------------------- ------------------------------------------------
Stanley D. Overton Director Retired
#7 Warwick Lane
Nashville, TN 37205
- --------------------------------------------- --------------------- ------------------------------------------------
Benjamin W. Rawlins, Jr. Director, Chairman and Chief Executive Officer, Union
Union Planters Corporation Chairman and Chief Planters Corporation and Union Planters Bank,
7130 Goodlett Farms Parkway Executive Officer N.A.
Memphis, TN 38017
- --------------------------------------------- --------------------- ------------------------------------------------
Dr. V. Lane Rawlins Director President, University of Memphis
University of Memphis
341 Administration Building
Campus Box 526643
Memphis, TN 38152-6643
- --------------------------------------------- --------------------- ------------------------------------------------
</TABLE>
-4-
<PAGE> 100
<TABLE>
<CAPTION>
- --------------------------------------------- --------------------- ------------------------------------------------
Name and Business Address Title Principal Occupation
- --------------------------------------------- --------------------- ------------------------------------------------
<S> <C> <C>
Donald F. Schuppe Director Retired
6448 Wynfrey Place
Memphis, TN 38120
- --------------------------------------------- --------------------- ------------------------------------------------
David M. Thomas Director Retired
1765 Camellia Drive
Greenville, MS 38701
- --------------------------------------------- --------------------- ------------------------------------------------
Richard A. Trippeer, Jr. Director President, R.A. Trippeer, Inc.
R.A. Trippeer, Inc.
5865 Ridgeway Center Pkwy.
Suite 300
Memphis, TN 38120
- --------------------------------------------- --------------------- ------------------------------------------------
Spence L. Wilson Director President, Kemmons Wilson, Inc.
Kemmons Wilson, Inc.
1629 Winchester Road
Memphis, TN 38116
- --------------------------------------------- --------------------- ------------------------------------------------
C.E. Heiligenstein Director Attorney, Heiligenstein & Badgley, P.C.
Heiligenstein & Badgley, P.C.
30 Public Square
Belleville, IL 62220
- --------------------------------------------- --------------------- ------------------------------------------------
Carl G. Hogan, Sr. Director Chairman and Chief Executive Officer, Hogan
Hogan Motor Leasing, Inc. Motor Leasing, Inc.
1000 North 14th Street
P.O. Box 7521
St. Louis, MO 63106
- --------------------------------------------- --------------------- ------------------------------------------------
S. Lee Kling Director Chairman of the Board, Kling Rechter & Co.
Kling Rechter & Co. (merchant banking company)
1401 S. Brentwood Blvd.
Suite 800
St. Louis, MO 63144
- --------------------------------------------- --------------------- ------------------------------------------------
</TABLE>
-5-
<PAGE> 101
Item 27. Principal Underwriters
----------------------
BISYS Fund Services ("BISYS") acts as distributor and administrator for
Registrant. BISYS also distributes the securities of the following
investment companies [TO BE UPDATED]:
Alpine Equity Trust
The ARCH Fund, Inc.
American Performance Funds
AmSouth Mutual Funds
The BB&T Mutual Funds Group
The Coventry Group
ESC Strategic Funds, Inc.
The Eureka Funds
Fountain Square Funds
Hirtle Callaghan Trust
HSBC Family of Funds
INTRUST Funds Trust
The Infinity Mutual Funds, Inc.
The Kent Funds
Magna Funds
Meyers Investment Trust
MMA Praxis Mutual Funds
M.S.D. & T Funds
Pacific Capital Funds
Parkstone Group of Funds
The Parkstone Advantage Funds
Pegasus Funds
The Republic Advisors Funds Trust
Puget Sound Alternative Investment Series Trust
The Republic Funds Trust
The Riverfront Funds, Inc.
Sefton Funds
The Sessions Group
Summit Investment Trust
Variable Insurance Funds
The Victory Portfolios
The Victory Variable Funds
Vintage Funds, Inc.
-6-
<PAGE> 102
<TABLE>
<CAPTION>
- --------------------------------------------- --------------------- ------------------------------------------------
Name and Principal Business Residence Positions and Positions and Offices with Registrant
Offices with
Distributor
- --------------------------------------------- --------------------- ------------------------------------------------
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
150 Clove Road
Little Falls, NJ 07424
- --------------------------------------------- --------------------- ------------------------------------------------
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, NJ 07424
- --------------------------------------------- --------------------- ------------------------------------------------
</TABLE>
Each of these corporations is a subsidiary of The BISYS Group, Inc., 150 Clove
Road, Little Falls, NJ 07424.
* The mailing address of each of the directors and officers is c/o BISYS Fund
Services, 3435 Stelzer Road, Columbus, Ohio 43219 unless otherwise indicated.
Item 28. Location of Accounts and Records
--------------------------------
The following companies maintain possession of the documents required
by the specified rules:
(a) Union Planters Bank, National Association
Rule 31a-1(b)(9),(10),(11) and
(12),(e) and (f)
Rule 31a-2(d) and (e)
(b) Fifth Third Bank
Rule 31a-1(b)(1) - (3), (5) - (9)
Rule 31a-2(c)
(c) BISYS Fund Services
Rule 31a-1(a), (b)(4),(12), (c) and (d)
Rule 31a-2(a) and (c)
Item 29. Management Services
-------------------
Not applicable.
Item 30. Undertakings
------------
None.
-7-
<PAGE> 103
********************
NOTICE
A copy of the Agreement and Declaration of Trust of Magna Funds (the
"Trust") is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this Registration Statement has
been executed on behalf of the Trust by an officer of the Trust as an officer
and by its Trustees as trustees and not individually and the obligations of or
arising out of this Registration Statement are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Trust.
-8-
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the Investment Company Act of 1940, as amended (the
"1940 Act"), the Registrant, Magna Funds (the "Trust"), has duly caused this
Post-Effective Amendment No. 7 to the Trust's Registration Statement under the
Securities Act, and Post-Effective Amendment No. 9 to the Trust's Registration
Statement under 1940 Act, to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Columbus and the State of Ohio, on the
18 day of October 1999.
MAGNA FUNDS
By: /S/ WALTER B. GRIMM
---------------------------
Walter B. Grimm
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
/S/ WALTER B. GRIMM
- ---------------------------
Walter B. Grimm
President
Date: October 18, 1999
/S/ GARY TENKMAN
- ---------------------------
Gary Tenkman
Treasurer (Chief Accounting Officer)
Date: October 18, 1999
*BRAD L. BADGLEY
- ----------------
Brad L. Badgley
Trustee
*EARL E. LAZERSON *ROBERT E. SAUR *NEIL SEITZ
- ----------------- --------------- -----------
Earl E. Lazerson Robert E. Saur Neil Seitz
Trustee Trustee Trustee
*ROBERT R. ARCHIBALD *HARRY R. MAIER *By: /S/ WALTER B. GRIMM
- -------------------- --------------- -------------------
Robert R. Archibald Harry R. Maier Walter B. Grimm
Trustee Trustee Attorney in Fact
Date: October 18, 1999
-9-
<PAGE> 105
EXHIBIT INDEX
Exhibit No. Name of Exhibit
- ----------- ---------------
1 Form of Investment Advisory Agreement - Magna Tax Exempt Bond
Fund (the "New Fund")
2 Form of Amendment to Distribution Agreement - New Fund
3 Form of Amendment to Custodian Agreement - New Fund
4 Form of Amendment to Administration Agreement - New Fund
5 Form of Amendment to Transfer Agent Agreement - New Fund
6 Form of Amendment to Fund Accounting Agreement - New Fund
7 Form of Notification of Fee Waiver
8 Form of Opinion and Consent of Counsel - New Fund
9 Form of 12b-1 Plan -- New Fund
- 10 -
<PAGE> 1
MAGNA TAX EXEMPT BOND FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of ___________, 1999 between MAGNA FUNDS, a
Massachusetts business trust (herein called the "Trust"), and Union Planters
Bank, National Association, a national bank (herein called the "Investment
Adviser").
WHEREAS, the Trust is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory services to the Magna Tax Exempt Bond Fund (the "Fund"), an
investment portfolio of the Trust, and the Investment Adviser represents that it
is willing and possesses legal authority to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act
as investment adviser to the Fund for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
2. Management. Subject to the supervision of the Trust's Board of
Trustees, the Investment Adviser will provide a continuous investment program
for the Trust, including investment research and management with respect to all
securities and investments and cash equivalents of the Fund. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by the Trust with respect to the Fund. The
Investment Adviser will provide the services under this Agreement in accordance
with the Trust's investment objective, policies and restrictions as stated in
the Prospectus and resolutions of the Trust's Board of Trustees. The Investment
Adviser further agrees that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to any fiduciary accounts for
which it has investment responsibilities;
(b) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission and in addition will conduct its
activities under this Agreement in accordance with any applicable
regulations of any governmental authority pertaining to the investment
advisory activities of the Investment Adviser;
(c) will place orders pursuant to its investment
determinations for the Trust either directly with the issuer or with
any broker or dealer. In placing orders with brokers and dealers, the
Investment Adviser will attempt to obtain prompt execution of orders in
an effective manner at the most favorable price. Consistent with this
obligation, when the execution and price offered by two or more brokers
or dealers are comparable, the Investment Adviser may, in its
discretion, purchase and sell portfolio securities to and from brokers
and dealers who provide the Investment Adviser with
<PAGE> 2
research advice and other services. Unless and until appropriate
procedures are adopted by the Trustees of the Trust under Rule 17e-1 of
the 1940 Act and unless the provisions of such Rule are complied with,
portfolio securities will not be purchased from or sold to BISYS Fund
Services, the Investment Adviser, or any affiliated person of the
Trust, BISYS Fund Services, or the Investment Adviser;
(d) will maintain all books and records with respect to the
Trust's securities transactions and will furnish the Trust's Board of
Trustees such periodic and special reports as the Board may request;
and
(e) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Trust
and prior, present or potential interestholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification
to and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the Investment
Adviser may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
3. Services Not Exclusive. The investment management services furnished
by the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so long
as its services under this Agreement are not impaired thereby.
4. Books and Records. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Investment Adviser hereby agrees that all records which
it maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
The Investment Adviser further agrees to preserve for the periods prescribed by
Rule 3la-3 under the 1940 Act the records required to be maintained by Rule
3la-1 under the 1940 Act.
5. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Trust.
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Trust will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee computed
daily and paid monthly at the applicable annual rate of 0.50% of average daily
net assets.
7. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the performance of this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Adviser in the performance of its
duties or from reckless disregard by the Investment Adviser of its obligations
and duties under this Agreement.
8. Duration and Termination. This Agreement will become effective as to
the Trust as of the date first written above, provided that it shall have been
approved by vote of a majority of the outstanding voting securities of the Fund,
in accordance with the requirements under the
<PAGE> 3
1940 Act, and, unless sooner terminated as provided herein, shall continue in
effect until September 30, 2001.
Thereafter, if not terminated, this Agreement shall continue in effect
for successive periods of twelve months each ending on September 30th of each
year, provided such continuance is specifically approved at least annually (a)
by the vote of a majority of those members of the Trust's Board of Trustees who
are not parties to this Agreement or interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the vote of a majority of the Trust's Board of Trustees or
by the vote of a majority of the outstanding voting securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated at any time on
sixty days' written notice, without the payment of any penalty, by the Trust (by
vote of the Fund's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Fund) or by the Investment Adviser. This Agreement will
immediately terminate in the event of its assignment. If the Investment Adviser
requires the Trust or the Fund to change its name so as to eliminate all
references to the word "Magna," then this Agreement shall automatically
terminate at the time of such change unless the continuance of this Agreement
after such change shall have been specifically approved by vote of a majority of
the outstanding voting securities of the Fund and by vote of a majority of the
Trustees of the Trust who are not interested persons of the Trust or the
Investment Adviser, cast in person at a meeting called for the purpose of voting
on such approval. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall have
the same meaning of such terms in the 1940 Act.)
9. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
10. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the Commonwealth of Massachusetts.
A copy of the Agreement and Declaration of Trust establishing the Trust
is on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the Fund
on behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the Trustees, officers or shareholders individually but are binding
only upon the assets and property belonging to the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
MAGNA FUNDS
Seal By:
----------------------------------
Title:
-------------------------------
UNION PLANTERS BANK,
NATIONAL ASSOCIATION
Seal By:
----------------------------------
Title:
-------------------------------
3
<PAGE> 1
_______________________, 1999
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
Re: Distribution Agreement dated June 2, 1997 by and between Magna
Funds and BISYS Fund Services Limited Partnership (the "Agreement")
Ladies and Gentlemen:
Magna Funds (the "Trust") hereby notifies you that it has established
an additional series of shares, namely, the "Magna Tax Exempt Bond Fund" (the
"New Fund"). The Trust desires that you serve as distributor of the assets of
the New Fund under the terms of the Agreement.
If you agree to so serve in such capacity for the New Fund, kindly sign
and return to the Trust the enclosed counterpart hereof, whereupon the New Fund
shall be deemed a "Fund" under the Agreement. This letter agreement shall
constitute an amendment to the Agreement and, as such, a binding agreement
between the Trust and you in accordance with its terms.
Very truly yours,
MAGNA FUNDS
By__________________________________
Name:
Title:
The foregoing is hereby
accepted and agreed:
BISYS FUND SERVICES LIMITED PARTNERSHIP
By__________________________________
Name:
Title:
<PAGE> 1
_______________________, 1999
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Trust Operations
Re: Custodian Agreement dated June 2, 1997 by and between Magna Funds
and The Fifth Third Bank (the "Agreement")
Ladies and Gentlemen:
Magna Funds (the "Trust") hereby notifies you that it has established
an additional series of shares, namely, the "Magna Tax Exempt Bond Fund" (the
"New Fund"). The Trust desires that you serve as custodian of the assets of the
New Fund under the terms of the Agreement.
If you agree to so serve as custodian for the New Fund, kindly sign and
return to the Trust the enclosed counterpart hereof, whereupon the New Fund
shall be deemed a "Fund" under the Agreement, including Exhibit A thereto. This
letter agreement shall constitute an amendment to the Agreement and, as such, a
binding agreement between the Trust and you in accordance with its terms.
Very truly yours,
MAGNA FUNDS
By__________________________________
Name:
Title:
The foregoing is hereby
accepted and agreed:
THE FIFTH THIRD BANK
By__________________________________
Name:
Title:
<PAGE> 1
______________________, 1999
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Re: Administration Agreement dated June 2, 1997 by and between
Magna Funds and BISYS Fund Services Limited Partnership (the
"Agreement")
Ladies and Gentlemen:
Magna Funds (the "Trust") hereby notifies you that it has established
an additional series of shares, namely, the "Magna Tax Exempt Bond Fund" (the
"New Fund"). The Trust desires that you serve as the administrator of the New
Fund under the terms of the Agreement.
If you agree to so serve in such capacity for the New Fund, kindly sign
and return to the Trust the enclosed counterpart hereof, whereupon the New Fund
shall be deemed a "Portfolio" under the Agreement, including Schedule A thereto.
This letter agreement shall constitute an amendment to the Agreement and, as
such, a binding agreement between the Trust and you in accordance with its
terms.
Very truly yours,
MAGNA FUNDS
By__________________________________
Name:
Title:
The foregoing is hereby
accepted and agreed:
BISYS FUND SERVICES LIMITED PARTNERSHIP
By__________________________________
Name:
Title:
<PAGE> 1
_____________________, 1999
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Re: Transfer Agency Agreement dated June 9, 1997 by and between
Magna Funds and BISYS Fund Services, Inc. (the "Agreement")
Ladies and Gentlemen:
Magna Funds (the "Trust") hereby notifies you that it has established
an additional series of shares, namely, the "Magna Tax Exempt Bond Fund" (the
"New Fund"). The Trust desires that you serve as fund accountant of the New Fund
under the terms of the Agreement.
If you agree to so serve in such capacity for the New Fund, kindly sign
and return to the Trust the enclosed counterpart hereof, whereupon the New Fund
shall be deemed a "Fund" under the Agreement. This letter agreement shall
constitute an amendment to the Agreement and, as such, a binding agreement
between the Trust and you in accordance with its terms.
Very truly yours,
MAGNA FUNDS
By__________________________________
Name:
Title:
The foregoing is hereby
accepted and agreed:
BISYS FUND SERVICES, INC.
By__________________________________
Name:
Title:
<PAGE> 1
________________________, 1999
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Re: Fund Accounting Agreement dated June 9, 1997 by and between
Magna Funds and BISYS Fund Services, Inc. (the "Agreement")
Ladies and Gentlemen:
Magna Funds (the "Trust") hereby notifies you that it has established
an additional series of shares, namely, the "Magna Tax Exempt Bond Fund" (the
"New Fund"). The Trust desires that you serve as the transfer agent of the New
Fund under the terms of the Agreement.
If you agree to so serve in such capacity for the New Fund, kindly sign
and return to the Trust the enclosed counterpart hereof, whereupon the New Fund
shall be deemed a "Fund" under the Agreement. This letter agreement shall
constitute an amendment to the Agreement and, as such, a binding agreement
between the Trust and you in accordance with its terms.
Very truly yours,
MAGNA FUNDS
By__________________________________
Name:
Title:
The foregoing is hereby
accepted and agreed:
BISYS FUND SERVICES, INC.
By__________________________________
Name:
Title:
<PAGE> 1
MAGNA FUNDS
NOTIFICATION OF OBLIGATION TO WAIVE
CERTAIN FEES
NOTIFICATION made October _____, 1999 by UNION PLANTERS BANK, NATIONAL
ASSOCIATION (the "Advisor") and BISYS FUND SERVICES (the "Distributor"), to
MAGNA FUNDS, a Massachusetts business trust (the "Trust").
WITNESSETH:
WHEREAS, the Advisor and the Distributor have agreed to reduce their
fees otherwise receivable from each Fund of the Trust to the amounts described
below so as to reduce or eliminate certain costs otherwise borne by shareholders
of the Funds and to enhance the returns generated by shareholders of the Funds.
NOW, THEREFORE, the Advisor hereby notifies the Trust that the Advisor
shall, through August 31, 2000 (and any subsequent periods as may be designated
by the Advisor by notice to the Trust), reduce its fees to the following
amounts:
Magna Growth & Income Fund 0.50%
Magna Intermediate Government Bond Fund 0.40%
Magna Money Market Fund 0.17%
Magna Tax Exempt Bond Fund 0.__%
NOW, THEREFORE, the Distributor hereby notifies the Trust that the
Distributor shall, through August 31, 2000 (and any subsequent periods as may be
designated by the Distributor by notice to the Trust), waive all 12b-1 fees that
the Distributor might otherwise be entitled to receive pursuant to each Fund's
Rule 12b-1 Service Plan.
In providing this Notification, the Advisor and the Distributor each
separately understand and acknowledge that the Trust intends to rely on this
Notification, including in connection with the preparation and printing of the
Trust's prospectuses and its daily calculation of each Fund's net asset value.
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Please be advised that all previous notifications by the Advisor and
the Distributor with respect to fee waivers and/or expense limitations regarding
any of the Funds shall hereafter be null and void and of no further force and
effect.
IN WITNESS WHEREOF, the Advisor and the Distributor have executed this
Notification of Obligation to Waive Certain Fees on the day and year first above
written.
ADVISOR:
UNION PLANTERS BANK, N.A.
By:
--------------------------------
Title:
DISTRIBUTOR:
BISYS FUND SERVICES
By:
--------------------------------
Title:
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December _____, 1999
BY HAND DELIVERY
Magna Funds
3435 Stelzer Road
Columbus, Ohio 43219
Gentlemen:
You have informed us that you propose to register under the Securities
Act of 1933, as amended (the "Act"), and offer and sell from time to time shares
of beneficial interest (the "Shares") of the Magna Tax Exempt Bond Fund, a
series (the "Series") of Magna Funds (the "Trust").
We have examined an executed copy of your Agreement and Declaration of
Trust, as amended, on file in the office of the Secretary of State of The
Commonwealth of Massachusetts. We are familiar with the actions taken by your
Trustees to authorize the issue and sale to the public from time to time of
authorized and unissued Shares of the Series. We have also examined a copy of
your By-laws and such other documents as we have deemed necessary for the
purpose of this opinion.
Based on the foregoing, we are of the opinion that the issue and sale
of the authorized but unissued Shares of the Series has been duly authorized
under Massachusetts law. Upon the original issue and sale of any such authorized
but unissued Shares and upon receipt by the Trust of the authorized
consideration therefor in an amount not less than the applicable net asset
value, the Shares so issued will be validly issued, fully paid and nonassessable
by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or its Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the property of the particular series of shares for all
loss and expense of any shareholder of that series held personally liable solely
by reason of his being or having been a shareholder. Thus, the
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Magna Funds -2- December ____, 1999
risk of shareholder liability is limited to circumstances in which that series
of shares itself would be unable to meet its obligations.
We understand that this opinion is to be used in connection with the
registration of an indefinite number of Shares for offering and sale pursuant to
the Act. We consent to the filing of this opinion with and as part of your
Registration Statement on Form N-1A relating to such offering and sale.
Very truly yours,
[DRAFT]
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MAGNA TAX EXEMPT BOND FUND
CLASS A SERVICE PLAN
This Plan (the "Plan") constitutes the Service Plan relating to the
Class A shares of MAGNA TAX EXEMPT BOND FUND (the "Series"), a series of Magna
Funds, a Massachusetts business trust (the "Trust").
Section 1. The Trust, on behalf of the Series, will pay to BISYS Fund
Services Limited Partnership, a limited partnership that acts as the Principal
Distributor of the Series' shares, or such other entity as shall from time to
time act as the Principal Distributor of the Series' shares (the "Distributor"),
a fee (the "Service Fee") for expenses borne by the Distributor in connection
with the provision of personal services provided to investors in Class A shares
of the Series and/or the maintenance of shareholder accounts, at an annual rate
not to exceed 0.25% of the Series' average daily net assets attributable to the
Class A shares. Subject to such limit and subject to the provisions of Section 7
hereof, the Service Fee shall be as approved from time to time by (a) the
Trustees of the Trust and (b) the Independent Trustees of the Trust. The Service
Fee shall be accrued daily and paid monthly or at such other intervals as the
Trustees shall determine. The Distributor may pay all or any portion of the
Service Fee to securities dealers or other organizations (including, but not
limited to, any affiliate of the Distributor) as service fees pursuant to
agreements with such organizations for providing personal services to investors
in Class A shares of the Series and/or the maintenance of shareholder accounts,
and may retain all or any portion of the Service Fee as compensation for
providing personal services to investors in Class A shares of the Series and/or
the maintenance of shareholder accounts. All payments under this Service Plan
are intended to qualify as "service fees" as defined in National Association of
Securities Dealers, Inc. ("NASD") Conduct Rule 2830 (or any successor provision)
as in effect from time to time.
Section 2. This Plan shall not take effect until it has been approved
by votes of the majority of both (a) the Trustees of the Trust, and (b) the
Independent Trustees of the Trust, in each case cast in person at a meeting
called for the purpose of voting on this Plan, and by vote of a majority of the
outstanding Class A shares of this Series, and shall in no event take effect
before the effective date under the Securities Act of 1933 of the Trust's
registration statement on Form N-1A relating to the Shares. This Plan shall
continue in effect for a period of more than one year after the date this Plan
takes effect, but only so long as such continuance is specifically approved at
least annually by votes of the majority (or whatever other percentage may, from
time to time, be required by Section 12(b) of the Investment Company Act of 1940
(the "Act") or the rules and regulations thereunder) of both (a) the Trustees of
the Trust, and (b) the Independent Trustees of the Trust, cast in person at a
meeting called for the purpose of voting on this Plan.
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Section 3. Any person authorized to direct the disposition of monies
paid or payable by the Trust pursuant to this Plan or any related agreement
shall provide to the Trustees of the Trust, and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
Section 4. This Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Class A shares of the Series.
Section 5. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
A. That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the
Independent Trustees or by vote of a majority of the
outstanding Class A shares of the Series, on not more than 60
days' written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event
of its assignment.
Section 6. This Plan may not be amended to increase materially the
amount of expenses permitted pursuant to Section 1 hereof without approval by a
vote of at least a majority of the outstanding Class A shares of the Series, and
all material amendments of this Plan shall be approved in the manner provided
for continuation of this Plan in Section 2.
Section 7. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the Act and
the rules and regulations thereunder, and (c) the term "majority of the
outstanding Class A shares of the Series" shall mean the lesser of the 67% or
the 50% voting requirements specified in clauses (A) and (B), respectively, of
the third sentence of Section 2(a)(42) of the Act, all subject to such
exemptions as may be granted by the Securities and Exchange Commission.
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