<PAGE> 1
As filed with the Securities and Exchange Commission on October 17, 2000
Registration No. 811-8494 and 33-78408
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No.__ [ ]
Post-Effective Amendment No. 13 [x]
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 15
(Check appropriate box or boxes) [x]
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Leader Mutual Funds (formerly "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
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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 September 1, 2000 pursuant to paragraph (b) of rule 485.
<PAGE> 2
This filing relates solely to the Trust's Institutional Shares and Investor
Shares. No prior filings relating to any other class of shares of the Trust are
intended to be amended or superceded hereby.
<PAGE> 3
INVESTMENT ADVISER
Union Planters Bank, National Association
One South Church Street
Suite 500
Belleville, Illinois 62220
ADMINISTRATOR & DISTRIBUTOR
BISYS Fund Services, L.P.
3435 Stelzer Road
Columbus, Ohio 43219
TRANSFER AND DIVIDEND
PAYING AGENT
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
Union Planters Bank, National Association
One South Church Street
Suite 500
Belleville, Illinois 62220
INDEPENDENT ACCOUNTANTS
[----------------------------]
[----------------------------]
[----------------------------]
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
QUESTIONS?
Call 1-800-219-4182 or your investment representative.
<PAGE> 4
LEADER MUTUAL FUNDS
LEADER GROWTH & INCOME FUND
LEADER BALANCED FUND
LEADER INTERMEDIATE GOVERNMENT BOND FUND
LEADER TAX-EXEMPT BOND FUND
LEADER SHORT TERM BOND FUND
LEADER MONEY MARKET FUND
LEADER TREASURY MONEY MARKET FUND
LEADER TAX-EXEMPT MONEY MARKET FUND
INVESTOR SHARES
PROSPECTUS
JANUARY 1, 2001
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> 5
LEADER MUTUAL FUNDS TABLE OF CONTENTS
RISK/RETURN SUMMARY AND FUND EXPENSES
Carefully review this LEADER Growth & Income Fund
important section, which LEADER Balanced Fund
summarizes each Fund's LEADER Intermediate Government Bond Fund
objectives, strategies, LEADER Tax-Exempt Bond Fund
investments, risks, past LEADER Short Term Bond Fund
performance, and fees. LEADER Money Market Fund
LEADER Treasury Money Market Fund
LEADER Tax-Exempt Money Market Fund
Fees and Expenses
Investing for Defensive Purposes
Additional Information Regarding Fund
Policies
FUND MANAGEMENT
Review this section for Investment Adviser
details on the people and Portfolio Managers
organizations who oversee Distributor and Administrator
the Funds and their investments.
SHAREHOLDER INFORMATION
Consult this section to obtain Pricing of Fund Shares
details on how shares are Purchasing and Adding to Your Shares
valued, how to purchase, sell Selling Your Shares
and exchange shares, related General Policies on Selling Shares
charges and payments of dividends. Distribution Arrangements
Exchanging Your Shares
Dividends and Distributions
Taxation
FINANCIAL HIGHLIGHTS
Review this section for details on Financial Highlights
the selected financial statements
of the Funds.
<PAGE> 6
LEADER GROWTH &
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
INVESTMENT OBJECTIVES Long-term growth of capital, current
income and growth of income.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Growth & Income Fund (formerly
the "Magna Growth & Income 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. The Fund intends
to hold a combination of growth stocks
and value stocks. By investing in a blend
of stocks that demonstrate strong
long-term earnings potential and
undervalued stocks, the Fund seeks to
achieve strong returns with less
volatility. A portion of the Fund's
assets may also be invested in preferred
stocks, bonds (primarily investment
grade) convertible into common stock and
securities of foreign issuers traded in
U. S. securities markets. The Fund's
investment in foreign issuers will be
primarily through American Depositary
Receipts ("ADRs"). The Fund expects to
earn current income mainly from dividends
paid on common and preferred stocks and
from interest on convertible bonds.
The Adviser utilizes both "top-down" and
"bottom-up" approaches in constructing
the Fund's portfolio. This means the
Adviser looks at the condition of the
overall economy and industry segments in
addition to data on individual companies.
The Adviser selects stocks with the
intent of realizing long-term capital
appreciation, not for quick turnover. The
Adviser exercises patience and discipline
in making decisions to sell or continue
to hold individual stocks over time.
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 those stocks selected by
other funds with similar objectives.
The 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" and/or "value
securities." Growth securities typically
trade at higher multiples of current
earnings than other stocks and are often
more volatile than other types of
securities because their market prices
tend to place greater emphasis on future
earnings expectations. Value securities
bear the risk that the companies may not
overcome the
1
<PAGE> 7
LEADER GROWTH &
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
adverse business or other developments
that caused the securities to be out of
favor or that the market does not
recognize the value of the company, such
that the price of its securities declines
or does not approach the value the
Adviser anticipates.
The Fund's investments in foreign issuers
(which will be primarily through ADRs)
carry potential risks that are in
addition to those associated with
domestic investments. Such risks may
include, but are not limited to: (1)
currency exchange rate fluctuations, (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, and (5)
less government regulation and
supervision of foreign stock exchanges,
brokers and listed companies.
Investing in the Fund involves risks
common to any investment in securities.
By itself, no Fund constitutes a balanced
investment program. There is no guarantee
that the Fund will meet its goals. When
you sell your shares in the Fund, they
may be worth more or less than you paid
for them. It is possible to lose money by
investing in the Fund.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed
by the Federal Deposit Insurance
Corporation or any other government
agency.
A more complete discussion of the Fund's
investments and related risks can be
found in the Statement of Additional
Information.
2
<PAGE> 8
LEADER GROWTH &
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
PERFORMANCE BAR CHART AND TABLE(1)- INSTITUTIONAL SHARES(2)
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing changes in its performance from year to year and by showing
how the Fund's average annual returns for 1 year, 5 years and the period of time
since inception compare with those of a broad-based securities index and two
indexes of funds that the Adviser believes have similar investment objectives.
The Standard and Poor's 500 Composite Stock Price Index (the "S&P 500") in the
table below is an unmanaged, independently maintained U.S. large capitalization
stock index. The information provided regarding the Lipper Growth & Income Index
and the Lipper Large Cap Core Index shows how the Fund's average annual total
returns compare with the returns of two indexes of funds that the Adviser
believes have similar investment objectives.
Past performance does not indicate how the Fund will perform in the future.
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
[Insert Table]
For the period January 1, 2000 through September 30, 2000, the Fund's
total return was [____]%.
Best quarter: Q4 1998 16.30%
Worst quarter: Q3 1998 -5.24%
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending
December 31, 1999)
SINCE FUND
PAST FIVE INCEPTION
YEAR YEAR (9/1/94)
LEADER GROWTH & INCOME FUND(3) 11.69% 24.63% 21.98%
S&P 500(R)INDEX 21.05% 28.54% 25.96%
LIPPER GROWTH & INCOME INDEX 11.86% 20.60% 18.29%
LIPPER LARGE CAP CORE INDEX 19.35% 25.32% 22.83%
(1) Both the chart and the table assume reinvestment of all dividend and
capital gain distributions.
(2) Investor Shares of the LEADER Growth & Income Fund have not been offered
prior to the date of this prospectus. The returns in both the chart and
the table are for the Institutional Shares of the LEADER Growth & Income
Fund, which are offered through a separate prospectus and which would
have a substantially similar (although slightly higher) return compared
to the Investor Shares because the Institutional Shares are invested in
the same portfolio of securities but bear lower fund expenses. Annual
returns would have differed only to the extent that the Investor Shares
and the Institutional Shares bear different expenses.
(3) Reflects payment of maximum 5.50% sales charge.
3
<PAGE> 9
RISK/RETURN SUMMARY AND FUND EXPENSES LEADER BALANCED FUND
INVESTMENT OBJECTIVE To maximize total return through a
combination of growth of capital and
current income consistent with
preservation of capital.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Balanced Fund invests in a
combination of equity securities (such as
stocks), fixed income securities (such as
bonds) and money market instruments in
relative proportions that the Adviser
believes will offer attractive returns
consistent with the Fund's objective. The
Fund invests in equity securities
primarily for growth and income, and in
fixed income securities and money market
securities primarily for income and
relative stability.
Under normal market conditions, the Fund
invests at least 25% of its total assets
in fixed income securities and no more
than 75% of its total assets in equity
securities. The actual percentages will
vary from time to time based on the
Adviser's economic and market outlooks.
In determining the allocation of assets,
the Adviser evaluates forecasts for
inflation, interest rates and corporate
earnings growth. The Adviser periodically
will increase or decrease the Fund's
allocation to equity securities, fixed
income securities and money market
instruments based on which asset class
appears relatively more attractive than
the others. For example, if the Adviser
forecasts rapid economic growth leading
to increased corporate earnings, it will
generally increase the Fund's holdings of
equity securities and reduce its holdings
of fixed income securities and money
market instruments.
The Fund's equity securities will consist
mainly of common stocks, but may also
include preferred stocks and securities
convertible into stocks, as well as
warrants to purchase such securities. In
selecting equity securities, the Adviser
utilizes both "top-down" and "bottom-up"
approaches. This means the Adviser looks
at the condition of the overall economy
and industry segments in addition to data
on individual companies. The Adviser
selects stocks with the intent of
realizing long-term capital appreciation,
not for quick turnover.
The Fund's investment in fixed income
securities will consist mainly of
investment-grade bonds, but the Fund may
invest in any kind of debt security
issued by private corporations or the
U.S. Government (including any of its
political subdivisions, agencies, or
instrumentalities). With respect to its
investment in bonds, the Fund will invest
primarily in issues rated in one of the
four highest categories by a nationally
recognized statistical rating
organization ("NRSRO") (for example,
rated Aaa, Aa, A or Baa by Moody's
Investors Service, Inc. ("Moody's") or
AAA, AA, A or BBB by Standard & Poor's
Rating Service ("Standard & Poor's")) or
unrated issues deemed by the Adviser to
be of
4
<PAGE> 10
RISK/RETURN SUMMARY AND FUND EXPENSES LEADER BALANCED FUND
comparable quality. The Fund may also
invest up to 10% of its assets in
securities rated below investment grade.
The U.S. Government securities in which
the Fund may invest include direct
obligations of the U.S. Treasury, such as
U.S. Treasury bills, notes and bonds, as
well as obligations of U.S. government
agencies, authorities or
instrumentalities such as the Federal
Home Loan Banks, FNMA, GNMA, the Federal
Farm Credit Banks, the Student Loan
Marketing Association, the Federal Home
Loan Mortgage Corporation or the
Tennessee Valley Authority. The Fund may
also invest in corporate debt
obligations, mortgage-backed securities,
asset-backed securities, collateralized
mortgage obligations, repurchase
agreements, adjustable rate securities
and payable-in-kind bonds.
PRINCIPAL
INVESTMENT RISKS Two principal risks of investing in the
Fund are market risk and selection risk.
Market risk means that each of the stock
and bond markets in general has ups and
downs, which may affect the performance
of the individual securities held by the
Fund, and thus the performance of the
Fund as a whole. Selection risk means
that the particular securities that are
selected by the Adviser for the Fund may
underperform the market or those
securities selected by other funds with
similar objectives.
The equity component of the 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" and/or
"value securities." Growth securities
typically trade at higher multiples of
current earnings than other stocks and
are often more volatile than other types
of securities because their market prices
tend to place greater emphasis on future
earnings expectations. Value securities
bear the risk that the companies may not
overcome the adverse business or other
developments that caused the securities
to be out of favor or that the market
does not recognize the value of the
company, such that the price of its
securities declines or does not approach
the value the Adviser anticipates.
The fixed income component of the Fund
seeks to provide income and a level of
protection of capital but offers less
potential for capital appreciation than
equity securities. In addition, the fixed
income component of the Fund's portfolio
will be subject to the following risks:
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
5
<PAGE> 11
RISK/RETURN SUMMARY AND FUND EXPENSES LEADER BALANCED FUND
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.
INCOME RISK: It is possible that the
income derived from the Fund's fixed
income component will decline over time
because of a decrease in interest rates
or other factors. Income risk is
generally 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: Certain of the Fund's
investments may be subject to the risk
that the principal amount of the
underlying loan 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.
Investing in the Fund involves risks
common to any investment in securities.
By itself, no Fund constitutes a balanced
investment program. There is no guarantee
that the Fund will meet its goals. When
you sell your shares in the Fund, they
may be worth more or less than you paid
for them. It is possible to lose money by
investing in the Fund.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed
by the Federal Deposit Insurance
Corporation or any other government
agency.
A more complete discussion of the Fund's
investments and related risks can be
found in the Statement of Additional
Information.
No performance is shown for the LEADER
Balanced Fund because as of the date of
this Prospectus, the Fund had not
completed a full calendar year of
operations.
6
<PAGE> 12
LEADER INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES GOVERNMENT BOND FUND
INVESTMENT OBJECTIVES Current income consistent with
preservation of capital.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Intermediate Government Bond
Fund (formerly the "Magna Intermediate
Government Bond 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) and high grade bonds
and notes of non-governmental issuers.
Under normal market conditions, at least
65% of the Fund's total assets will be
invested in U.S. Government securities.
The Fund will invest at least 65% of its
total assets in "bonds," which the
Adviser deems to include all debt
securities for this purpose. 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.
The Fund's investments in U.S. Government
securities may include direct obligations
of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds, as well
as obligations of U.S. government
agencies, authorities or
instrumentalities such as the Federal
Home Loan Banks, FNMA, GNMA, the Federal
Farm Credit Banks, the Student Loan
Marketing Association, the Federal Home
Loan Mortgage Corporation or the
Tennessee Valley Authority.
The Fund will invest primarily in issues
rated in one of the four highest
categories by a NRSRO (for example, rated
Aaa, Aa, A or Baa by Moody's or AAA, AA,
A or BBB by Standard & Poor's) or unrated
issues deemed by the Adviser to be of
comparable quality. 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
rated below investment grade (for
example, below Baa or BBB).
The Fund may also invest in corporate
debt obligations, mortgage-backed
securities, collateralized mortgage
obligations and repurchase agreements.
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
7
<PAGE> 13
LEADER INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES GOVERNMENT BOND FUND
as credit risk and relative interest rate
yields available among fixed income
market sectors.
While maturity and credit quality are the
most important investment factors, other
factors considered by the Fund when
making investment decisions include:
- Current yield and yield to maturity.
- Potential for capital gain.
Decisions to sell portfolio holdings are
generally the result of changes in the
Adviser's forecast of interest rate
trends, industries or other economic
conditions, changes in the Adviser's
assessment of the financial condition of
a particular issuer, for liquidity
purposes, or to rebalance the portfolio.
8
<PAGE> 14
LEADER INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES GOVERNMENT BOND FUND
PRINCIPAL
INVESTMENT RISKS The 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. 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 the Fund may
underperform the market or other funds
with similar objectives. In addition to
market risk and selection risk, the Fund
will also be subject to the following
principal investment risks:
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, including U.S.
Government securities, have exposure to
some degree of credit risk. U.S.
Government securities may be subject to
different types and amounts of credit
support, as certain U.S. Government
securities are not backed by the full
faith and credit of the U.S. Government.
Corporate bonds and notes, which may
constitute up to 35% of the Fund's
assets, generally involve more credit
risk than U.S. Government securities.
Mortgage-backed securities may also be
exposed to high levels of credit risk,
depending upon the credit of the assets
underlying such securities, the issuer's
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
or other factors. Income risk is
generally lower for portfolios holding
long-term bonds and higher for portfolios
holding 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
9
<PAGE> 15
LEADER INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES GOVERNMENT BOND FUND
risk that the principal amount of the
underlying loan 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.
Investing in the Fund involves risks
common to any investment in securities.
By itself, no Fund constitutes a balanced
investment program. There is no guarantee
that the Fund will meet its goals. When
you sell your shares in the Fund, they
may be worth more or less than you paid
for them. It is possible to lose money by
investing in the Fund.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed
by the Federal Deposit Insurance
Corporation or any other government
agency.
A more complete discussion of the Fund's
investments and related risks can be
found in the Statement of Additional
Information.
10
<PAGE> 16
LEADER INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES GOVERNMENT BOND FUND
PERFORMANCE BAR CHART AND TABLE(1) - INSTITUTIONAL SHARES(2)
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing changes in its performance from year to year and by showing
how the Fund's average annual returns for one year, five years and the period of
time since inception compare with those of a broad-based securities index. The
Lipper Intermediate Government Bond Index in the table below is an unmanaged,
independently maintained index comprised of U.S. Treasury issues, publicly
issued debt of U.S. Government agencies, and corporate debt guaranteed by the
U.S. Government.
Past performance does not indicate how the Fund will perform in the future.
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
[Insert Table]
For the period January 1, 2000 through September 30, 2000, the
Fund's total return was [____]%.
Best quarter: Q2 1995 5.19%
Worst quarter: Q2 1999 -2.12%
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending
December 31, 1999)
PAST FIVE SINCE FUND
YEAR YEAR INCEPTION (9/1/94)
---- ---- ------------------
LEADER INTERMEDIATE GOVERNMENT BOND FUND(3) -8.68% 4.84% 4.09%
LIPPER INTERMEDIATE GOVERNMENT BOND INDEX -1.39% 6.63% 5.93%
(1) Both the chart and the table assume reinvestment of all dividend and
capital gain distributions.
(2) Investor Shares of the LEADER Growth & Income Fund have not been offered
prior to the date of this prospectus. The returns in both the chart and
the table are for the Institutional Shares of the LEADER Growth & Income
Fund, which are offered through a separate prospectus and which would
have a substantially similar (although slightly higher) return compared
to the Investor Shares because the Institutional Shares are invested in
the same portfolio of securities but bear lower fund expenses. Annual
returns would have differed only to the extent that the Investor Shares
and the Institutional Shares bear different expenses.
(3) Reflects payment of maximum applicable 4.75% sales charge.
11
<PAGE> 17
LEADER TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
INVESTMENT OBJECTIVES Current income that is exempt from
federal income tax consistent with
preservation of capital.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Tax-Exempt Bond Fund (formerly
the "Magna Tax-Exempt Bond Fund"),
normally invests at least 80% of its
total assets in obligations producing
income that is exempt from federal income
taxation. 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 will invest at least 65%
of its total assets in "bonds," which the
Adviser deems to include all debt
securities for this purpose. The Fund may
invest up to 20% of its net assets in
U.S. Government securities, money market
instruments or "private activity" bonds
(some or all of which may produce income
subject to federal alternative minimum
tax). The Fund seeks to maintain a
dollar-weighted average portfolio
maturity between five and twenty years.
The Fund will only purchase securities
rated in one of the four highest
categories by an NRSRO (for example, Aaa,
Aa, A or Baa by Moody's or AAA, AA, A or
BBB by Standard & Poor's) or unrated
securities deemed by the Adviser to be of
comparable quality. 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 10% of its assets in securities
that have been downgraded below
investment grade (for example, below Baa
by Moody's or BBB by Standard & Poor's).
While maturity and credit quality are the
most important investment factors, the
Fund also considers the following when
making investment decisions:
- Current yield and yield to maturity.
- Potential for capital gain.
Decisions to sell portfolio holdings are
generally the result of changes in the
Adviser's forecast of interest rate
trends, industries or other economic
conditions, changes in the Adviser's
assessment of the financial condition of
a particular issuer, for liquidity
purposes, or to rebalance the portfolio.
12
<PAGE> 18
LEADER TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
PRINCIPAL
INVESTMENT RISKS The Fund will invest primarily in high
quality fixed income securities, which
provide income and a level of protection
of capital, but do not typically present
opportunity for capital appreciation. The
amount of information available about
issuers of tax-exempt debt may not be as
extensive as that which is made available
by companies whose stock or debt is
publicly traded. In addition, changes in
law or adverse determinations by the
Internal Revenue Service could make the
income from some of the Fund's
investments taxable. 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 the Fund may underperform
the market or other funds with similar
objectives. In addition to these risks,
the Fund will also be subject to the
following principal investment risks:
13
<PAGE> 19
LEADER TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
INTEREST RATE RISK: All bonds fluctuate
in value as interest rates fluctuate.
Generally, as interest rates rise, the
value of a Fund's bond investments, and
of its shares, will decline. 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.
INCOME RISK: It is possible that the
Fund's income will decline over time
because of a decrease in interest rates
or other factors. Income risk is
generally 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: Certain of the Fund's
investments may be subject to the risk
that the principal amount of the
underlying loan 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.
Investing in the Fund involves risks
common to any investment in securities.
By itself, no Fund constitutes a balanced
investment program. There is no guarantee
that the Fund will meet its goals. When
you sell your shares in the Fund, they
may be worth more or less than you paid
for them. It is possible to lose money by
investing in the Fund.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed
by the Federal Deposit Insurance
Corporation or any other government
agency.
A more complete discussion of the Fund's
investments and related risks can be
found in the Statement of Additional
Information.
No performance is shown for the LEADER
Tax-Exempt Bond Fund because as of the
date of this Prospectus, the Fund had not
completed a full calendar year of
operations.
14
<PAGE> 20
LEADER SHORT
RISK/RETURN SUMMARY AND FUND EXPENSES TERM BOND FUND
INVESTMENT OBJECTIVES To provide a high level of current income
consistent with preservation of capital.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Short Term Bond Fund invests
primarily in investment-grade bonds (for
example, those rated at least Baa or
BBB, or determined to be of comparable
quality by the Adviser). The types of
securities that the Fund may purchase
include bonds of U.S. corporate and
governmental issuers, U.S.
dollar-denominated bonds of foreign
issuers, and mortgage-backed and other
asset-backed securities. The Fund will
normally maintain a dollar-weighted
average portfolio maturity of three
years or less, but may purchase
individual securities with longer
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.
In addition to a wide range of corporate
and government debt obligations, the Fund
may also invest in collateralized
mortgage obligations, repurchase
agreements, adjustable rate securities
and payable in kind bonds. The Fund may
also invest in securities rated below
investment grade (for example, below Baa
or BBB), but does not expect such
investments to exceed 10% of the Fund's
net assets.
While maturity and credit quality are the
most important investment factors, other
factors considered by the Adviser when
making investment decisions include:
- Current yield and yield to maturity.
- Potential for capital gain.
Decisions to sell portfolio holdings are
generally the result of changes in the
Adviser's forecast of interest rate
trends, industries or other economic
conditions, changes in the Adviser's
assessment of the financial condition of
a particular issuer, for liquidity
purposes, or to rebalance the portfolio.
PRINCIPAL
INVESTMENT RISKS The Fund invests primarily in short-term
investment grade fixed-income securities,
which provide income and a level of
protection of capital, but present less
potential for capital appreciation than
equity securities. 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 the Fund may underperform
the market or other funds with similar
objectives. In addition to market risk
and selection risk, the Fund will be
subject to the following principal
investment risks:
15
<PAGE> 21
LEADER SHORT
RISK/RETURN SUMMARY AND FUND EXPENSES TERM BOND FUND
INTEREST RATE RISK: All bonds fluctuate
in value as interest rates fluctuate.
Generally, as interest rates rise, the
value of the Fund's investments, and of
its shares, will decline. If interest
rates decline, the Fund's 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, including U.S.
Government securities, have exposure to
some degree of credit risk.
Mortgage-backed securities may be exposed
to higher levels of credit risk,
depending upon the credit of the assets
underlying such securities, the issuer's
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
or other factors. Income risk is
generally higher for portfolios holding
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- and asset-backed securities,
are subject to the risk that the
principal amount of the underlying loan
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.
FOREIGN INVESTMENTS. The Fund may invest
in U.S. dollar-denominated bonds issued
by foreign governments or corporations.
Foreign investments involve certain
special risks, including the risk of
seizure by foreign governments,
imposition of restrictions on exchange,
tax increases, less publicly-available
information, less liquidity due to
limited markets and higher transaction
costs.
Investing in the Fund involves risks
common to any investment in securities.
By itself, no Fund constitutes a balanced
investment program. There is no guarantee
that the Fund will meet its goals. When
you sell your shares in the Fund, they
may be worth more or less than you paid
for them. It is possible to lose money by
investing in the Fund.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed
by the Federal Deposit Insurance
Corporation or any other government
agency.
A more complete discussion of the Fund's
investments and related risks can be
found in the Statement of Additional
Information.
16
<PAGE> 22
LEADER SHORT
RISK/RETURN SUMMARY AND FUND EXPENSES TERM BOND FUND
No performance is shown for the LEADER
Short Term Bond Fund because as of the
date of this Prospectus, the Fund had not
completed a full calendar year of
operations.
17
<PAGE> 23
LEADER MONEY
RISK/RETURN SUMMARY AND FUND EXPENSES MARKET FUND
INVESTMENT OBJECTIVES Maximum current income consistent with
preservation of capital and liquidity.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Money Market Fund (formerly
the "Magna Money Market Fund"), invests
in a variety of high-quality money market
instruments, including U.S. Government
securities, taxable municipal debt,
commercial paper and other corporate debt
obligations, certificates of deposit,
repurchase agreements, bankers'
acceptances and other dollar-denominated
bank obligations, including obligations
issued by U.S. banks, their foreign
branches and/or foreign banks. At the
time of purchase, all of the Fund's
investments (other than U.S. Government
securities and related repurchase
agreements) will be rated in the highest
rating category by an NRSRO (for example,
Aaa by Moody's or AAA by Standard &
Poor's) or, if unrated, deemed by the
Adviser to be of comparable quality. In
addition, all Fund investments will
mature in 397 days or less, and the
Fund's average maturity will not exceed
90 days.
While the Fund typically holds securities
until maturity, decisions to sell
portfolio holdings are generally the
result of a change in financial condition
of the issuer of a security, for
liquidity purposes, or to rebalance the
portfolio.
PRINCIPAL
INVESTMENT RISKS The Fund will invest primarily in high
quality fixed income securities, which
provide income and a level of protection
of capital, but do not typically present
opportunity for capital appreciation. The
Fund's quality and maturity limitations
described above will reduce, but not
altogether eliminate the following risks:
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 generally involve more credit
risk although even U.S. Government
securities are generally considered to
have some credit risk. The Fund's use of
repurchase agreements also involves some
credit risk, primarily the risk of loss
if the seller defaults.
18
<PAGE> 24
LEADER MONEY
RISK/RETURN SUMMARY AND FUND EXPENSES MARKET FUND
INCOME RISK: It is possible that the
Fund's income will decline over time
because of a decrease in interest rates
or other factors. Income risk is
generally lower for longer-term bonds and
higher for shorter-term bonds. Because
interest rates vary, it is impossible to
predict the income or yield of the Fund
for any particular period.
Investing in the Fund involves risks
common to any investment in securities.
By itself, no Fund constitutes a balanced
investment program. There is no guarantee
that the Fund will meet its goals.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed
by the Federal Deposit Insurance
Corporation or any other government
agency. Although the Fund seeks to
preserve the value of your investment at
$1.00 per share, it is possible to lose
money by investing in this Fund.
A more complete discussion of the Fund's
investments and related risks can be
found in the Statement of Additional
Information.
No performance is shown for the LEADER
Money Market Fund because as of the date
of this Prospectus, the Fund had not
completed a full calendar year of
operations.
19
<PAGE> 25
LEADER TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
INVESTMENT OBJECTIVES High level of current income consistent
with stability of principal and
liquidity.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Treasury Money Market Fund
invests primarily in high-quality,
short-term money market securities whose
interest and principal payments are
backed by the full faith and credit of
the U.S. Government. Under normal market
conditions, the Fund will invest
substantially all of its total assets in
money market securities issued by the
U.S. Treasury and certain U.S. government
agencies and instrumentalities that
provide income that is generally not
subject to state income tax. All Fund
investments will mature in 397 days or
less, and the Fund's average maturity
will not exceed 90 days.
While the Fund typically holds securities
until maturity, decisions to sell
portfolio holdings are generally the
result of a change in financial condition
of the issuer of a security, for
liquidity purposes, or to rebalance the
portfolio.
PRINCIPAL
INVESTMENT RISKS The Fund will invest primarily in high
quality fixed income securities, which
provide income and a level of protection
of capital, but do not typically present
opportunity for capital appreciation. The
Fund's issuer selection, credit quality
and maturity limitations will reduce, but
not altogether eliminate, the following
risks:
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: Credit risk includes the
possibility that a party to a transaction
involving the Fund will fail to meet its
obligations. Although U.S. Treasury
obligations have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value of
your investment could decline.
INCOME RISK: It is possible that the
Fund's income will decline over time
because of a decrease in interest rates
or other factors. Income risk is
generally lower for longer-term bonds and
higher for shorter-term bonds. Because
interest rates vary, it is impossible to
predict the income or yield of the Fund
for any particular period.
Investing in the Fund involves risks
common to any investment in securities.
By itself, no Fund constitutes a balanced
investment program. There is no guarantee
that the Fund will meet its goals.
20
<PAGE> 26
LEADER TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
An investment in the Fund is not a bank
deposit and is not insured or guaranteed
by the Federal Deposit Insurance
Corporation or any other government
agency. Although the Fund seeks to
preserve the value of your investment at
$1.00 per share, it is possible to lose
money by investing in this Fund.
A more complete discussion of the Fund's
investments and related risks can be
found in the Statement of Additional
Information.
No performance is shown for the LEADER
Treasury Money Market Fund because as of
the date of this Prospectus, the Fund had
not completed a full calendar year of
operations.
21
<PAGE> 27
LEADER TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
INVESTMENT OBJECTIVES Maximum current income exempt from
federal income tax consistent with
preservation of capital and liquidity.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Tax-Exempt Money Market Fund
invests primarily in high-quality,
short-term money market instruments which
pay interest that is exempt from federal
income tax. Under normal market
conditions, the Fund will invest at least
80% of its assets in short-term
tax-exempt instruments. Federally
tax-exempt obligations may include
municipal securities and commercial paper
issued by states and other local
governments. 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 short-term money
market instruments or "private activity"
bonds, some or all of which may produce
income subject to federal alternative
minimum tax.
At the time of purchase, all of the
Fund's investments (other than U.S.
Government securities and related
repurchase agreements) will be rated in
the highest rating category by an NRSRO
(for example, Aaa by Moody's or AAA by
Standard & Poor's) or, if unrated, deemed
by the Adviser to be of comparable
quality. In addition, all Fund
investments will mature in 397 days or
less, and the Fund's average maturity
will not exceed 90 days.
While the Fund typically holds securities
until maturity, decisions to sell
portfolio holdings are generally the
result of a change in financial condition
of the issuer of a security, for
liquidity purposes, or to rebalance the
portfolio.
PRINCIPAL INVESTMENT RISKS The Fund will invest primarily in high
quality fixed income securities, which
provide income and a level of protection
of capital, but do not typically present
opportunity for capital appreciation. The
amount of information available about
issuers of tax-exempt debt may not be as
extensive as that which is made available
by companies whose stock or debt is
publicly traded. In addition, changes in
law or adverse determinations by the
Internal Revenue Service could make the
income from some of the Fund's
investments taxable. The Fund's quality
and maturity limitations described above
will reduce, but not altogether
eliminate, the following risks:
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.
22
<PAGE> 28
LEADER TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
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. 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
or other factors. Income risk is
generally lower for longer-term bonds and
higher for shorter-term bonds. Because
interest rates vary, it is impossible to
predict the income or yield of the Fund
for any particular period.
Investing in the Fund involves risks
common to any investment in securities.
By itself, no Fund constitutes a balanced
investment program. There is no guarantee
that the Fund will meet its goals.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed
by the Federal Deposit Insurance
Corporation or any other government
agency. Although the Fund seeks to
preserve the value of your investment at
$1.00 per share, it is possible to lose
money by investing in this Fund.
A more complete discussion of the Fund's
investments and related risks can be
found in the Statement of Additional
Information.
No performance is shown for the LEADER
Tax-Exempt Money Market Fund because as
of the date of this Prospectus, the Fund
had not completed a full calendar year of
operations.
23
<PAGE> 29
RISK/RETURN SUMMARY AND FUND EXPENSES FEES AND EXPENSES
FEES AND EXPENSES
The following table describes the Fees and Expenses that you may pay if you buy
and hold Investor Shares of the Funds:
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID LEADER LEADER LEADER LEADER LEADER LEADER LEADER LEADER
DIRECTLY FROM YOUR INVESTMENT) GROWTH BALANCED INTERMEDIATE SHORT TAX-EXEMPT MONEY TREASURY TAX-EXEMPT
& FUND GOVERNMENT TERM BOND BOND FUND MARKET MONEY MONEY
INCOME BOND FUND FUND FUND MARKET MARKET FUND
FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of offering
price) 5.50% 5.50% 4.75% 4.75% 4.75% None None None
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None None None None None None
Maximum Deferred Sales Load None(1) None(1) None(1) None(1) None(1) None None None
Annual Fund Operating Expenses
(expenses that are deducted from
Fund assets)
Management Fees 0.75% 0.80% 0.50% 0.55% 0.50% 0.40% 0.40% 0.50%(2)
Distribution and Service (12b-1)
Fees 0.30% 0.30% 0.30% 0.30% 0.30% 0.50% 0.50% 0.50%
Other Expenses(2) 0.37% 0.45% 0.42% 0.94% 0.57% 0.36% 0.50% 0.50%
Total Annual Fund Operating 1.42% 1.55% 1.22% 1.79% 1.37% 1.26% 1.40% 1.40%
Expenses(3)
</TABLE>
(1) On purchases over $1 million, the Fund may charge a 1% contingent deferred
sales charge on amounts redeemed within two years after purchase by shareholders
that would have otherwise been subject to a larger sales charge.
(2) Other Expenses are estimated for the Fund's current fiscal year.
(3) As a result of the Adviser's voluntary waiver of a portion (___%) of its
management fee and a voluntary waiver of part (___%) of the amount payable under
the Distribution and Service Plan, net annual operating expenses are expected to
be ____%, 1.35%, ____%, 1.34%, ____%, ____%, ____% and ____%, for the Growth &
Income Fund, Balanced Fund, Intermediate Government Bond Fund, Short Term Bond
Fund and Tax-Exempt Bond Fund, the Money Market Fund, the Treasury Money Market
Fund and the Tax-Exempt Money Market Fund. These waivers may be eliminated at
any time in the Adviser's discretion.
The Example at the right is intended to help you compare the cost of investing
in the LEADER Mutual Funds with the costs of investing in other mutual funds. It
estimates 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
may be higher or lower. The examples below do not reflect any fee waivers that
may be in effect for part or all of the relevant period.
EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
LEADER GROWTH & INCOME FUND $687 $975 $1,284 $2,158
LEADER BALANCED FUND $680 $994
</TABLE>
24
<PAGE> 30
<TABLE>
<S> <C> <C> <C> <C>
LEADER INTERMEDIATE GOVERNMENT BOND FUND $593 $844 $1,113 $1,882
LEADER TAX-EXEMPT BOND FUND $608 $888
LEADER SHORT TERM BOND FUND $605 $970
LEADER MONEY MARKET FUND $128 $400 [___] [___]
LEADER TREASURY MONEY MARKET FUND $143 $443
LEADER TAX-EXEMPT MONEY MARKET FUND $143 $443
</TABLE>
25
<PAGE> 31
RISK/RETURN SUMMARY AND FUND EXPENSES
INVESTING FOR DEFENSIVE PURPOSES
When the Adviser determines that market conditions are appropriate, each Fund
may, for temporary defensive purposes, invest up to 100% of its assets in money
market instruments. (The Money Market Fund, Treasury Money Market Fund and
Tax-Exempt Money Market Fund (each a "Money Fund" and collectively, the "Money
Funds") may invest 100% of their assets in money market investments for any
purpose.) Each of the Intermediate Government Bond Fund, the Short Term Bond
Fund and the Tax-Exempt Bond Fund 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.
ADDITIONAL INFORMATION REGARDING FUND POLICIES
Except for those policies specifically identified as "fundamental", the
investment objectives and policies set forth in this Prospectus may be changed
by the Adviser, subject to review and approval by the Board of Trustees of
LEADER Mutual Funds (the "Trust"), without shareholder vote. The investment
objective of each of the Growth & Income Fund and Intermediate Government Bond
Fund is fundamental. The investment objective of each other Fund is
non-fundamental, and may be changed without shareholder vote.
Each of the Funds may invest in shares of other open-end investment companies,
consistent with, and to the extent permitted by, applicable law. In addition,
pursuant to an order issued by the U.S. Securities and Exchange Commission (the
"SEC"), each non-Money Fund may invest a portion of its assets in one or more of
the Money Funds for cash management purposes.
FUND MANAGEMENT
INVESTMENT ADVISER
Union Planters Bank, National Association ("Union Planters" or the "Adviser"),
One South Church Street, Suite 500, Belleville, Illinois 62220 serves as
investment adviser to the LEADER Mutual Funds. 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 $33 billion.
For investment advisory services provided by Union Planters, the Funds paid as
follows during the fiscal year ended August 31, 2000:
AS A PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 8/31/00*
--------------
LEADER Growth & Income Fund 0.50%
LEADER Intermediate Government Bond Fund 0.40%
LEADER Money Market Fund 0.17%
LEADER Tax-Exempt Bond Fund 0.50%
* Absent expense limitations that were in place throughout this period,
these amounts would have been 0.75%, 0.50% and 0.40% (as a percentage
of average daily net assets) for the Growth & Income Fund,
Intermediate Government Bond Fund and Money Market Fund, respectively.
In addition, the Balanced Fund, Short Term Bond Fund, Treasury Money
Market Fund and Tax-Exempt Money Market Fund will pay Union Planters, 0.80%,
0.55%, 0.40% and 0.40% (as a percentage of average daily net assets)
respectively, for investment advisory services rendered to such Funds.
26
<PAGE> 32
PORTFOLIO MANAGERS
Union Planters has several portfolio managers committed to the day-to-day
management of the Funds.
Gary J. Guthrie is the portfolio manager for the LEADER Growth & Income Fund.
Mr. Guthrie is a graduate of Southern Illinois University and is currently Vice
President of Union Planters.
L. Clark Zedric is the portfolio manager for the LEADER Intermediate Government
Bond Fund. He received his MBA from Illinois State University and is currently
Vice President of Union Planters.
Both Mr. Guthrie and Mr. Zedric have served as portfolio managers since these
Funds' inception in 1994.
Lucy Kasson is the portfolio manager for the LEADER Tax-Exempt Bond Fund and
each of the Money Funds. A graduate of DePaul University, Ms. Kasson joined
Union Planters in 1999, where she is currently a Vice President and has served
as the portfolio manager for each of these Funds since their inception. Ms.
Kasson was employed by Nuveen Advisory Corporation from 1978 until 1999, where
she served as a portfolio manager from 1995 to 1999.
The LEADER Balanced Fund is managed by Mr. Guthrie, Ms. Kasson and Mr. Zedric.
The LEADER Short Term Bond Fund is managed by Mr. Zedric and James W. Duies. Mr.
Duies joined Union Planters in April 1999 as a Junior Portfolio Manager and
became a portfolio manager in 2000. Prior to joining Union Planters, Mr. Duies
was a Trust & Investment Assistant at SunTrust Investments. Mr. Duies graduated
from Millikin University in 1995.
The Statement of Additional Information ("SAI") has more detailed information
about the Adviser and the Funds' other service providers.
DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services, L.P. ("BISYS"or the "Distributor") is the distributor of
each Fund, and also 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. (the "Transfer Agent"), 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.
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<PAGE> 33
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
HOW NET ASSET VALUE IS CALCULATED
The net asset value, or 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
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.
LEADER MONEY FUNDS
The NAV of the Money Funds is expected to be constant at $1.00 per share,
although this value is not guaranteed. The NAV is determined at 3:00 p.m.
Eastern time (2:00 p.m. Central time) for the Money Market Fund and Treasury
Money Market Fund and 12:30 a.m. Eastern time (11:30 a.m. Central time) for the
Tax-Exempt Money Market Fund on all days when the New York Stock Exchange (the
"Exchange") is open for regular trading. In addition to Exchange holidays, the
Money Funds will also be closed on Columbus Day and Veterans' Day. The Money
Funds value their 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.
LEADER GROWTH & INCOME FUND
LEADER INTERMEDIATE GOVERNMENT BOND FUND
LEADER TAX-EXEMPT BOND FUND
LEADER BALANCED FUND
LEADER SHORT TERM BOND FUND
The per share NAV for each Fund other than the Money Funds is determined, and
its shares are priced at the close of regular trading on the Exchange, normally
at 4:00 p.m. Eastern time (3:00 p.m. Central time), on days the Exchange is open
for regular trading.
Your order for the purchase, sale or exchange of shares is priced at the next
NAV calculated after a properly completed order is received and accepted by the
Fund less any applicable sales charges (see "Distribution Arrangements/Sales
Charges") on any day that the Exchange is open for business. For example, if you
place a purchase order to buy shares of the LEADER Growth & Income Fund, it must
be received prior to the close of regular trading on the Exchange (generally
4:00 p.m. Eastern time) in order to receive the NAV calculated on that day. If
your order is received after the close of regular trading on the Exchange that
day, you will receive the NAV calculated on the next business day.
The Funds' (other than the Money Funds') securities, other than short-term debt
obligations, are generally valued at current market prices unless market
quotations are not available, in which case securities will be valued by a
method that the Board of Trustees believes accurately reflects fair value. Debt
obligations with remaining maturities of 60 days or less are valued at amortized
cost or based on their acquisition cost.
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<PAGE> 34
SHAREHOLDER INFORMATION
PURCHASING AND SELLING YOUR SHARES
You may purchase Investor Shares of the LEADER Mutual 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.
MINIMUM MINIMUM
INITIAL SUBSEQUENT
ACCOUNT TYPE INVESTMENT(1) INVESTMENT
Regular $1,000 $100
(non-retirement)
Retirement (IRA) $500 $100
Automatic Investment
Plan $50 $50
All purchases must be in U.S. dollars. Third-party checks are not accepted.
(1) A Fund may waive its minimum investment requirement at the Adviser's or
Distributor's discretion. The Fund reserves the right to refuse any order to buy
shares.
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<PAGE> 35
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
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:
LEADER Mutual Funds LEADER Mutual Funds
P.O. Box 182754 3435 Stelzer Road
Columbus, OH 43218-2784 Columbus, OH 43219
Attn: T.A. Operations
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 "LEADER Mutual Funds"
and include the name of the appropriate Fund(s) on the check.
3. Mail or deliver application and payment to the appropriate address
above.
For Subsequent Investments:
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 "LEADER Mutual Funds"
and include your account number on the check.
3. Mail or deliver investment slip and payment to the appropriate address
above.
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<PAGE> 36
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
BY WIRE TRANSFER
Please call LEADER Mutual Funds at 1-800-219-4182 for instructions on opening an
account or purchasing additional shares by wire transfer.
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.
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 $50.
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 $50).
- How often you want to invest (every month, four 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 Investor Shares of another LEADER Mutual Fund. 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 upon notice. You can
change or terminate your participation in the reinvestment option at any time.
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. You can, however, elect to receive them in cash. There are no
sales charges for reinvested dividends or 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 MAY BE RETURNED TO YOU IN THE FORM OF A TAXABLE DISTRIBUTION.
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<PAGE> 37
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
INSTRUCTIONS FOR SELLING SHARES
You may sell your shares on any day the Exchange is open for regular trading
(except, in the case of the Money Funds only, Columbus Day and Veteran's Day).
Your sales price will be the NAV next determined after your sell order is
received by the Funds, the 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.
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 that will affect your redemption. For all
other sales transactions, follow the instructions below.
BY TELEPHONE (unless you have declined telephone sales privileges)
1. Call 1-800-219-4182 with instructions as to how you wish to receive
your funds (mail or wire). (See "General Policies on Selling
Shares--Verifying Telephone Redemptions" below.)
BY MAIL (See "General Policies on Selling Shares--When Written Redemption
Requests Are Required" below.)
1. Call 1-800-219-4182 to request redemption forms (if your account is an
IRA or another form of retirement plan) or write a letter of
instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner(s) signature
2. Mail to: LEADER Mutual Funds P.O. Box 182754 Columbus, OH 43218-2784
BY OVERNIGHT SERVICE (See "General Policies on Selling Shares--When Written
Redemption Requests Are Required" below.) See instruction 1 above.
2. Send to LEADER Mutual Funds c/o BISYS Fund Services, Attn: T.A.
Operations 3435 Stelzer Road Columbus, OH 43219
WIRE TRANSFER
You must indicate this option on your application.
The Fund may charge a wire transfer fee of up to $15 per wire.
Note: Your financial institution may also charge a separate fee.
Call 1-800-219-4182 to request a wire transfer.
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<PAGE> 38
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. 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.
REDEMPTION BY CHECK WRITING--MONEY FUNDS ONLY
You may write checks in amounts of $250 or more on your account(s) in the Money
Funds. 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 Fund account(s) 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 $100,000
- 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
- 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
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<PAGE> 39
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
CONTINUED
Agents Medallion Program), MSP (New York Stock Exchange Medallion Signature
Program) or SEMP (Stock Exchanges Medallion Program). Members are subject to
dollar limitations that 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 Trust has instituted procedures designed to ensure that telephone
redemptions are made by authorized shareholders only. All telephone calls are
recorded for your protection and you will be asked for information to verify
your identity. By completing an account application, you agree that the Trust,
Distributor and Transfer Agent will not be liable for any loss incurred by you
by reason of the Trust accepting unauthorized telephone redemption requests for
your account if the Trust reasonably believes the instructions to be genuine.
The Trust may accept telephone redemption instructions from any person
identifying himself as the owner of an account or the owner's broker where the
owner has not declined in writing to utilize this service. The Trust will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, and may be liable for any losses due to unauthorized or fraudulent
instructions if it fails to employ such procedures.
REDEMPTIONS WITHIN 10 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, you may redeem any portion
at any time. Proceeds from the redemption, however, will not be delivered to you
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 Exchange is closed
or under any emergency circumstances as determined by the SEC. 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 "Instructions for Selling Shares--By mail"
in this section.
REDEMPTION IN KIND
The Funds reserve the right to make payment in securities rather than cash,
known as a "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), or in other circumstances
where the Fund deems it to be in best interests of the Fund and its other
shareholders. Redemptions in kind will consist of securities equal in market
value to your shares. These securities will generally consist of liquid
securities, but will not generally represent a pro rata share of the relevant
Fund's assets. When you convert these securities to cash, you will pay brokerage
charges.
CLOSING OF SMALL ACCOUNTS
If primarily by reason of a redemption or exchange your account falls below the
applicable minimum initial investment, the relevant 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.
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<PAGE> 40
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.
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS
Investor Shares are sold through selected broker-dealers and other financial
intermediaries acting on behalf of their individual or institutional customers.
CALCULATION OF SALES CHARGES--NON-MONEY FUNDS ONLY
Investor Shares of all Funds are sold at their public offering price. In the
case of the Growth & Income Fund, Balanced Fund, Intermediate Government Bond
Fund, Short Term Bond Fund, Tax-Exempt Bond Fund, this price includes an initial
sales charge. Therefore, part of the money you invest in these Funds will be
used to pay the sales charge. The remainder is invested in Fund shares. The
applicable sales charge percentage decreases with larger purchases. There is no
sales charge on reinvested dividends and distributions.
The current sales charge rates for the each of the Funds are as follows:
<TABLE>
<CAPTION>
GROWTH & INCOME FUND AND INTERMEDIATE GOVERNMENT BOND FUND,
BALANCED FUND TAX-EXEMPT BOND FUND AND SHORT TERM BOND FUND
Dealers'
Sales Charge Sales Charge Reallowance Sales Charge Sales Charge Sales Charge
As A % Of As A % Of As A % Of As A % Of As A % Of As A % Of
The Offering The Offering The Offering The Offering The Offering The Offering
Your Investment
<S> <C> <C> <C> <C> <C> <C>
Less that $50,000 5.50% 5.82% 5.00% 4.75% 4.99% 4.25%
$50,000 but less than $100,000 4.50% 4.71% 4.00% 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.00% 3.50% 3.63% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.00% 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.50% 2.00% 2.04% 1.50%
$1,000,000 and over* 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
* A contingent deferred sales charge equal to 1% of the net asset value of the
amount redeemed will be applied on all redemptions of shares by shareholders
otherwise subject to a sales charge within two years of purchase.
The Fund's Distributor reserves the right to pay the entire sales charge on
purchases of Investor Shares to dealers. In addition, the Fund's Distributor
may, from time to time implement programs under which a broker-dealer's sales
force may be eligible to win nominal awards for certain sales efforts. If any
such program is made available to any broker-dealer, it will be made available
to all broker-dealers on the same terms. Payments made under such programs are
made by the Fund's Distributor out of its own assets an not out of the assets of
the Funds. These programs will not change the price of Investor Shares or the
amount that the Funds will receive from such sales.
SALES CHARGE REDUCTIONS
Reduced sales charges are available to shareholders of Investor Shares with
investments of $50,000 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 reduced
sales charge.
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<PAGE> 41
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 Investor 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 Investor 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 sales charge may be waived in connection with purchases of Investor Shares
by or through certain qualified fiduciary accounts, employee benefit, retirement
plan or other qualified accounts.
In addition, there's no sales charge when you buy Investor Shares if:
- You buy shares by reinvesting your dividends and capital gains
distributions.
- You're an officer or director of the Fund (or an immediate family
member of any such individual).
- You're a director, a current or retired employee or a participant
in an employee benefit or retirement plan of Union Planters
Corporation or the Fund's Distributor or any of their affiliates
(or an immediate family member of any such individual).
- You're a broker, dealer or agent who has a sales agreement with
the Fund's Distributor (or an employee or immediate family member
of any such individual).
- You buy shares pursuant to a wrap-free program offered by a
broker-dealer or other financial institution.
- You buy shares with proceeds of Investor Shares of a Fund
redeemed in connection with a rollover of benefits paid by a
qualified retirement or employee benefit plan or a distribution
on behalf of any other qualified account administered by Union
Planters Bank or its affiliates or correspondents within 60 days
of receipt of such payment.
- You buy shares through a payroll deduction program.
- You're an employee of any sub-adviser to the Fund.
- You're exchanging Investor Shares of a Fund received from the
distribution of assets held in a qualified trust, agency or
custodian account with Union Planters Bank or any of its
affiliates or correspondents.
- You're another investment company distributed by the Fund's
Distributor or its affiliates.
If you think you qualify for any of these waivers, please call the Fund at
1-800-219-4182 before buying any shares.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each Fund has adopted a Rule 12b-1 Distribution and Service Plan (a "Plan") to
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. Each Plan provides
for payments at annual rates (based
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<PAGE> 42
on average net assets) of up to 0.30% for the non-Money Funds and 0.50% for the
Money Funds. The Distributor may use up to 0.25% of each Fund's fees for
shareholder servicing.
Over time, shareholders may pay more than the equivalent of the maximum
permitted front-end sales charge because 12b-1 fees are paid out of the Fund's
assets on an on-going basis.
EXCHANGING YOUR SHARES
You can exchange your Investor Shares in one Fund for Investor Shares of another
LEADER Mutual Fund (see "Notes on Exchanges" below). No transaction fees are
charged in connection with such exchanges. In addition, certain exchanges will
be subject to sales loads on shares acquired through the exchange as follows:
- If you paid a front-end sales charge ("load") when purchasing
your Investor Shares, you generally will be permitted to exchange
your shares for Investor Shares of another Fund offered by the
Trust without paying an exchange fee or sales load on shares
acquired though the exchange. If, however, you own Investors
Shares of a Fund with a lower sales load, you may be charged an
additional sales load on exchanges of those shares for Investor
Shares of a Fund, with a higher sales load.
- If you own Investor Shares of a no-load Fund (i.e., any Money
Fund ), you generally will be permitted to exchange those shares
for Investor Shares of another no-load Fund offered by the Trust
without paying a sales load. If you own Investor Shares of
another no-load Fund, you will be permitted to exchange those
shares for Investor Shares of a load Fund, but you will be
subject to the sales load applicable to the load Fund. If
however, you acquired Investor Shares of a no-load Fund through a
previous exchange involving shares on which a load was paid, you
generally will not be required to pay an additional sales load
upon the reinvestment of the equivalent investment into a load
Fund.
If you have a qualified trust, agency or custodian account with the trust
department of Union Planters Bank or any of its affiliated or correspondent
banks, and your Investor Shares are to be held in that account, you may exchange
your Investor Shares for Sweep Shares or Institutional Shares of the same Fund
without paying an exchange fee or sales charge.
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to LEADER Mutual Funds, P.O.
Box 182754, Columbus OH 43218-2784, or by calling 1-800-219-4182. Please provide
the following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security
number)
- Dollar value or number of shares to be exchanged
- The name and class of the Fund from which the exchange is to be
made
- The name and class of the Fund into which the exchange is being
made
See "General Policies on Selling Shares" above for important information about
telephone transactions.
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<PAGE> 43
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
CONTINUED
AUTOMATIC EXCHANGES
You can use the Funds' Automatic Exchange feature to purchase shares of the
Funds at regular intervals through regular, automatic redemptions from the Money
Funds. To participate in the Automatic Exchange:
- Complete the appropriate section of the Account Application.
- Keep a minimum of $10,000 in the relevant Money Fund and $1,000
in the Fund whose shares you are buying.
To change the Automatic Exchange instructions or to discontinue the feature, you
should write to LEADER Mutual Funds, P.O. Box 182754, Columbus, Ohio 43218-2784.
NOTES ON EXCHANGES
The registration and taxpayer identification numbers of the two accounts must be
identical. If you don't have an account with the new Fund, a new account will be
opened with the same features unless you write to tell us to change them.
The exchange privilege (including automatic exchanges) may be modified or
eliminated at any time with 60 days notice. The exchange privilege is available
only in states where shares of the new Fund may be sold. If you purchase shares
of a Fund by check, those shares cannot be exchanged until your check has
cleared, which could take up to 10 days. 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. Be sure to read the Prospectus
carefully of any Fund into which you wish to exchange shares.
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, while income dividends for all other Funds are declared daily and
paid monthly. Capital gains, if any, for all Funds are distributed at least
annually.
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<PAGE> 44
SHAREHOLDER INFORMATION
TAXATION
FEDERAL TAXES
Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements necessary for it to be
relieved of federal taxes on income and gains it distributes to shareholders.
Each Fund contemplates declaring as dividends each year all or substantially all
of its taxable income, including its net capital gain (the excess of net
long-term capital gain over net short-term capital loss). You will be subject to
income tax on these distributions regardless of whether they are paid in cash or
reinvested 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 Tax-Exempt Bond Fund or the
Tax-Exempt Money Market Fund) will generally be taxable as ordinary income.
The Tax-Exempt Bond Fund and the Tax-Exempt Money Market Fund (the "Tax-Exempt
Funds") intend to distribute primarily income that is exempt from federal
taxation. The Tax-Exempt Funds may, however, invest in securities that generate
income that is not exempt from federal taxation. In addition, income that is
exempt from federal taxation may be subject to state and local taxation. Any
capital gains will be taxable federally and may also be subject to state or
local taxation. Distributions designated by the Tax-Exempt Funds 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 a Tax-Exempt Fund may have on the federal taxation of your benefits. In
addition, an investment in a Tax-Exempt 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 taxed 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."
You will generally 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. In the case of the Money Funds, however, the recognition of
gain or loss on a sale, exchange or redemption of your shares is unlikely to
occur. (To aid in computing your tax basis, you 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.
One notable exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an Individual Retirement
Account (or IRA) or other tax-qualified plan will not be currently taxable.
The foregoing is a summary of certain federal income tax consequences of
investing in the Funds. For more information on the federal income taxation of
the Funds, see the SAI. You should consult your tax adviser to determine the
precise effect of an investment in the Funds on your particular tax situation
(including possible liability for state and local taxes).
39
<PAGE> 45
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The Financial Highlights tables are intended to help you understand each Fund's
financial performance for the last five years or, in the case of the Tax-Exempt
Bond Fund and Money Market Fund, since inception. 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). Except as
otherwise noted below, this information has been audited by [_______________],
whose report, along with the Trust's financial statements, is incorporated by
reference in the Trust's SAI, which is available upon request. Institutional
Shares are the continuation of the Fund's single class of shares, Class A
Shares, which existed prior to September 1, 2000. Class A Shares were
redesignated as "Institutional Shares" effective September 1, 2000.
LEADER GROWTH & INCOME FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $[___] $ 23.46 $ 22.18 $ 16.42 $ 14.05
INCOME FROM INVESTMENT OPERATIONS:
Net investment income [___] 0.30 0.23 0.26 0.24
Net realized and unrealized gains
from investment transactions [___] 7.53 1.72 6.12 2.39
Total income from investment operations [___] 7.83 1.95 6.38 2.63
LESS DISTRIBUTIONS:
Net investment income [___] (0.27) (0.25) (0.25) (0.23)
Net realized gain from investment
transactions [___] (0.65) (0.42) (0.37) (0.03)
Total dividends and distributions(1) [___] (0.92) (0.67) (0.62) (0.26)
NET ASSET VALUE--END OF PERIOD $[___] $30.37 $ 23.46 $ 22.18 $ 16.42
Total return(1) [___] 33.73% 8.84% 39.59% 18.77%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, at end of period ($000's) $[___] $145,919 $74,131 $ 70,276 $ 39,995
Ratio of expenses to average net assets [___] 0.87% 0.99% 1.06% 1.27%
Ratio of net investment income to
average net assets [___] 1.05% 0.96% 1.36% 1.56%
Ratio of expenses to average net assets
without fee waivers* [___] 1.37% 1.49% 1.56% 1.77%
Ratio of net investment income to
average net assets without fee waivers* [___] 0.55% 0.46% 0.86% 1.06%
Portfolio turnover rate [___] 9% 26% 17% 31%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(1) Had the Adviser, Distributor, and administrator not reduced or waived
certain expenses, total returns would have been lower. Total return for
periods of less than one year are not annualized.
(2) Annualized.
40
<PAGE> 46
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
LEADER INTERMEDIATE GOVERNMENT BOND FUND-- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD [___] $ 13.00 $ 12.61 $ 12.43 $ 12.75
INCOME FROM INVESTMENT OPERATIONS:
Net investment income [___] 0.72 0.76 0.79 0.76
Net realized and unrealized gains
(losses) from investment transactions [___] (0.96) 0.39 0.19 (0.32)
Total income from investment operations [___] (0.24) 1.15 0.98 0.44
LESS DISTRIBUTIONS:
Net investment income [___] (0.72) (0.76) (0.79) (0.76)
In excess of net investment income [___] -.- (0.01) -.- -.-
Total dividends and distributions [___] (0.72) (0.76) (0.80) (0.76)
NET ASSET VALUE--END OF PERIOD [___] $ 12.04 $ 13.00 $ 12.61 $ 12.43
Total return (2) [___] (1.97)% 9.33% 7.96% 3.48%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, at end of period ($000's) [___] $ 80,607 $72,614 $ 64,459 $56,764
Ratio of expenses to average net assets [___] 0.82% 0.90% 0.96% 1.05%
Ratio of net investment income to
average net assets [___] 5.69% 5.92% 6.15% 5.97%
Ratio of expenses to average net
assets without fee waivers*** [___] 1.17% 1.25% 1.31% 1.40%
Ratio of net investment income
to average net assets without
fee waivers*** [___] 5.34% 5.57% 5.80% 5.62%
Portfolio turnover rate [___] 16% 32% 19% 20%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(1) Annualized.
(2) Total return excludes sales charges. Had the Adviser, Distributor, and
administrator not reduced or waived certain expenses, total returns
would have been lower. Total return for periods of less than one year
are not annualized.
41
<PAGE> 47
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
LEADER MONEY MARKET FUND--INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
JULY 7,
YEAR 1999*
ENDED THROUGH
AUGUST 31, AUGUST 31,
2000* 1999
<S> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD [___] $ 1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income [___] 0.007
Net realized and unrealized gains from investment transactions -.-
Total income from investment operations [___] 0.007
LESS DISTRIBUTIONS:
Net investment income [___] (0.007)
Total dividends and distributions [___] (0.007)
NET ASSET VALUE--END OF PERIOD [___] $ 1.000
Total return(1) [___] 0.67%(2)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, at end of period ($000's) [___] $ 166,335
Ratio of expenses to average net assets [___] 0.51%(3)
Ratio of net investment income to average net assets [___] 4.35%(3)
Ratio of expenses to average net assets without fee waivers** [___] 1.02%(3)
Ratio of net investment income to average net assets
without fee waivers*** [___] 3.84%(3)
</TABLE>
* Commencement of operations.
** During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(1) Had the Adviser, Distributor, and administrator not reduced or waived
certain expenses, total returns would have been lower.
(2) Not annualized.
(3) Annualized.
42
<PAGE> 48
[INSERT TAX-EXEMPT BOND FUND - FINANCIAL HIGHLIGHTS FROM INCEPTION TO AUGUST 31,
2000]
43
<PAGE> 49
[Intentionally Left Blank]
44
<PAGE> 50
[Intentionally Left Blank]
45
<PAGE> 51
[Intentionally Left Blank]
46
<PAGE> 52
[Intentionally Left Blank]
47
<PAGE> 53
[Intentionally Left Blank]
48
<PAGE> 54
The following additional information regarding LEADER Mutual Funds (formerly
"Magna Funds") is available to you upon request and without charge.
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Funds' Reports to shareholders contain additional information regarding 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 their last 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 to be part of this prospectus.
You can get free copies of the 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 shares of the Funds. In addition, you may
contact the Funds at:
LEADER MUTUAL FUNDS
P.O. BOX 182754
COLUMBUS, OHIO 43218-2784
TELEPHONE: 1-800-219-4182
You can review the Reports and the SAI at the Public Reference Room of the
Securities and Exchange Commission (the "SEC") in Washington, D.C. You can get
copies:
- For a duplicating fee, by writing the Public Reference Section of the
SEC, Washington, D.C. 20549-0102, by calling the SEC at 1-202-942-8090,
or by electronic request at the following e-mail address:
[email protected].
- At no charge from the SEC's Website at http://www.sec.gov.
Investment Company Act file no. 811-8494
49
<PAGE> 55
INVESTMENT ADVISER
Union Planters Bank, National Association
One South Church Street
Suite 500
Belleville, Illinois 62220
ADMINISTRATOR & DISTRIBUTOR
BISYS Fund Services, L.P.
3435 Stelzer Road
Columbus, Ohio 43219
TRANSFER AND DIVIDEND
PAYING AGENT
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
Union Planters Bank, National Association
One South Church Street
Suite 500
Belleville, Illinois 62220
INDEPENDENT ACCOUNTANTS
[---------------------]
[---------------]
[---------------]
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
QUESTIONS?
Call 1-800-219-4182 or your investment representative.
<PAGE> 56
LEADER MUTUAL FUNDS
LEADER GROWTH & INCOME FUND
LEADER BALANCED FUND
LEADER INTERMEDIATE GOVERNMENT BOND FUND
LEADER TAX-EXEMPT BOND FUND
LEADER SHORT TERM BOND FUND
LEADER MONEY MARKET FUND
LEADER TREASURY MONEY MARKET FUND
LEADER TAX-EXEMPT MONEY MARKET FUND
INSTITUTIONAL SHARES
PROSPECTUS
JANUARY 1, 2001
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> 57
LEADER MUTUAL FUNDS TABLE OF CONTENTS
RISK/RETURN SUMMARY AND FUND EXPENSES
Carefully review this LEADER Growth & Income Fund
important section, which LEADER Balanced Fund
summarizes each Fund's LEADER Intermediate Government Bond Fund
objectives, strategies, LEADER Tax-Exempt Bond Fund
investments, risks, past LEADER Short Term Bond Fund
performance, and fees. LEADER Money Market Fund
LEADER Treasury Money Market Fund
LEADER Tax-Exempt Money Market Fund
Fees and Expenses
Investing for Defensive Purposes
Additional Information Regarding Fund
Policies
FUND MANAGEMENT
Review this section for Investment Adviser
details on the people and Portfolio Managers
organizations who oversee the Distributor and Administrator
Funds and their investments.
SHAREHOLDER INFORMATION
Consult this section to obtain Pricing of Fund Shares
details on how shares are Purchasing and Adding to Your Shares
valued, how to purchase, sell Selling Your Shares
and exchange shares, related General Policies on Selling Shares
charges and payments of dividends. Distribution Arrangements
Exchanging Your Shares
Dividends and Distributions
Taxation
FINANCIAL HIGHLIGHTS
Review this section for details on Financial Highlights
the selected financial
statements of the Funds.
<PAGE> 58
LEADER GROWTH &
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
INVESTMENT OBJECTIVES Long-term growth of capital, current income
and growth of income.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Growth & Income Fund (formerly
the "Magna Growth & Income 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. The Fund intends to hold a
combination of growth stocks and value
stocks. By investing in a blend of stocks
that demonstrate strong long-term earnings
potential and undervalued stocks, the Fund
seeks to achieve strong returns with less
volatility. A portion of the Fund's assets
may also be invested in preferred stocks,
bonds (primarily investment grade)
convertible into common stock and
securities of foreign issuers traded in U.
S. securities markets. The Fund's
investment in foreign issuers will be
primarily through American Depositary
Receipts ("ADRs"). The Fund expects to earn
current income mainly from dividends paid
on common and preferred stocks and from
interest on convertible bonds.
The Adviser utilizes both "top-down" and
"bottom-up" approaches in constructing the
Fund's portfolio. This means the Adviser
looks at the condition of the overall
economy and industry segments in addition
to data on individual companies. The
Adviser selects stocks with the intent of
realizing long-term capital appreciation,
not for quick turnover. The Adviser
exercises patience and discipline in making
decisions to sell or continue to hold
individual stocks over time.
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 those stocks
selected by other funds with similar
objectives.
The 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" and/or "value
securities." Growth securities typically
trade at higher multiples of current
earnings than other stocks and are often
more volatile than other types of
securities because their market prices tend
to
1
<PAGE> 59
LEADER GROWTH &
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
place greater emphasis on future earnings
expectations. Value securities bear the
risk that the companies may not overcome
the adverse business or other developments
that caused the securities to be out of
favor or that the market does not recognize
the value of the company, such that the
price of its securities declines or does
not approach the value the Adviser
anticipates.
The Fund's investments in foreign issuers
(which will be primarily through ADRs)
carry potential risks that are in addition
to those associated with domestic
investments. Such risks may include, but
are not limited to: (1) currency exchange
rate fluctuations, (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, and (5) less
government regulation and supervision of
foreign stock exchanges, brokers and listed
companies.
Investing in the Fund involves risks common
to any investment in securities. By itself,
no Fund constitutes a balanced investment
program. There is no guarantee that the
Fund will meet its goals. When you sell
your shares in the Fund, they may be worth
more or less than you paid for them. It is
possible to lose money by investing in the
Fund.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation
or any other government agency.
A more complete discussion of the Fund's
investments and related risks can be found
in the Statement of Additional Information.
2
<PAGE> 60
LEADER GROWTH &
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
PERFORMANCE BAR CHART AND TABLE(1)- INSTITUTIONAL SHARES(2)
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing changes in its performance from year to year and by showing
how the Fund's average annual returns for 1 year, 5 years and the period of time
since inception compare with those of a broad-based securities index and two
indexes of funds that the Adviser believes have similar investment objectives.
The Standard and Poor's 500 Composite Stock Price Index (the "S&P 500") in the
table below is an unmanaged, independently maintained U.S. large capitalization
stock index. The information provided regarding the Lipper Growth & Income Index
and the Lipper Large Cap Core Index shows how the Fund's average annual total
returns compare with the returns of two indexes of funds that the Adviser
believes have similar investment objectives.
Past performance does not indicate how the Fund will perform in the future.
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
[INSERT TABLE]
For the period January 1, 2000 through September 30, 2000, the Fund's
total return was [___]%.
Best quarter: Q4 1998 16.30%
Worst quarter: Q3 1998 -5.24%
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending
December 31, 1999)
SINCE FUND
PAST FIVE INCEPTION
YEAR YEAR (9/1/94)
------ ------ ----------
LEADER GROWTH & INCOME FUND 18.18% 26.05% 23.29%
S&P 500(R) INDEX 21.05% 28.54% 25.96%
LIPPER GROWTH & INCOME INDEX 11.86% 20.60% 18.29%
LIPPER LARGE CAP CORE INDEX 19.35% 25.32% 22.83%
(1) Both the chart and the table assume reinvestment of all dividend and
capital gain distributions.
(2) Institutional Shares are the continuation of the Fund's single class of
shares (Class A Shares) that existed prior to September 1, 2000. Class
A Shares were redesignated as "Institutional Shares" effective
September 1, 2000. Unlike Class A Shares, purchases of Institutional
Shares are not subject to any sales charges. As a result, the average
annual total return figures set forth above do not reflect any
reduction for such charges.
3
<PAGE> 61
RISK/RETURN SUMMARY AND FUND EXPENSES LEADER BALANCED FUND
INVESTMENT OBJECTIVE To maximize total return through a
combination of growth of capital and
current income consistent with
preservation of capital.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Balanced Fund invests in a
combination of equity securities (such as
stocks), fixed income securities (such as
bonds) and money market instruments in
relative proportions that the Adviser
believes will offer attractive returns
consistent with the Fund's objective. The
Fund invests in equity securities
primarily for growth and income, and in
fixed income securities and money market
securities primarily for income and
relative stability.
Under normal market conditions, the Fund
invests at least 25% of its total assets
in fixed income securities and no more
than 75% of its total assets in equity
securities. The actual percentages will
vary from time to time based on the
Adviser's economic and market outlooks. In
determining the allocation of assets, the
Adviser evaluates forecasts for inflation,
interest rates and corporate earnings
growth. The Adviser periodically will
increase or decrease the Fund's allocation
to equity securities, fixed income
securities and money market instruments
based on which asset class appears
relatively more attractive than the
others. For example, if the Adviser
forecasts rapid economic growth leading to
increased corporate earnings, it will
generally increase the Fund's holdings of
equity securities and reduce its holdings
of fixed income securities and money
market instruments.
The Fund's equity securities will consist
mainly of common stocks, but may also
include preferred stocks and securities
convertible into stocks, as well as
warrants to purchase such securities. In
selecting equity securities, the Adviser
utilizes both "top-down" and "bottom-up"
approaches. This means the Adviser looks
at the condition of the overall economy
and industry segments in addition to data
on individual companies. The Adviser
selects stocks with the intent of
realizing long-term capital appreciation,
not for quick turnover.
The Fund's investment in fixed income
securities will consist mainly of
investment-grade bonds, but the Fund may
invest in any kind of debt security issued
by private corporations or the U.S.
Government (including any of its political
subdivisions, agencies, or
instrumentalities). With respect to its
investment in bonds, the Fund will invest
primarily in issues rated in one of the
four highest categories by a nationally
recognized statistical rating organization
("NRSRO") (for example, rated Aaa, Aa, A
or Baa by Moody's Investors Service, Inc.
("Moody's") or AAA, AA, A or BBB by
Standard & Poor's Rating Service
("Standard &
4
<PAGE> 62
RISK/RETURN SUMMARY AND FUND EXPENSES LEADER BALANCED FUND
Poor's")) or unrated issues deemed by the
Adviser to be of comparable quality. The
Fund may also invest up to 10% of its
assets in securities rated below
investment grade.
The U.S. Government securities in which
the Fund may invest include direct
obligations of the U.S. Treasury, such as
U.S. Treasury bills, notes and bonds, as
well as obligations of U.S. government
agencies, authorities or instrumentalities
such as the Federal Home Loan Banks, FNMA,
GNMA, the Federal Farm Credit Banks, the
Student Loan Marketing Association, the
Federal Home Loan Mortgage Corporation or
the Tennessee Valley Authority. The Fund
may also invest in corporate debt
obligations, mortgage-backed securities,
asset-backed securities, collateralized
mortgage obligations, repurchase
agreements, adjustable rate securities and
payable-in-kind bonds.
PRINCIPAL
INVESTMENT RISKS Two principal risks of investing in the
Fund are market risk and selection risk.
Market risk means that each of the stock
and bond markets in general has ups and
downs, which may affect the performance of
the individual securities held by the
Fund, and thus the performance of the Fund
as a whole. Selection risk means that the
particular securities that are selected by
the Adviser for the Fund may underperform
the market or those securities selected by
other funds with similar objectives.
The equity component of the 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" and/or "value
securities." Growth securities typically
trade at higher multiples of current
earnings than other stocks and are often
more volatile than other types of
securities because their market prices
tend to place greater emphasis on future
earnings expectations. Value securities
bear the risk that the companies may not
overcome the adverse business or other
developments that caused the securities to
be out of favor or that the market does
not recognize the value of the company,
such that the price of its securities
declines or does not approach the value
the Adviser anticipates.
The fixed income component of the Fund
seeks to provide income and a level of
protection of capital but offers less
potential for capital appreciation than
equity securities. In addition, the fixed
income component of the Fund's portfolio
will be subject to the following risks:
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
5
<PAGE> 63
RISK/RETURN SUMMARY AND FUND EXPENSES LEADER BALANCED FUND
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.
INCOME RISK: It is possible that the
income derived from the Fund's fixed
income component will decline over time
because of a decrease in interest rates or
other factors. Income risk is generally
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: Certain of the Fund's
investments may be subject to the risk
that the principal amount of the
underlying loan 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.
Investing in the Fund involves risks
common to any investment in securities. By
itself, no Fund constitutes a balanced
investment program. There is no guarantee
that the Fund will meet its goals. When
you sell your shares in the Fund, they may
be worth more or less than you paid for
them. It is possible to lose money by
investing in the Fund.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed
by the Federal Deposit Insurance
Corporation or any other government
agency.
A more complete discussion of the Fund's
investments and related risks can be found
in the Statement of Additional
Information.
No performance is shown for the LEADER
Balanced Fund because as of the date of
this Prospectus, the Fund had not
completed a full calendar year of
operations.
6
<PAGE> 64
LEADER INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES GOVERNMENT BOND FUND
INVESTMENT OBJECTIVES Current income consistent with preservation
of capital.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Intermediate Government Bond
Fund (formerly the "Magna Intermediate
Government Bond 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) and high grade bonds and
notes of non-governmental issuers. Under
normal market conditions, at least 65% of
the Fund's total assets will be invested in
U.S. Government securities. The Fund will
invest at least 65% of its total assets in
"bonds," which the Adviser deems to include
all debt securities for this purpose. 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.
The Fund's investments in U.S. Government
securities may include direct obligations
of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds, as well
as obligations of U.S. government
agencies, authorities or instrumentalities
such as the Federal Home Loan Banks, FNMA,
GNMA, the Federal Farm Credit Banks, the
Student Loan Marketing Association, the
Federal Home Loan Mortgage Corporation or
the Tennessee Valley Authority.
The Fund will invest primarily in issues
rated in one of the four highest
categories by a NRSRO (for example, rated
Aaa, Aa, A or Baa by Moody's or AAA, AA, A
or BBB by Standard & Poor's) or unrated
issues deemed by the Adviser to be of
comparable quality. 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 rated below
investment grade (for example, below Baa
or BBB).
The Fund may also invest in corporate debt
obligations, mortgage-backed securities,
collateralized mortgage obligations and
repurchase agreements.
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.
7
<PAGE> 65
LEADER INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES GOVERNMENT BOND FUND
While maturity and credit quality are the
most important investment factors, other
factors considered by the Fund when making
investment decisions include:
- Current yield and yield to maturity.
- Potential for capital gain.
Decisions to sell portfolio holdings are
generally the result of changes in the
Adviser's forecast of interest rate
trends, industries or other economic
conditions, changes in the Adviser's
assessment of the financial condition of a
particular issuer, for liquidity purposes,
or to rebalance the portfolio.
8
<PAGE> 66
LEADER INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES GOVERNMENT BOND FUND
PRINCIPAL
INVESTMENT RISKS The 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. 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 the Fund may
underperform the market or other funds
with similar objectives. In addition to
market risk and selection risk, the Fund
will also be subject to the following
principal investment risks:
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, including U.S.
Government securities, have exposure to
some degree of credit risk. U.S.
Government securities may be subject to
different types and amounts of credit
support, as certain U.S. Government
securities are not backed by the full
faith and credit of the U.S. Government.
Corporate bonds and notes, which may
constitute up to 35% of the Fund's assets,
generally involve more credit risk than
U.S. Government securities.
Mortgage-backed securities may also be
exposed to high levels of credit risk,
depending upon the credit of the assets
underlying such securities, the issuer's
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 or
other factors. Income risk is generally
lower for portfolios holding long-term
bonds and higher for portfolios holding
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 loan 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
9
<PAGE> 67
LEADER INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES GOVERNMENT BOND FUND
will be paid on the investment. Prepayment
exposes a Fund to potentially lower return
upon subsequent reinvestment of the
principal.
Investing in the Fund involves risks
common to any investment in securities. By
itself, no Fund constitutes a balanced
investment program. There is no guarantee
that the Fund will meet its goals. When
you sell your shares in the Fund, they may
be worth more or less than you paid for
them. It is possible to lose money by
investing in the Fund.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed
by the Federal Deposit Insurance
Corporation or any other government
agency.
A more complete discussion of the Fund's
investments and related risks can be found
in the Statement of Additional
Information.
10
<PAGE> 68
LEADER INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES GOVERNMENT BOND FUND
PERFORMANCE BAR CHART AND TABLE(1) - INSTITUTIONAL SHARES(2)
PERFORMANCE INFORMATION
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing changes in its performance from year to year and by showing
how the Fund's average annual returns for one year, five years and the period of
time since inception compare with those of a broad-based securities index. The
Lipper Intermediate Government Bond Index in the table below is an unmanaged,
independently maintained index comprised of U.S. Treasury issues, publicly
issued debt of U.S. Government agencies, and corporate debt guaranteed by the
U.S. Government.
Past performance does not indicate how the Fund will perform in the future.
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
[INSERT TABLE]
For the period January 1, 2000 through September 30, 2000, the
Fund's total return was [___]%.
<TABLE>
<S> <C> <C> <C>
Best quarter: Q2 1995 5.19%
Worst quarter: Q2 1999 -2.12%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending
December 31, 1999)
<TABLE>
<CAPTION>
SINCE FUND
PAST FIVE INCEPTION
YEAR YEAR (9/1/94)
------ ------ ----------
<S> <C> <C> <C>
LEADER INTERMEDIATE GOVERNMENT BOND FUND -4.14% 5.87% 5.04%
LIPPER INTERMEDIATE GOVERNMENT BOND INDEX -1.39% 6.63% 5.93%
</TABLE>
(1) Both the chart and the table assume reinvestment of all dividend and
capital gain distributions.
(2) Institutional Shares are the continuation of the Fund's single class of
shares (Class A Shares) that existed prior to September 1, 2000. Class
A Shares were redesignated as "Institutional Shares" effective
September 1, 2000. Unlike Class A Shares, purchases of Institutional
Shares are not subject to any sales charges. As a result, the average
annual total return figures set forth above do not reflect any
reduction for such charges.
11
<PAGE> 69
LEADER TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
INVESTMENT OBJECTIVES Current income that is exempt from federal
income tax consistent with preservation of
capital.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Tax-Exempt Bond Fund (formerly
the "Magna Tax-Exempt Bond Fund"),
normally invests at least 80% of its total
assets in obligations producing income
that is exempt from federal income
taxation. 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 will
invest at least 65% of its total assets in
"bonds," which the Adviser deems to
include all debt securities for this
purpose. The Fund may invest up to 20% of
its net assets in U.S. Government
securities, money market instruments or
"private activity" bonds (some or all of
which may produce income subject to
federal alternative minimum tax). The Fund
seeks to maintain a dollar-weighted
average portfolio maturity between five
and twenty years.
The Fund will only purchase securities
rated in one of the four highest
categories by an NRSRO (for example, Aaa,
Aa, A or Baa by Moody's or AAA, AA, A or
BBB by Standard & Poor's) or unrated
securities deemed by the Adviser to be of
comparable quality. 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 10% of
its assets in securities that have been
downgraded below investment grade (for
example, below Baa by Moody's or BBB by
Standard & Poor's).
While maturity and credit quality are the
most important investment factors, the
Fund also considers the following when
making investment decisions:
- Current yield and yield to maturity.
- Potential for capital gain.
PRINCIPAL
INVESTMENT RISKS Decisions to sell portfolio holdings are
generally the result of changes in the
Adviser's forecast of interest rate
trends, industries or other economic
conditions, changes in the Adviser's
assessment of the financial condition of a
particular issuer, for liquidity purposes,
or to rebalance the portfolio.
12
<PAGE> 70
LEADER TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
The Fund will invest primarily in high
quality fixed income securities, which
provide income and a level of protection of
capital, but do not typically present
opportunity for capital appreciation. The
amount of information available about
issuers of tax-exempt debt may not be as
extensive as that which is made available by
companies whose stock or debt is publicly
traded. In addition, changes in law or
adverse determinations by the Internal
Revenue Service could make the income from
some of the Fund's investments taxable. 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 the Fund may underperform the market or
other funds with similar objectives. In
addition to these risks, the Fund will also
be subject to the following principal
investment risks:
13
<PAGE> 71
LEADER TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
INTEREST RATE RISK: All bonds fluctuate in
value as interest rates fluctuate.
Generally, as interest rates rise, the value
of a Fund's bond investments, and of its
shares, will decline. 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.
INCOME RISK: It is possible that the Fund's
income will decline over time because of a
decrease in interest rates or other factors.
Income risk is generally 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: Certain of the Fund's
investments may be subject to the risk that
the principal amount of the underlying loan
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.
Investing in the Fund involves risks common
to any investment in securities. By itself,
no Fund constitutes a balanced investment
program. There is no guarantee that the Fund
will meet its goals. When you sell your
shares in the Fund, they may be worth more
or less than you paid for them. It is
possible to lose money by investing in the
Fund.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or
any other government agency.
A more complete discussion of the Fund's
investments and related risks can be found
in the Statement of Additional Information.
No performance is shown for the LEADER
Tax-Exempt Bond Fund because as of the date
of this Prospectus, the Fund had not
completed a full calendar year of
operations.
14
<PAGE> 72
LEADER SHORT
RISK/RETURN SUMMARY AND FUND EXPENSES TERM BOND FUND
INVESTMENT OBJECTIVES To provide a high level of current income
consistent with preservation of capital.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Short Term Bond Fund invests
primarily in investment-grade bonds (for
example, those rated at least Baa or BBB,
or determined to be of comparable quality by
the Adviser). The types of securities that
the Fund may purchase include bonds of U.S.
corporate and governmental issuers, U.S.
dollar-denominated bonds of foreign issuers,
and mortgage-backed and other asset-backed
securities. The Fund will normally maintain
a dollar-weighted average portfolio maturity
of three years or less, but may purchase
individual securities with longer
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.
In addition to a wide range of corporate and
government debt obligations, the Fund may
also invest in collateralized mortgage
obligations, repurchase agreements,
adjustable rate securities and payable in
kind bonds. The Fund may also invest in
securities rated below investment grade (for
example, below Baa or BBB), but does not
expect such investments to exceed 10% of the
Fund's net assets.
While maturity and credit quality are the
most important investment factors, other
factors considered by the Adviser when
making investment decisions include:
- Current yield and yield to
maturity.
- Potential for capital gain.
Decisions to sell portfolio holdings are
generally the result of changes in the
Adviser's forecast of interest rate trends,
industries or other economic conditions,
changes in the Adviser's assessment of the
financial condition of a particular issuer,
for liquidity purposes, or to rebalance the
portfolio.
PRINCIPAL
INVESTMENT RISKS The Fund invests primarily in short-term
investment grade fixed-income securities,
which provide income and a level of
protection of capital, but present less
potential for capital appreciation than
equity securities. 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 the Fund may
underperform the market or other funds with
similar objectives. In
15
<PAGE> 73
LEADER SHORT
RISK/RETURN SUMMARY AND FUND EXPENSES TERM BOND FUND
addition to market risk and selection risk,
the Fund will be subject to the following
principal investment risks:
INTEREST RATE RISK: All bonds fluctuate in
value as interest rates fluctuate.
Generally, as interest rates rise, the value
of the Fund's investments, and of its
shares, will decline. If interest rates
decline, the Fund's 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, including U.S. Government
securities, have exposure to some degree of
credit risk. Mortgage-backed securities may
be exposed to higher levels of credit risk,
depending upon the credit of the assets
underlying such securities, the issuer's
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 or other factors.
Income risk is generally higher for
portfolios holding 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- and asset-backed securities, are
subject to the risk that the principal
amount of the underlying loan 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.
FOREIGN INVESTMENTS. The Fund may invest in
U.S. dollar-denominated bonds issued by
foreign governments or corporations. Foreign
investments involve certain special risks,
including the risk of seizure by foreign
governments, imposition of restrictions on
exchange, tax increases, less
publicly-available information, less
liquidity due to limited markets and higher
transaction costs.
Investing in the Fund involves risks common
to any investment in securities. By itself,
no Fund constitutes a balanced investment
program. There is no guarantee that the Fund
will meet its goals. When you sell your
shares in the Fund, they may be worth more
or less than you paid for them. It is
possible to lose money by investing in the
Fund.
16
<PAGE> 74
LEADER SHORT
RISK/RETURN SUMMARY AND FUND EXPENSES TERM BOND FUND
An investment in the Fund is not a bank
deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or
any other government agency.
A more complete discussion of the Fund's
investments and related risks can be found
in the Statement of Additional Information.
No performance is shown for the LEADER Short
Term Bond Fund because as of the date of
this Prospectus, the Fund had not completed
a full calendar year of operations.
17
<PAGE> 75
LEADER MONEY
RISK/RETURN SUMMARY AND FUND EXPENSES MARKET FUND
INVESTMENT OBJECTIVES Maximum current income consistent with
preservation of capital and liquidity.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Money Market Fund (formerly the
"Magna Money Market Fund"), invests in a
variety of high-quality money market
instruments, including U.S. Government
securities, taxable municipal debt,
commercial paper and other corporate debt
obligations, certificates of deposit,
repurchase agreements, bankers' acceptances
and other dollar-denominated bank
obligations, including obligations issued by
U.S. banks, their foreign branches and/or
foreign banks. At the time of purchase, all
of the Fund's investments (other than U.S.
Government securities and related repurchase
agreements) will be rated in the highest
rating category by an NRSRO (for example,
Aaa by Moody's or AAA by Standard & Poor's)
or, if unrated, deemed by the Adviser to be
of comparable quality. In addition, all Fund
investments will mature in 397 days or less,
and the Fund's average maturity will not
exceed 90 days.
While the Fund typically holds securities
until maturity, decisions to sell portfolio
holdings are generally the result of a
change in financial condition of the issuer
of a security, for liquidity purposes, or to
rebalance the portfolio.
PRINCIPAL
INVESTMENT RISKS The Fund will invest primarily in high
quality fixed income securities, which
provide income and a level of protection of
capital, but do not typically present
opportunity for capital appreciation. The
Fund's quality and maturity limitations
described above will reduce, but not
altogether eliminate the following risks:
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
generally involve more credit risk although
even U.S. Government securities are
generally considered to have some credit
risk. The Fund's use of repurchase
agreements also
18
<PAGE> 76
LEADER MONEY
RISK/RETURN SUMMARY AND FUND EXPENSES MARKET FUND
involves some 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 or other factors.
Income risk is generally lower for
longer-term bonds and higher for
shorter-term bonds. Because interest rates
vary, it is impossible to predict the income
or yield of the Fund for any particular
period.
Investing in the Fund involves risks common
to any investment in securities. By itself,
no Fund constitutes a balanced investment
program. There is no guarantee that the Fund
will meet its goals.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or
any other government agency. Although the
Fund seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in this
Fund.
A more complete discussion of the Fund's
investments and related risks can be found
in the Statement of Additional Information.
No performance is shown for the LEADER Money
Market Fund because as of the date of this
Prospectus, the Fund had not completed a
full calendar year of operations.
19
<PAGE> 77
LEADER TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
INVESTMENT OBJECTIVES High level of current income consistent with
stability of principal and liquidity.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Treasury Money Market Fund
invests primarily in high-quality,
short-term money market securities whose
interest and principal payments are backed
by the full faith and credit of the U.S.
Government. Under normal market conditions,
the Fund will invest substantially all of
its total assets in money market securities
issued by the U.S. Treasury and certain U.S.
government agencies and instrumentalities
that provide income that is generally not
subject to state income tax. All Fund
investments will mature in 397 days or less,
and the Fund's average maturity will not
exceed 90 days.
While the Fund typically holds securities
until maturity, decisions to sell portfolio
holdings are generally the result of a
change in financial condition of the issuer
of a security, for liquidity purposes, or to
rebalance the portfolio.
PRINCIPAL
INVESTMENT RISKS The Fund will invest primarily in high
quality fixed income securities, which
provide income and a level of protection of
capital, but do not typically present
opportunity for capital appreciation. The
Fund's issuer selection, credit quality and
maturity limitations will reduce, but not
altogether eliminate, the following risks:
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: Credit risk includes the
possibility that a party to a transaction
involving the Fund will fail to meet its
obligations. Although U.S. Treasury
obligations have historically involved
little risk, if an issuer fails to pay
interest or repay principal, the value of
your investment could decline.
INCOME RISK: It is possible that the Fund's
income will decline over time because of a
decrease in interest rates or other factors.
Income risk is generally lower for
longer-term bonds and higher for
shorter-term bonds. Because interest rates
vary, it is impossible to predict the income
or yield of the Fund for any particular
period.
20
<PAGE> 78
LEADER TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
Investing in the Fund involves risks common
to any investment in securities. By itself,
no Fund constitutes a balanced investment
program. There is no guarantee that the Fund
will meet its goals.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or
any other government agency. Although the
Fund seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in this
Fund.
A more complete discussion of the Fund's
investments and related risks can be found
in the Statement of Additional Information.
No performance is shown for the LEADER
Treasury Money Market Fund because as of the
date of this Prospectus, the Fund had not
completed a full calendar year of
operations.
21
<PAGE> 79
LEADER TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
INVESTMENT OBJECTIVES Maximum current income exempt from federal
income tax consistent with preservation of
capital and liquidity.
PRINCIPAL
INVESTMENT STRATEGIES The LEADER Tax-Exempt Money Market Fund
invests primarily in high-quality,
short-term money market instruments which
pay interest that is exempt from federal
income tax. Under normal market conditions,
the Fund will invest at least 80% of its
assets in short-term tax-exempt instruments.
Federally tax-exempt obligations may include
municipal securities and commercial paper
issued by states and other local
governments. 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 short-term money market
instruments or "private activity" bonds,
some or all of which may produce income
subject to federal alternative minimum tax.
At the time of purchase, all of the Fund's
investments (other than U.S. Government
securities and related repurchase
agreements) will be rated in the highest
rating category by an NRSRO (for example,
Aaa by Moody's or AAA by Standard & Poor's)
or, if unrated, deemed by the Adviser to be
of comparable quality. In addition, all Fund
investments will mature in 397 days or less,
and the Fund's average maturity will not
exceed 90 days.
While the Fund typically holds securities
until maturity, decisions to sell portfolio
holdings are generally the result of a
change in financial condition of the issuer
of a security, for liquidity purposes, or to
rebalance the portfolio.
PRINCIPAL
INVESTMENT RISKS The Fund will invest primarily in high
quality fixed income securities, which
provide income and a level of protection of
capital, but do not typically present
opportunity for capital appreciation. The
amount of information available about
issuers of tax-exempt debt may not be as
extensive as that which is made available by
companies whose stock or debt is publicly
traded. In addition, changes in law or
adverse determinations by the Internal
Revenue Service could make the income from
some of the Fund's investments taxable. The
Fund's quality and maturity limitations
described above will reduce, but not
altogether eliminate, the following risks:
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
22
<PAGE> 80
LEADER TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
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. 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 or other factors.
Income risk is generally lower for
longer-term bonds and higher for
shorter-term bonds. Because interest rates
vary, it is impossible to predict the income
or yield of the Fund for any particular
period.
Investing in the Fund involves risks common
to any investment in securities. By itself,
no Fund constitutes a balanced investment
program. There is no guarantee that the Fund
will meet its goals.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or
any other government agency. Although the
Fund seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in this
Fund.
A more complete discussion of the Fund's
investments and related risks can be found
in the Statement of Additional Information.
No performance is shown for the LEADER
Tax-Exempt Money Market Fund because as of
the date of this Prospectus, the Fund had
not completed a full calendar year of
operations.
23
<PAGE> 81
RISK/RETURN SUMMARY AND FUND EXPENSES FEES AND EXPENSES
FEES AND EXPENSES
The following table describes the Fees and Expenses that you may pay if you buy
and hold shares of the Funds:
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID LEADER LEADER LEADER LEADER LEADER LEADER LEADER LEADER
DIRECTLY FROM YOUR INVESTMENT) GROWTH BALANCED INTERMEDIATE SHORT TAX-EXEMPT MONEY TREASURY TAX-EXEMPT
& FUND GOVERNMENT TERM BOND BOND FUND MARKET MONEY MONEY
INCOME BOND FUND FUND FUND MARKET MARKET FUND
FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) None None None None None None None None
Imposed on Purchases
(as a percentage of offering
price)
Maximum Sales Charge (Load) None None None None None None None None
Imposed on Reinvested Dividends
Maximum Deferred Sales Load None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
Management Fees(1) 0.75% 0.80% 0.50% 0.55% 0.50% 0.40% 0.40% 0.40%
Other Expenses(2) 0.67% 0.45% 0.72% 0.94% 0.87% 0.62% 0.75% 0.75%
Total Annual Fund Operating 1.42% 1.25% 1.22% 1.49% 1.37% 1.02% 1.15% 1.15%
Expenses(3)
</TABLE>
(1) Includes an annual administrative services fee of up to 0.30% for each of
the Growth & Income Fund, Balanced Fund, Intermediate Government Bond Fund,
Short Term Bond Fund and Tax-Exempt Bond Fund, and up to 0.25% for each Money
Fund. Part or all of these fees, which are payable under an Administrative
Services Plan adopted by the Board of Trustees of LEADER Mutual Funds (the
"Trust"), may be paid to financial institutions that provide certain
administrative services to their customers who own Institutional Shares of the
Funds.
(2) Other Expenses are estimated for the Fund's current fiscal year.
(3) As a result of the Adviser's voluntary waiver of a portion (___%) of its
management fee and a voluntary waiver of part (___%) of the amount payable under
the Distribution and Service Plan, net annual operating expenses are expected to
be ____%, 1.05%, ____%, 1.04%, ____%, ____%, ____% and ____%, for the Growth &
Income Fund, Balanced Fund, Intermediate Government Bond Fund, Short Term Bond
Fund and Tax-Exempt Bond Fund, the Money Market Fund, the Treasury Money Market
Fund and the Tax-Exempt Money Market Fund. These waivers may be eliminated at
any time in the Adviser's discretion.
EXAMPLE
The Example at the right is intended to help you compare the cost of investing
in the LEADER Mutual Funds with the costs of investing in other mutual funds. It
estimates 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
may be higher or lower. The examples do not reflect any fee waivers that may be
in effect for part or all of the relevant period.
24
<PAGE> 82
Example
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
LEADER Growth & Income Fund $145 $449 $776 $1,702
LEADER Balanced Fund $107 $377
LEADER Intermediate Government Bond Fund $124 $387 $670 $1,477
LEADER Tax-Exempt Bond Fund $139 $434
LEADER Short Term Bond Fund $106 $427
LEADER Money Market Fund $103 $332 [___] [____]
LEADER Treasury Money Market Fund $117 $365
LEADER Tax-Exempt Money Market Fund $117 $365
</TABLE>
25
<PAGE> 83
RISK/RETURN SUMMARY AND FUND EXPENSES
INVESTING FOR DEFENSIVE PURPOSES
When the Adviser determines that market conditions are appropriate, each Fund
may, for temporary defensive purposes, invest up to 100% of its assets in money
market instruments. (The Money Market Fund, Treasury Money Market Fund and
Tax-Exempt Money Market Fund, (each a "Money Fund" and collectively, the "Money
Funds") may invest 100% of their assets in money market investments for any
purpose.) Each of the Intermediate Government Bond Fund, the Short Term Bond
Fund and the Tax-Exempt Bond Fund 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.
ADDITIONAL INFORMATION REGARDING FUND POLICIES
Except for those policies specifically identified as "fundamental", the
investment objectives and policies set forth in this Prospectus may be changed
by the Adviser, subject to review and approval by the Trust's Board of Trustees,
without shareholder vote. The investment objective of each of the Growth &
Income Fund and Intermediate Government Bond Fund is fundamental. The investment
objective of each other Fund is non-fundamental, and may be changed without
shareholder vote.
Each of the Funds may invest in shares of other open-end investment companies,
consistent with, and to the extent permitted by, applicable law. In addition,
pursuant to an order issued by the U.S. Securities and Exchange Commission (the
"SEC"), each non-Money Fund may invest a portion of its assets in one or more of
the Money Funds for cash management purposes.
26
<PAGE> 84
FUND MANAGEMENT
INVESTMENT ADVISER
Union Planters Bank, National Association ("Union Planters" or the "Adviser"),
One South Church Street, Suite 500, Belleville, Illinois 62220, serves as
investment adviser to the LEADER Mutual Funds. 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 $34 billion.
For investment advisory services provided by Union Planters, the Funds paid as
follows during the fiscal year ended August 31, 2000:
AS A PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 8/31/00*
--------------
LEADER Growth & Income Fund 0.50%
LEADER Intermediate Government Bond Fund 0.40%
LEADER Money Market Fund 0.17%
LEADER Tax-Exempt Bond Fund 0.50%
* Absent expense limitations that were in place throughout this period,
these amounts would have been 0.75%, 0.50%, and 0.40% (as a percentage
of average daily net assets) for the Growth & Income Fund,
Intermediate Government Bond Fund and Money Market Fund, respectively.
In addition, the Balanced Fund, Short Term Bond Fund, Treasury Money
Market Fund and Tax-Exempt Money Market Fund will pay Union Planters, 0.80%,
0.55%, 0.40% and 0.40% (as a percentage of average daily net assets),
respectively, for investment advisory services rendered to such Funds.
PORTFOLIO MANAGERS
Union Planters has several portfolio managers committed to the day-to-day
management of the Funds.
Gary J. Guthrie is the portfolio manager for the LEADER Growth & Income Fund.
Mr. Guthrie is a graduate of Southern Illinois University and is currently a
Vice President of Union Planters.
L. Clark Zedric is the portfolio manager for the LEADER Intermediate Government
Bond Fund. He received his MBA from Illinois State University and is currently a
Vice President of Union Planters.
Both Mr. Guthrie and Mr. Zedric have served as portfolio managers since these
Funds' inception in 1994.
Lucy Kasson is the portfolio manager for the LEADER Tax-Exempt Bond Fund and
each of the Money Funds. A graduate of DePaul University, Ms. Kasson joined
Union Planters in 1999, where she is currently a Vice President and has served
as the portfolio manager for each of these Funds since their inception. Ms.
Kasson was employed by Nuveen Advisory Corporation from 1978 until 1999, where
she served as a portfolio manager from 1995 to 1999.
The LEADER Balanced Fund is managed by Mr. Guthrie, Ms. Kasson and Mr. Zedric.
The LEADER Short Term Bond Fund is managed by Mr. Zedric and James W. Duies. Mr.
Duies joined Union Planters in April 1999 as a Junior Portfolio Manager and
became a portfolio manager in 2000. Prior to joining Union Planters, Mr. Duies
was a Trust & Investment Assistant at SunTrust Investments. Mr. Duies graduated
from Millikin University in 1995.
The Statement of Additional Information ("SAI") has more detailed information
about the Adviser and the Funds' other service providers.
27
<PAGE> 85
DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services L.P., ("BISYS" or the "Distributor") is the distributor of
each Fund, and also 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. (the "Transfer Agent"), 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.
28
<PAGE> 86
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
HOW NET ASSET VALUE IS CALCULATED
The net asset value, or 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)
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.
LEADER MONEY FUNDS
The NAV of the Money Funds is expected to be constant at $1.00 per share,
although this value is not guaranteed. The NAV is determined at 3:00 p.m.
Eastern time (2:00 p.m. Central time) for the Money Market Fund and Treasury
Money Market Fund and 12:30 a.m. Eastern time (11:30 a.m. Central time) for the
Tax-Exempt Money Market Fund on all days when the New York Stock Exchange (the
"Exchange") is open for regular trading. In addition to Exchange holidays, the
Money Funds will also be closed on Columbus Day and Veterans' Day. The Money
Funds value their 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.
LEADER GROWTH & INCOME FUND
LEADER INTERMEDIATE GOVERNMENT BOND FUND
LEADER TAX-EXEMPT BOND FUND
LEADER BALANCED FUND
LEADER SHORT TERM BOND FUND
The per share NAV for each Fund other than the Money Funds is determined, and
its shares are priced at the close of regular trading on the Exchange, normally
at 4:00 p.m. Eastern time (3:00 p.m. Central time), on days the Exchange is open
for regular trading.
Your order for the purchase, sale or exchange of shares is priced at the next
NAV calculated after a properly completed order is received and accepted by the
Fund on any day that the Exchange is open for business. For example, if you
place a purchase order to buy shares of the LEADER Growth & Income Fund, it must
be received prior to the close of regular trading on the Exchange (generally
4:00 p.m. Eastern time) in order to receive the NAV calculated on that day. If
your order is received after the close of regular trading on the Exchange that
day, you will receive the NAV calculated on the next business day.
The Funds' (other than the Money 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 Trust's Board of Trustees believes accurately reflects fair
value. Debt obligations with remaining maturities of 60 days or less are valued
at amortized cost or based on their acquisition cost.
29
<PAGE> 87
SHAREHOLDER INFORMATION
PURCHASING AND SELLING YOUR SHARES
Institutional Shares of the LEADER Mutual Funds are available to institutional
investors through the Funds' Distributor or through certain banks or other
financial institutions. If you are purchasing Institutional Shares through a
financial institution, you must follow the procedures established by your
institution. Your financial institution is responsible for sending your purchase
order to the Fund's Distributor and wiring payment to the Fund's custodian. Your
financial institution holds the shares in your name and receives all
confirmations of purchases and sales. Financial institutions placing orders for
themselves or on behalf of their customers should call the Fund at
1-800-219-4182. The Fund reserves the right to refuse any order to buy shares.
Investments in Institutional Shares of the Funds require a minimum investment of
$1,000,000, which may be waived at the Adviser's or Distributor's discretion. If
you purchase shares through a bank or other financial institution, these
institutions may charge additional fees, require higher minimum investments or
impose other limitations on buying and selling shares (such as an earlier
cut-off time for purchase and sale requests). All purchases must be in U.S.
dollars. Third-party checks are not accepted.
Orders to sell or "redeem" Institutional Shares should be placed with the same
financial institution that placed the original purchase order in accordance with
the procedures established by that institution. Your financial institution is
responsible for sending your order to the Fund's Distributor and for crediting
your account with the proceeds. The Fund may charge a wire transfer fee of up to
$15 per wire, and your financial institution may charge an additional fee.
You may sell your shares on any day the Exchange is open for regular trading
(except, in the case of the Money Funds only, Columbus Day and Veterans' Day).
Your sales price will be the NAV next determined after your sell order is
received by the Funds, the Transfer Agent, or your investment representative.
See "Pricing of Fund Shares" above. Normally you will receive your proceeds
within a week after your request is received. See section on "General Policies
on Selling Shares" below.
The Fund's Transfer Agent may require a signature guarantee unless the
redemption proceeds are payable to the shareholder of record and the proceeds
are either mailed to the shareholder's address of record or electronically
transferred to the account designated on the original account application. A
signature guarantee helps prevent fraud, and you may obtain one from most banks
and broker/dealers. Contact the Fund for more information on signature
guarantees.
Special Note for Pre-9/1/00 Shareholders Only: Prior to the redesignation of
Class A Shares as Institutional Shares on September 1, 2000, Class A Shares were
subject to lower minimum initial investment requirements ranging from $100 to
$250 and to minimum subsequent investment requirements ranging from $100 to
$150. Shareholders of the Funds as of August 31, 2000 will continue to be
eligible to buy Institutional Shares at these lower minimum investment levels,
and may continue to participate in any Fund investment programs in which they
were a participant as of August 31, 2000. If you purchased shares through a
financial intermediary, please follow the instructions for purchases and sales
set forth above. For all other shareholders, you may continue to purchase or
redeem shares by wire by calling 1-800-219-4182 for instructions. You may also
continue to purchase or redeem shares by mail, by writing to: LEADER Mutual
Funds, P.O. Box 182754, Columbus, OH 43218-2784 (for overnight mail: LEADER
Mutual Funds, c/o BISYS Fund Services, Attn: T.A. Operations, 3435 Stelzer Road,
Columbus, OH 43219). For additional purchases, please use the investment slip
attached to your account statement, and indicate the fund name, amount invested,
and your account name and number, and make your check, bank draft or money order
payable to "LEADER Mutual Funds". Please include your account number on the
check.
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. You can, however, elect to receive them in cash. 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 MAY BE RETURNED TO YOU IN THE FORM OF A TAXABLE DISTRIBUTION.
30
<PAGE> 88
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
VERIFYING TELEPHONE REDEMPTIONS
The Trust has instituted procedures designed to ensure that telephone
redemptions are made by authorized shareholders only. All telephone calls are
recorded for your protection and you will be asked for information to verify
your identity. By completing an account application, you agree that the Trust,
Distributor and Transfer Agent will not be liable for any loss incurred by you
by reason of the Trust accepting unauthorized telephone redemption requests for
your account if the Trust reasonably believes the instructions to be genuine.
The Trust may accept telephone redemption instructions from any person
identifying himself as the owner of an account or the owner's broker where the
owner has not declined in writing to utilize this service. The Trust will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, and may be liable for any losses due to unauthorized or fraudulent
instructions if it fails to employ such procedures.
REDEMPTIONS WITHIN 10 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, you may redeem any portion
of it at any time. Proceeds from the redemption, however, will not be delivered
to you 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
SEC. 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 at LEADER Mutual Funds c/o BISYS Fund Services Attn:
T.A. Operations 3435 Stelzer Road Columbus, OH 43219. The request should include
your fund and account number, the amount you wish to redeem, the address where
your check should be sent, and the account owner(s) signature.
REDEMPTION IN KIND
The Funds reserve the right to make payment in securities rather than cash,
known as a "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), or in other circumstances
where the Fund deems it to be in best interests of the Fund and its other
shareholders. Redemptions in kind will consist of securities equal in market
value to your shares. These securities will generally consist of liquid
securities, but will not generally represent a pro rata share of the relevant
Fund's assets. When you convert these securities to cash, you will pay brokerage
charges.
CLOSING OF SMALL ACCOUNTS
If primarily by reason of a redemption or exchange your account falls below the
applicable minimum initial investment, the relevant 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
31
<PAGE> 89
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.
32
<PAGE> 90
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS
Institutional Shares are sold through the Distributor, and are available for
purchase primarily by financial institutions, such as banks, trust companies,
thrift institutions, mutual funds or other financial institutions acting on
their own behalf or on behalf of their qualified accounts as well as by
shareholders of LEADER Mutual Funds as of August 31, 2000.
EXCHANGING YOUR SHARES
You can exchange your Institutional Shares in one Fund for Institutional Shares
of another LEADER Mutual Fund (see "Notes on Exchanges" below). No transaction
fees are charged in connection with such exchanges.
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to LEADER Mutual Funds, P.O.
Box 182754, Columbus OH 43218-2784, or by calling 1-800-219-4182. Please provide
the following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security
number)
- Dollar value or number of shares to be exchanged
- The name and class of the Fund from which the exchange is to
be made
- The name and class of the Fund into which the exchange is
being made
See "General Policies on Selling Shares" above for important information about
telephone transactions.
33
<PAGE> 91
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
CONTINUED
NOTES ON EXCHANGES
The registration and taxpayer identification numbers of the two accounts must be
identical. If you don't have an account with the new Fund, a new account will be
opened with the same features unless you write to tell us to change them.
The Exchange Privilege may be modified or eliminated at any time with 60 days
notice.
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 cleared, which could take up to 10 days.
All exchanges are based on the relative net asset value next determined after
the exchange order is received by the Funds. Be sure to read the Prospectus
carefully of any Fund into which you wish to exchange shares.
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, while income dividends for all other Funds are declared daily and
paid monthly. Capital gains, if any, for all Funds are distributed at least
annually.
34
<PAGE> 92
SHAREHOLDER INFORMATION
TAXATION
FEDERAL TAXES
Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements necessary for it to be
relieved of federal taxes on income and gains it distributes to shareholders.
Each Fund contemplates declaring as dividends each year all or substantially all
of its taxable income, including its net capital gain (the excess of net
long-term capital gain over net short-term capital loss). You will be subject to
income tax on these distributions regardless of whether they are paid in cash or
reinvested 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 Tax-Exempt Bond Fund or the
Tax-Exempt Money Market Fund) will generally be taxable as ordinary income.
The Tax-Exempt Bond Fund and the Tax-Exempt Money Market Fund (the "Tax-Exempt
Funds") intend to distribute primarily income that is exempt from federal
taxation. The Tax-Exempt Funds may, however, invest in securities that generate
income that is not exempt from federal taxation. In addition, income that is
exempt from federal taxation may be subject to state and local taxation. Any
capital gains will be taxable federally and may also be subject to state or
local taxation. Distributions designated by the Tax-Exempt Funds 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 a Tax-Exempt Fund may have on the federal taxation of your benefits. In
addition, an investment in a Tax-Exempt 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 taxed 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."
You will generally 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. In the case of the Money Funds, however, the recognition of
gain or loss on a sale, exchange or redemption of your shares is unlikely to
occur. (To aid in computing your tax basis, you 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.
One notable exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an Individual Retirement
Account (or IRA) or other tax-qualified plan will not be currently taxable.
The foregoing is a summary of certain federal income tax consequences of
investing in the Funds. For more information on the federal income taxation of
the Funds, see the SAI. You should consult your tax adviser to determine the
precise effect of an investment in the Funds on your particular tax situation
(including possible liability for state and local taxes).
35
<PAGE> 93
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The Financial Highlights tables are intended to help you understand each Fund's
financial performance for the last five years or, in the case of the Tax-Exempt
Bond Fund and Money Market Fund, since inception. 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). Except as
otherwise noted below, this information has been audited by [_______________],
whose report, along with the Trust's financial statements, is incorporated by
reference in the Trust's SAI, which is available upon request. Institutional
Shares are the continuation of the Fund's single class of shares, Class A
Shares, which existed prior to September 1, 2000. Class A Shares were
redesignated as "Institutional Shares" effective September 1, 2000.
LEADER GROWTH & INCOME FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $ 30.37 $ 23.46 $ 22.18 $ 16.42 $ 14.05
INCOME FROM INVESTMENT OPERATIONS:
Net investment income [___] 0.30 0.23 0.26 0.24
Net realized and unrealized gains
from investment transactions [___] 7.53 1.72 6.12 2.39
Total income from investment operations [___] 7.83 1.95 6.38 2.63
LESS DISTRIBUTIONS:
Net investment income [___] (0.27) (0.25) (0.25) (0.23)
Net realized gain from investment
transactions [___] (0.65) (0.42) (0.37) (0.03)
Total dividends and distributions(1) [___] (0.92) (0.67) (0.62) (0.26)
NET ASSET VALUE--END OF PERIOD $ [___] $ 30.37 $ 23.46 $ 22.18 $ 16.42
Total return [___] 33.73% 8.84% 39.59% 18.77%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, at end of period ($000's) $ [___] $145,919 $ 74,131 $ 70,276 $39,995
Ratio of expenses to average net assets [___](2) 0.87% 0.99% 1.06% 1.27%
Ratio of net investment income to
average net assets [___](2) 1.05% 0.96% 1.36% 1.56%
Ratio of expenses to average net assets
without fee waivers** [___](2) 1.37% 1.49% 1.56% 1.77%
Ratio of net investment income to
average net assets without fee waivers* [___](2) 0.55% 0.46% 0.86% 1.06%
Portfolio turnover rate [___] 9% 26% 17% 31%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(1) Had the Adviser, Distributor, and administrator not reduced or waived
certain expenses, total returns would have been lower. Total return for
periods of less than one year are not annualized.
(2) Annualized.
36
<PAGE> 94
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
LEADER INTERMEDIATE GOVERNMENT BOND FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $12.04 $ 13.00 $ 12.61 $ 12.43 $ 12.75
INCOME FROM INVESTMENT OPERATIONS:
Net investment income [___] 0.72 0.76 0.79 0.76
Net realized and unrealized gains
(losses) from investment transactions [___] (0.96) 0.39 0.19 (0.32)
Total income from investment operations [___] (0.24) 1.15 0.98 0.44
LESS DISTRIBUTIONS:
Net investment income [___] (0.72) (0.76) (0.79) (0.76)
In excess of net investment income -- -- -- (0.01) --
Total dividends and distributions [___] (0.72) (0.76) (0.80) (0.76)
NET ASSET VALUE--END OF PERIOD $[___] $ 12.04 $ 13.00 $ 12.61 $ 12.43
Total return(1) [___] (1.97)% 9.33% 7.96% 3.48%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, at end of period ($000's) $[___] $80,607 $72,614 $64,459 $56,764
Ratio of expenses to average net assets [___](2) 0.82% 0.90% 0.96% 1.05%
Ratio of net investment income to
average net assets [___](2) 5.69% 5.92% 6.15% 5.97%
Ratio of expenses to average net
assets without fee waivers*** [___](2) 1.17% 1.25% 1.31% 1.40%
Ratio of net investment income
to average net assets without
fee waivers* * [___](2) 5.34% 5.57% 5.80% 5.62%
Portfolio turnover rate [___] 16% 32% 19% 20%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(1) Had the Adviser, Distributor, and administrator not reduced or waived
certain expenses, total returns would have been lower. Total return for
periods of less than one year are not annualized.
(2) Annualized.
37
<PAGE> 95
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
LEADER MONEY MARKET FUND - INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
JULY 7,
YEAR 1999*
ENDED THROUGH
AUGUST 31, AUGUST 31,
2000 1999
<S> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $1.000 $ 1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income [___] 0.007
Net realized and unrealized gains from investment transactions --
Total income from investment operations [___] 0.007
LESS DISTRIBUTIONS:
Net investment income [___] (0.007)
Total dividends and distributions [___] (0.007)
NET ASSET VALUE--END OF PERIOD $ [___] $ 1.000
Total return(1) [___](2) 0.67%(2)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, at end of period ($000's) $ [___] $166,335
Ratio of expenses to average net assets [___](3) 0.51%(3)
Ratio of net investment income to average net assets [___](3) 4.35%(3)
Ratio of expenses to average net assets without fee waivers** [___](3) 1.02%(3)
Ratio of net investment income to average net assets
without fee waivers** [___](3) 3.84%(3)
</TABLE>
* Commencement of operations.
** During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(1) Had the Adviser, Distributor, and administrator not reduced or waived
certain expenses, total returns would have been lower.
(2) Not annualized.
(3) Annualized.
38
<PAGE> 96
[INSERT TAX-EXEMPT BOND FUND -- FINANCIAL HIGHLIGHTS FROM INCEPTION TO
AUGUST 31, 2000]
39
<PAGE> 97
[Intentionally Left Blank]
40
<PAGE> 98
[Intentionally Left Blank]
41
<PAGE> 99
[Intentionally Left Blank]
42
<PAGE> 100
[Intentionally Left Blank]
43
<PAGE> 101
The following additional information regarding LEADER Mutual Funds (formerly
"Magna Funds") is available to you upon request and without charge.
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Funds' Reports to shareholders contain additional information regarding 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 their last 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 to be part of this prospectus.
You can get free copies of the 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 shares of the Funds. In addition, you may
contact the Funds at:
LEADER MUTUAL FUNDS
P.O. BOX 182754
COLUMBUS, OHIO 43218-2784
TELEPHONE: 1-800-219-4182
You can review the Reports and the SAI at the Public Reference Room of the
Securities and Exchange Commission (the "SEC") in Washington, D.C. You can get
copies:
- For a duplicating fee, by writing the Public Reference Section of the
SEC, Washington, D.C. 20549-0102, by calling the SEC at 1-202-942-8090,
or by electronic request at the following e-mail address:
[email protected].
- At no charge from the SEC's Website at http://www.sec.gov.
Investment Company Act file no. 811-8494
44
<PAGE> 102
LEADER MUTUAL FUNDS
STATEMENT OF ADDITIONAL INFORMATION
INVESTOR SHARES
SWEEP SHARES
SEPTEMBER 1, 2000
This Statement of Additional Information (this "Statement of Additional
Information" or this "Statement") is not a prospectus. This Statement of
Additional Information relates to the LEADER Mutual Funds (the "Trust")
Prospectus (Investor Shares and Sweep Shares), dated January 1, 2001 (the
"Prospectus"), and should be read in conjunction therewith. The contents of the
Prospectus are hereby incorporated into this Statement of Additional
Information. A copy of the Prospectus may be obtained free of charge by writing
to LEADER Mutual Funds, P.O. Box 182754, Columbus, OH 43218-2784, or calling
(800) 219-4182.
The Trust's audited financial statements for the fiscal year ended
August 31, 2000 included in the Trust's Annual Report are hereby incorporated
into this Statement of Additional Information. Copies of the Trust's Annual
Report are available without charge upon request from LEADER Mutual Funds, P.O.
Box 182754, Columbus, Ohio 43218-2754, or by calling (800) 219-4182.
<PAGE> 103
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS.................................................................1
INVESTMENT RESTRICTIONS..........................................................................................7
ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS AND RELATED RISKS..............................................13
MANAGEMENT OF THE TRUST..........................................................................................28
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................32
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................37
DESCRIPTION OF THE TRUST.........................................................................................39
RECORD AND BENEFICIAL OWNERS OF 5% OR
MORE OF THE FUND'S SHARES...............................................................................42
NET ASSET VALUE AND PUBLIC OFFERING PRICE........................................................................44
SHAREHOLDER SERVICES.............................................................................................46
REDEMPTIONS......................................................................................................48
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS.....................................................49
PERFORMANCE INFORMATION..........................................................................................54
APPENDIX A......................................................................................................A-1
DESCRIPTION OF CERTAIN FUND INVESTMENTS.........................................................................A-1
APPENDIX B......................................................................................................B-1
DESCRIPTION OF BOND RATINGS ....................................................................................B-1
</TABLE>
<PAGE> 104
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective and policies of each Fund (a "Fund") of LEADER
Mutual Funds 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 Board of Trustees of the
Trust (the "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
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<PAGE> 105
changes its portfolio securities for investment considerations and not for
trading purposes.
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 (as defined below in the Section entitled
"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.
Balanced Fund
-------------
As described in the Prospectus, the investment objective of the
Balanced Fund is to maximize total return through a combination of growth of
capital and current income consistent with preservation of capital. The Fund
invests in a combination of equity securities (such as stocks), fixed income
securities (such as bonds) and money market instruments in relative proportions
that Union Planters believes will offer attractive returns consistent with the
Fund's objectives. Under normal market conditions, the Fund invests at least 25%
of its total assets in fixed income securities and no more than 75% of its total
assets in equity securities. The allocation of assets will vary with market
conditions that may make equity securities, fixed income securities or money
market instruments more or less attractive.
The Fund's equity securities will consist mainly of common stocks, but
may also include preferred stocks and securities convertible into stocks, as
well as warrants to purchase such securities.
The Fund's investment in fixed income securities will consist mainly of
investment-grade bonds, but the Fund may invest in any kind of debt security
issued by private corporations or the U.S. Government. With respect to its
investment in bonds, the Fund will invest primarily in issues rated in one of
the four highest categories by a nationally recognized statistical rating
organization ("NRSRO") (that is, rated Aaa, Aa, A or Baa by Moody's Investors
Services, Inc. ("Moody's") or AAA, AA, A or BBB by Standard & Poors Rating
Service ("Standard & Poor's") or Fitch Investors Service, Inc."("Fitch")) or
unrated issues deemed by Union Planters to be of comparable quality.
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 intent to hold more than 10% of
its assets
-2-
<PAGE> 106
in securities that have been downgraded below investment grade (that is, below
BBB or Baa).
Because the Balanced Fund invests in a combination of stocks and bonds,
this Fund may invest in any of the types of securities in which either the
Growth & Income Fund (as described above) or the Intermediate Government Bond
Fund (as described below) may invest
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 seeks 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:
X direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds;
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<PAGE> 107
X obligations of U.S. Government agencies, authorities or
instrumentalities such as the Federal Home Loan Banks, FNMA, GNMA, the
Federal Farm Credit Banks, the Student Loan Marketing Association, the
Federal Home Loan Mortgage Corporation ("FHLMC") or the Tennessee
Valley Authority;
X corporate debt obligations having floating or fixed rates of interest
and rated in one of the three highest categories by an NRSRO (that is,
rated Aaa, Aa or A by Moody's or AAA, AA or A by Standard & Poor's or
Fitch), or which are not rated but are of comparable quality in the
judgment of Union Planters;
X 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;
X mortgage-backed securities;
X collateralized mortgage obligations; and
X 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
--------------------
As noted in the Prospectus, the Fund normally invests at least 80% of
its total assets in obligations producing income exempt from federal income
taxation, including municipal bonds, note and commercial paper issued by states
and other local government that are exempt from federal taxes. For additional
information on the Fund's investment in tax-exempt securities, see the Section
below entitled "Tax-exempt Securities".
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, including municipal bonds, notes and commercial
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<PAGE> 108
paper issued by states and other local governments that are exempt from federal
taxes as well as U.S. Government Securities, money market instruments or
"private activity" bonds (some or all of which may produce income subject to
federal alternative minimum tax). As a result, a portion of the income earned by
the Tax-Exempt Bond Fund may not be exempt from federal income taxation when
distributed to shareholders.
Short Term Bond Fund
--------------------
As described in the Prospectus, the Short Term Bond Fund seeks to
provide a high level of current income consistent with the preservation of
capital. The Fund invests primarily in investment-grade bonds (that is, those
rated at least Baa or BBB, or determined by Union Planters to be of comparable
quality). The types of securities that the Fund may purchase include bonds of
U.S. corporate and governmental issuers, U.S. dollar-denominated bonds of
foreign issuers, and mortgage-backed and other asset-backed securities, as well
as any other securities in which the Intermediate Government Bond Fund may
invest (as described above). The Fund will normally maintain a dollar-weighted
average portfolio maturity of three years or less, but may purchase individual
securities with longer maturities.
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 intent to hold more than 10% of
its assets in securities that have been downgraded below investment grade (that
is, below BBB or Baa).
Money Market Fund, Treasury Money Market Fund and Tax-Exempt Money Market Fund
------------------------------------------------------------------------------
(each a "Money Fund" and collectively, the "Money Funds")
---------------------------------------------------------
Each Money Fund will invest only in securities that Union Planters,
acting under guidelines established by the Board of Trustees, has determined are
of high quality and present minimal credit risk. For a description of certain
money market instruments in which the Money Funds may invest, and the related
descriptions of the ratings of Standard & Poor's and Moody's, see 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.
For additional information on the Tax-Exempt Money Market Fund's investment in
tax-exempt securities, see the Section below entitled "Tax-exempt Securities".
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
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<PAGE> 109
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 Funds from investing in money market instruments paying the
highest available yield at a particular time. Each Money 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. Each Money
Fund may also invest 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 Money Funds, may result in frequent changes in each Money
Fund's portfolio. There are usually no brokerage commissions as such paid by the
Money Funds in connection with the purchase of securities of the type in which
each Money Fund invests.
As described in the Prospectus, all of the investments of each of the
Money Funds will, at the time of investment, have remaining maturities of 397
days or less. The average maturity of the each of the Money 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 by a Money Fund results
in a dollar-weighted average portfolio maturity for such Fund in excess of 90
days, 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 foregoing maturity restrictions,
variable rate instruments that 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
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<PAGE> 110
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 Money Funds 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 a Money Fund's shares
could require the sale of portfolio investments at a time when a sale might not
be desirable.
After purchase by a Money Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by such a Fund.
Neither event will necessarily require a sale of such security by such a 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 Standard & Poor's (or another NRSRO approved by the Securities and Exchange
Commission (the "SEC")) 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. For additional information regarding certain of the Tax-Exempt Money
Market Fund's investments, see "Tax-exempt Securities" in this Statement.
INVESTMENT RESTRICTIONS
Investment Restrictions - All Funds except the Money Funds
----------------------------------------------------------
In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of each Fund
other than a Money Fund (and those marked with an asterisk are fundamental
policies of each Fund):
Each such Fund will not:
(1) Invest in companies for the purpose of exercising control or
management.
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<PAGE> 111
*(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) Except for the Tax-Exempt Bond Fund, 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) Except for the Tax-Exempt Bond Fund, 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 arrangements with respect to
options, futures contracts and options on futures contracts and with respect to
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<PAGE> 112
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 and sell put and
call options on currencies and enter into currency forward contracts.
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<PAGE> 113
*(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 SEC, to
restrict its investments in repurchase agreements maturing in more than seven
days, together with other investments in illiquid securities, to 15% of such
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 - The Money Funds
-----------------------------------------
The following is a list of the Money Funds' investment restrictions.
The restrictions set forth in the numbered paragraphs marked with an asterisk
are fundamental policies and, accordingly, will not be changed by a Money Fund
without the consent of the holders of a majority of the outstanding voting
securities of such Fund.
Each Money 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 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
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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.
(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
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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) 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.)
A Money Fund will not purchase any security restricted as to
disposition under federal securities laws if, as a result, more than 10% of such
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. Each
Money 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.
Except as otherwise stated, all percentage limitations set forth in
this Statement of Additional Information and/or 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.
Each Fund is a "diversified" fund as such term is defined under the
1940 Act. This means that it is a fundamental policy of each Fund, which may not
be changed without shareholder approval, that at least 75% of the value of each
such Fund's total assets are represented by cash and cash items (including
receivables), U.S. Government Securities, securities of other investment
companies, and other securities for the purposes of this calculation limited in
respect of any one issuer to an amount not greater than 5% of the value of the
relevant Fund's total assets and to not more than 10% of the outstanding voting
securities of any single issuer. The Money Funds are subject to additional
diversification requirements pursuant to Rule 2a-7 under the 1940 Act.
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ADDITIONAL INFORMATION REGARDING
FUND INVESTMENTS AND RELATED RISKS
U.S. GOVERNMENT SECURITIES
As described in the Prospectus, each Fund may invest in U.S. Government
Securities. The term "U.S. Government Securities" includes 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 GNMA,
the FHLMC, the FNMA, 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.
- U.S. Treasury Bills--Direct obligations of the United States Treasury
that 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 U.S. Government.
- 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 U.S. Government.
- "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. 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.
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- "Fannie Maes"--The FNMA is a government-sponsored corporation owned
entirely by private 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 U.S. Government.
- "Freddie Macs"--The FHLMC is a corporate instrumentality of the U.S.
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 U.S. 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.
TAX-EXEMPT SECURITIES
As used in this Statement, the term "tax-exempt securities" includes
debt obligations issued by a state, its political subdivisions (for example,
counties, cities, towns, villages, districts and authorities) and their
agencies, instrumentalities or other governmental units, the interest from which
is, in the opinion of bond counsel, exempt from federal income tax and the
appropriate state's personal income tax. Such obligations are issued to obtain
funds for various public purposes, including the construction of a wide range of
public facilities, such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which tax-exempt securities may be issued include the refunding of
outstanding obligations or the payment of general operating expenses.
Short-term tax-exempt securities are generally issued by state and
local governments and public authorities as interim financing in anticipation of
tax collections, revenue receipts, or bond sales to finance such public
purposes.
In addition, certain types of "private activity" bonds may be issued by
public authorities to finance projects such as privately operated housing
facilities; certain local facilities for supplying water, gas or electricity;
sewage or solid waste disposal
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facilities; student loans; or public or private institutions for the
construction of educational, hospital, housing and other facilities. Such
obligations are included within the term tax-exempt securities if the interest
paid thereon is, in the opinion of bond counsel, exempt from federal income tax
and state personal income tax (such interest may, however, be subject to federal
alternative minimum tax). Other types of private activity bonds, the proceeds of
which are used for the construction, repair or improvement of, or to obtain
equipment for, privately operated industrial or commercial facilities, may also
constitute tax-exempt securities, although the current federal tax laws place
substantial limitations on the size of such issues.
The Tax-Exempt Money Market Fund may invest in tax-exempt securities
either by purchasing them directly or by purchasing certificates of accrual or
similar instruments evidencing direct ownership of interest payments or
principal payments, or both, on tax-exempt securities, provided that, in the
opinion of counsel to the initial seller of each such certificate or instrument,
any discount accruing on a certificate or instrument that is purchased at a
yield not greater than the coupon rate of interest on the related tax-exempt
securities will be exempt from federal income tax to the same extent as interest
on the tax-exempt securities. The Tax-Exempt Money Market Fund may also invest
in tax-exempt securities by purchasing from banks participation interests in all
or part of specific holdings of tax-exempt securities. These participations may
be backed in whole or in part by an irrevocable letter of credit or guarantee of
the selling bank. The selling bank may receive a fee from the Tax-Exempt Money
Market Fund in connection with the arrangement. The Tax-Exempt Money Market Fund
will not purchase such participation interests unless it receives an opinion of
counsel or a ruling of the Internal Revenue Service that interest earned by it
on tax-exempt securities in which it holds such participation interests is
exempt from federal income tax.
When a Fund purchases tax-exempt securities, it has the authority to
acquire stand-by commitments from banks and broker-dealers with respect to those
tax-exempt securities. A stand-by commitment may be considered a security
independent of the tax-exempt security to which it relates. The amount payable
by a bank or dealer during the time a stand-by commitment is exercisable, absent
unusual circumstances, would be substantially the same as the market value of
the underlying tax-exempt security to a third party at any time. The fund
expects that stand-by commitments generally will be available without the
payment of direct or indirect consideration. The fund does not expect to assign
any value to stand-by commitments.
The yields on tax-exempt securities depend on a variety of factors,
including general money market conditions, effective marginal tax rates, the
financial condition of the issuer, general conditions of the tax-exempt security
market, the
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size of a particular offering, the maturity of the obligation and the rating of
the issue. The ratings of nationally recognized securities rating agencies
represent their opinions as to the credit quality of the tax-exempt securities
which they undertake to rate. It should be emphasized, however, that ratings are
general and are not absolute standards of quality. Consequently, tax-exempt
securities with the same maturity and interest rate but with different ratings
may have the same yield. Yield disparities may occur for reasons not directly
related to the investment quality of particular issues or the general movement
of interest rates and may be due to such factors as changes in the overall
demand or supply of various types of tax-exempt securities or changes in the
investment objectives of investors. Subsequent to purchase by a Fund, an issue
of tax-exempt securities or other investments may cease to be rated, or its
rating may be reduced below the minimum rating required for purchase by such
Fund. Neither event will require the elimination of an investment from the
Fund's portfolio, but Union Planters will consider such an event in its
determination of whether the Fund should continue to hold an investment in its
portfolio.
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
(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. No income is generally earned on these securities
until after delivery. 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 securities themselves (which may have a value
greater or less than the Fund's payment obligation).
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CONVERTIBLE SECURITIES
The Growth & Income Fund and the Balanced 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 a
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 and the Balanced 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. Neither the Growth & Income Fund nor the Balanced Fund will
generally 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 such Fund's total 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, the Tax-Exempt Bond Fund and the
Short Term 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 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
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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 requirements 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 U.S.
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.
LOANS OF PORTFOLIO SECURITIES
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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
Each Fund may engage in 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. The Funds may engage in both types of options.
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 move during the period that the Fund holds
options positions, the Fund will pay the cost of acquiring those positions
(brokerage costs). As a result of these
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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 Funds) 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 and the Balanced
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 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
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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 and the Balanced 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. The Funds will not purchase or sell futures
contracts or related options if as a result a Fund's initial margin deposits
plus premiums paid for outstanding related options would be greater than 5% of
such 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 that is a
member of a contract market.
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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 that 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 Funds) 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 that are being hedged. While
the Fund will incur commission expenses in
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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 and the Balanced 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.
LIMITATIONS ON THE USE OF OPTIONS AND FUTURES PORTFOLIO STRATEGIES
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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 that 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 limits
may restrict the Funds' ability to purchase or sell options on a particular
security.
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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 that 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 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
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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, the Balanced Fund, the
Tax-Exempt Bond Fund, the Short Term Bond Fund and the Money Funds 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.
CMOs are bonds issued by single purpose finance subsidiaries or trusts
established by financial institutions, government agencies, brokerage firms or
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companies related to the construction industry. CMOs purchased by the Fund may
be:
- 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;
- 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
- 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 FHLMC; 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 upon the credit quality of the assets underlying such securities, how
well the
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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 total 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 SEC, the Growth & Income Fund, the Balanced Fund, the Intermediate
Government Bond Fund, the Short Term Bond Fund and the Tax-Exempt Bond Fund may
each purchase and redeem shares of the Money Funds. Any such investments will
result in Union Planters receiving management fees from both the investing Fund
and the relevant Money 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 AGE POSITION WITH THE TRUST DURING THE PAST FIVE YEARS
<S> <C> <C>
Robert R. Archibald, Ph.D (51) Trustee President, Missouri
Missouri Historical Society Historical Society
P.O. Box 11940
St. Louis, MO 63112-0940
Earl E. Lazerson (68) Trustee Director, National Stockyards;
5 Hidden Valley Lane Director, AAA of Missouri;
Edwardsville, IL 62022 President (until 1993) and
Professor (until 1994), So.
Illinois University at Edwardsville
Brad L. Badgley* (48) Trustee Attorney, Heiligenstein & Badgley,
Heiligenstein & Badgley PC PC; Director, Magna Trust Company
30 Public Square (an affiliate of Magna Bank, N.A.,
Belleville, Illinois 62220 which
</TABLE>
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<PAGE> 132
<TABLE>
<S> <C> <C>
merged into Union Planters in
1998) (until 1997); Director, Banc
Star One (1995 to present)
Robert E. Saur (56) Trustee President and Owner, Conrad
750 S. Hanley Street Properties Corp. (real estate);
Clayton, MO 63105 Director, Enterbank Holding Company
Harry R. Maier* (53) Trustee Chief Executive Officer,
118 Sun Lake Dr. Memorial Hospital
Belleville, IL 62221 Belleville, Illinois
Neil Seitz (56) Trustee Dean, School of
School of Business Business, Saint
Saint Louis University Louis University;
3674 Lindell Blvd. Professor, Saint
St. Louis, MO 63108 Louis University
(until 1993)
</TABLE>
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<PAGE> 133
<TABLE>
<S> <C> <C>
Walter B. Grimm (55) President Senior Vice President, BISYS Fund
BISYS Fund Services Services, L.P. ("BISYS, L.P.");
3435 Stelzer Road President, Leigh Investments Consulting
Columbus, Ohio 43219 (investments firm)
Charles L. Booth (40) Vice President Vice President, BISYS
BISYS Fund Services Fund Services, Inc. ("BISYS, Inc.")
3435 Stelzer Road
Columbus, Ohio 43219
Gary Tenkman (29) Treasurer From April 1998 to present, employee of
3435 Stelzer Road BISYS, L.P.; from September 1990 to
Columbus, Ohio 43219 April 1998, employee of Ernst & Young
LLP
R. Jeffrey Young (35) Secretary Vice President, BISYS, Inc.
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
Alaina V. Metz (31) Assistant Chief Administrator, Administrative and
BISYS Fund Services Secretary Regulatory Services, BISYS, L.P.
3435 Stelzer Road
Columbus, Ohio 43219
Warren Leslie (37) Assistant From May 1995 to present, employee of
BISYS Fund Services Secretary BISYS, L.P.; from April 1988 to May
3435 Stelzer Road 1995, employee of American Express
Columbus, Ohio 43219
</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.
Previous positions of officers of the Trust during the past five years
with BISYS, L.P. 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 Mr. Booth were first
elected by the Trustees to serve in the offices noted above in October 1997.
Messrs. Tenkman and Leslie were first elected by the Trustees to serve in
offices noted
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in April 1999. Mr. Young was first elected by the Trustees to serve in the
offices noted above in July 2000. 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 or she attends. These costs are spread across all Funds of the
Trust, and are allocated to each Fund pro rata based on their relative average
net assets for the relevant fiscal period. 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, 2000 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 __, 2000, the Trustees and officers of the Trust
beneficially owned as a group less than 1% of the outstanding shares of each
Fund.
Each of the Trust, Union Planters, and BISYS, L.P., the Trust's
Distributor, has adopted a Code of Ethics pursuant to the requirement of the
1940 Act. Under the Code of Ethics, personnel are only permitted to engage in
personal securities transactions in accordance with certain conditions relating
to such person's position, the identity of the security, the timing of the
transaction, and similar factors. Transactions in securities that may be held by
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<PAGE> 135
the Funds are permitted, subject to compliance with applicable provisions of the
Code. Personal securities transactions must be reported quarterly and broker
confirmations of such transactions must be provided for review.
Under the Declaration of Trust (as defined below) and Massachusetts
law, the Board of Trustees has ultimate responsibility for the management of the
Funds. Under the relevant agreements, the Trustees supervise the performance of
the Funds' adviser, custodian and other service-providers.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Under a separate investment advisory agreement with each Fund (each, an
"Advisory Agreement"), 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 largest banking organizations in the country, with
total assets of approximately $33 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 December 31, 2000, such
fees are as follows: Intermediate Government Bond Fund, 0.40%; Growth & Income
Fund, 0.50%; Tax-Exempt Bond Fund, 0.30%; Money Market Fund, 0.17% (through
August 31, 2000) and 0.20% thereafter through December 31, 2000. Without any
further waivers or reductions, each Fund's advisory fees will be as follows,
effective January 1, 2001: Intermediate Government Bond Fund, 0.50%; Short Term
Bond Fund, 0.55%; Growth & Income Fund, 0.75%; Balanced Fund, 0.80%; Tax-Exempt
Bond Fund, 0.50%; and each Money Fund, 0.40%.
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
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<PAGE> 136
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 Advisory 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 Advisory 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 "LEADER" 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.
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 that 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:
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<PAGE> 137
<TABLE>
<CAPTION>
FISCAL GROSS (BEFORE NET (AFTER
YEAR ENDED VOLUNTARY VOLUNTARY
FUND AUG. 31 REDUCTION) REDUCTION REDUCTION)
<S> <C> <C> <C> <C>
LEADER Growth & Income Fund 1998 $596,301 $198,767 $397,534
1999 $967,691 $322,563 $645,128
2000 $[_____] $[_____] $[_____]
LEADER Intermediate Government 1998 $338,078 $67,615 $270,463
Bond Fund
1999 $387,178 $77,435 $309,743
2000 $[_____] $[_____] $[______]
LEADER Money Market Fund 1999 $96,163 $55,293 $40,870
2000 $[_____] $[_____] $[_____]
LEADER Tax-Exempt
Bond Fund 2000 $[_____] $[_____] $[_____]
</TABLE>
ADMINISTRATOR
BISYS Fund Services, L.P., under an agreement with the Trust (the
"Administration Agreement"), provides management and administrative services to
the Funds, and, in general, supervises the operations of the Trust. BISYS, L.P.
does not provide investment advisory services. As part of its duties, BISYS,
L.P. provides office space, equipment and clerical personnel for managing and
administering the affairs of the Trust. BISYS, L.P. supervises the provision of
custodial, auditing, valuation, bookkeeping, legal, and dividend disbursing
services and provides other management and administrative services. The Trust
pays BISYS, L.P. a fee for its services to each Fund at the annual rate of 0.20%
of the Trust's average daily net assets.
For the fiscal year ended August 31, 2000, pursuant to the terms of the
Administration Agreement, the Growth & Income Fund paid BISYS, L.P. $[_____],
the Intermediate Government Bond Fund paid BISYS, L.P. $[_____], the Tax-Exempt
Bond Fund paid BISYS, L.P. $[_____], the Money Market Fund paid BISYS, L.P.
$[_____] (which is $[_____] less than the maximum administration fees the Fund
would have paid absent BISYS, L.P.'s agreement to reduce its fees to 0.17%). For
the fiscal year ended August 31, 1999, pursuant to the terms of the
Administration Agreement, the Growth & Income Fund paid BISYS, L.P. $257,852,
the Intermediate Government Bond Fund paid BISYS, L.P. $154,873, and the Money
Market Fund paid BISYS, L.P. $40,867 (which is $7,212 less than the maximum
administration fees the Fund would have paid absent BISYS, L.P.'s agreement to
reduce its fees to 0.17%). For the fiscal year ended August 31, 1998, pursuant
to the terms of the Administration Agreement, the Growth & Income Fund paid
BISYS, L.P. $158,698, and the Intermediate Government Bond Fund
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<PAGE> 138
paid BISYS, L.P. $134,948. For the period June 2, 1997 (the date the Trust
entered into this agreement with BISYS, L.P.) through August 31, 1997, pursuant
to the terms of the Administration Agreement, the Growth & Income Fund paid
BISYS, L.P. $29,572, and the Intermediate Government Bond Fund paid BISYS, L.P.
$27,878. Prior to June 2, 1997, Ernst Asset Management Corporation ("EAMC")
provided management and administrative services to the Funds. For the 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.
ADMINISTRATIVE SERVICES PLAN (SWEEP SHARES ONLY)
Sweep Shares of each Fund adopted an Administrative Services Plan (the
"Service Plan"), effective as of September 1, 2000 as described in the Sweep
Shares' Prospectus. This Statement contains additional information that may be
of interest to investors.
Continuance of the Service Plan is subject to annual approval by a vote
of the Trustees, including a majority of the Trustees that are not "interested
persons" of the Funds. All material amendments to the Service Plan must be
approved by the Trustees and the "disinterested" Trustees. The Service Plan may
be amended to increase or otherwise change the costs Sweep Shares bear for
services covered by the Service Plan without shareholder vote. The Service Plan
may be terminated without penalty, at any time, by a majority of the
disinterested Trustees. The Trust may compensate financial institutions that
have entered into servicing agreements with the Trust pursuant to the Service
Plan for providing a range of administrative support services to certain Fund
shareholders that may also be customers of the financial institution.
DISTRIBUTION AND SERVICE (RULE 12b-1) PLAN (INVESTOR SHARES ONLY)
Investor Shares of each Fund have adopted a distribution and service
plan pursuant to Rule 12b-1 under the 1940 Act (the "Rule 12b-1 Plan"), as
described in the Investor Shares' Prospectus. This Statement contains additional
information that may be of interest to investors.
Continuance of the Rule 12b-1 Plan is subject to annual approval by a
vote of the Trustees, including a majority of the Trustees that are not
"interested persons" of the Funds and who have no direct or indirect interest in
the Rule 12b-1 Plan or related arrangements (the "Qualified Trustees"), cast in
person at a meeting called for that purpose. All material amendments to the Rule
12b-1 Plan must be likewise approved by the Trustees and the Qualified Trustees.
The Rule 12b-1 Plan may not be amended in order to increase materially the costs
which Investor Shares of the Funds may bear for distribution and service
pursuant to such plan without also being approved by a majority of the
outstanding voting securities of the Investor Shares of such
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<PAGE> 139
Fund. The Rule 12b-1 Plan automatically terminates in the event of its
assignment and may be terminated without penalty, at any time, by a majority of
the Qualified Trustees or by a vote of a majority of the outstanding voting
securities of the Investor Shares of the relevant Fund. The Trust may compensate
qualifying dealers (including for this purpose certain financial institutions)
for sales of shares and the maintenance of shareholder accounts. As no Investor
Shares were outstanding as of the date of this Prospectus, no amounts have been
paid under the Rule 12b-1 Plan to date.
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. Prior to September 22, 2000, The Fifth Third
Bank, located at Fifth Third Center, Cincinnati, Ohio 45263, was the custodian
for the Growth & Income Fund, Intermediate Government Bond Fund, Tax-Exempt Bond
Fund and Money Market Fund. Union Planters succeeded The Fifth Third Bank as
custodian for such Funds on September 22, 2000. Union Planters has served as
the custodian for the Treasury Money Market Fund, Tax-Exempt Money Market Fund,
Balanced Fund and Short Term Bond Fund since inception. As custodian, Union
Planters 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 custodian 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.
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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. Prior to October
___, 2000, [___________], [_________________], served as the Trust's independent
accountants.
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 and the Balanced Fund) will be with the issuer or with
underwriters of or dealers in those securities, acting as principal.
Accordingly, only the Growth & Income Fund and the Balanced 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.
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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.
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, 1998, August 31, 1999, and the
August 31, 2000, the Trust paid, on behalf of the Growth & Income Fund, $31,137,
$51,122, and $[_____], respectively, in brokerage commissions. No such
commissions were paid to the Trust.
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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 eight separate
series - one for each of the Growth & Income Fund, the Balanced Fund, the
Intermediate Government Bond Fund, the Tax-Exempt Bond Fund, the Short Term Bond
Fund, the Money Market Fund, the Treasury Money Market Fund, and the Tax-Exempt
Money Market 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 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 more than one Fund.
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 Trustees have designated and authorized the issuance of three
different classes of shares for each Money Fund--"Institutional Shares"
(formerly "Class A Shares"), "Investor Shares" and "Sweep Shares." The Trustees
have designated and authorized the issuance of two classes of shares for each of
the other Funds of the Trust--"Institutional Shares" (formerly "Class A
Shares"), and "Investor Shares." 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
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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 (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.
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 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,
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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).
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,
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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
The table below shows the percentage of shares that were owned of
record by Union Planters as of December ___, 2000; all of such shares were held
for the benefit of accounts for which Union Planters acts as Trustee or
custodian. Owners of 25% or more of the outstanding shares of a Fund may be
presumed to "control" that Fund, as that term is defined under the 1940 Act.
LEADER Growth & Income Fund [___]%
LEADER Balanced Fund [___]%
LEADER Intermediate Government [___]%
Bond Fund
LEADER Tax-Exempt [___]%
Bond Fund
LEADER Short Term [___]%
Bond Fund
LEADER Money Market Fund [___]%
LEADER Treasury Money [___]%
Market Fund
LEADER Tax-Exempt [___]%
Money Market Fund
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 Institutional Class Shares of any Fund as of [INSERT
DATE]:
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<TABLE>
<CAPTION>
Name and Address %
Fund of Beneficial Owner Ownership
---- ------------------- ---------
<S> <C> <C>
LEADER Growth & Income Fund - ISTCO A Partnership [96.86]%
Investor Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Balanced Fund- Investor ISTCO A Partnership [____]%
Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Intermediate Government ISTCO A Partnership [99.60]%
Bond Fund - Investor Shares s P.O. Box 523
Belleville, IL 62222-0523
LEADER Money Market Fund - ISTCO A Partnership [92.98]%
Investor Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Tax-Exempt Bond Fund - ISTCO A Partnership [97.45]%
Investor Shares P.O. Box 523
Belleville, IL 62222-0523
Name and Address %
Fund of Beneficial Owner Ownership
---- ------------------- ---------
LEADER Growth & Income Fund - ISTCO A Partnership [96.86]%
Sweep Shares P.O. Box 523
Belleville, IL 62222-0523
</TABLE>
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<PAGE> 147
<TABLE>
<S> <C> <C>
LEADER Balanced Fund- Sweep ISTCO A Partnership [____]%
Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Intermediate Government ISTCO A Partnership [99.60]%
Bond Fund - Sweep Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Money Market Fund - ISTCO A Partnership [92.98]%
Sweep Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Tax-Exempt Bond Fund - ISTCO A Partnership [97.45]%
Sweep Shares P.O. Box 523
Belleville, IL 62222-0523
</TABLE>
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, L.P. 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. The
Money Funds will also be closed on Columbus Day and Veterans' Day.
All Funds (except for the Money Funds)
--------------------------------------
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
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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 that 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 Funds
-----------
Under normal market conditions, each of the Money Funds 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 date 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.
By using amortized cost valuation, each of the Money Funds 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 each 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 a Fund, the Board of Trustees will consider what
action, if any, should be initiated to provide fair valuation of the portfolio
securities of such 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 a given Money Fund will be able to maintain its net asset
value at $1.00.
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SHAREHOLDER SERVICES
Please see the Prospectus under "Shareholder Information" for additional
information regarding services offered by the Funds.
OPEN ACCOUNTS
A shareholder's investment in any Fund is automatically credited to an
open account maintained for the shareholder by BISYS, Inc., the shareholder
servicing agent for the 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, Inc. 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.
SYSTEMATIC WITHDRAWAL PLAN - INVESTOR SHARES ONLY
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 Funds)
from the account of a shareholder provided that the account has a value of at
least $5,000 ($10,000 in the case of the Money Funds) 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
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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.
CHECK WRITING (INVESTOR SHARES OF MONEY FUNDS ONLY)
A Money Fund Investor Share 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 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
relevant 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. A minimum account balance, as disclosed in the Prospectus from time to
time, may also apply.
If you use withdrawal checks, you will be subject to The Huntington
Bank's rules governing checking accounts. The Money Funds, 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 Money 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 $50 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.
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REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "Shareholder Information."
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. The circumstances
under which a signature guarantee will be required are described in the
Prospectus.
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 (up to $10.00) is deducted.
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, Inc. 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, Inc. 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, Inc. and Union Planters 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, Inc. 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
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<PAGE> 152
check has cleared, which may take up to 10 business 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 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
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. In the event Fund shares are redeemed in
kind, the Fund will attempt to distribute liquid securities.
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, Inc. In order for a change to be in effect for any dividend
or distribution, it must be received by BISYS, Inc. 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
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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 that
represent, with respect to each issuer, no more than 5% of the value of the
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 that 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.
If a Fund does not qualify for taxation as a regulated investment
company for any taxable year, such Fund's income will be subject to corporate
income taxes imposed at the Fund level, and all distributions from earnings and
profits, including distributions of net exempt-interest income and net capital
gain (i.e., the excess, if any, of net long-term capital gain over net
short-term capital loss), will be taxable to shareholders as ordinary income. In
addition, in order to re-qualify for taxation as a regulated investment company,
such Fund may be required to recognize unrealized gains, pay substantial taxes
and interest, and make certain 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.
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<PAGE> 154
Each of the Tax-Exempt Bond Fund and the Tax-Exempt Money Market 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.
Because Fund expenses attributable to earning tax-exempt income do not reduce
the Fund's current earnings and profits, a portion of any distribution in excess
of the Fund's net tax-exempt and taxable income may be considered as paid out of
the Fund's earnings and profits and may therefore be treated as a taxable
dividend (even though that portion represents a return of the Fund's capital).
Distributions, if any, in excess of the Fund's earnings and profits will first
reduce the adjusted tax basis of a shareholder's shares and, after that basis
has been reduced to zero, will constitute capital gains to such shareholder
(assuming that such shareholder held its shares as a capital asset).
If a shareholder incurs or continues indebtedness to purchase or carry
shares of either of the Tax-Exempt Bond Fund or the Tax-Exempt Money Market
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 relevant 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.
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 or
the Tax-Exempt Money Market 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 or the Tax-Exempt
Money Market 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. Shareholders of each Fund will be subject to
federal income taxes on distributions made by each Fund, whether received in
-51-
<PAGE> 155
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, regardless
of how long a shareholder has held shares in the Fund. For taxable years
beginning after December 31, 2000, the maximum capital gain tax rate for capital
assets (including Fund shares) held by a non-corporate shareholder for more than
5 years will be 8 percent and 18 percent (rather than 10 percent and 20 percent,
respectively). The 18-percent rate applies only to assets the holding period for
which begins after December 31, 2000 (including by way of an election to mark
the asset to the market, and to pay the tax on any gain thereon, as of January
2, 2001). The mark-to-market election may be disadvantageous from a federal tax
perspective, and shareholders should consult their tax advisors before making
such an election. 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. For purposes of
determining whether shares have been held for six months or less, the holding
period is suspended for any periods during which a shareholder's risk of loss is
diminished as a result of holding one or more other positions in substantially
similar or related property, or through certain options or short sales.
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.
Generally a Fund may designate dividends eligible for the
dividends-received deduction only to the extent that such dividends are derived
from dividends paid to the Fund with respect to which the Fund could have taken
the dividends-received deduction if it had been a regular corporation. The
dividends-received deduction is not available to non-corporate shareholders,
Subchapter S corporations or corporations who do not hold their shares for a
least 46 days during the 90-day period beginning on the date that is 45 days
before the ex-dividend date.
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,
-52-
<PAGE> 156
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 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.
A Fund's investment in securities issued at a discount and certain
other obligations will (and investments in securities purchased at a discount
may) require the Fund to accrue and distribute income not yet received. In such
cases, a Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.
If a Fund engages in hedging transactions, including hedging
transactions in options, futures contracts, and straddles, or other similar
transactions, it will be subject to special tax rules (including constructive
sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of
which may be to accelerate income to such Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, or convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to
shareholders. Such Fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best interests of the
Fund.
A Fund's investments in foreign securities, if any, may be subject to
foreign withholding taxes. In that case, such Fund's yield on those securities
would be decreased. Shareholders generally will not be entitled to claim a
credit or deduction with respect to foreign taxes. In addition, a Fund's
investments in foreign securities or foreign currencies may increase or
accelerate such Fund's recognition of ordinary income and may affect the timing
or amount of such Fund's distributions.
A Fund's transactions, if any, in foreign currencies are likely to
result in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to constitute
a return of capital for tax purposes or require the Fund to make distributions
exceeding book income to avoid excise tax liability and to qualify as a
regulated investment company.
Dividends and distributions also may be subject to state and local
taxes. To the extent distributions consist of interest from securities of the
U.S. Government and certain of its agencies and instrumentalities, they may be
exempt from state and local income taxes. Interest from obligations that are
merely guaranteed by the U.S. Government or one of its agencies generally is not
entitled to this exemption. Shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state or local taxes.
-53-
<PAGE> 157
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 31% United States withholding tax (or a reduced rate of
withholding provided by treaty).
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.
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
$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.
-54-
<PAGE> 158
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 in the case of the Magna Money
Market Fund) 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's Institutional Shares for the one year period ending August 31, 2000, and
for the period from the commencement of the Funds' operations until August 31,
2000. Investor Shares and Sweep Shares commenced operations in September 2000,
and therefore have not performance information as of the date of this Statement.
Investor Shares and Sweep Shares bear higher annual fund operating expenses than
Institutional Shares. As a result, total returns for Investor and Sweep Shares
would have lower during each period shown. In addition, Investor Shares are
subject to a sales load, payment of which would have further lowered performance
as indicated below.
AVERAGE ANNUAL RETURN OF FUND SHARES FOR THE PERIODS LISTED
-55-
<PAGE> 159
Assuming MAXIMUM sales load (applicable to Investor Shares only):
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Return Total Return Total Return
FUND (One Year) (Three Year) (Since Inception)
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
LEADER Growth & Income Fund [ ]% [ ]% [ ]%
(commencement of operations:
September 1, 1994)
(maximum load: 5.50%)
-------------------------------------------------------------------------------------------------------------
LEADER Intermediate Government [ ]% [ ]% [ ]%
Bond Fund (commencement of
operations: September 1, 1994)
(maximum load: 4.75%)
-------------------------------------------------------------------------------------------------------------
Assuming NO sales load (0.00%):
-------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Return Total Return Total Return
FUND (One Year) (Three Year) (Since Inception)
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
LEADER Growth & Income Fund [ ]% [ ]% [ ]%
(commencement of operations:
September 1, 1994)
-------------------------------------------------------------------------------------------------------------
LEADER Intermediate Government [ ]% [ ]% [ ]%
Bond Fund (commencement of
operations: September 1, 1994)
-------------------------------------------------------------------------------------------------------------
</TABLE>
YIELD FOR LEADER MONEY MARKET FUND
The table below sets forth the LEADER Money Market Fund's yield and
total effective yield, in each case based on the seven days ended August 31,
2000:
Magna Money Market Fund Yield Effective Yield
----- ---------------
[ ]% [ ]%
-56-
<PAGE> 160
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> 161
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> 162
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> 163
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> 164
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> 165
LEADER MUTUAL FUNDS
STATEMENT OF ADDITIONAL INFORMATION
INSTITUTIONAL CLASS SHARES
JANUARY 1, 2001
This Statement of Additional Information (this "Statement of Additional
Information" or this "Statement") is not a prospectus. This Statement of
Additional Information relates to the LEADER Mutual Funds (the "Trust")
Prospectus (Institutional Class Shares), dated January 1, 2001(the
"Prospectus"), and should be read in conjunction therewith. The contents of the
Prospectus are hereby incorporated into this Statement of Additional
Information. A copy of the Prospectus may be obtained free of charge by writing
to LEADER Mutual Funds, P.O. Box 182754, Columbus, OH 43218-2784, or calling
(800) 219-4182.
The Trust's audited financial statements for the fiscal year ended
August 31, 2000 included in the Trust's Annual Report are hereby incorporated
into this Statement of Additional Information. Copies of the Trust's Annual
Report are available without charge upon request from LEADER Mutual Funds, P.O.
Box 182754, Columbus, Ohio 43218-2754, or by calling (800) 219-4182.
<PAGE> 166
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS..................................................................1
INVESTMENT RESTRICTIONS...........................................................................................7
ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS AND RELATED RISKS..............................................13
MANAGEMENT OF THE TRUST..........................................................................................29
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................33
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................37
DESCRIPTION OF THE TRUST.........................................................................................39
RECORD AND BENEFICIAL OWNERS OF 5% OR
MORE OF THE FUND'S SHARES...............................................................................42
NET ASSET VALUE AND PUBLIC OFFERING PRICE........................................................................44
SHAREHOLDER SERVICES.............................................................................................46
REDEMPTIONS......................................................................................................46
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS.....................................................48
PERFORMANCE INFORMATION..........................................................................................53
APPENDIX A......................................................................................................A-1
DESCRIPTION OF CERTAIN FUND INVESTMENTS.........................................................................A-1
APPENDIX B......................................................................................................B-1
DESCRIPTION OF BOND RATINGS ....................................................................................B-1
</TABLE>
<PAGE> 167
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective and policies of each Fund (a "Fund") of LEADER
Mutual Funds 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 Board of Trustees of the
Trust (the "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
-1-
<PAGE> 168
changes its portfolio securities for investment considerations and not for
trading purposes.
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 (as defined below in the Section entitled
"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.
Balanced Fund
-------------
As described in the Prospectus, the investment objective of the
Balanced Fund is to maximize total return through a combination of growth of
capital and current income consistent with preservation of capital. The Fund
invests in a combination of equity securities (such as stocks), fixed income
securities (such as bonds) and money market instruments in relative proportions
that Union Planters believes will offer attractive returns consistent with the
Fund's objectives. Under normal market conditions, the Fund invests at least 25%
of its total assets in fixed income securities and no more than 75% of its total
assets in equity securities. The allocation of assets will vary with market
conditions that may make equity securities, fixed income securities or money
market instruments more or less attractive.
The Fund's equity securities will consist mainly of common stocks, but
may also include preferred stocks and securities convertible into stocks, as
well as warrants to purchase such securities.
The Fund's investment in fixed income securities will consist mainly of
investment-grade bonds, but the Fund may invest in any kind of debt security
issued by private corporations or the U.S. Government. With respect to its
investment in bonds, the Fund will invest primarily in issues rated in one of
the four highest categories by a nationally recognized statistical rating
organization ("NRSRO") (that is, rated Aaa, Aa, A or Baa by Moody's Investors
Services, Inc. ("Moody's") or AAA, AA, A or BBB by Standard & Poors Rating
Service ("Standard & Poor's") or Fitch Investors Service, Inc."("Fitch")) or
unrated issues deemed by Union Planters to be of comparable quality.
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 intent to hold more than 10% of
its assets
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in securities that have been downgraded below investment grade (that is, below
BBB or Baa).
Because the Balanced Fund invests in a combination of stocks and bonds,
this Fund may invest in any of the types of securities in which either the
Growth & Income Fund (as described above) or the Intermediate Government Bond
Fund (as described below) may invest
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 seeks to
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:
X direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds;
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X obligations of U.S. Government agencies, authorities or
instrumentalities such as the Federal Home Loan Banks, FNMA, GNMA, the
Federal Farm Credit Banks, the Student Loan Marketing Association, the
Federal Home Loan Mortgage Corporation ("FHLMC") or the Tennessee
Valley Authority;
X corporate debt obligations having floating or fixed rates of interest
and rated in one of the three highest categories by an NRSRO (that is,
rated Aaa, Aa or A by Moody's or AAA, AA or A by Standard & Poor's or
Fitch or which are not rated but are of comparable quality in the
judgment of Union Planters;
X 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;
X mortgage-backed securities;
X collateralized mortgage obligations; and
X 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
--------------------
As noted in the Prospectus, the Fund normally invests at least 80% of
its total assets in obligations producing income exempt from federal income
taxation, including municipal bonds, note and commercial paper issued by states
and other local government that are exempt from federal taxes. For additional
information on the Fund's investment in tax-exempt securities, see the Section
below entitled "Tax-exempt Securities".
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, including municipal bonds, notes and commercial paper issued by
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states and other local governments that are exempt from federal taxes as well as
U.S. Government Securities, money market instruments or "private activity" bonds
(some or all of which may produce income subject to federal alternative minimum
tax). As a result, a portion of the income earned by the Tax-Exempt Bond Fund
may not be exempt from federal income taxation when distributed to shareholders.
Short Term Bond Fund
--------------------
As described in the Prospectus, the Short Term Bond Fund seeks to
provide a high level of current income consistent with the preservation of
capital. The Fund invests primarily in investment-grade bonds (that is, those
rated at least Baa or BBB, or determined by Union Planters to be of comparable
quality). The types of securities that the Fund may purchase include bonds of
U.S. corporate and governmental issuers, U.S. dollar-denominated bonds of
foreign issuers, and mortgage-backed and other asset-backed securities, as well
as any other securities in which the Intermediate Government Bond Fund may
invest (as described above). The Fund will normally maintain a dollar-weighted
average portfolio maturity of three years or less, but may purchase individual
securities with longer maturities.
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 intent to hold more than 10% of
its assets in securities that have been downgraded below investment grade (that
is, below BBB or Baa).
Money Market Fund, Treasury Money Market Fund and Tax-Exempt Money Market Fund
------------------------------------------------------------------------------
(each a "Money Fund" and collectively, the "Money Funds")
---------------------------------------------------------
Each Money Fund will invest only in securities that Union Planters,
acting under guidelines established by the Board of Trustees, has determined are
of high quality and present minimal credit risk. For a description of certain
money market instruments in which the Money Funds may invest, and the related
descriptions of the ratings of Standard & Poor's and Moody's, see 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.
For additional information on the Tax-Exempt Money Market Fund's investment in
tax-exempt securities, see the Section below entitled "Tax-exempt Securities".
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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 Funds from investing in money market instruments paying the
highest available yield at a particular time. Each Money 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. Each Money
Fund may also invest 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 Money Funds, may result in frequent changes in each Money
Fund's portfolio. There are usually no brokerage commissions as such paid by the
Money Funds in connection with the purchase of securities of the type in which
each Money Fund invests.
As described in the Prospectus, all of the investments of each of the
Money Funds will, at the time of investment, have remaining maturities of 397
days or less. The average maturity of the each of the Money 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 by a Money Fund results
in a dollar-weighted average portfolio maturity for such Fund in excess of 90
days, 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 foregoing maturity restrictions,
variable rate instruments that are scheduled to mature in more than 397 days are
treated as having a maturity equal to the longer of (i) the period remaining
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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 Money Funds 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 a Money Fund's shares
could require the sale of portfolio investments at a time when a sale might not
be desirable.
After purchase by a Money Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by such a Fund.
Neither event will necessarily require a sale of such security by such a 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 Standard & Poor's (or another NRSRO approved by the Securities and Exchange
Commission (the "SEC")) 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. For additional information regarding certain of the Tax-Exempt Money
Market Fund's investments, see "Tax-exempt Securities" in this Statement.
INVESTMENT RESTRICTIONS
Investment Restrictions - All Funds except the Money Funds
----------------------------------------------------------
In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of each Fund
other than a Money Fund (and those marked with an asterisk are fundamental
policies of each Fund):
Each such Fund will not:
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(1) Invest in companies for the purpose of exercising control
or management.
*(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) Except for the Tax-Exempt Bond Fund, 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) Except for the Tax-Exempt Bond Fund, 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.)
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(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 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.
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(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 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 SEC, to
restrict its investments in repurchase agreements maturing in more than seven
days, together with other investments in illiquid securities, to 15% of such
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 - The Money Funds
-----------------------------------------
The following is a list of the Money Funds' investment restrictions.
The restrictions set forth in the numbered paragraphs marked with an asterisk
are fundamental policies and, accordingly, will not be changed by a Money Fund
without the consent of the holders of a majority of the outstanding voting
securities of such Fund.
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Each Money 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 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
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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.
(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) 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.)
A Money Fund will not purchase any security restricted as to
disposition under federal securities laws if, as a result, more than 10% of such
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. Each
Money 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.
Except as otherwise stated, all percentage limitations set forth in
this Statement of Additional Information and/or the Prospectus will apply at the
time of the purchase of a security and shall not be considered violated unless
an excess
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or deficiency occurs or exists immediately after and as a result of a purchase
of such security.
Each Fund is a "diversified" fund as such term is defined under the
1940 Act. This means that it is a fundamental policy of each Fund, which may not
be changed without shareholder approval, that at least 75% of the value of each
such Fund's total assets are represented by cash and cash items (including
receivables), U.S. Government Securities, securities of other investment
companies, and other securities for the purposes of this calculation limited in
respect of any one issuer to an amount not greater than 5% of the value of the
relevant Fund's total assets and to not more than 10% of the outstanding voting
securities of any single issuer. The Money Funds are subject to additional
diversification requirements pursuant to Rule 2a-7 under the 1940 Act.
ADDITIONAL INFORMATION REGARDING
FUND INVESTMENTS AND RELATED RISKS
U.S. GOVERNMENT SECURITIES
As described in the Prospectus, each Fund may invest in U.S. Government
Securities. The term "U.S. Government Securities" includes 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 GNMA,
the FHLMC, the FNMA, 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.
- U.S. Treasury Bills--Direct obligations of the United States
Treasury that 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 U.S.
Government.
- 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 U.
S. Government.
- "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
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guaranteed by the Veterans Administration. 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.
- "Fannie Maes"--The FNMA is a government-sponsored corporation
owned entirely by private 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 U.S. Government.
- "Freddie Macs"--The FHLMC is a corporate instrumentality of
the U.S. 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 U. S. 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.
TAX-EXEMPT SECURITIES
As used in this Statement, the term "tax-exempt securities" includes
debt obligations issued by a state, its political subdivisions (for example,
counties, cities, towns, villages, districts and authorities) and their
agencies, instrumentalities or other governmental units, the interest from which
is, in the opinion of bond counsel, exempt from federal income tax and the
appropriate
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state's personal income tax. Such obligations are issued to obtain funds for
various public purposes, including the construction of a wide range of public
facilities, such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which tax-exempt securities may be issued include the refunding of
outstanding obligations or the payment of general operating expenses.
Short-term tax-exempt securities are generally issued by state and
local governments and public authorities as interim financing in anticipation of
tax collections, revenue receipts, or bond sales to finance such public
purposes.
In addition, certain types of "private activity" bonds may be issued by
public authorities to finance projects such as privately operated housing
facilities; certain local facilities for supplying water, gas or electricity;
sewage or solid waste disposal facilities; student loans; or public or private
institutions for the construction of educational, hospital, housing and other
facilities. Such obligations are included within the term tax-exempt securities
if the interest paid thereon is, in the opinion of bond counsel, exempt from
federal income tax and state personal income tax (such interest may, however, be
subject to federal alternative minimum tax). Other types of private activity
bonds, the proceeds of which are used for the construction, repair or
improvement of, or to obtain equipment for, privately operated industrial or
commercial facilities, may also constitute tax-exempt securities, although the
current federal tax laws place substantial limitations on the size of such
issues.
The Tax-Exempt Money Market Fund may invest in tax-exempt securities
either by purchasing them directly or by purchasing certificates of accrual or
similar instruments evidencing direct ownership of interest payments or
principal payments, or both, on tax-exempt securities, provided that, in the
opinion of counsel to the initial seller of each such certificate or instrument,
any discount accruing on a certificate or instrument that is purchased at a
yield not greater than the coupon rate of interest on the related tax-exempt
securities will be exempt from federal income tax to the same extent as interest
on the tax-exempt securities. The Tax-Exempt Money Market Fund may also invest
in tax-exempt securities by purchasing from banks participation interests in all
or part of specific holdings of tax-exempt securities. These participations may
be backed in whole or in part by an irrevocable letter of credit or guarantee of
the selling bank. The selling bank may receive a fee from the Tax-Exempt Money
Market Fund in connection with the arrangement. The Tax-Exempt Money Market Fund
will not purchase such participation interests unless it receives an opinion of
counsel or a ruling of the Internal Revenue Service that interest earned by it
on tax-exempt securities in which it holds such participation interests is
exempt from federal income tax.
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When a Fund purchases tax-exempt securities, it has the authority to
acquire stand-by commitments from banks and broker-dealers with respect to those
tax-exempt securities. A stand-by commitment may be considered a security
independent of the tax-exempt security to which it relates. The amount payable
by a bank or dealer during the time a stand-by commitment is exercisable, absent
unusual circumstances, would be substantially the same as the market value of
the underlying tax-exempt security to a third party at any time. The fund
expects that stand-by commitments generally will be available without the
payment of direct or indirect consideration. The fund does not expect to assign
any value to stand-by commitments.
The yields on tax-exempt securities depend on a variety of factors,
including general money market conditions, effective marginal tax rates, the
financial condition of the issuer, general conditions of the tax-exempt security
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The ratings of nationally recognized securities rating
agencies represent their opinions as to the credit quality of the tax-exempt
securities which they undertake to rate. It should be emphasized, however, that
ratings are general and are not absolute standards of quality. Consequently,
tax-exempt securities with the same maturity and interest rate but with
different ratings may have the same yield. Yield disparities may occur for
reasons not directly related to the investment quality of particular issues or
the general movement of interest rates and may be due to such factors as changes
in the overall demand or supply of various types of tax-exempt securities or
changes in the investment objectives of investors. Subsequent to purchase by a
Fund, an issue of tax-exempt securities or other investments may cease to be
rated, or its rating may be reduced below the minimum rating required for
purchase by such Fund. Neither event will require the elimination of an
investment from the Fund's portfolio, but Union Planters will consider such an
event in its determination of whether the Fund should continue to hold an
investment in its portfolio.
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
(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. No income is generally earned on these securities
until after
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delivery. 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
securities themselves (which may have a value greater or less than the Fund's
payment obligation).
CONVERTIBLE SECURITIES
The Growth & Income Fund and the Balanced 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 a
fixed income stream. For this reason, a convertible security may not decline in
price as rapidly as the underlying common stock.
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Union Planters will select convertible securities to be purchased by
the Growth & Income Fund and the Balanced 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. Neither the Growth & Income Fund nor the Balanced Fund will
generally 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 such Fund's total 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, the Tax-Exempt Bond Fund and the
Short Term 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 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 requirements 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
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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 U.S.
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.
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
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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
Each Fund may engage in 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. The Funds may engage in both types of options.
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 move during the period that the Fund holds
options positions, the Fund will pay the cost of acquiring those positions
(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.
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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 Funds) 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 and the Balanced
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 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 and the Balanced
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
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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. The Funds will not purchase or sell futures
contracts or related options if as a result a Fund's initial margin deposits
plus premiums paid for outstanding related options would be greater than 5% of
such 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 that is a
member of a contract market.
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.
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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 that 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 Funds) 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 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.
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The Growth & Income Fund and the Balanced 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.
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.
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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 that 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 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.
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Futures contracts or options thereon may be used to hedge against a
possible increase in the price of securities that 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 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. 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, the Balanced Fund, the
Tax-Exempt Bond Fund, the Short Term Bond Fund and the Money Funds 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
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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.
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:
- 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;
- 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
- 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.
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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 FHLMC; 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 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 total 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
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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 SEC, the Growth & Income Fund, the Balanced Fund, the Intermediate
Government Bond Fund, the Tax-Exempt Bond Fund and the Short Term Bond Fund may
each purchase and redeem shares of the Money Funds. Any such investments will
result in Union Planters receiving management fees from both the investing Fund
and the relevant Money 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 AGE POSITION WITH THE TRUST DURING THE PAST FIVE YEARS
--------------------- ----------------------- --------------------------
<S> <C> <C>
Robert R. Archibald, Ph.D (51) Trustee President, Missouri
Missouri Historical Society Historical Society
P.O. Box 11940
St. Louis, MO 63112-0940
Earl E. Lazerson (68) Trustee Director, National Stockyards;
5 Hidden Valley Lane Director, AAA of Missouri;
Edwardsville, IL 62022 President (until 1993) and
Professor (until 1994), So.
Illinois University at Edwardsville
Brad L. Badgley* (48) Trustee Attorney, Heiligenstein &
Heiligenstein & Badgley PC Badgley, PC; Director, Magna
30 Public Square Trust Company (an affiliate of
Belleville, Illinois 62220 Magna Bank, N.A., which merged
into Union Planters in 1998)
(until 1997); Director, Banc
Star One (1995 to present)
</TABLE>
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<TABLE>
<S> <C> <C>
Robert E. Saur (56) Trustee President and Owner, Conrad Properties
750 S. Hanley Street Corp. (real estate); Director,
Clayton, MO 63105 Enterbank Holding Company
Harry R. Maier* (53) Trustee Chief Executive Officer,
118 Sun Lake Dr. Memorial Hospital
Belleville, IL 62221 Belleville, Illinois
Neil Seitz (56) Trustee Dean, School of Business, Saint
School of Business Louis University; Professor, Saint
Saint Louis University Louis University (until 1993)
3674 Lindell Blvd.
St. Louis, MO 63108
</TABLE>
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<TABLE>
<S> <C> <C>
Walter B. Grimm (55) President Senior Vice President, BISYS Fund
BISYS Fund Services Services, L.P. ("BISYS, L.P.");
3435 Stelzer Road President, Leigh Investments Consulting
Columbus, Ohio 43219 (investments firm)
Charles L. Booth (40) Vice President Vice President, BISYS
BISYS Fund Services Fund Services, Inc. ("BISYS, Inc.")
3435 Stelzer Road
Columbus, Ohio 43219
Gary Tenkman (30) Treasurer From April 1998 to present, employee of
3435 Stelzer Road BISYS, L.P.; from September 1990 to
Columbus, Ohio 43219 April 1998, employee of Ernst & Young
LLP
R. Jeffrey Young (36) Secretary Vice President, BISYS, Inc.
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
Alaina V. Metz (32) Assistant Chief Administrator, Administrative and
BISYS Fund Services Secretary Regulatory Services, BISYS, L.P.
3435 Stelzer Road
Columbus, Ohio 43219
Warren Leslie (38) Assistant From May 1995 to present, employee of
BISYS Fund Services Secretary BISYS, L.P.; from April 1988 to May
3435 Stelzer Road 1995, employee of American Express
Columbus, Ohio 43219
</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.
Previous positions of officers of the Trust during the past five years
with BISYS, L.P. 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 Mr. Booth were first
elected by the Trustees to serve in the offices noted above in October 1997.
Messrs.
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Tenkman and Leslie were first elected by the Trustees to serve in offices noted
in April 1999. Mr. Young was first elected by the Trustees to serve in the
offices noted above in July 2000. 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 or she attends. These costs are spread across all Funds of the
Trust, and are allocated to each Fund pro rata based on their relative average
net assets for the relevant fiscal period. 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, 2000 to the persons who served as Trustees during all or any portion
of such fiscal year:
TOTAL
COMPENSATION
PERSON FROM TRUST
------ ------------
Robert R. Archibald $7000
Brad L. Badgley $7000
Earl E. Lazerson $7000
Harry R. Maier $7000
Robert E. Saur $7000
Neil Seitz $7000
As of December _____, 2000, the Trustees and officers of the Trust
beneficially owned as a group less than 1% of the outstanding shares of each
Fund.
Each of the Trust, Union Planters, and BISYS, L.P.., the Trust's
Distributor, has adopted a Code of Ethics pursuant to the requirement of the
1940 Act. Under the Code of Ethics, personnel are only permitted to engage in
personal securities transactions in accordance with certain conditions relating
to such person's position, the identity of the security, the timing of the
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transaction, and similar factors. Transactions in securities that may be held by
the Funds are permitted, subject to compliance with applicable provisions of the
Code. Personal securities transactions must be reported quarterly and broker
confirmations of such transactions must be provided for review.
Under the Trust's Declaration of Trust (as defined below) and
Massachusetts law, the Board of Trustees has ultimate responsibility for the
management of the Funds. Under the relevant agreements, the Trustees supervise
the performance of the Funds' adviser, custodian and other service-providers.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Under a separate investment advisory agreement with each Fund (each, an
"Advisory Agreement"), 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 largest banking organizations in the country, with
total assets of approximately $33 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 December 31, 2000, such
fees are as follows: Intermediate Government Bond Fund, 0.40%; Growth & Income
Fund, 0.50%; Tax-Exempt Bond Fund, 0.30%; Money Market Fund, 0.17% (through
August 31, 2000) and 0.20% thereafter through December 31, 2000. Without any
further waivers or reductions, each Fund's advisory fees will be as follows,
effective January 1, 2001: Intermediate Government Bond Fund, 0.50%; Short Term
Bond Fund, 0.55%; Growth & Income Fund, 0.75%; Balanced Fund, 0.80%; Tax-Exempt
Bond Fund, 0.50%; and each Money Fund, 0.40%.
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
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<PAGE> 200
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 Advisory 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 Advisory 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 "LEADER" 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.
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 that 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:
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<PAGE> 201
<TABLE>
<CAPTION>
FISCAL GROSS (BEFORE NET (AFTER
YEAR ENDED VOLUNTARY VOLUNTARY
FUND AUG. 31 REDUCTION) REDUCTION REDUCTION)
---- ------- ---------- --------- ----------
<S> <C> <C> <C> <C>
LEADER Growth & Income Fund 1998 $596,301 $198,767 $397,534
1999 $967,691 $322,563 $645,128
2000 $[______] $_______] $[______]
LEADER Intermediate Government 1998 $338,078 $67,615 $270,463
Bond Fund
1999 $387,178 $77,435 $309,743
2000 $[______] $[______] $[______]
LEADER Money Market Fund 1999 $96,163 $55,293 $40,870
2000 $[______] $[______] $[______]
Tax-Exempt Bond Fund 2000 $[______] $[______] $[______]
</TABLE>
ADMINISTRATOR
BISYS Fund Services, L.P.., under an agreement with the Trust (the
"Administration Agreement"), provides management and administrative services to
the Funds, and, in general, supervises the operations of the Trust. BISYS, L.P.
does not provide investment advisory services. As part of its duties, BISYS,
L.P. provides office space, equipment and clerical personnel for managing and
administering the affairs of the Trust. BISYS, L.P. supervises the provision of
custodial, auditing, valuation, bookkeeping, legal, and dividend disbursing
services and provides other management and administrative services. The Trust
pays BISYS, L.P. a fee for its services to each Fund at the annual rate of 0.20%
of the Trust's average daily net assets.
For the fiscal year ended August 31, 2000, pursuant to the terms of the
Administration Agreement, the Growth & Income Fund paid BISYS, L.P. $[_____],
the Intermediate Government Bond Fund paid BISYS, L.P. $[_____], the Tax-Exempt
Bond Fund paid BISYS, L.P. $[_____], the Money Market Fund paid BISYS, L.P.
$[_____] (which is $[_____] less than the maximum administration fees the Fund
would have paid absent BISYS, L.P.'s agreement to reduce its fees to 0.17%). For
the fiscal year ended August 31, 1999, pursuant to the terms of the
Administration Agreement, the Growth & Income Fund paid BISYS, L.P. $257,852,
the Intermediate Government Bond Fund paid BISYS, L.P. $154,873, and the
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Money Market Fund paid BISYS, L.P. $40,867 (which is $7,212 less than the
maximum administration fees the Fund would have paid absent BISYS, L.P.'s
agreement to reduce its fees to 0.17%). For the fiscal year ended August 31,
1998, pursuant to the terms of the Administration Agreement, the Growth & Income
Fund paid BISYS, L.P. $158,698, and the Intermediate Government Bond Fund paid
BISYS, L.P. $134,948. For the period June 2, 1997 (the date the Trust entered
into this agreement with BISYS, L.P.) through August 31, 1997, pursuant to the
terms of the Administration Agreement, the Growth & Income Fund paid BISYS, L.P.
$29,572, and the Intermediate Government Bond Fund paid BISYS, L.P. $27,878.
Prior to June 2, 1997, Ernst Asset Management Corporation ("EAMC") provided
management and administrative services to the Funds. For the 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.
ADMINISTRATIVE SERVICES PLAN
Institutional Shares of each Fund adopted an Administrative Services
Plan (the "Service Plan") effective as of September 1, 2000, as described in the
Prospectus. This Statement contains additional information that may be of
interest to investors.
Continuance of the Service Plan is subject to annual approval by a vote
of the Trustees, including a majority of the Trustees that are not "interested
persons" of the Funds. All material amendments to the Service Plan must be
approved by the Trustees and the "disinterested" Trustees. The Service Plan may
be amended to increase or otherwise change the costs Institutional Shares bear
for services covered by the Service Plan without shareholder vote. The Service
Plan may be terminated without penalty, at any time, by a majority of the
disinterested Trustees. The Trust may compensate financial institutions that
have entered into servicing agreements with the Trust pursuant to the Service
Plan for providing a range of administrative support services to certain Fund
shareholders that may also be customers of the financial institution.
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;
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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. Prior to September 22, 2000, The Fifth Third
Bank, located at Fifth Third Center, Cincinnati, Ohio 45263, was the custodian
for the Growth & Income Fund, Intermediate Government Bond Fund, Tax-Exempt Bond
Fund and Money Market Fund. Union Planters succeeded The Fifth Third Bank as
custodian for such Funds on September 22, 2000. Union Planters has served as
the custodian for the Treasury Money Market Fund, Tax-Exempt Money Market Fund,
Balanced Fund and Short Term Bond Fund since inception. As custodian, Union
Planters 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 custodian 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. Prior to October
___, 2000, [___________], [_________________], served as the Trust's independent
accountants.
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.
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<PAGE> 204
It is anticipated that most purchases and sales of securities by the Funds
(except for the Growth & Income Fund and the Balanced Fund) will be with the
issuer or with underwriters of or dealers in those securities, acting as
principal. Accordingly, only the Growth & Income Fund and the Balanced 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.
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
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<PAGE> 205
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, 1998, August 31, 1999, and
August 31, 2000, the Trust paid, on behalf of the Growth & Income Fund, $31,137,
$51,122, 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 eight separate
series - one for each of the Growth & Income Fund, the Balanced Fund, the
Intermediate Government Bond Fund, the Tax-Exempt Bond Fund, the Short Term Bond
Fund, the Money Market Fund, the Treasury Money Market Fund, and the Tax-Exempt
Money Market 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 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
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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 more than one Fund.
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 Trustees have designated and authorized the issuance of three
different classes of shares for each Money Fund--"Institutional Shares"
(formerly "Class A Shares"), "Investor Shares" and "Sweep Shares." The Trustees
have designated and authorized the issuance of two classes of shares for each of
the other Funds of the Trust--"Institutional Shares" (formerly "Class A
Shares"), and "Investor Shares." 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 (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.
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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 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).
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<PAGE> 208
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
The table below shows the percentage of shares that were owned of
record by Union Planters as of December ___, 2000; all of such shares were held
for the benefit of accounts for which Union Planters acts as Trustee or
custodian. Owners of 25% or more of the outstanding shares of a Fund may be
presumed to "control" that Fund, as that term is defined under the 1940 Act.
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<PAGE> 209
LEADER Growth & Income Fund [___]%
LEADER Balanced Fund [___]%
LEADER Intermediate Government [___]%
Bond Fund
LEADER Tax-Exempt [___]%
Bond Fund
LEADER Short Term [___]%
Bond Fund
LEADER Money Market Fund [___]%
LEADER Treasury Money [___]%
Market Fund
LEADER Tax-Exempt [___]%
Money Market Fund
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 Institutional Class Shares of any Fund as of [INSERT
DATE], 2000:
<TABLE>
<CAPTION>
Name and Address %
Fund of Beneficial Owner Ownership
---- ------------------- ---------
<S> <C> <C>
LEADER Growth & Income Fund - ISTCO A Partnership [96.86]%
Instutional Shares P.O. Box 523
Belleville, IL 62222-0523
</TABLE>
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<PAGE> 210
<TABLE>
<S> <C> <C>
LEADER Balanced Fund- ISTCO A Partnership [____]%
Instutional Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Intermediate Government ISTCO A Partnership [99.60]%
Bond Fund - Instutional Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Money Market Fund - ISTCO A Partnership [92.98]%
Instutional Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Tax-Exempt Bond Fund - ISTCO A Partnership [97.45]%
Instutional Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Treasury Money Market ISTCO A Partnership [___]%
Fund- Instutional Shares P.O. Box 523
Belleville, IL 62222-0523
LEADER Short Term Bond Fund - ISTCO A Partnership [___]%
Instutional Shares P.O. Box 523
Belleville, IL 62222-0523
</TABLE>
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, L.P. 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
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Labor Day. The Money Funds will also be closed on Columbus Day and Veterans'
Day.
All Funds (except for the Money Funds)
--------------------------------------
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 that 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 Funds
-----------
Under normal market conditions, each of the Money Funds 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 date 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.
By using amortized cost valuation, each of the Money Funds 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 each 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 a Fund, the Board of Trustees will consider what
action, if any, should be initiated to provide fair valuation of the
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<PAGE> 212
portfolio securities of such 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 a given Money Fund will be able to maintain its net
asset value at $1.00.
SHAREHOLDER SERVICES
Please see the Prospectus under "Shareholder Information" for additional
information regarding services offered by the Funds.
OPEN ACCOUNTS
A shareholder's investment in any Fund is automatically credited to an
open account maintained for the shareholder by BISYS, Inc., the shareholder
servicing agent for the 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, Inc. 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.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "Shareholder Information."
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. The circumstances
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<PAGE> 213
under which a signature guarantee will be required are described in the
Prospectus.
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, Inc. 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 (up to $10.00) is
deducted.
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, Inc. 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, Inc. 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, L.P., BISYS, Inc. and Union
Planters 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, Inc. 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 business 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 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
governed by Rule l8f-l under the 1940 Act pursuant to which the Trust is
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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. In the event Fund shares are redeemed in
kind, the Fund will attempt to distribute liquid securities.
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, Inc.. In order for a change to be in effect for any dividend
or distribution, it must be received by BISYS, Inc. 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 that
represent, with respect to each issuer, no more than 5% of the value of the
Fund's total
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<PAGE> 215
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 that 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.
If a Fund does not qualify for taxation as a regulated investment
company for any taxable year, such Fund's income will be subject to corporate
income taxes imposed at the Fund level, and all distributions from earnings and
profits, including distributions of net exempt-interest income and net capital
gain (i.e., the excess, if any, of net long-term capital gain over net
short-term capital loss), will be taxable to shareholders as ordinary income. In
addition, in order to re-qualify for taxation as a regulated investment company,
such Fund may be required to recognize unrealized gains, pay substantial taxes
and interest, and make certain 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.
Each of the Tax-Exempt Bond Fund and the Tax-Exempt Money Market 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.
Because Fund expenses attributable to earning tax-exempt income do not
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<PAGE> 216
reduce the Fund's current earnings and profits, a portion of any distribution in
excess of the Fund's net tax-exempt and taxable income may be considered as paid
out of the Fund's earnings and profits and may therefore be treated as a taxable
dividend (even though that portion represents a return of the Fund's capital).
Distributions, if any, in excess of the Fund's earnings and profits will first
reduce the adjusted tax basis of a shareholder's shares and, after that basis
has been reduced to zero, will constitute capital gains to such shareholder
(assuming that such shareholder held its shares as a capital asset).
If a shareholder incurs or continues indebtedness to purchase or carry
shares of either of the Tax-Exempt Bond Fund or the Tax-Exempt Money Market
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 relevant 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.
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 or
the Tax-Exempt Money Market 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 or the Tax-Exempt
Money Market 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, regardless of how long a shareholder has
held shares in the Fund. For taxable years beginning after December 31, 2000,
the maximum capital gain tax rate for capital assets (including Fund shares)
held by a non-corporate shareholder for more than 5 years will be 8 percent and
18 percent (rather than 10 percent and 20 percent, respectively). The 18-percent
rate applies only to assets the holding period for which begins after December
31, 2000 (including by way of an election to mark the asset to the market, and
to pay the tax on any gain thereon, as of January 2, 2001). The mark-to-market
election may be disadvantageous from a federal
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<PAGE> 217
tax perspective, and shareholders should consult their tax advisors before
making such an election. 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. For purposes of
determining whether shares have been held for six months or less, the holding
period is suspended for any periods during which a shareholder's risk of loss is
diminished as a result of holding one or more other positions in substantially
similar or related property, or through certain options or short sales.
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.
Generally a Fund may designate dividends eligible for the
dividends-received deduction only to the extent that such dividends are derived
from dividends paid to the Fund with respect to which the Fund could have taken
the dividends-received deduction if it had been a regular corporation. The
dividends-received deduction is not available to non-corporate shareholders,
Subchapter S corporations or corporations who do not hold their shares for a
least 46 days during the 90-day period beginning on the date that is 45 days
before the ex-dividend date.
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 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.
A Fund's investment in securities issued at a discount and certain
other obligations will (and investments in securities purchased at a discount
may) require the Fund to accrue and distribute income not yet received. In such
cases, a Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
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to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.
If a Fund engages in hedging transactions, including hedging
transactions in options, futures contracts, and straddles, or other similar
transactions, it will be subject to special tax rules (including constructive
sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of
which may be to accelerate income to such Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, or convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to
shareholders. Such Fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best interests of the
Fund.
A Fund's investments in foreign securities, if any, may be subject to
foreign withholding taxes. In that case, such Fund's yield on those securities
would be decreased. Shareholders generally will not be entitled to claim a
credit or deduction with respect to foreign taxes. In addition, a Fund's
investments in foreign securities or foreign currencies may increase or
accelerate such Fund's recognition of ordinary income and may affect the timing
or amount of such Fund's distributions.
A Fund's transactions, if any, in foreign currencies are likely to
result in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to constitute
a return of capital for tax purposes or require the Fund to make distributions
exceeding book income to avoid excise tax liability and to qualify as a
regulated investment company.
Dividends and distributions also may be subject to state and local
taxes. To the extent distributions consist of interest from securities of the
U.S. Government and certain of its agencies and instrumentalities, they may be
exempt from state and local income taxes. Interest from obligations that are
merely guaranteed by the U.S. Government or one of its agencies generally is not
entitled to this exemption. 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 31% United States withholding tax (or a reduced rate of
withholding provided by treaty).
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.
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<PAGE> 219
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
$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 in the case of the Magna Money
Market Fund) 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
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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, 2000, and for the period from the
commencement of the Funds' operations until August 31, 2000. The performance
shown is for Class A Shares of the Funds. Institutional Shares are the
continuation of the Class A Shares, the sole class of shares offered by the
Funds prior to September 1, 2000, when the Class A Shares were redesignated
"Institutional Shares."
AVERAGE ANNUAL RETURN OF FUND SHARES FOR THE PERIODS LISTED
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Total Return Total Return Total Return
FUND (One Year) (Three Year) (Since Inception)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LEADER Growth & Income Fund [_____]% [_____]% [_____]%
(commencement of operations:
September 1, 1994)
--------------------------------------------------------------------------------------------------------------------
LEADER Intermediate Government [_____]% [_____]% [_____]%
Bond Fund (commencement of
operations: September 1, 1994)
--------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 221
<TABLE>
<S> <C> <C> <C>
LEADER Tax-Exempt Bond [_____]% N/A [_____]%
Fund (commencement of
operations: [_____])
--------------------------------------------------------------------------------------------------------------------
</TABLE>
YIELD FOR LEADER MONEY MARKET FUND
The table below sets forth the LEADER Money Market Fund's yield and
total effective yield, in each case based on the seven days ended August 31,
2000:
LEADER Money Market Fund Yield Effective Yield
----- ---------------
[----]% [----]%
TAX EFFECTIVE YIELD OF THE TAX-EXEMPT BOND FUND
-55-
<PAGE> 222
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> 223
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> 224
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> 225
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> 226
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> 227
Part C. OTHER INFORMATION
Item 23. Exhibits
Exhibits:
a. Agreement and Declaration of Trust.(1).
Amendment No. 1 to Agreement and Declaration
of Trust.(8)
b. By-Laws.(1)
c. None.
d. Forms of Investment Advisory Agreements for
each of LEADER Growth & Income Fund
(formerly Magna Growth & Income Fund) and
LEADER Intermediate Government Bond Fund
(formerly Magna Intermediate Government Bond
Fund).(3) Form of Investment Advisory
Agreement for LEADER Money Market Fund
(formerly Magna Money Market Fund).(4) Form
of Investment Advisory Agreement for LEADER
Tax-Exempt Bond Fund (formerly Magna
Tax-Exempt Bond Fund).(5) Form of Investment
Advisory Agreements for LEADER Treasury
Money Market Fund.(8) Form of Investment
Advisory Agreement for LEADER Tax-Exempt
Money Market Fund.(8) Forms of Investment
Advisory Agreements for each of LEADER
Balanced Fund and LEADER Short Term Bond
Fund.
e. Forms of Distribution Agreement for each of
LEADER Growth & Income Fund (formerly
Magna Growth & Income Fund) and LEADER
Intermediate Government Bond Fund (formerly
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
<PAGE> 228
Agreement for LEADER Money Market Fund
(formerly Magna Money Market Fund).(4) Form
of Amendment to Distribution Agreement for
LEADER Tax-Exempt Bond Fund (formerly Magna
Tax-Exempt Bond Fund).(5) Form of Amendment
to Distribution Agreement for LEADER
Treasury Money Market Fund and LEADER
Tax-Exempt Money Market Fund.(8) Form of
Amendment to Distribution Agreement for
LEADER Balanced Fund and LEADER Short Term
Bond Fund.
f. None.
g. Form of Custodian Agreement for LEADER
Growth & Income Fund (formerly Magna Growth
& Income Fund) and LEADER Intermediate
Government Bond Fund (formerly Magna
Intermediate Government Bond Fund).(2) Form
of Amendment to Custodian Agreement for
LEADER Money Market Fund (formerly Magna
Money Market Fund).(4) Form of Amendment to
Custodian Agreement for LEADER Tax-Exempt
Bond Fund (formerly Magna Tax-Exempt Bond
Fund).(5) Form of Custodian Agreement for
LEADER Growth and Income Fund (formerly
Magna Growth and Income Fund) LEADER
Intermediate Government Bond Fund (formerly
Magna Intermediate Government Bond Fund)
LEADER Tax-Exempt Bond Fund (formerly Magna
Tax-Exempt Bond Fund) LEADER Money Market
Fund (formerly Magna Money Market Fund),
LEADER Treasury Money Market Fund and LEADER
Tax-Exempt Money Market Fund.(8) Form of
Amendment to Custodian Agreement for LEADER
Balanced Fund and LEADER Short Term Bond
Fund.
h.(i) Form of Administration Agreement for
LEADER Growth & Income Fund (formerly
Magna Growth & Income Fund) and LEADER
Intermediate Government Bond Fund (formerly
Magna Intermediate Government Bond Fund).(2)
Form of Amendment to Administration
Agreement for LEADER Money Market Fund
(formerly Magna Money
--------------------
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.
(5) Incorporated by reference to Post-Effective Amendment No. 7 to
Registrant's Registration Statement (File No. 33-78408) filed electronically
with the Securities and Exchange Commission on October 18, 1999.
(6) Incorporated by reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement (File No. 33-78408) filed electronically
with the Securities and Exchange Commission on December 30, 1999.
-2-
<PAGE> 229
Market Fund).(4) Form of Amendment to
Administration Agreement for LEADER
Tax-Exempt Bond Fund (formerly Magna
Tax-Exempt Bond Fund.(5) Form of Amendment
to Administration Agreement for LEADER
Treasury Money Market Fund and LEADER
Tax-Exempt Money Market Fund.(8) Form of
Amendment to Administration Agreement for
LEADER Balanced Fund and LEADER Short Term
Bond Fund.
h.(ii) Form of Transfer Agent Agreement for LEADER
Growth & Income Fund (formerly Magna Growth
& Income Fund) and LEADER Intermediate
Government Bond Fund (formerly Magna
Intermediate Government Bond Fund).(2) Form
of Amendment to Transfer Agent Agreement for
LEADER Money Market Fund (formerly Magna
Money Market Fund).(4) Form of Amendment to
Transfer Agent for LEADER Tax-Exempt Bond
Fund (formerly Magna Tax-Exempt Bond
Fund.(5) Form of Amendment to Transfer Agent
Agreement for LEADER Treasury Money Market
Fund and LEADER Tax-Exempt Money Market
Fund.(8) Form of Amendment to Transfer Agent
Agreement for LEADER Balanced Fund and
LEADER Short Term Bond Fund.
h.(iii) Form of Fund Accounting Agreement for LEADER
Growth & Income Fund (formerly Magna Growth
& Income Fund) and LEADER Intermediate
Government Bond Fund (formerly Magna
Intermediate Government Bond Fund).(2) Form
of Amendment to Fund Accounting Agreement
for LEADER Money Market Fund (formerly Magna
Money Market Fund).(4) Form of Amendment to
Fund Accounting Agreement for LEADER
Tax-Exempt Bond Fund (formerly Magna
Tax-Exempt Bond Fund).(5) Form of Amendment
to Fund Accounting Agreement for LEADER
Treasury Money Market Fund and LEADER
Tax-Exempt Money Market Fund.(8) Form of
Amendment to Fund Accounting Agreement for
LEADER Balanced Fund and LEADER Short Term
Bond Fund.
h.(iv) Form of Notification of Fee Waiver.(6)
h.(v) Form of Administrative Services Plan for
Institutional Shares and Sweep Shares of
each Fund.(8) Form of Amended and Restated
Administrative Services Plan (Institutional
Shares).
h.(vi) Form of Rule 2a-7 Policies and Procedures
for the LEADER Money Market Fund (formerly
Magna Money Market Fund), LEADER Treasury
Money Market Fund and LEADER Tax-Exempt
Money Market Fund.(8)
i. Opinion and Consent of Counsel.(2) Form of
Opinion and Consent with respect to LEADER
Tax-Exempt Bond Fund (formerly Magna
Tax-Exempt Bond Fund).(5) Form of Opinion
and Consent of Counsel with respect to
LEADER Treasury Money Market Fund and LEADER
Tax-Exempt Money Market Fund.(8) Form of
Opinion and Consent of Counsel with respect
to LEADER Balanced Fund and LEADER Short
Term Bond Fund.
j. Consent of Independent Accountant.
-3-
<PAGE> 230
k. None.
l. Form of Organizational Expense Reimbursement
Agreement(2); Letter regarding sale of
initial shares.(2)
m. Form of LEADER Mutual Funds Distribution and
Service Plan for Investor Shares pursuant to
Rule 12b-1 under the Investment Company Act
of 1940.
n. Form of LEADER Mutual Funds Multi-Class Plan
Pursuant to Rule 18f-3 under the Investment
Company Act of 1940.
o. Powers of Attorney of Robert A. Archibald,
Earl E. Lazerson, Robert E. Saur, Harry R.
Maier, Neil Seitz and Brad L.
Badgley.(3)
p. Form of Code of Ethics for each of LEADER
Mutual Funds and Union Planters Bank, N.A.
(7)
(7) Incorporated by reference to Post-Effective Amendment No. 10 to
Registrant's Registration Statement (File No. 33-78408) filed electronically
with the Securities and Exchange Commission on June 30, 2000.
(8) Incorporated by reference to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement (File No. 33-78408) filed electronically
with the Securities and Exchange Commission on June 13, 2000.
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 is a multi-state
national banking association headquartered in
Memphis, Tennessee.
(b) The name, address and principal occupation of Union
Planters' directors and principal executive officers
are as follows:
Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT
ADVISER:
(a) Founded in 1869, Union Planters Bank, a national
banking association, is a wholly-owned subsidiary of
Union Planters Corporation (the "Corporation"), a
multi-bank holding company headquartered in
-4-
<PAGE> 231
Memphis, Tennessee. Union Planters is a commercial
bank offering a wide range of banking services to its
customers. The adviser has been managing trust assets
for over 80 years. As of December 31, 1998, the Trust
Group of Union Planters had approximately $10.5
billion under administration, of which it had
investment discretion over approximately $3.2
billion.
<TABLE>
<CAPTION>
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
---- ----------- ----------------------
<S> <C> <C>
Benjamin W. Rawlins, Jr. Chairman of the Board, Chairman and Chief Executive
Chief Executive Officer Officer,
Union Planters Corporation
7130 Goodlett Farms Pkwy.
Memphis, TN 38017
Bobby Durey Senior Executive Senior Executive Vice President
Vice President and and Chief Financial Officer,
Chief Financial Officer Union Planters Corporation
7130 Goodlett Farms Pkwy
Memphis, TN 38017
Al Kennebeck Senior Executive
Vice President -
Retail Services
Mike Russell Senior Executive
Vice President -
Lending & Credit Administration
Lloyd Devaux Senior Executive Vice President
and Chief Information Officer
Technology & Operations
Jackson W. Moore Director President and Chief Operating
Officer,
Union Planters Corporation
7130 Goodlett Farms Pkwy.
Memphis, TN 38017
Albert M. Austin Director Chairman, Cannon, Austin and
Cannon, Inc.,
6685 Poplar Avenue, #200
Germantown, TN 38138
George W. Bryan Director Chief Executive Officer
Sable Enterprises
752 Walnut Knoll Lane
#207
Memphis, TN 38120
James E. Harwood Director President, Sterling Equities
6305 Humphreys Blvd. Suite 207
Memphis, TN 38120
</TABLE>
-5-
<PAGE> 232
<TABLE>
<CAPTION>
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
---- ----------- ----------------------
<S> <C> <C>
Parnell S. Lewis, Jr. Director River Investments, LLC;
P.O. Box 271240
Memphis, TN 38167-1240
Dr. V. Lane Rawlins Director President, Washington State University
P.O. Box 64108
Pullman, WA 99164
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.
5865 Ridgeway Center Pkwy.
Suite 300
Memphis, TN 38120
</TABLE>
-6-
<PAGE> 233
<TABLE>
<CAPTION>
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
---- ----------- ----------------------
<S> <C> <C>
Spence L. Wilson Director President, Kemmons Wilson, Inc.
Kemmons Wilson, Inc.
1629 Winchester Road
Memphis, TN 38116
</TABLE>
Item 27. Principal Underwriters
BISYS Fund Services, L.P. ("BISYS") currently serves as administrator and/or
distributor to the following investment companies:
Alpine Equity Trust
American Performance Funds
AmSouth Mutual Funds
The BB&T Mutual Funds Group
The Coventry Group
ESC Strategic Funds, Inc.
The Eureka Funds
Governor Funds
Fifth Third Funds
Hirtle Callaghan Trust
HSBC Funds Trust and HSBC Mutual Funds Trust
INTRUST Funds Trust
The Infinity Mutual Funds, Inc.
Solution Funds
Mercantile Mutual Funds, Inc.
Metamarkets.com
Meyers Investment Trust
MMA Praxis Mutual Funds
M.S.D.&T. Funds
Pacific Capital Funds
Republic Advisor Funds Trust
Republic Funds Trust
-7-
<PAGE> 234
Sefton Funds Trust
SSgA International Liquidity Fund
Summit Investment Trust
USAllianz Funds
USAllianz Funds Variable Insurance Products Trust
Valenzuela Capital Trust
Variable Insurance Funds
The Victory Portfolios
The Victory Variable Insurance Funds
Vintage Mutual Funds, Inc.
-8-
<PAGE> 235
Item 27(b)- Information about Directors and officers of BISYS Fund Services,
L.P. is set forth below:
<TABLE>
<CAPTION>
Name Position with Underwriter Position with Fund
---- ------------------------- ------------------
<S> <C> <C>
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, NJ 07424
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
OTHER BISYS DISTRIBUTORS:
In addition to the following officers of the BISYS related distributors listed
below, each distributor has additional officers listed to the right ( business
address for each person and distributor unless noted otherwise is 3435 Stelzer
Road, Columbus, OH 43219 and unless noted otherwise each person holds no
position with the Fund):
Lynn Mangum Director
Dennis Sheehan Director
Kevin Dell Vice President/Secretary
William Tomko Sr Vice President
Michael Burns Vice President
Steve Ludwig Compliance Officer
Robert Tuch Assistant Secretary
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) The Fifth Third Bank
Rule 31a-1(b)(1) - (3), (5) - (9)
Rule 31a-2(c)
-9-
<PAGE> 236
(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.
-10-
<PAGE> 237
********************
NOTICE
A copy of the Agreement and Declaration of Trust of LEADER Mutual 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.
-11-
<PAGE> 238
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
Registrant, Leader Mutual Funds (the "Trust"), has caused this post-effective
amendment to its registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbus and the State of
Ohio, on the 17th day of October, 2000.
LEADER MUTUAL 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:
/s/ Gary Tenkman
----------------------
Gary Tenkman
Treasurer (Chief Accounting Officer)
Date:
*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:
-12-
<PAGE> 239
EXHIBIT INDEX
Exhibit No. Name of Exhibit
----------- ---------------
1-D(1) Forms of Investment Advisory Agreement for LEADER Balanced Fund.
2-D(2) Form of Investment Advisory Agreement for LEADER Short Term Bond
Fund.
3-E Form of Amendment to Distribution Agreement for LEADER Balanced
Fund and LEADER Short Term Bond Fund.
4-G Form of Amendment to Custodian Agreement for LEADER Balanced Fund
and LEADER Short Term Bond Fund.
5-H(1) Form of Amendment to Administration Agreement for LEADER Balanced
Fund and LEADER Short Term Bond Fund.
6-H(2) Form of Amendment to Transfer Agent Agreement for LEADER Balanced
Fund and LEADER Short Term Bond Fund.
7-H(3) Form of Amendment to Fund Accounting Agreement for LEADER Balanced
Fund and LEADER Short Term Bond Fund.
8-H(5) Form of Amended and Restated Administrative Services Plan for
Institutional Shares.
9-I Form of Opinion and Consent of Counsel with respect to LEADER
Balanced Fund and LEADER Short Term Bond Fund.
10-M Form of Amended and Restated LEADER Mutual Funds Distribution and
Service Plan for Investor Shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940.
11-N Form of Amended and Restated LEADER Mutual Funds Multi-Class Plan
pursuant to Rule 18f-3 under the Investment Company Act of 1940.
-13-
